New orthodoxy of small and
medium enterprises promotion
Dr. Franck S. Wiebe, Chief Economist, The
Asia Foundation, USA
Throughout Asia today, there is a new focus
on the role played by small and medium enterprises (SMEs) in the broader process of
economic development. Once considered a relatively unimportant aspect of the economy, SMEs
are increasingly viewed by government policy makers and international donors alike as a
critical sector for generating economic growth. Given this increasingly important role, a
proper understanding of the SME sector, its value and its needs, has likewise gained
urgency for planning policy and program approaches.
In Asia, recognition of the central role that
SMEs play in a healthy, dynamic economy has emerged since the financial crisis in the late
1990s. Large businesses, including conglomerates and state-owned enterprises, SOEs, were
seen for decades as the engine of growth and, as a result, governments provided protected
domestic markets, special access to scarce capital, and other non-market advantages to
ensure that flagship firms and industries thrived and pulled the rest of the economy along
with them. In this setting, SMEs were seen as part of the traditional economy, with low
levels of investment and labor productivity, giving policy makers little reason to worry
about how the advantages provided to large firms might actually serve to the disadvantage
every body else.
The financial crisis revealed the systemic
weakness of this preoccupation with large and politically preferred firms. The intimate
relation between large businesses and domestic financial institutions made it possible for
significant lending to take place, based not on financial principles, rather on the
internal needs of these large firms. The acquiescence if not active support, of government
regulators in the channeling of the capital to these privileged firms, despite prudential
regulations that were often on the books, helped set the stage for the financial sector
meltdown that ensued.
Today, in many Asian countries, the
inflexible, debt-ridden giants continue to struggle to right themselves, and economies
that depended on these firms and industries for growth now find themselves stagnating
increasingly, the cost of propping up unprofitable state-owned enterprises or bailing out
deeply-indebted conglomerates is generating too much red ink, either in the government
budget or, more often, on the books of state-owned banks, to remain a credible development
strategy.
With the focus on selected large firms and
strategic industries no longer in favor, a new orthodoxy of dynamic development in Asia
has emerged that places far greater emphasis on the role of SMEs in creating jobs and
raising incomes. The new model of economic development has not been restricted to
crisis-affected countries, but has gained currency among multilateral development banks
and bilateral donors and, as a result, has spread throughout Asia and much of the rest of
the developing world. Unfortunately, rather than focusing development efforts on leveling
the play field for all firms, the new approach reproduces many of the weaknesses that
plagued industrial policy by seeking direct growth by providing special advantages to a
preferred category of firms.
The new orthodoxy of SME Promotion:
The pervasiveness of this new way of thinking, call it "SME-centered
development", is difficult to exaggerate. Of course, multilateral development banks
continue to lend for large-scale infrastructure projects, and grass roots NGOs continue to
support the development of micro-enterprises, such as self-employed traditional artisans.
What is new that both types of development institutions have now incorporated the language
of small business promotion into how they talk about their objectives. Further, the
bilateral donors that populate the space between the biggest lenders and the smallest
community organizations have embraced the new orthodoxy with perhaps the greatest zeal.
And many Asian government, even while loathe, or unable, to cut their losses by abandoning
the large conglomerates and SOEs to their final judgements at the hands of the market,
have adopted the new orthodoxy with surprising alacrity, in some cases even leading the
revolution in development strategy by pushing donors to do more to help them promote the
small business sector.
While the focus of development effort appears
to have shifted away from large firms and strategic industries, the new paradigm
attributing a more central role to the SME sector unfortunately maintains some of the
tenets that motivated the failed development strategy of the past. Perhaps most
importantly, the new orthodoxy maintains a pivotal role for the government in promoting
the growth of SMEs in selected "competitive"'' sectors, just as large firms and
strategic industries were the recipients of many forms of publicly-provided advantages in
the past.
Many of the problems that beset current SME
promotion stem from a poor understanding of what SMEs are, why they are important, and
what the small business sector needs to become more dynamic. Three misconceptions of SMEs
characterize much of the thinking about development strategy today: 1) that SMEs are
somehow more noble and valuable than large firms; 2)00 that SMEs are weak and vulnerable;
and 3) that many of the constraints to the growth of the SMEs are problem specific to the
firm, rather than systemic barriers to efficient economic growth conceived more broadly.
