Export Opportunities for SMEs in Developing Countries Articals Flip

EXPORT OPPORTUNITIES FOR SMEs IN DEVELOPING COUNTRIES: GLOBAL EXPERIENCES
Editors
Dr. S. Glory Swarupa Director General, ni-msme
Dr.E.Vijaya
Faculty Member, ni-msme
Mr.Sarath Muthyala
Associate Faculty Member, ni-msme
National Institute for Micro, Small and Medium Enterprises (ni-msme)
An Organisation of Ministry of MSME, Govt. of India and ISO 9001-2015 Certified Yousufguda, Hyderabad – 500045
www.nimsme.org
VAAGDEVI PUBLISHERS
• HYDERABAD • NEW DELHI

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"Export Opportunities for SMEs in Developing Countries: Global Experiences"
EDITORS @ Dr. S. Glory Swarupa, Dr.E.Vijaya & Mr.Sarath Muthyala ISBN No. : 978-81-964851-3-9
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PREFACE
Micro, Small and Medium Enterprises (MSMEs) are the backbone of developing economies as they are playing a vital role in driving economic activity and employment generation. SMEs represent the bulk of production in manufacturing and even larger share in services, both in developed and developing countries. They contribute over 55% of GDP, 50% of Exports and over 65% of total employment in high-income countries.
In international trade, the contribution of SMEs to direct export revenues is less obvious and varies greatly, even among OECD economies. For example, SMEs contribute a substantial share of East Asian manufactured exports such as 56% in Taiwan Province of China, over 40% in China and the Republic of Korea and more than 31% in India, whereas their role is marginal in LDCs, especially in Africa, with the little-documented transborder and subregional trade. The central question is whether a higher proportion of competitive SMEs in developing economies could access regional and global chains of production.
The export capacity of local SMEs can be enhanced through appropriate trade and investment linkages, upstream and downstream of the production and service activities of other large firms. Such business linkages already play an increasingly significant role in various segments of local SMEs, which can thus move up the technological and management ladder and become part of global and integrated chains of production.
To enhance the knowledge about the procedures & policy initiatives to improve SME exports in developing countries, ni-msme organised a three week International Executive Development Program on “Export Opportunities for SMEs in Developing Countries”, sponsored under the Indian Technical and Economic Cooperation Ministry of External Affairs, Government of India, from 07 to 25 August, 2023 at ni-msme campus. A total of 16 international executives from 12 countries representing Bangladesh, Cameroon, Eritrea, Guyana, Jordan, Kiribati, Kenya, Maldives, Nigeria, Sri Lanka, Zambia and Zimbabwe attended the program to comprehend the deeper insights on Policy and Procedural issues related to SME Exports besides sharing experiences that are beneficial to the participants.
Keeping the importance of SME Exports in developing economies, the international executives have contributed papers on various aspects related to the status of SMEs, various problems and prospects in SME Exports and Trade Barriers in International Trade and Environmental issues in Trade & Industry. The papers are published in a book titled: SME Exports in Developing Countries: Global Experiences, would surely invoke further deliberations on the theme which is immensely significant for the participating countries.
BEST WISHES
Dr. S. Glory Swarupa Date: 25.08.2023
Director General

TABLE OF CONTENTS
S. No.
Title of the Paper
Page No.
1
A Study on Status of SME Exports in Jordan
Dr. Amer Al Majali, Mr. Amr Al SArkhi
1-8
2
Impact of Government Initiatives on MSME Export Promotion: A Case of Kenya
Mr.Munoru Baituiba Edward, Miss.Grace Jeptoo
9-18
3
Develop and Expand Exports of Agricultural Products for Micro, Small and Medium Enterprises (SMEs) in Guyana Thakurdai Gopaul
19-25
4
The Maldives Economy: Current Production and Potential for Export Development
Farisha Fath’hulla
26-35
5
Role of MSMEs in Reviving the Sri Lankan Economy in the Post Crisis Period
H.M.R Kanishka Herath
36-49
6
The Impact of Export Promotion Strategies for Micro, Small and Medium Enterprises: A Case of Zimbabwe
Ms. Letwin Nyamupinga
50-58
7
Effect of Trade Barriers on SME Exports in Kiribati
Ms Bwereia Ienimango, Ms Eriteti Mikaere
59-65
8
Challenges faced by Micro, Small and Medium Enterprises in Casava’s Export Promotion in Cameroon
Mrs. Veronique bekono
66-71
9
Problems &Prospects of MSMEs in Tomatoes Production for Export Promotion in Nigeria
Anthonia Okangbe Abonye
72-81
10
Environmental Issues of Eritrea’s Trade and Industry Sector
Mr. Michael Yared Kidane, Mr. Osman Seid Hamid
82-94
11
Export Barriers for Small and Medium Enterprises in Bangladesh
Md. Delwar Hossain
95-102
12
Promoting MSME Competiveness In Zambia:
Opportunities And Challenges
Ms. Margaret Phiri
103-108

Export Opportunities for SMEs in Developing Countries: Global Experiences
1
A STUDY ON STATUS OF SME EXPORTS IN JORDAN
Dr. Amer Al Majali
The Centre of Ministry & Directorate Trade, Jordan [email protected]
Abstract
Mr. Amr Al SArkhi
Head , Accounting Department Jordan enterprise for Development Corporation, Jordan [email protected]
The study aims to identify the status of the export situation of small and medium-sized companies in Jordan and to identify the obstacles facing these companies while trying to find ideas that would support the companies and keep them within the global export market. Attention is paid to small and medium-sized companies by finding institutions that support export, and the government has provided financial support to increase export opportunities for these companies, in addition to that there are problems related to the time of obtaining licenses and the duration of export, and this is what stimulates progress in achieving electronic commerce and its orientation to support exports through the availability of data and information electronically for companies wishing to exports. The study also recommended the need to establish an export insurance fund under the umbrella of the Ministry of Industry and Trade, the Jordan Chamber of Industry and the Jordan Chamber of Commerce, which would provide support in cases of small and medium-sized companies suffering from their inability to survive in the market, by finding alternative markets and promoting them in a modern way, as well. The study recommended the need to participate in international exhibitions and work to host an international exhibition to support exports in Jordan and to make trade agreements to support exports for these companies.
Introduction
Small, medium and micro enterprises are considered as the backbone of the economy and are also one of the essential elements in achieving economic development all over the world, as they occupy a large percentage among all types of economic projects of all sizes, and they have witnessed great development and increasing interest from all countries and international organizations Where a lot of evidence has emerged throughout that these projects play a critical role in addressing poverty, and contribute to creating job opportunities for women, youth, and low-skilled people, especially in low-income countries. It is struggling to continue or expand due to many obstacles .
Small, medium and micro enterprises are considered as the backbone of the economy and are also one of the key elements in achieving economic development worldwide, accounting for a large proportion of all types of economic enterprises of all sizes. it has
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Export Opportunities for SMEs in Developing Countries: Global Experiences
witnessed significant development and growing interest from all countries and global organizations as evidence has emerged throughout that these projects play a critical role in addressing poverty, and contribute to the creation of jobs for women, youth and low- skilled people, especially in low -income countries. These companies are also engines of economic growth through GDP growth and export of goods, but they struggle to continue or expand due to many constraints.The definition of SMEs varies, but there is a common denominator that depends on the number of employees and the rate of turnover of assets, where it is divided into:
The definition of small and medium enterprises varies, but there is a common denominator that depends on the number of employees and the rate of asset turnover, as it is divided into :
• • •
Medium companies and the number of their employees 50-249. Small companies and the number of their employees 10-49. Micro companies with 5-9 employees.
As for Jordan, it paid attention to small and medium-sized companies because of their impact on the reality of the Jordanian economy, as the number of small and medium-sized companies reached 89 thousand companies, representing 99.5% of the total companies in Jordan, and these companies employ about 560 thousand workers, or 57.6% of the total workforce. These companies also contribute 40% of the total GDP It contributes 40-60% of private sector employment.
Jordan has given special attention to the export sector of these companies through many programs and initiatives. On the other hand, the figures issued by the Department of Statistics indicate fluctuations in foreign markets as a result of the effects of the Corona virus. The pandemic affected the entire economic activity, including small and medium- sized companies as a result of the closures. These companies have been severely damaged, resulting in continuous losses and the inability to raise salaries and rents, as well as a loss in inventory as a result of its expiration date.
Objectives
1. To understand the situation of small and medium enterprises in Jordan.
2. To identify the export obstacles for small and medium enterprises in Jordan.
3. To explore the possible opportunities to improve the performance of these companies.
Theoretical framework
First: The reality of small and medium enterprises in Jordan:
Small, medium and micro enterprises in Jordan attract the attention of a wide segment of all economic spectrums, as they are considered one of the most important sectors to accommodate the increase in employment and the need for more economic growth and to
2

employment and the need for more economic growth and to support developmental economic
3|Page
projects in light of the remarkable increase in poverty and unemployment in Jordan. Through which the linking of economic development with small, medium and micro projects is strengthened.
Export Opportunities for SMEs in Developing Countries: Global Experiences
The private sector in Jordan is made up almost entirely of small, medium and micro enterprises,
support developmental economic projects in light of the remarkable increase in poverty and unemployment in Jordan. Through which the linking of economic development with
which represent approximately 99.5% of all private sector firms. Based on the most recent
small, medium and micro projects is strengthened.
establishment survey issued by the Department of Statistics, which measures all firms with 99
The private sector in Jordan is made up almost entirely of small, medium and micro
employees or less. As a percentage of the total number of companies, as shown in Figure No. (1) the
enterprises, which represent approximately 99.5% of all private sector firms. Based on the
relative distribution of the number of establishments in the Kingdom, as the percentage of micro-
most recent establishment survey issued by the Department of Statistics, which measures companalilesfirmeascwheitdh 899.7em%pilonySeemsaollr cleosms.pAasniaepsearmceonutangtedoftoth8e.1to%ta,l mnuemdibuemr ocfocmompapnaineisesa,mounted to
as shown in Figure No. (1) the relative distribution of the number of establishments in
1.7%, and finally large companies amounted to 0.5%.
the Kingdom, as the percentage of micro-companies reached 89.7% in Small companies amounted to 8.1%, medium companies amounted to 1.7%, and finally large companies
Figure No. (1)
amounted to 0.5%.
Percentage distribution of the number of establishments in the Kingdom, on average, 2018, Percentage distribution of the number2o0f2e0stablishments in the Kingdom, on
average, 2018, 2020
Figure No. (1)
Source: Department of Statistics, Establishments Survey 2018, and the study’s
Source: Department of Statistics, Establishments Survey 2018, and the study's expectations for
expectations for 2020.
2020.
Most of the Jordanian small and medium companies are registered in the manner specified
by the law, however, a percentage of the companies operate for their own account in the
Most of the Jordanian small and medium companies are registered in the manner specified by the
unregistered (informal) sector, i.e. the company. businesses that provide legally permitted
law, however, a percentage of the companies operate for their own account in the unregistered
products and services without registering with the relevant authorities (the informal (informeaclo)nsoemcytoris, ie.est.imthaetecdomatpJaonryd.anbuhsaisneasbsoeust t1h5a.t2p6r%o,viwdheiclehgmalelyanpsetrhmatittehde pnruomdbuecrtsofand services
establishments is 15.2% more than what is recorded.
without registering with the relevant authorities (the informal economy is estimated at Jordan has
With regard to the distribution of small, medium and micro enterprises in Jordan at the
about 15.26%, which means that the number of establishments is 15.2% more than what is recorded.
geographical level, it is clear from Figure No. (2) that they are concentrated in the central region with a rate of 68%, compared to 23% in the northern region and 9% in the southern
With regard to the distribution of small, medium and micro enterprises in Jordan at the geographical
region, out of the total companies subject to the establishments survey.
level, it is clear from Figure No. (2) that they are concentrated in the central region with a rate of 68%, compared to 23% in the northern region and 9% in the southern region, out of the total
companies subject to the establishments survey.
3

