Regional Integration in Asia and the Contribution of SMEs – a Review of the

Over the past decade the economies of East Asia and APEC more generally have been increasinglyopening up their markets, and in the process have achieved significant gains in exports and economicgrowth. In conjunction with this increased economic integration, there has been increased recognitionby regional governments of the potential for a substantial increase in the participation by smallbusinesses in the generation of regional income, employment, exports, investment and expandedeconomic growth. Advances in information and communications technology add credence to thispotential. In addition, developing economies are especially seeing small businesses as potentialinstruments for the alleviation of poverty and regional development. While in developed economies theformation of horizontal and vertical clusters of small businesses can form the basis for internationallycompetitive regions, and this can be further enhanced through the construct of networks with similarsmall businesses locally or internationally.This viewpoint was given further stimulus after the financial and economic crisis of 1997-98, arisingfrom which there has been a growing recognition of the need for the East Asian economies to engagein comprehensive restructuring of their corporate sectors, with the objective of achieving transparency,improving corporate governance and developing globally competitive enterprises. Small and mediumenterprises (SMEs) can play a key role in the attainment of such objectives.This paper reviews the contribution of the SME sector to the growth and development of theEast Asian economies, and their important contribution to economic growth, employment, trade andinvestment and the development of globally competitive economies. In doing so identification of thepotentially important role of SMEs in facilitating and bringing about the practical benefits of closereconomic integration are also emphasized. To enable this to occur it is important to identify withinthe East Asian region: barriers to their development key factors essential for their capacity buildingstrategies to enhance their competitiveness in the global marketplace key components relating totheir export success and their role and importance in facilitating regional economic development,reducing income inequality, and empowering regional involvement in the global economy.Keywords: Small and Medium Enterprises (SMEs), Regional Integration, Competitiveness, AsiaJEL Classification: F15, L22, L25