These three ideas conspire to rationalize a strategy that seeks to promote, protect and
provide direct support to small businesses, but that too frequently results in expensive
and ineffective interventions that leave the systemic impediments to small business growth
unchanged.
Text courtesy: Small and Medium
Enterprise Development in Nepal-chief editor.
The Mediterranean TGV: the
marriage of technology and environment
-Jean-Luc Crozel, Journalist with the
regional daily, La Provence, France
On June 10, 2001, departing from Marseilles,
the double decker blue and silver trains of the TGV Mediterranee welcomed its first paying
passengers for a journey that took them to Paris at a speed of 300km/ph in a maximum of
three hours. Begun twelve years ago with the launch of initial studies by the government,
then the real work started on the ground five years ago with the arrival of bulldozers,
tunnel borers and cranes, when the site very quickly took shape forming a long furrow
swarming with men and machinery.
Starting at both ends, on the outskirts of
Marseilles and Valence, the construction of the new line began with overhead and
underground structures-a project long in preparation and development because of the
vulnerability of the natural areas through which it passed and the beauty of the Provencal
countryside. Th designers of the new line, SNCF, the publicly owned French rail company,
through the TGV Mediterranee organization, initially opposed by residents and environment
campaigners, made it a point of honor to blend the route into a succession of picturesque
rural landscapes.
"Initially, the planners conceived the
whole line cutting through the hills in the interests of high speed. They subsequently
adapted the structural features and landscaping to each site through which it
passes", explained Guy Claverie, who is in charge of planning and the environment on
the new line.
Cutting edge technologies: The 500 permanent
structures that punctuate the route, seven magnificient viaducts varying in length from
320 to 1,730 meters, and two tunnels, one more than 8kms long on the outskirts of
Marseille, were the object of intensive studies which made use of the most efficient
construction techniques, some for the very first time in the world.
Thus the Vantabren viaduct, whose 1,730 meter
plinth straddles a motorway, was connected in the space of five years by rotating two
4,000 ton sections hoisted into position on their columns. This daring technique was
employed because there was no question of stopping motorway traffic for an extended
period. Another far from minor aspect was allowing for seismic risks. The structures of
the new line have specially designed to withstand an earthquake of 5.5 on the Richter
scale occurring at the very moment when two trains are passing each other at high speed.
On the environmental side, the architects
have favored curved and rounded shapes, even the concrete being specially mixed to merge
into the countryside along the route. But the odyssey of the new line is also distinctive
for the care taken not to disturb wildlife and plants. Fences have been specially designed
to prevent animals crossing, and passages created so that deer, wild boar and toads can
cross the high speed track. Embankments, mounds and walls have been redesigned, seeded and
planted in order to stabilize them and make them attractive to look at. At the last count,
more than a million plants have been planted, some times after growers had had to learn
how to cultivate species they had never had before.
This background work represents an area of
expertise that SNCF presents to visitors from all over the world, more than 10,000 out of
a total of 100,000 visitors from US, China, Korea, Australia, the EU, Eastern Europe and
the ME. Alongside this, a web site, listed by most search engines, provides an idea of the
scale of the work done. That is not all: SNCF wanted to see how these features evolve over
time; hence the creation of a monitoring unit whose first task is to ensure that the
landscapes dominates the train, and not the other way round-another innovation.
The drive to develop the country: The
care taken over the construction of the TGV Mediterranean line is certainly due to the
beauty of the countryside through which it passes. But the concepts of land development
and commercial ventures also play their part.
Indeed, for the first time, the high speed
train will make Marseilles and its port, France's largest and third largest in Europe in
terms of trade, one hour from Lyons, the Rhone-Alpes regional capital and the third
largest French city, bringing two metropolises together, as well as adjusting the balance
of the communications network to the South to the benefit of medium sized towns. For SNCF,
this new TGV service should also be considered in the context of the completion of a
European high seed rail network that will extend first towards Spain, then to Italy.
Studies are in progress. What's more, bringing the new line into service will release
other tracks for freight between Marseilles and Lyons.
Lastly, the travelling public. For the first
time the train will be in direct competition with the plane on the
Marseilles-Paris-Marseilles route and SNCF should gain six million additional passengers
here, thus shooting ahead as it enters the new century. Text courtesy: Label France Number
44. July 2001- |