Export Opportunities for SMEs in Developing Countries: Global Experiences
Figure No. (2)
Figure No. (2)
Geographical distribution in the Kingdom, on average3 (2011- 2020)
Geographical distribution in the Kingdom, on average (2011- 2020)
9%
68%
%23 %%%
Source: Department of Statistics.
Source: Department of Statistics.
With regard to employment, there was a relative contribution of small and medium-
With regard to employment, there was a relative contribution of small and medium-sized official
sized official companies to job opportunities in Jordan, as it can be said that the private
companies to job opportunities in Jordan, as it can be said that the private sector in Jordan consists
sector in Jordan consists mostly of small and medium-sized companies and companies.
mostly of small and medium-sized companies and companies. infinitely small, as it employs
infinitely small, as it employs approximately 71% of the workforce in the private sector
approximately 71% of the workforce in the private sector It represents about 57.6% of all the
It represents about 57.6% of all the workforce in the Kingdom, and thus its increasing
workforce in the Kingdom, and thus its increasing importance as a provider of job opportunities.
importance as a provider of job opportunities.
As for the distribution of the capital structure according to the classification of companies within the
As for the distribution of the capital structure according to the classification of companies
critewriiothninofththeecrniutemriboenr of twheornkuemrs,bethreofCwenotraklerBs,anthkedCateantirnadlicBaatensk tdhatathinedcicaaptietaslthoaftththeemicro
comcpapniiteasliosfctohnecmenitcrraotecdoamtp7a9n%ielseisscthoannce5n0t0r0atdedinatrs7a9n%d1le5s%stihnatnhe50c0ap0itdailn.aFrrsoamnd5,1050%0diinarsto
10,0t0h0e cdainpaitrasl.aFnrdom6%5,m00o0reditnharns 1to01,00,00d0indainrsa,rascacnodrd6i%ngmtortehtehacnla1ss0i,f0ic0a0tidoinaorfs,tahcecworodriknfgorce is to the classification of the workforce is less than 5 workers. As for the small ones, the
less than 5 workers. As for the small ones, the concentration was in the categories up to 20,000 dinars,
concentration was in the categories up to 20,000 dinars, with 80% of the companies
with 80% of the companies having employees from 5 to 20. As for the medium companies, the
having employees from 5 to 20. As for the medium companies, the number of workers is
number of workers is A. More than 20 workers.
A. More than 20 workers.
With regard to the sales structure of small and medium enterprises, sales of micro projects are
With regard to the sales structure of small and medium enterprises, sales of micro projects
concentrated at a rate of 97% up to 90 thousand dinars per year, while sales of small companies are
are concentrated at a rate of 97% up to 90 thousand dinars per year, while sales of small
concentrated at 83.1% up to 83.1%. 135 thousand dinars, and finally sales of medium projects are
companies are concentrated at 83.1% up to 83.1%. 135 thousand dinars, and finally sales
concentrated at a rate of 83.6%, between 90 thousand and more than 450 thousand dinars per year.
of medium projects are concentrated at a rate of 83.6%, between 90 thousand and more than 450 thousand dinars per year.
Second: Institutions supporting small and medium enterprises and building their Secocnadp:abInilsititeustfiornsexsupporptoirntinJogrsdmaanl:l and medium enterprises and building their capabilities for export in Jordan:
1.
1.
Ministry of Planning and International Cooperation (Irada Program): It is a national program and one of the components of the economic and social productivity
Ministry of Planning and International Cooperation (Irada Program): It is a national program
promotion programs at the Ministry of Planning and International Cooperation.
and one of the components of the economic and social productivity promotion programs at
It was launched in 2002. Centres and offices spread across all governorates of the
the Ministry of Planning and International Cooperation. It was launched in 2002. Centres and
Kingdom, represented by the beneficiaries of the program for everyone wishing to
establish a productive project to help to find job opportunities for the local community,
and provides basic support to the owners of medium and small projects wishing to
4
3 Department of Statistics, 2011, General Census of Economic Establishments, Establishments Survey.
4|Page

Export Opportunities for SMEs in Developing Countries: Global Experiences
establish and expand their projects, and those wishing to obtain a training that helps them later in starting their projects. The Irada program promotes local investment opportunities, improves financing and training tools, and establishes or develops micro, small and medium enterprises through studying them on scientific basis. A sound policy that enables them to make the appropriate investment decision, and guarantees their implementation and sustainability, through discussing the project idea, studying the price offers, directing the client to the appropriate financing agency, preparing the economic feasibility study, and following up the financing.
2. Jordan Enterprise for Development Corporation (JEDCO): The Corporation was established in 1972 to support the private sector, support emerging, small and medium projects, and develop them in Jordan, helping them to develop and grow, and finding export markets. This is done by providing technical and financial support within specialized programs that are designed according to the needs of the various economic sectors in the various governorates. Through the following programmers:
a. “By Your Effort” program to support youth projects: The program targeted 50 projects, in which JEDCO contributed five thousand dinars as a higher ceiling (non-refundable grant), and the owner of the project contributed an amount of 556 dinars. The project is to build the capacities of young people in preparing work plans necessary to transform their projects’ ideas into productive projects or to develop their existing projects.
b. Enhance your industrial and service exports: my industry for export, which is a grant with a ceiling of 30 thousand dinars for the company, with a financing rate of 80% for companies that did not export previously or whose exports were less than 50 thousand dinars January during 2020, as the target segment is all industrial companies in the governorates of the Kingdom, to be compatible with the conditions for benefiting from the program according to the program documents.
3. Program Enable your project to sell and export electronically: a program to increase corporate exports through e-commerce and virtual markets, through which the Foundation provides financial support in the form of grants with a ceiling of 7 thousand dinars to the company, with a financing rate of 70% of the total cost of the service, which includes technical training regarding the establishment and management of electronic stores. And the registration fees for the virtual markets, and the task of developing an online store for the company or an electronic application for promotion.
4. A program to support industrial companies through individual services, e-commerce or remote work. (It includes electronic promotion and sale through electronic stores, as it works to enable companies to work “remotely”.) By automating some of its activities, and providing financial support in the form of grants with a ceiling of 7 thousand dinars for the company, with a financing rate of 70% of the total cost of the single service.
5

with a financing rate of 70% of the total cost of the single service.
5. Project for accelerating the growth of small and medium enterprises: The project aims to
support new projects and small and medium enterprises and their sustainability in Jordan,
Export Opportunities for SMEs in Developing Countries: Global Experiences
with a focus on companies with high growth opportunities in order to increase productivity
5. Project for accelerating the growth of small and medium enterprises: The project aims
and competitiveness, bearing in mind that the project is a comprehensive technical support
to support new projects and small and medium enterprises and their sustainability
funded by the Transition Fund for Middle East and North Africa under the Deauville
in Jordan, with a focus on companies with high growth opportunities in order to
Partnership initiative.
increase productivity and competitiveness, bearing in mind that the project is a
comprehensive technical support funded by the Transition Fund for Middle East and
Obstacles facing small and medium enterprises4:
North Africa under the Deauville Partnership initiative.
Small anOdbmstaecdlieusmfaecnintegrspmriasellsaanrde mthedmiuamineenntegripnreisoefst:he Jordanian economy, as they represent 98% of the private sector units.
Small and medium enterprises are the main engine of the Jordanian economy, as they
represent 98% of the private sector units.
The main challenges for SMEs in Jordan are access to new markets, lack of skilled labor, lack of
The main challenges for SMEs in Jordan are access to new markets, lack of skilled labor,
business planning, intense price competition for imported goods, difficulty in accessing finance, and
lack of business planning, intense price competition for imported goods, difficulty in
poor diffusion of new technologies,
accessing finance, and poor diffusion of new technologies,
Procedural limitations
Marketing limitations
ClassifiCcalatisosinficoaftoiobnstorfuocbtsitornusctaionnds laimnditlaimtioitnatsi:ons:
The Jordanian government has issued several laws to support small and medium
The Jordanian government has issued several laws to support small and medium enterprises, such
enterprises, such as the Ministry of Industry and Trade Law (18/1998), the Chamber of
as the Ministry of Industry and Trade Law (18/1998), the Chamber of Industry Law (10/2005), the
Industry Law (10/2005), the Jordan Investment Council Law (18/1991), the Investment
Jordan ILnavwes(t6m8e/2n0t0C3o),uancdilthLeaJwor(d1a8n/1E9n9te1r)p,ritsheDInevelsotpmmeennttLaaw.(68/2003), and the Jordan Enterprise
Development Law.
Types of Obstacles
Types of Obstacles
Export limitations
Managerial limitations
Governmental limitations
Data availability
Environmental limitation
Financial limitations
(33/2008) and the Development and Employment Fund Law (33/1992), The Kingdom of
Jordan has established many public and private financing institutions (such as the Jordan 6 | P a g e Enterprise for Development Corporation-JEDCO and the National Project Support Fund
NAFES, the Development and Employment Fund, the Jordan Investment Board, the
6
Internal
limitations
External limitations

5
d f
e a
i h
g
(33/2008) and the Development and Employment Fund Law (33/1992), The Kingdom of Jor
has established many public and private financing institutions (such as the Jordan Enterprise
Development Corporation-JEDCO and the National Project Support Fund NAFES, the Developm
Export Opportunities for SMEs in Developing Countries: Global Experiences
and Employment Fund, the Jordan Investment Board, the Jordan Loan Guarantee Corporation
Jordan Loan Guarantee Corporation and other private sector organizations such as small
other private sector organizations such as small and medium-sized financing institutions).
and medium-sized financing institutions).
ExterEnxatlerxnpaolrtexopbsotratcloebsstacles
Cost of capital (high interest rate)
High customs
Economical circumestances in import countries(insuffecient capital)
High competition Exchange rate fluctuation
Internal limitations
Hard to find export opportunities through agent
cash flow problems
Difficulties in finding good agents
The governmental changes in exporting incentives
Internal limitations
risk of doing business on foriegn markets
cost and difficulties of shipping
Long waiting periods for payment
Political circumstances in foreign markets
Findings:
Findings:
Lack of trust in foriegn markets
Internal limitation
language barier
Export documentati on
Limited number of qualified export employees
Limited export experts
Product customization to foriegn markets
Long tearm finince cost
Low production capacity
Foriegn exchange logistics
1.1.JorJdoardnanhahsasmmadadeessigignniiffiicantimprroovveemenenttininsuspuppoprtoinrtgintghethSeMSEM’sEth’srouthgrhoughprovid providing financial support and long term loans.
financial support and long term loans.
2. 2.CoCvoidv-i1d-91p9apnadnedmemicichihtsitsthteheSMSMEE’s’svevreyryhahradrdththrorouugghhththeelolocckkddoownnaannddththeeproduction s
production shut down which resulted in many bankruptcy cases.
down which resulted in many bankruptcy cases.
3. Many companies have suffered from internal and external limitation that affected the export performance.
5 Damour, Hani Hamed, (2003) “Problems Facing the Export of Jordanian Flowers to Markets”. European (field study)", Studies Journal, Administrative Sciences, Vol. 30, No.
4. Many companies suffer from the long time and requirement of obtaining the exporting permits, which result in changings in the prices or conditions.
7|Pa 7

Export Opportunities for SMEs in Developing Countries: Global Experiences
Recommendations:
 Start an export insurance fund to minimize the risks related to exports.
 Providing financial support for SME’s and reduces the cost and time to obtain
export permit.
 Sign fair trade agreements to serve the exporting companies and maximize their business.
 Participate and host international exhibitions to connect companies with the potential buyers.
 Start a database for exports and foreign buyers. References:
1. SME Finance Forum, 2019, MSME Economic Indicator the National Financial Inclusion Strategy (2018-2020), Central Bank of Jordan. 28. UNCLAD, 2020, the International Day of Micro, Small and Medium Enterprises (MSMEs).
2. Central Bank of Jordan, 2021, Data on facilities granted to small and medium enterprises Size, website.
3. Department of Statistics, 2011, General Census of Economic Establishments, Establishments Survey.
4. Hallaq, Saeed, (1997) “Volatile Jordanian Exports: Causes and Repercussions,” King’s University Journal. Abdul Aziz: Economics and Administration, Volume 10.
5. Damour, Hani Hamed, (2003) “Problems Facing the Export of Jordanian Flowers to Markets”. European (field study)”, Studies Journal, Administrative Sciences, Vol. 30, No.
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Export Opportunities for SMEs in Developing Countries: Global Experiences
2
IMPACT OF GOVERNMENT INITIATIVES ON MSME EXPORT PROMOTION:
A CASE OF KENYA
Mr.Munoru Baituiba Edward
Assistant Director
Enterprise Development
Micro and Small Enterprises Authority Kenya
[email protected]
Abstract
Miss.Grace Jeptoo
Tutor O’llessos Technical Training Institute Kenya [email protected]
This study analyzed the impact of Government initiatives in export promotion for MSMEs in Kenya. The objectives were: to examine the impact of export policy frame work on MSMEs export promotion; to assess the effect of export trade market linkages on MSMEs export promotion and to examine the impact of export promotion institutions on MSMEs export trade. The literature review was analyzed from previous studies, publications, reports, surveys and data. The study adopted desk research method. An in depth data analysis presentation and interpretation in line with existing source was done and data presented by use tables, graphs among others. From the analysis, several findings were drawn which includes: enactment of some policies; initiation of export promotion strategies and programmes; export trade partnerships; establishment of Export promotion institution; majority of MSMEs are not familiar with policies, institutions and partnerships; there is no proper data on MSMEs export performance and contributions; there are several challenges and Constraints faced by MSMEs in export market; and establishment of export promotions and branding programmes. The study further, suggested some key interventions which will improve export market and inclusivity of various stake holders. It was concluded that export promotion initiatives should be all stake-holders strategic priorities.
Introduction
Micro, small and medium enterprises are known as the economic engines across the World in their current constraints, roles and interventions. MSMEs contribute to increased participation of indigenous Kenyan’s in the economic activities of the country; offering opportunities to entrepreneurial and managerial talent to bridge the critical shortage of skill which is often a great handicap to economic development; supporting industrialization policies that promote rural-urban balance, increasing savings and investment by local Kenyans and encouraging use of local resources, thus leading to more effective use of capital and adapting quickly to market changes. (MSME Survey of 2016).Kenya has an estimated 1.5 million formally registered MSMEs and over 5
9

Export Opportunities for SMEs in Developing Countries: Global Experiences
million informal MSMEs. They collectively generate 30 percent of the GDP and provide non-agricultural employment. Kenyan MSMEs operate in all sectors of the economy, with large concentrations in wholesale and retail trade, manufacturing, and food services (USAID, 2023).
In the Kenya, MSEs are classified as per the MSE Act of 2012 which comprise of enterprises in both formal and informal sector employing 1-50 persons. The micro employ less than 10 persons while small enterprises employ between 10 and 50 persons. The MSE Act of 2012 provides additional criteria for defining MSEs, including turnover and assets. The micro-enterprises have less than KSh. 500,000 annual turnover; while small enterprises are those whose turnover ranges between KSh. 500,000 – 5 million.
Efforts to develop and promote MSMEs by various Governments globally not with- standing, the sector face myriad of challenges. For instance in Kenya, MSMEs are hindered by inadequate capital, limited market access, poor infrastructure, inadequate knowledge and skills and rapid changes in technology, Corruption and an unfavorable regulatory environment, minimal growth and poor performance (The Deloitte Kenya Economic Outlook, 2016).In comparison to other sub-Saharan African countries and despite Kenyan banks’ improved involvement, Kenyan MSMEs continue to face challenges related to financing and limited access to credit (Murithi 2017). Other challenges includes: lack of adequate managerial training, rapid technology changes, new laws and regulations, inadequate knowledge and skills (Bowen, Morara, and Mureithi 2009)for example the SME sector contributed over 50percent of new jobs created in 2005 but despite their significance, SMEs are faced with the t hreat of failure with past statistics indicating that three out five fail within the first few months. This study sought to understand how SMEs manage the challenges they face. These challenges seem to change (evolve.
Exports/external trade is an integral part of economic growth and a foreign earner in Kenya that cannot be under emphasized. The most recent exports are led by Tea ($1.2B), Cut Flowers ($766M), Coffee ($262M), Refined Petroleum ($247M), and Titanium Ore ($194M). The most common destination for the exports of Kenya are Uganda ($831M), Netherlands ($576M), United States ($566M), Pakistan ($487M), and United Kingdom ($465M) (Kenya National bureau of statistics, 2023).
Kenyan Government over the years has made a lot strides in promoting international trade strategies which aims at ensuring that Kenyan business enterprisesespeciallythe Micro, Small and Medium Enterprises (MSMEs) get the necessary support to be competitive and achieve their full potential through various intervention such as policy frame work, market linkages and institutional capacity (Kenya National Trade policy, 2009).
The National Trade policy recognizes international trade as a strategic priority in realizing some of the following main objectives: raising business productivity; encouraging increased international trade and investment; stimulating and supporting MSMEs to participate more in international trade; enhancing the competitiveness in both the export and domestic markets; addressing market distortions; encouraging value additions and diversification; and improving market access. The policy has identified various programmes for implementation in order to address the constraints and challenges affecting the
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Export Opportunities for SMEs in Developing Countries: Global Experiences
development of international trade in the country. The constraints and challenges as well as intervention measures on the promotion of international trade have been categorized into five (5) broad areas namely: market access, trade facilitation, institutional capacity and coordination mechanisms, supply capacity and information flow. (Kenya National Trade policy, 2009).
Objectives
1. To examine the impact of export policy frame work on MSMEs export promotion.
2. To assess the effect of export trade market linkages on MSMEs export promotion
3. To examine the impact of export promotion institutions on MSMEs export trade
Literature Review
Various studies and publications shows that Kenya’s Trade regime is guided by market- driven principles of liberalization under the World Trade Organization (WTO), which came into effect in 1995 and the increased efforts in the regional economic integration that has resulted in the establishment of the East African Community (EAC), Common Market for Eastern and Southern Africa COMESA) and the Inter-governmental Authority on Development (IGAD).
Progressive liberalization in Kenya has significantly reduced tariff levels, eliminated price controls and licensing requirements leading to modest growth in export markets. This has been enhanced through robust policy frame work such as: National Trade Policy which was developed in 2009 aiming at addressing main constraints and challenges to international trade, which include; limited capacity for diversification and low value addition in production; increased use of non-tariff barriers in export markets; lack of competitiveness due to inefficient trade facilitation infrastructure; limited availability of affordable trade finance; limited negotiation capacity and uncoordinated negotiation processes; and preference erosion, among others; The Integrated National Export Development and Promotion Strategy (INEDPS) came into effect in 2018 aims at catalyzing implementation of the national goals by facilitating and coordinating activities in the eight prioritized productive sectors in the economy that feeds into the national export system; Agriculture, Livestock, Fisheries, Manufacturing, Services, Handicrafts and Artisanal products, emerging sectors (mining, petroleum) and Cross Cutting Issues; and The Kenya’s Industrial Transformation Programme (KITP) initiated in 2015.This programme has taken note of the fact that, over the past ten years, Kenya’s manufacturing base has remained static at 11 per cent of the country’s GDP, and its industrial exports have decreased in absolute terms. Hence, increasing this base is critical to job creation and economic growth as well as domestic and foreign investment. The programme has identified opportunities that will double the amount of current formal manufacturing sector jobs and production. The priority focal areas are Tea;’ Horticulture; Coffee; Processed High –Value Crops; Meat, Dairy and Industrial Crops; Textile and Apparel and Leather.
Kenya’s Foreign Policy is another game changer where the Government commits to realign Kenya’s Foreign Policy with the Nation’s international trade objectives
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Export Opportunities for SMEs in Developing Countries: Global Experiences
including export promotion and negotiation, bilateral and multilateral partnerships to increase market share in traditional export destinations, penetration of new markets in emerging economies as well as enhancing the role of private sector in regional integration initiatives. The Africa Continental Free Trade Area (AfCFTA) strategy is another mile stone for export promotion. The East African Community has developed the EAC- AfCFTA implementation strategy that provides a framework for exploitation of the opportunities in the AfCFTA by the East African Community member states. Kenya, being a member of the EAC has further unbundled and cascaded this strategy to develop the Kenya National AfCFTA strategy that outlines opportunities and suggest framework for exploitation of these opportunities by the Kenya’s public and private sector to leverage on 1.2 billion African market by the Kenya. The EAC Regional Integration Strategy focuses on advocacy for strategic interventions, reviewing of export incentives regimes and establishment of permanent exhibitions centers; identification of training needs and establishment of training programmes; and duty remission and exemptions, among other initiatives, within the East African Community.
According to (Heckscher, Eli & Ohlin ,1991) prices of factors of production between countries will always tend to equalize if the prices of final goods tend to equalize. In autarky, those countries have different prices for the output goods. Once free trade area is allowed in outputs, output prices will become equal in the involved countries. Thus free trade will equalize goods prices, wage and rental rates. Since the two countries face the same wage and rental rates they will also produce each goods using the same capital –labour ratio. However, countries continues to have different quantities of factor endowments, they will produce different quantities of the two goods.
In its endeavor to promote export, Kenya has established institutions and schemes such as The Export Processing Zones Authority (EPZA) created in 1990.EPZA’s mandate is to promote and facilitate export oriented investments and to develop an enabling environment for such investments. EPZA under the (Export Processing Zone) EPZ programme offers a range of attractive fiscal, physical and procedural incentives to ensure low-cost operations, fast set up and smooth operations for export-oriented businesses. Transactions in EPZs are not subject to import restrictions and tariffs, and thus they escape the delay sand administrative costs often associated with other “partial-export” regimes. The EPZ scheme provides a package of benefits to export-oriented firms within designated zones. Also duty tax remission scheme was introduced in 1990 to offer incentives for manufacturers of goods for export. The programme later became fully operational in 1993 with an objective of providing for VAT exemption from those inputs that were used in the manufacturing of goods for export. Export Promotion Council (EPC) is another institution started in 1992 whose mandate was developing and promoting Kenya’s exports and transformed later to Kenya export promotion and branding Agency (KEPROBA) whose mandate to implement export promotion and nation branding initiatives and policies to promote Kenya’s export of goods and services. Further to promote easy cross border trade, Kenya Trade Network Agency (Kentrade) was established in 2011 and designated with easing cross-border trade through the establishment, management, and implementation of the first National Electronic Single Window System in the Republic of Kenya.
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Export Opportunities for SMEs in Developing Countries: Global Experiences
Export Promotion has attracted some studies from various scholars in the world, Africa,
East Africa community bloc and Kenya. Ongeri, J.M. & Ongeri, B.O (2017) in their study
on Export Promotion Schemes and Export Performance in the East African Community:
A Comparative Analysis, established that duty draw back scheme boosted the volumes
of export in both Uganda and Tanzania. In Kenya duty remission facility and export
promotion zones were the most effective export promotion schemes in promoting
volumes of export. Export promotion zones though effective in Kenya the results showed
Exports in Kenya averaged 35599.73 KES Million from 1998 until 2023, reac
opposite impact for Tanzania manufacturing under bond scheme. Further value-added tax
of 91354.00 KES Million in May of 2023 and a record low of 9007.00 KES
remission and exercise duty relief schemes are not effective in promoting the volumes of 1e9x9p9o.rItts’isniUmgpaondrtaaanntdtoTanzoatneiathreastpEecxtipvoelryt.s in Kenya decreased to 85829 KES
hing an all Million in Million in
9E1x3p5o4rtKs iEnSKMeniylalioavneirnagMeda3y5o59f92.70323K(EKSeMnyilalioNnaftriomna1l9B9u8ruenatuil o2f02S3ta, triesatcichsin,g20an23). all-time high of 91354.00 KES Million in May of 2023 and a record low of 9007.00 KES Million in January of 1999.It’s important to note that Exports in Kenya decreased
to 85829 KES Million in June from 91354 KES Million in May of 2023 (Kenya National
SBourecaeu:oKf eSntaytiastNicas,ti2o0n2a3l).Bureau of Statistics/Tradineconomics.com, 2023
Figure1: 2022-2023 Export Market trend
Further, Balance of Trade in Kenya averaged -55723.79 KES Million from 1998 until 2023
Source: Kenya National Bureau of Statistics/Tradineconomics.com, 2023
an all- time high of -2175.00 KES Million in June of 1999 and a record low of -16800
April,2023.
Figure1: 2022-2023 Export Market trend
Million in August of 2022.Figure 2 below shows Kenya’s balance of trade between Jul
Further, Balance of Trade in Kenya averaged -55723.79 KES Million from 1998 until
2023, reaching an all- time high of -2175.00 KES Million in June of 1999 and a record low of -168002.00 KES Million in August of 2022.Figure 2 below shows Kenya’s balance of trade between July 2022 to April,2023.
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Export Opportunities for SMEs in Developing Countries: Global Experiences
Figure2: 2022-2023 Balance of Trade
(Source: Kenya Bureau of Statistics/Tradineconomics.com, 2023)
Methodology
The study employed desk research method by carry out an in-depth analysis of the existing publications, reports, surveys and data as well drawing a comparison from the existing situation in order to examine the impact of Government initiatives on MSMEs export promotion in Kenya.
Data analysis and presentation
An in depth data analysis presentation and interpretation in line with existing source was done. Data was presented by use tables and graphs. Data analysis was applied systematically and logical technique used in order to establish the resultant impact of Government export promotion initiatives on MSMEs export promotion in Kenya. Figure1 below shows 2022-2023 export market trend.
Policy Frame work analysis
It’s evident that Kenyan Government has developed several policies, programmes, strategies and entered into various export treaties as analyzed and presented in table 1 below.
Table 1: Policy Frame work analysis
Sr. No
Policy/Treaty/ Programme/strategy
Intervention/objective
1
National Trade Policy,2009
To address main constraints and challenges to international trade
2
The Integrated National Export Development and Promotion Strategy (INEDPS) (2018)
catalysing implementation of the national goals by facilitating and coordinating activities in the eight prioritized productive sectors in the economy that feeds into the national export system
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Export Opportunities for SMEs in Developing Countries: Global Experiences
3
The Kenya’s Industrial Transformation Programme (KITP) (2015)
Increasing base for job creation and economic growth as well as domestic and foreign investment
4
Kenya’s Foreign Policy
To enhance multilateral and bilateral partnerships to increase export market
5
The Africa Continental Free Trade Area (AfCFTA) strategy
To opportunities within Africa continent market
6
The EAC Regional Integration Strategy
Advocacy for strategic interventions, reviewing of export incentives regimes and establishment of permanent exhibitions centres
Source: Author’s August 2023
From the analysis above, the country has developed a strong policy frame work and engagements which if utilized optimally will greatly impact positively on MSMEs export promotions and increase market share globally.
Market Access Strategies and Programmes analysis
The study has analyzed and presented the following strategies meant to address the market access constraints:
1. Participation in International Trade Negotiation
2. Diversification of Export Base and Value-Addition
3. Export Penetration in Priority Markets
4. Safeguarding Sensitive Sectors and Industries
The above market access strategies can revolutionize export market if well administered and register better results.
Analysis on export promotion Institutions
Kenya has established three key institutions as analyzed and presented in table 2 below:
Table 2: Export promotion institutions analysis
Sr. No
Institution
Mandate
1
Kenya Export promotion and branding Agency
To implement export promotion and nation branding initiatives and policies to promote Kenya’s export of goods and services.
2
The Export Processing Zones Authority (EPZA)
To promote and facilitate export oriented investments and to develop an enabling environment for such investments
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Export Opportunities for SMEs in Developing Countries: Global Experiences
3
Kenya Trade Network Agency
Easing cross-border trade through
the establishment, management, and implementation of the first National Electronic Single Window System
Source: Author’s August 2023
Above analysis shows export promotion institutions established under the law with a clear mandate to propel export trade, offer institutional capacity as well build capacity to MSMEs among others.
Findings
From the analysis, the study came out with the following findings:
1. The Government has enacted some policies to address export promotions for MSMEs
2. The Government has initiated export promotion strategies and programmes
3. The Government has entered into various export trade partnerships such as East Africa Community (EAC), Common Market for Eastern and Southern Africa (COMESA), African Growth and Opportunity Act (AGO), The Africa Continental Free Trade Area (AfCFTA) et al.
4. The Kenyan Government has established Export promotion institutions with a clear mandate.
5. Most MSMEs are not familiar with policies, institutions and partnerships to leverage.
6. There is no proper data on MSMEs’ export performance and contributions.
7. There are several challenges and Constraints faced by MSMEs in export market for example:
a. The Increased Use of Non-Tariff Barriers (NTBs)
b. Tariff Peaks and Escalations
c. Domestic Support and Trade Distorting Subsidies
d. High and Multiple Internal Duties and Taxes
e. Treatment of Sensitive Products
f. Limited Trade in Services
g. Information gap between concerned Government stake holders and MSMEs
h. Lack of local Export Credit Guarantee scheme.
8. There are export promotions and branding programmes geared towards supporting MSMEs access market and promote Kenyan products and services to the world.
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Export Opportunities for SMEs in Developing Countries: Global Experiences
Suggestions
In order for the Government and other stakeholders to initiate proper and enhance existing export promotion strategies, legal frame work and trade treaties beneficial to MSMEs, the researcher suggested the following:
1. Enhancement of the existing export promotion legal frame work
2. Enhancement of the operations of existing export promotion institutions
3. Development of clear information and communication frame work to timely and effectively disseminate information to existing and potential MSMEs.
4. Establishment of Export Credit Guarantee scheme
5. Initiate various export promotion schemes in line with varied products and services
6. Develop a frame work to capture proper and specific data on MSMEs contributions and performance on export market.
7. Enhancement of Participation in International Trade Negotiation
8. Acceleration of Diversification of Export Base and Value-Addition
9. Development of strategies for Export Penetration in Priority Markets
Conclusion
Export promotion initiatives should be The Government, partners and private stake-holders strategic priorities in raising business productivity, encouraging increased international trade and investment, stimulating and supporting MSMEs to participate more in international trade, enhancing the competitiveness in both the export markets, addressing market distortions, encouraging value additions and diversification and improving market access. Considering the contributions of MSMEs to job creation and National economic growth, there is need for development of a robust and sustainable policy framework among other strategic interventions as well as effective implementation in order to propel MSMEs export promotion in Kenya to reliable growth and citizen’s benefits.
References
1. https:www.kenyaembassy.org.tr (2023 August 14)
2. https:www.kentrade.go.ke (2023 August 14)
3. Heckscher,Eli & Ohlin (1991) Trade Theory
4. Kenya Export Promotion and Branding Agency Strategic plan (2019-2023)
5. Kenya MSME Survey of 2016
6. Kenya National Bureau Statistics survey, 2023
7. Kenya National Trade Policy, 2009
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Export Opportunities for SMEs in Developing Countries: Global Experiences
8. Kenya Vision 2030
9. The Deloitte Kenya Economic Outlook, 2016
10. The Evolution of Kenya’s Trade Policy, (2015), Indian Journal of Economics and Development.
11. Organization for Economic Co-operation and Development (2017). Report on entrepreneurs and globalized economy.
12. Ongeri, J.M. & Ongeri, B.O (2017), Export Promotion Schemes and Export Performance in the East African Community: A Comparative Analysis. Archives of Business Research ,5(12) 245-260
13. United States Agency for International Development,2023
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3
Export Opportunities for SMEs in Developing Countries: Global Experiences
DEVELOP AND EXPAND EXPORTS OF AGRICULTURAL PRODUCTS FOR MICRO, SMALL AND MEDIUM ENTERPRISES (SMES) IN GUYANA
Abstract
Thakurdai Gopaul
Marketing Officer Guyana Rice Development Board Guyana, South America [email protected]
The export of agricultural products play a pivotal role in global trade and economic growth. This research paper investigates key factors hindering and influencing the export performance of SMEs with agricultural products. The aim is to provide an insight of the strategies that can enhance exports, identify the potential challenges SMEs will face before venturing out into exportation of perishable products.
The paper will also provide an understanding of the dynamics of exporting agricultural products. Additionally, a few areas were highlighted to aware SMEs on the need for market research, supply chain, adhere to trade regulations and collaborate with officials for a guidance and resources needed to navigate the complexities of the global marketplace.
Introduction
Guyana has the potential to become the food basket for the Caribbean if more micro, small and medium enterprises (SME’s) are given the opportunity to export their products. According to the Food and Agricultural Organization (FAO) it was estimated that only 10 percent of the total fruits and vegetables that Guyana produced in 2021 were exported. As a result, there is potential to expand exports of agricultural products.
In 2004, the Government of Guyana developed and passed in parliament an act in support of SME’s the act is called Small Business Act of 2004 Vol. 2. The act defined small business as “any person or persons, including a body corporate or unincorporate, carrying on business in Guyana for gain or profit and satisfying the criteria listed hereunder, but does not include any business having as its principal object the furtherance of a charitable or political purpose is incorporated or registered under the Company Act 1991 or the Business Names (Registration) Act; or is a partnership under the Partnership Act; or is owned by a person or persons trading not under the Companies Act nor in partnership; is a registered cooperative society under the Co-operative Societies Act; is owned and controlled by those persons who hold the majority shareholding or controlling interests in the business, and is not a subsidiary or affiliate of another company.”
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Export Opportunities for SMEs in Developing Countries: Global Experiences
Another definition of SME is that business which constitutes a small and midsize enterprise. Certain size criteria must be met, and occasionally the industry in which the company operates is taken into account as well. Though small, SMEs play an important role in an economy. They outnumber large firms, employ vast numbers of people, and are generally entrepreneurial in nature, helping to shape innovation. (Aug.2023, Investopedia.com).
In support of Small Business Development in Guyana, in the year 2020 the sum of over G$400M was approved in support of small business development under the subheads:
• Small Business Development Fund – G$100M
• Small Business Bureau - $212.1M
• Livelihood and Entrepreneurial Development Program – G$105M
The Minister of Public Works, Bishop Edgill stated that this redesign “ensure that the intended outcomes of small and micro business development and livelihood improvements are being demonstrably achieved”. The government support is one way to aid in the development and expansion for SME’s in Guyana. Despite the fact that agriculture has a large percentage in the total export in Guyana, it is evident that there is potential for more exports in the field. The current non-oil GDP for agriculture is 19 percent. However, the agriculture sectors were not neglected as Guyanese continued to export agri-products. In 2022, rice exports amounted to US$185,000,000.
In 2022, Guyana’s major agricultural products that were exported was rice, sugar, fish, fruits, vegetables, etc. and exports to the demographic locations were, 60% to the Americas, while 24% within Asia and 15% to Europe.
It was explained that exports refers to the act of selling goods and services produced within a country to customers located in other countries. While, SME’s are businesses with a limited number of employees and resources. As such, engaging in export opportunities can provide SME’s with unique opportunities to expand their customer base, increase their revenues and achieve sustainable growth and development. For SME’s to enter into the export market it can be a transformative step, but it often comes with challenges and complexities. These challenges might include adapting products to fit the preferences of foreign markets, navigating trade regulations, managing logistics and establishing a presence in unfamiliar territories.
Objectives
1. To identify the constraints that SMEs’ face when attempting to export agricultural products.
2. To understand how those constraints negatively/positively impact trade in Guyana.
3. To find out the areas to improve and develop exports for SME’s in order to expand on exports of agricultural products.
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Export Opportunities for SMEs in Developing Countries: Global Experiences
Literature Review
After reviewing several literature texts, it was noted that agriculture is the root of survival and all human being depends on agricultural products from all parts of the world. Even in Guyana, it is considered an agricultural economy, however, recently the country tapped into a new natural resource, the oil and gas resource, but the government is still actively supporting the agriculture sector.
A literature paper was published online by Bello R.S., Bello M.B., Saidu M.J. on Small Scale Enterprises (SMEs) and Agricultural Transformation: The Nigerian Experience. In the article, it was discussed that in the early and better part of 1960s, Nigerian economy was overwhelmed by a well-diversified agricultural sector, supporting over 75% of the population, with approximately 78% in food export and 94% of food supply to the rapidly growing population (World Bank, 1996; Abdulkareem, 2015). Nigeria small holder farmers constitute over 70% of the total people engaged in agricultural activities at small and medium scale levels. 70% of these farmers are not literate, 70% are of the age above 60 years and are mostly resident in the rural areas (National Agricultural Survey, 2001). The small and medium scale industries are seen as keys to integrated growth, alleviation of poverty and reduction of unemployment in the country (Aremu and Adeyemi, 2011).
SMEs have been acknowledged to have huge potentials for sustainable development, contributing immensely to Gross Domestic Product (GDP), especially with full support on incentives, policies, programmes, financial and extension services. SMEs are found everywhere in the society including agriculture, spanning crop and animal production, processing and products marketing (Onwumere, 2008). These SMEs played vital roles in the economic development of nations and forms the bulk of business activities in growing economies like that of Nigeria (Emesowum et al., 2013).
Nigeria SMEs are largely dominated by small and medium scale agro-based enterprises specializing in production of bulk commodities consumed in homes and industries and for export promotions, especially in cash crops and fruit 12 Bello R. S. et al.: Small Scale Enterprises (SMEs) and Agricultural Transformation: The Nigeria Experience production and processing. Nigeria is one of the leading countries in the production of agricultural products such as fruits, cassava, yam, cowpea and cocoa (Adewumi, 2008a) as well as fruits, leafy and root vegetables, grain legumes and animal products, of which the bulk is from the SMEs. Their government initiated an Agricultural Transformation Program to help develop agribusinesses.
Methodology
This methodology adopts a mixed-method of research design, combining both qualitative and quantitative approaches. The research was designed to allow for comprehensive study of SME’s in the field of agriculture and the pros and cons to exports. The study is based on secondary data gathered from official websites from Guyana, Caribbean and the rest of the world that supports SME’s. Additionally, newspaper articles online were reviewed to identify data on exports of agricultural products from Guyana. Data were also gathered and analyzed from official external websites such as, Food & Agriculture Organization (FAO), World Trade Organization (WTO).
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Export Opportunities for SMEs in Developing Countries: Global Experiences
Data Analysis
The agricultural sector in Guyana has one of the largest populations of small businesses, especially in rice farming. However, in 2023, there were only 16 licensed rice exporters in the system and this is as a result of skepticism to venture out into exports.
The current cycle in the rice sector is that rice farmers cultivate the rice, sells their paddy to millers, these millers then mill the paddy to rice and sell to local market and international markets.
In the supply chain system to export perishable goods like rice, there are a number of factors that must be taken into consideration, e.g. storage, pesticide, transportation, available markets, logistics, financial capabilities, etc. However, the fact is SME’s have the potential to expand and develop trade in rice.
According to the Guyana Rice Development Board annual report of 2016, rice exports from Guyana were as follows, indicating that there is market potential for customers that are interested in the producet globally.
(Source: GRDB, Annual Report, 2016)
In the data analysis, the objectives were reviewed and analyzed as follows:
Objective 1: Constraints that SME’s face when attempting to export agricultural productions.
It is essential to note that agricultural products are perishable and has a limited timeline from harvest to the pot/dinner. As such, every process of the supply chain is vital and important for SMEs to take into consideration. There are a few constraints that must be noted when promoting the growth and expansion for exports of agricultural products with SME’s, since there are significant financial implications.
a. Exports of food products require several documents such as phytosanitary and quality certification before exports; as a result the time factor is important to
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Export Opportunities for SMEs in Developing Countries: Global Experiences
take into consideration. Additionally different countries have varying quality and safety standards that must be met and strict rules and regulations that must such as the labelling, packaging and pesticide residue limits.
b. Supply chain challenges especially during on and off season because agricultural products are often subject to seasonality which affects the availability and pricing of the products.
c. Logistics and transportation are key to exports of any agricultural products, since these products are perishable, any delay or improper handling can lead to spoilage and losses. For instance, rarely rice exporters in Guyana venture out to the Middle East or East Africa to export rice from Guyana due to the logistical challenges to those locations.
d. Additionally, freight, tariff, quotas, import restrictions are all factors to consider, and trade barriers imposed by other countries because these can increase cost for the products.
e. One major area that SME’s must be aware of is the cultural difference between countries when exporting, for instance exporting non-halal meat from Guyana to Muslim destination may result in the product being rejected at port of entry of by the customer.
f. For SMEs to start up exports they will need the support of the government because exports of agricultural products require infrastructural support and guidance in areas such as transportation, storage (cold/warm storage) and processing infrastructure. Additionally, financial support is essential to commence just operation.
As a result, these constraints require careful planning, strong partnership, collaboration and support from government personnel in order for exports to be materialized. Currently, in Guyana there are several initiatives that supports SME’s financially and non- financially, for instance banks give small loans to farmers for aid to develop and expand their business. Additionally, taxes are waivered on some agricultural products to support farmers and also there are several agencies that work with agriculture farmers in various areas to provide support and guidance, like the Guyana Rice Development Board, New Guyana Marketing Corporation, etc.
Objective 2: Understand how constraints impacts trade in Guyana
The World Trade Organization classified Guyana as a developing country. However, recently, there have been significant improvements and plans for expansion in the country. For instance, plans are in made to construct a new port in Georgetown, Guyana which is the capital of the country and the main trade hub. The estimate for the construction of the port is $600M. Additionally, there are massive road developments and construction of new roads in and around the capital city, such infrastructural development will aid in import and export of goods to and from Guyana. There is also investment in other major aspect that will impact trade, such as road expansion and development to accommodate movement of goods to and from ports.
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Export Opportunities for SMEs in Developing Countries: Global Experiences
The customs process requires several steps and processes to be followed, these processes may discourage SMEs from exporting. For instance, there are some processes done online while others require the exporter to visit offices. In order to combat this challenge, Guyana is presently working with an international agency to automate all shipping documents and processes, as such after the automation, SMEs will be able to sit at home and process all their transactions by the click of buttons on the laptops.
Objective 3: Identify areas to improve and develop exports for SME’s in order to expand on exports of agricultural products.
In order for SMEs to participate in exports, several government initiative must be
taken by the government, for instance, supporting SMEs in their initial stage of product development, collaborate with farmers in provide infrastructural facilities such as larger cold storage at ports and provide guidance to farmers at the stage of negotiation with potential customers.
Strategies for the development of SMEs
Should small farmers be interested in exporting agricultural products such as rice there are a number of factors to take into consideration
a. Market Research - be able to conduct adequate market research to identify potential export markets. Consider factors like demand, competition, and regulatory environment cultural patterns.
b. Product adaptation – Tailor the product to meet the preference of the target market.
c. Networking- it is important to establish relation with local chambers of commerce, trade associations and government agencies related to international trade.
d. Export training – always be prepared to learn and the SME must train their staff on export procedures, regulations, etc.
e. Quality Control – maintain high quality standards to build a strong reputation in international markets. Satisfied customers are more likely to become repeat buyers and recommend the product to others.
f. Customs and Regulations – SME’s are advised to familiarize themselves with import/export regulations and compliance requirement.
g. E-Commerce and Online Platforms – utilize e-commerce platform to reach new customers.
h. Trade Agreements – leverage any trade agreement between Guyana and other countries to identify potential target markets.
Recommendations
There are many benefits for SME’s to engage in the export of their products. Relying solely on local market and local consumption can be risky. Exposure of products allows for the spread of those products across nations and it reduces dependence. By
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Export Opportunities for SMEs in Developing Countries: Global Experiences
entering the international market, it will lead to higher sales. Exporting their products also helps to increase revenue and achieve economies of scale as well as improve profitability. Exporting increase exposure to global competition and this force the SME’s to continuously improve their products through product quality, innovate, and become more efficient. Importantly when SME’s export their products it open door to markets with different level of demand, economic conditions and consumer preferences, allowing them to expand their business and build their brand.
Another major benefit for SME’s exporting is that it provides for adaptation to different market demands which often requires innovation and new approaches and this will allow for SMEs to benefit in the long run. Networking is also a significant benefit in exporting. SMEs can be able to build networks by engaging in international trade exports, or other public events, this allowing SME’s to learn about new business practices, cultures and ideas that can lead to business expansion.
References
1. Investopedia
2. GRDB, Annual Report, 2016
3. Bello R. S., Bello M. B., Saidu M. J.. Small Scale Enterprises (SMEs) and Agricultural Transformation: The Nigeria Experience, Science Journal of Business and Management. Special Issue: Sustainable Entrepreneurial Developments in Agribusiness. Volume 3, Issue 5-1, September 2015 , pp. 11-15. doi: 10.11648/j. sjbm.s.2015030501.13
4. Emesowum, C. E.; J. A. Mbanasor and S. A. Olayimola (2013): Analysis of factors affecting performance of agribusiness-SMEs in Imo State, Nigeria: policy issues for agricultural transformation. Proc. of the 47 the Annual Conf. of agricultural society of Nigeria, Ibadan 2013. Pp 518-521.
5. National Agricultural Survey Report, 2001
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Abstract
Export Opportunities for SMEs in Developing Countries: Global Experiences
4
THE MALDIVES ECONOMY: CURRENT PRODUCTION AND POTENTIAL FOR EXPORT DEVELOPMENT
Farisha Fath’hulla
Assistant Director Ministry of Economic Development Republic of Maldives [email protected]
This research paper provides a comprehensive overview of the Maldives’ economy, including its current production landscape and export sectors. The paper also analyzes the potential for export diversification and identifies the most promising export sectors. The paper then identifies and assesses the challenges and limitations that hinder the growth of the Maldives’ export activities. Finally, the paper investigates the latent potential for broadening the Maldives’ range of exports by exploring unexplored sectors with promising export prospects.
The paper concludes with a set of practical and actionable policy recommendations that can be adopted by the Maldivian government and relevant stakeholders to increase the nation’s export potential. In short, this paper examines the Maldives’ export sector and proposes policy recommendations to promote export diversification and economic growth.
Introduction
The Maldives is a small island nation in the Indian Ocean with a population of over 500,000 people (The World Bank, 2023). The Maldives is a beautiful country with stunning beaches, clear blue waters, and lush coral reefs. It is a popular tourist destination, and tourism accounts for about 21.4 percent of Maldives gross domestic products in 2021 (Maldives Bureau of Statistics, 22). However, the Maldives is also a major producer of tuna, and tourism is not the only sector with the potential for export growth.
The Maldives economy is growing rapidly, but it is also facing a number of challenges. One of the biggest challenges is the country’s high dependence on tourism. Tourism is a volatile industry, and it is susceptible to external shocks, such as the COVID-19 pandemic. The Maldives also faces challenges from climate change, which is causing sea levels to rise and threatening the country’s low-lying islands.
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Export Opportunities for SMEs in Developing Countries: Global Experiences
In order to reduce its dependence on tourism and to mitigate the risks posed by climate change, the Maldives government is looking to diversify the economy. One way to do this is to increase exports. The Maldives has a number of potential export sectors, including fisheries, tourism, handicrafts, and information technology.
This paper will provide a comprehensive overview of the Maldives economy, including its current production landscape and export sectors. The paper will also analyze the potential for expanding the Maldives’ exports by focusing on the most promising export sectors. The paper will then identify and assess the current challenges and limitations that hinder the growth of the Maldives’ export activities. Finally, the paper will investigate the latent potential for broadening the Maldives’ range of exports by exploring unexplored sectors with promising export prospects. The paper will conclude with a set of practical and actionable policy recommendations that can be adopted by the Maldivian government and relevant stakeholders to increase the nation’s export potential.
Objectives
1. To provide a comprehensive overview of the Maldives economy, including its current production landscape and export sectors.
2. To examine and analyze the potential for expanding the Maldives’ exports by focusing on the most promising export sectors.
3. To identify and assess the current challenges and limitations that hinders the growth of the Maldives’ export activities.
4. To explore potential for export variety: Investigate the latent potential for broadening the Maldives’ range of exports by exploring unexplored sectors with promising export prospects.
5. To develop practical and actionable policy recommendations that can be adopted by the Maldivian government and relevant stakeholders to increase the nation’s export potential.
Literature Review
The Maldives is a developing country with a vulnerable economy that is heavily reliant on tourism. In order to reduce this dependency, it is important to analyze the current production of the country and the potential for promoting exports. A variety of sources were reviewed, including reports, databases, websites, and other materials.
A variety of sources were reviewed, including reports, databases, websites, and other materials. The major source of data for this paper was the data from the Maldives Bureau of Statistics (MBS). This includes national accounts, different data releases by the MBS, and publications related to different areas. Another major source of data available relating to the Maldives was the research and publications by the World Bank, as they have several ongoing initiatives in the Maldives. There are also several publications by the Asian Development Bank (ADB) relating to the Maldivian economy. Other sources which
27

Export Opportunities for SMEs in Developing Countries: Global Experiences
were reviewed include from the Ministry of Economic Development of the Maldives, President’s office of the republic of Maldives, and the Maldives Monetary Authority.
The annual gross domestic product (GDP) data by the MBS shows that tourism sector has the largest percentage share of the nominal GDP in 2021 with 21.4 percent contribution to the GDP. Transport and communication have the second largest share of the GDP in 2021 accounting for 9.5 percent (Maldives Bureau of Statistics, 2022). This data also shows that in 2021, the sectors with the highest percentage of contribution to the nominal GDP in Maldives are tourism, transport and communication, wholesale and retail trade, real estate activities, and financial services respectively.
As per the balance of goods and services of the Maldives released by the MBS, services exports in past years only include travel and transport (National Bureau of Statistics). Export composition data by the Maldives Monetary Authority shows that the merchandise export of the Maldives mainly include the fishery products and there is only a small number of garments & other exports. (Maldives Monetary Authority, 2023).
A country diagnostic study of the Maldives conducted by the World Bank in 2016 found that tourism sector and fisheries sector are the sources of growth and shared prosperity of the Maldives (The World BanK, 2016). However, the study also showed that there are many constraints in these sectors. The World Bank also found that economic growth can be boosted by providing more opportunities for the local population to participate in existing industries.
The ADB validation of the Maldives Country Partnership Strategy Final Review Update, 2014–2019 found that the Maldives economy is heavily reliant on tourism and vulnerable to external shocks. The report also found that the Maldives’ commercial activity is constrained by a number of factors, including a small domestic market, limited natural resources, a shortage of skilled workers, remoteness, and difficult inter-island transport. (Asian Development Bank, 2020).
The Government of the Maldives developed the National Resilience and Recovery Plan 2019-2023 in response to the COVID-19 pandemic. It prioritizes key elements of the Maldives Strategic Action Plan 2019-2023 and identifies sector-specific strategies to diversify the economy, decentralize government, and build resilience. (Government of Maldives, n.d.).
It should be noted that there is not much research relating to the current productions and potential for export development in the Maldives. This is an important area for future research, as it could help to reduce the country’s reliance on tourism and make the economy more resilient to external shocks.
Methodology
This research paper investigates the Maldives current production landscape and potential for export development within the Maldives economy. The study employs a comprehensive methodology that draws on both quantitative and qualitative data derived from various reputable sources. The primary data sources for this research include the Maldives Bureau of Statistics, research and publications from the World Bank, reports
28

Export Opportunities for SMEs in Developing Countries: Global Experiences
by the Asian Development Bank, and additional data from the Ministry of Economic Development of the Maldives, President’s Office of the Republic of Maldives, and the Maldives Monetary Authority. The methodology encompasses data collection, data analysis, and interpretation stages, enabling a comprehensive assessment of the economic landscape.
Data Collection
Maldives Bureau of Statistics: Data from the Maldives Bureau of Statistics constitute a fundamental component of this study. National accounts data, statistical releases, and publications spanning various domains were gathered. These data sources offer a rich and accurate portrayal of the Maldives’ economic activities, enabling an informed analysis of current productions and economic trends.
World Bank Initiatives: Research and publications by the World Bank were leveraged to provide a broader perspective on the Maldivian economy. Given the World Bank’s extensive involvement in the region, these sources contribute valuable insights into economic indicators, growth patterns, and potential areas for export development.
• Asian Development Bank Reports: Reports from the Asian Development Bank further augment the understanding of the Maldives economy. These documents offer a well-rounded overview of economic challenges, developmental projects, and potential sectors for export growth.
• Government Sources: Publications from the Ministry of Economic Development of the Maldives and the President’s Office of the Republic of Maldives offer direct insights into governmental strategies, policies, and priorities. These sources inform the qualitative analysis of potential export development and align it with national goals.
• Maldives Monetary Authority: Data from the Maldives Monetary Authority were utilized to comprehend the Maldives current production landscape based on the external trade data and annual trade data. Knowing the current production landscape plays pivotal role in evaluating the potential for export development in the Maldives.
Data Analysis
The data will be analyzed using a variety of methods, including:
• Content analysis: This will be used to analyze the qualitative data from the literature review and publications.
• Descriptive statistics: This will be used to summarize the quantitative data from the national accounts data.
• Qualitative analysis: This will be used to interpret the qualitative data from the literature review and publications.
29

Export Opportunities for SMEs in Developing Countries: Global Experiences
Interpretation
• Synthesis of Findings: The integration of quantitative and qualitative data provided a comprehensive understanding of the current economic context in the Maldives. By synthesizing data from a variety of sources, enabled to gain a holistic perspective of the economy, including both existing productions and the potential for export diversification.
• Assessment of Export Potential: The interpretation section of the research paper offered an insightful assessment of sectors with substantial export potential. This assessment was based on both quantitative trends and qualitative insights, ensuring a well-rounded evaluation.
• Strategic Recommendations: The research paper concluded with strategic recommendations for leveraging identified opportunities and addressing challenges. These recommendations were guided by the data-driven analysis and qualitative insights, providing a roadmap for policymakers and stakeholders aiming to enhance the Maldives’ export capabilities.
In summary, the research methodology presented a comprehensive approach to understanding the Maldives economy’s current productions and potential for export development. The utilization of data from diverse and reputable sources, coupled with a meticulous analysis of both quantitative and qualitative information, ensured a robust foundation for forming informed opinions and recommendations.
Findings
Current Production Landscape
The Maldives has a GDP of $6.19 billion in 2022 as per World Bank data (World Bank, 2023). The Maldives economy is heavily reliant on tourism, which accounts for 21.4% of GDP (Maldives Bureau of Statistics, 22). Annual Gross Domestic Data by Maldives National Bureau of Statistics which was released in 2022 also shows the percentage share of nominal GDP by sector as shown in the Figure 1. Other important sectors include fishing, agriculture, and manufacturing.
30

of Statistics, 22). Annual Gross Domestic Data by Maldives National Bureau of Statistics which was
released in 2022 also shows the percentage share of nominal GDP by sector as shown in the Figure
1. Other important sectors include fishing, agriculture, and manufacturing.
Export Opportunities for SMEs in Developing Countries: Global Experiences
FigurFeig1u:rPee1r:cePnetracgeenstahgaereshoaf rGeDoPf G20D2P1 2(M02a1ld(iMveasldBivueresaBuuorfeaSutaotifsStitcast,is2t2ic)s, 22)
Assessing the current export composition is essential to gaining a better understanding of the Maldives' production
Assessing the current export composition is essential to gaining a better understanding
landscape and identifying potential areas for export growth. Figure 2 shows the export composition
of the Maldives’ production landscape and identifying potential areas for export growth.
of Maldives in merchandise trade for the domestic exports in the past five years 2018-2022. As seen
Figure 2 shows the export composition of Maldives in merchandise trade for the domestic infiguerxep2oritsciantbhespeeanstthfiavte,fyoeratrhse2p0a1s8t-f2iv0e22y.eaArsmseaejnorintyfiogfutrhe2Miatldciavnesbdeosmeenstitchaetx,pforrtisthe
unprotcheesspeadstfifishveryeparroscmesasjeodr.itTyhoisf dthaetaMshaoldwivsetshadto6m8e.6st8icpexrcpeonrt oisf the uMnaplrdoicvesseddomfieshsteircyexport processed. This data shows that 68.68 percent of the Maldives domestic export consists
consists of the fresh, chilled or frozen tuna, and only 23.65 percent of the exports are value added or
of the fresh, chilled or frozen tuna, and only 23.65 percent of the exports are value added
processed fish in 2022.
or processed fish in 2022.
FiFgiugurere22Domestic expoorrttccoommpopsoitsiotnioonf oMf aMldaivldesi:vemse:rmchearncdhiasentdriasdeet(riandme i(lilinonms iollfioUnSsDo) f USD)
Year
Fresh, chilled or frozen tuna
Fresh, chilled or frozen fish (excluding tuna)
Canned or pouched
Processed fish, nes
Fish products, sea food, marine product nes & live fish
Garments
& other
exports
29 |
2018
123
4.9
40.5
5.5
1.2
6.6
2019
106.8
3.2
35.1
5.1
1.4
6.5
2020
111.7
2.1
34.8
6.6
1
6.7
2021
101.8
1.7
32.1
4.3
1.2
10.2
2022
109.2
1.4
33
3
1.6
10.9
Source: Maldives Monetary Authority 2023
31
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Export Opportunities for SMEs in Developing Countries: Global Experiences
The Maldives highly depends on tourism and fisheries but in recent years the government has been promoting export diversification to reduce the country’s reliance on tourism the National Resilience and Recovery Plan 2019-2023 states the government’s plan on ways to diversify the Maldives economy. Government plans to diversify the current value- added products in fisheries sector. Also, the government plans to diversify the economy by investing in commercial-scale agriculture and by making targeted policy interventions to amend the import/export regime. These interventions will help to facilitate growth and sustainability in the economy (Government of Maldives, n.d.).
Potential Export Development
It is worth noting that the volume of yellowfin tuna exports fell below 10,000 metric tonnes in 2022, the first time since 2010. However, this decline was partially offset by the growth in the export volume of skipjack tuna and canned or pouched tuna, the third largest export category (Maldives Monerary Authority, 2023).
During June 2023 despite a decline in Maldives earnings from both frozen skipjack tuna and fresh or chilled yellowfin tuna exports, Maldives domestic exports increased during the period, largely owing to an increase in earnings from canned or pouched tuna exports, together with frozen yellowfin tuna exports (Maldives Moneraty Authority, 2023).
These indicate that there is potential to increase the Maldives exports by increasing the export if the value-added products instead of exporting the unprocessed fish. It is also important to look into which sectors have grown over the past years. Figure 3 shows GDP at current price in millions of Maldivian Rufiya (MVR) for the year 2017 and 2021.
Figure 3 (Maldives Bureau of Statistics)
PUBLIC ADMINISTRATION PROFESSIONAL, SCIENTIFIC AND TECHNICAL ACTIVITIES REAL ESTATE FINANCIAL SERVICES TRANSPORTATION AND COMMUNICATION TOURISM WHOLESALE AND RETAIL TRADE CONSTRUCTION ELECTRICITY AND WATER MANUFACTURING FISHERIES
85 937.11
.79
89
GDP at current price 2017 and 2021 (in Million MVR)
ENTERTAINMENT, RECREATION & OTHER SERVICES HUMAN HEALTH AND SOCIAL WORK ACTIVITIES EDUCATION
1,772.61
1,530.14 0.98
3,205.06
1,94
2,941.24
2,283
945.77
.88
5,695.43
7,009.
5,025.20
6,388
3,752.62
8,600.68
1,2
4,236.69 85.90
13.46
1,609.95
62.67 3,022.68
6,102.
5,452.28
7,871.29
6,848.71
6,014.66
14,984.83
17,790.51
1,5
1,5
3,388.78
AGRICULTURE
987.03 892.12
2021 2017
The tourism sector has seen the most significant increase in exports, as shown in Figure 3. However, 32 the agriculture sector has decreased, despite the government's plans to diversify the economy through
investments in agriculture.

Export Opportunities for SMEs in Developing Countries: Global Experiences
The tourism sector has seen the most significant increase in exports, as shown in Figure 3. However, the agriculture sector has decreased, despite the government’s plans to diversify the economy through investments in agriculture.
Recommendations
Based on the finding of the research, there are several potential strategies that the Maldives could consider to improve its exports and reduce its reliance on tourism.
• Value-Added Processing of Fishery Products: Given the substantial proportion of unprocessed fishery exports, the Maldives could focus on enhancing its value- added processing capabilities. By investing in modern processing facilities and techniques, Maldives can transform raw fish into higher-value products such as canned, pouched, or processed fish. This approach not only diversifies export offerings but also opens avenues for increased revenue and employment opportunities within the domestic economy.
• Promotion of Seafood Products: With a rich marine ecosystem, the Maldives possesses the potential to expand its range of seafood exports beyond tuna. Exploring and promoting a broader spectrum of seafood products could tap into new markets and consumer preferences, fostering export growth and reducing overreliance on specific fish varieties
• Export Diversification through Agriculture: As highlighted in the National Resilience and Recovery Plan, investing in commercial-scale agriculture presents an opportunity for export diversification. By cultivating a diverse range of agricultural products, the currently Maldives can not only reduce its dependence on imported goods. However, potentially in future Maldives could develop a new export sector that aligns with international demand for organic and specialty products.
• Strengthening Trade Partnerships: The government could consider fostering and strengthening trade partnerships with key trading partners. Collaborative efforts to access new markets, negotiate favorable trade agreements, and participate in regional and global trade networks can bolster the export potential of the Maldives.
• Product Innovation and Branding: Developing unique and innovative products with a distinct Maldivian identity can differentiate the country’s exports in the international market. Effective branding and marketing strategies can elevate the value of Maldivian exports, attracting consumers and enhancing export revenue.
• Investment in Research and Development: Allocating resources to research and development (R&D) initiatives can lead to product innovation and quality enhancement. R&D efforts can focus on improving processing methods, developing new value-added products, and enhancing the sustainability and traceability of exports.
• Skills Development and Training: To support the transition towards higher-value exports, investing in workforce skills and capabilities is crucial. Providing training and education programs to enhance processing techniques, product development,
33

Export Opportunities for SMEs in Developing Countries: Global Experiences
and quality control can empower local industries to produce competitive and sought-after exports.
• Policy Interventions: As indicated in the National Resilience and Recovery Plan, targeted policy interventions that amend the import/export regime can create an enabling environment for export growth. This may include streamlining trade procedures, providing incentives for value-added production, and facilitating access to finance for export-oriented businesses.
Conclusions
Maldives possesses significant potential to diversify and enhance its exports beyond its current heavy reliance on tourism and fisheries. By strategically focusing on value-added processing, expanding product offerings, fostering trade partnerships, and investing in innovation and skills development, the Maldives can carve a path towards sustainable export growth and reduced vulnerability to external economic shocks.
References
1. Asian Development Bank. (2020, August). CPS Final Review Validation. Retrieved from Asian Development Bank: https://www.adb.org/sites/default/files/evaluation- document/609436/files/in244-20a_6.pdf
2. Government of Maldives. (n.d.). National Resilience and Recovery Plan. Retrieved from The President’s Office, Republic of Maldives: https://presidency.gov.mv/ Pages/Index/224
3. Maldives Bureau of Statistics. (2022, October 5). GDP Production. Retrieved from Maldives Bureau of Statistics: https://statisticsmaldives.gov.mv/nbs/wp-content/ uploads/2022/10/Annual-GDP-production-2022.pdf
4. Maldives Bureau of Statistics. (22). Annual-GDP-production-2022. Retrieved from https://statisticsmaldives.gov.mv: https://statisticsmaldives.gov.mv/nbs/wp- content/uploads/2022/10/Annual-GDP-production-2022.pdf
5. Maldives Bureau of Statistics. (n.d.). National Summary Data Page (NSDP)- Maldives. Retrieved from Maldives Bureau of Statistics: https://statisticsmaldives. gov.mv/nsdp/
6. Maldives Monerary Authority. (2023). Documents. Retrieved from ldives Monerary Authority: https://www.mma.gov.mv/documents/Annual%20Report/2022/ AR2022.pdf
7. Maldives Moneraty Authority. (2023, July). Economic Update Vol.5; Issue.6 Jun 2023. Retrieved from Maldives Moneraty Authority: https://www.mma.gov.mv/ documents/Economic%20Update/2023/EU-Jul-2023.pdf
8. Maldives Monetary Authority. (2023). External Sector Statistics. Retrieved from Maldives Monetary Authority: https://view.officeapps.live.com/op/view.aspx- ?src=https%3A%2F%2Fwww.mma.gov.mv%2Ffiles%2FMonthly%2520Sta- tistics%2FExternal%2520Sector%2F14.2.xlsx%3Fv%3D20230801&wdOrig- in=BROWSELINK
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Export Opportunities for SMEs in Developing Countries: Global Experiences
9. National Bureau of Statistics. (n.d.). National Summary Data Page (NSDP)- Mal- dives. Retrieved from Maldives National Bureau of Statistics: https://view.office- apps.live.com/op/view.aspx?src=https%3A%2F%2Fwww.mma.gov.mv%2Fdocu- ments%2FeGDDS%2FBOP_Maldives.xlsx&wdOrigin=BROWSELINK
10. The World BanK. (2016). Maldives: A Systematic Country Diagnostic. Retrieved from The World Bank: https://www.worldbank.org/en/news/feature/2016/05/10/ maldives-a-systematic-country-diagnostic
11. The World Bank. (2023). Population, total - Maldives. Retrieved from The World Bank IBRD-IDA: https://data.worldbank.org/indicator/SP.POP.TOTL?loca- tions=MV
12. World Bank. (2023). GDP (current US$) - Maldives. Retrieved from Worl Bank: https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=MV
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Export Opportunities for SMEs in Developing Countries: Global Experiences
ROLE OF MSMES IN REVIVING THE SRI LANKAN ECONOMY IN THE POST CRISIS PERIOD
H.M.R Kanishka Herath
Board of Investment of Sri Lanka Ministry of Investment Promotion, Sri Lanka
[email protected]
Abstract
Sri Lanka is a country who is trying their best to rise from the ashes. But due to adverse investment environmental factors, large scale investing or attracting Foreign Direct Investments (FDIs) may rarely happen. As such according to many experts Sri Lanka should be employ MSME sector as the lifeline in reviving an economy after a series of crises. During the last few decades, though many governments focus is triggered at the large scale enterprises, nevertheless micro, small and medium-scale enterprises (MSMEs), comprising trade, services, and manufacturing, put in a large proportion of revenue, employment, and innovation boosting the economy of Sri Lanka.
On the other hand, MSME sector also faces numerous problems during this crisis period. Therefore the government agencies and other stakeholders and expertise should come to a round table and should form a national policy to uplift the MSMEs in the country. Further the paper discusses the cause and effects of the economic crisis, potential of MSMEs to revive Sri Lankan economy during post crisis period, challenges that they have to tackle and the suggestions or the recommendations to be taken by the responsible government agencies and other stakeholders.
Introduction
Until 21/04/2019 Sri Lanka was a peaceful country with a better investor and entrepreneur friendly environment. But from nowhere, Easter bombing terrorist attacks came and the tourism and investor friendly environment of Sri Lanka was totally damaged. Almost after a year, while Sri Lankans were hoping for a new dawn Covid Pandemic came and almost destroyed some couple of years along with the future of the citizens. The economic crisis jeopardized the livelihood of the citizens and protests and dissatisfaction raised through the country against the prevailing government. Ultimately the economic crisis was converted into a political crisis. Irrespective of the political view, ethnicity or religion people were approached to the road and pointed out that the government failed and demanded it to resign. Therefore the Prime Minister and cabinet had to resign amidst the rising protests. Later the president also resigned by leaving the whole nation in chaos.
5
36

Export Opportunities for SMEs in Developing Countries: Global Experiences
Making things bad to worse, finally Sri Lankan Central Bank had declared its sovereign default, as the remaining foreign exchange reserves were not sufficient to pay the international debts.
Therefore Sri Lanka was isolated among other nations and considered as a failed state.
Further Sri Lanka’s economic crisis was made worse by the Russian-Ukrainian war and by the ongoing economic crisis of the USA and Europe. Most of the enterprises in the manufacturing sector lost the majority of their orders including their in hand businesses. Their major industrial export was the clothing and apparel and even in the global apparel market there was a decline of nearly 40% of the orders. During the crisis period many large scale investors left Sri Lanka by closing their business ventures. Further every organization stopped hiring new employees. This triggered the unemployment of the community, endangering the food security of the people.
At the end of the tunnel there is light as Sri Lanka is having some political stability and has settled the further worsening of their economy to some extent. According to the Commissioner of the Central Bank of Sri Lanka, Mr. Nandalal Weerasinghe, the Central Bank has already applied the brakes of the crashing vehicle of the Sri Lankan economy. But according to the IMF, Sri lanka is facing mounting challenges of including public debt that has risen to unstable levels, low foreign currency reserves, and persistently large finance needs will come in the future years.
But still the situation of the country is not good enough to attract huge foreign direct investments. As the government is suffering from a huge income - expense gap, offering incentives of tax concessions to large scale investors is unrealistic. Further higher interest rates also keep people away from entering new businesses.Further Large scale investments are more capital intensive and further they take some considerable time to establish and most probably it may be some years before starting the commercial operations.
On this point the potential of establishing, developing and promoting MSMEs to revive the economy becomes a topic to discuss.Though traditionally this area is underrated, recently it is identified as an essential strategic sector in Sri Lanka. MSMEs contribute to 52 percent of the GDP while 45 percent of the domestic workforce is engaged in this area. Before going into deep analysis, understanding the potential of MSMEs to revive the Sri Lankan Economy in the post crisis period is a very important point.
Micro, small and medium-sized enterprises are businesses that comprise a lower number of employees, assets, or revenues at a lower scale when compared to large-scale firms. The exact definition for an SME may differ based on the country. In Sri Lanka, a business is considered as an SME if its number of employees does not exceed 300 individuals and if its revenue does not exceed 750 million LKR.
SMEs play a major role in the developing economy of many Asian economies which are similar to Sri Lanka. These entities are less capital intensive compared to larger firms. Therefore, the growth of an SME provides more employment opportunities to the youth and supports the battle against poverty. They also can increase tax bases much quickly
37

Export Opportunities for SMEs in Developing Countries: Global Experiences
when compared to big organizations. This is favorable to any country from an economic perspective.
But MSME sector enterprises also face a similar set of problems while establishing and running their business ventures. But in Sri Lanka under a severe economic crisis those problems will be amplified.
Objectives
1. To examine the structural and economic contribution of MSME to the national economy
2. To identify the specific challenges faced by MSMEs in Sri Lanka during the post crisis period
3. To evaluate effective methods of government assistance to Sri Lanka’s MSME sector
Literature Review
(i) Sri Lanka’s economic crisis, causes and effects
The crisis is said to have begun due to multiple compounding factors like tax cuts, money creation, a nationwide policy to shift to organic or biological farming, the 2019 Sri Lanka Easter bombings, and the impact of the COVID-19 pandemic in Sri Lanka. Further Ukrainian - Russian war and recession in Europe and the United States of America also catalyst the issue.
During the crisis Sri Lanka’s FOREX stocks were not enough to import fuel on time. Therefore businessmen have to close down their enterprises and wait in ques near fuel stations for days. Further LP gasoline was out of stock and the restaurants, hotels, short eats and instant food industry was totally outdone with that. Further due to fuel and coal shortages there was power cut for long hours and all the industries were affected.
During the climax of the crisis the author carried out a case study regarding three poly bag and polysack manufacturing factories located in the Central Province. Within a few weeks the US$ exchange rate of a Sri Lankan rupee skyrocketed to 182 to 360. All of them engaged in importing raw material and supplying it to the local market. With the increase of raw material cost due to depreciation of currency, he tried to double the price of the product. At the end of the day because of the price hike the company lost the majority of their fixed businesses.
Though the official statistics were not issued by the government, according to sector wise studies done by various stake holdings agencies more than 1.5 to 2 million people lost their jobs.
(ii) MSME sector in Sri Lanka
MSMEs have their inheritance qualities and they are very diverse in their nature. Therefore it is very difficult to find a universal gauge or a worldwide measurement
38

(ii) MSMEsectorinSriLanka
MSMEs have their inheritance qualities and they are very diverse in their nature. Therefore it is very
Export Opportunities for SMEs in Developing Countries: Global Experiences
difficult to find a universal gauge or a worldwide measurement to evaluate them. Because of that
to evaluate them. Because of that reason, there is no commonly accepted definition
reason, there is no commonly accepted definition for SMEs. It is significant that various countries
for SMEs. It is significant that various countries use multiple parameters to define
use multiple parameters to define SMEs such as number of employees, amount of capital invested,
SMEs such as number of employees, amount of capital invested, amount of
amount of turnover, etc. Further different definitions are also used by different organizations within
turnover, etc. Further different definitions are also used by different organizations the sawmiethcoinunthtreystaomdeficnoeuSnMtryEstofodredfiifnferSenMt EpusrfporsedsifafnedretnhitspiusrcpoomsmesoannindSthriisLaisnkcaomasmwoenll.
in Sri Lanka as well.
Table1: showsdefinitionsofSMEsinSriLankabydifferentauthorities
Table 1: shows definitions of SMEs in Sri Lanka by different authorities
It is significant that there is less research done on the reviving economy of Sri Lanka during the post crisis period. The magnitude of the crisis is still unknown and therefore
It is significant that there is less research done on the reviving economy of Sri Lanka during the post
the same reason, the recovery time is also at a question mark leaving all the stakeholders
crisis period. The magnitude of the crisis is still unknown and therefore the same reason, the
in a turbulent situation. Hence the facts relating to the potential of MSMEs to rebuild the coruencotrvye’rsyetcimoneoismaylsoisaatlasoqupelsatcioendmataraklloewaveirngleavlel lt.he stakeholders in a turbulent situation. Hence
the facts relating to the potential of MSMEs to rebuild the country’s economy is also placed at a
SMEs have a strategic role in any economy, particularly in developing countries. Further
lower level.
this crucial sector demonstrates the most unique contribution to the growth of a country, and Sri Lanka is no exception. Even during a crisis, according to their nature, SMEs can provide more employment opportunities than many other sectors, if proper plans and assistance are provided by the government or Ministry. In Sri Lanka, SMEs also
contribute immensely to national output. To make this a turning point, the Government’s
SMEs have a strategic role in any economy, particularly in developing countries. Further this crucial
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Export Opportunities for SMEs in Developing Countries: Global Experiences
attention to the suffering SME sector is extremely important as their success or failure can have an impact on the future of our children. In addition, SMEs can play a pivotal role in achieving sustainable recovery from the current dire economic situation where external help/funds is delayed for unavoidable reasons.
However, the common belief of the stakeholders of the SME sector is that they are being neglected by successive Governments, including the incumbent, despite their visible representation in a number of forums. The Easter Sunday attacks, the Covid-19 pandemic, and the current gruesome circumstances resulting from the economic crisis all dealt a triple blow to these businesses. According to statistics, SMEs account for 80 percent of all enterprises in Sri Lanka, making up a significant portion of its economy. These can be found in all economic sectors, including the primary, secondary, and tertiary ones, and they offer jobs to people with a variety of talents, including skilled, semi-skilled, and unskilled workers.
It should be said that while the percentage of SME enterprises in the industrial sector is 20 percent, it is over 90 percent in the service sector. Additionally, SMEs, which are projected to account for around 35 percent of employment, are a crucial source of job prospects in the country. There is no doubt that SMEs make up a crucial part of the national economy. Accounting for 52% of total GDP and 45% of national employment, these enterprises present a wealth of opportunity for domestic economic growth (1).
Generally, SMEs tend to be labor-intensive and require less establishment capital than larger firms. As such, growth in the SME sector poses significant potential to create new employment opportunities and facilitate wider distribution of wealth across rural and regional areas. They also hold the potential to increase tax bases at a quicker pace than larger enterprises, thereby contributing to government revenue. However, Sri Lanka still lags behind regional neighbors when it comes to SMEs as a percentage of total enterprises.
In India, Malaysia, and Singapore, SMEs make up between 95-99% of total enterprises, while in Sri Lanka, they barely make up 80% (2018). Moreover, despite their significant contribution to the economy, SMEs in Sri Lanka only account for a marginal proportion of total national exports, suggesting a severe disconnect between the interest of the SME community in expanding their market base beyond the domestic sphere and their practical ability to do so.
The Government itself has acknowledged the need to strengthen the SME sector and increase its export potential. The National Export Strategy of Sri Lanka (2018-2022) explicitly acknowledges the need to “strengthen Sri Lankan exporters’ market entry capacities” and support “the integration of SMEs from across Sri Lanka into the export value chain”. As a result, the Enterprise Sri Lanka credit programme has been launched by the Government in an attempt to improve awareness and access to finance for small and medium entrepreneurs through a variety of loan schemes. These include interest subsidy loan schemes, donor-funded refinance loan schemes, and financial and non- financial support programmes.
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Export Opportunities for SMEs in Developing Countries: Global Experiences
Methodology
As mentioned earlier the research centered on the ongoing economic crisis of Sri Lanka. As the subject lasted for just above one year there is less research done on the reviving economy of Sri Lanka during the post crisis period. Therefore Explorative Research Study should be employed here.
Exploratory research takes place when problems are in a preliminary stage or when the topic or issue is new or when data is difficult to collect. Further exploratory research is research conducted to investigate a problem that is not clearly defined, has been under- investigated, or is otherwise poorly understood.
Exploratory research, intends merely to explore the research questions and does not intend to offer final and conclusive solutions to existing problems. On the contrary it helps us to have a better understanding of the problem.
When conducting exploratory research, the researcher ought to be willing to change his/ her direction as a result of revelation of new data and new insights3.
Also this research is a Qualitative Research Study. Qualitative researchers may gather information through observations, note-taking, interviews, focus groups (group interviews), documents, and artifacts. Further, Qualitative research can also be viewed as collecting and analyzing non-numerical data to understand concepts, opinions, or experiences. It can be used to gather in-depth insights into a problem or generate new ideas for research
The study is based on secondary data and the relevant and accurate data has been collected from various sources of government and non-government publications. It includes the Annual Reports published by the Central Bank of Sri Lanka, Publications from Chamber of Commerce, Sri Lanka and academic research done in previous years.
Data Analysis
To examine the structural and economic contribution of MSME to the national economy
Small and medium-sized enterprises (SMEs) are the bedrock of Sri Lanka’s economy. Comprising 75% of all active enterprises, Sri Lanka’s SMEs provide 45% of employment and contribute 52% to its gross domestic product. Creating an environment conducive to SME growth is integral to achieving equitable economic growth in Sri Lanka.
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Export Opportunities for SMEs in Developing Countries: Global Experiences
But with the addition of Micro Level enterprises % representation of large scale enterprises further But with the addition of Micro Level enterprises % representation of large scale enterprises further
But with the addition of Micro Level enterprises % representation of large scale enterprises
deplete. Therefore the MSMEs have a pivotal role in the Sri Lankan economy. Accordingto the deplete. Therefore the MSMEs have a pivotal role in the Sri Lankan economy. Accordingto the
further deplete. Therefore the MSMEs have a pivotal role in the Sri Lankan economy.
below chart, distribution of establishments in the country in relation to the four categories Micro
below chart, distribution of establishments in the country in relation to the four categories Micro Acwciothrd9i3n5g,7t3o6t(h9e1.b8%el)o,wSmcahlla,r7t,1,d1i2s6tr(i7b.u0t%io)nMoefdeiusmtab1%lisahnmdelanrtgsei0n.2t%heecstoaublnistrhymientrselation to
with 935,736 (91.8%), Small, 71,126 (7.0 %) Medium 1% and large 0.2% establishments
the four categories Micro with 935,736 (91.8%), Small, 71,126 (7.0 %) Medium 1% and
The total MSME sector accounts for 99.8% of the total establishments in the country.
The total MSME sector accounts for 99.8% of the total establishments in the country.
large 0.2% establishments
Distribution of Establishments in Non Agricultural Sector
ThDeisttortiabluMtioSnMofEsteacbtloisrhamcecnotus nintsNfonr A99gr.8ic%ultoufrathl Seetcottoarl establishments in the country.
(Source: Non-Agricultural Economic Activities in SL, Dept of Census and Statistics, 2013/14) Di(sStoruirbceu:tNion-AogfriEcusltuarbaliEschomnomenictsAcintivNitieosninASgLr, Diceuptltouf rCaenlsSusecantdorStatistics, 2013/14)
Table: Number of Establishments and percentage distribution economic sector wise Table:TNaublme:bNeurmobfeEr sotfaEbsltiasbhlmishemntesntasnadndppeerrcceentagedisistrtirbiubtuiotnioencoencomniocmseictosrecwtioser wise
(Source: Non-Agricultural Economic Activities in Sri Lanka, Department of Census and
(Source: Non-Agricultural Economic Activities in Sri Lanka, Department of Census and (Source: Non-Agricultural EconomiSctaAtcisttiivcisti,e2s0i1n3/S1r4i)Lanka, Department of Census and
Contribution of MSMEs to the domestic workforce
Contribution of MSMEs to the domestic workforce
Statistics, 2013/14)
Statistics, 2013/14)
Distribution of MSMEs by geographic sectors urban, rural and estate
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