Author Archives: Kyounghye Shim

SMEs: the Intersection of Economic Development and Democratization

Small and medium-sized enterprises make a significant contribution to the economies of Southeast Asia.

Because small and medium-sized enterprises (SMEs) are measured according to the size and level of development in a particular country, the definition of an SME varies from country to country. This is one of the main reasons that SME research and data analysis entail serious impediments. Despite debate over whether SMEs are beneficial compared to multinational corporations, there is no denying that SMEs drive sustainable growth and positively affect the economies of individual countries and the global economy.

First of all, SMEs play a significant role in national economies around the world, according to a June 2017 report by the Organisation for Economic Co-operation and Development (OECD). In many countries, SMEs represent 98 percent or more of all businesses. They are also great economic engines, accounting for an average of 70 percent of jobs in OECD countries and 45 percent of net total employment and 33 percent of gross domestic product (GDP) in emerging economies. Moreover, the World Economic Forum and the National Center from the Middle Market (NCMM) have shown that SMEs, as the main source of economic growth, produce the region’s middle class and consequently contribute to poverty reduction.

Additionally, SMEs are central to efforts to achieve more inclusive growth. They create opportunities for upward mobility in society by allowing disadvantaged or marginalized groups including youth, women, seniors, migrants, and minorities to actively participate in a country’s productivity. By employing broad segments of the labor force, including low-skilled workers, SMEs provide employees with access to social services, such as improved health care. For example, as part of its efforts to increase SMEs’ participation in the macroeconomy from 20 to 35 percent by 2030, Saudi Arabia’s government announced that four in 10 startups launched in 2017 were owned by women.

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Safeguarding Democracy and Free Markets in Southeast Asia

A floating market in Vietnam. Survey findings show that people in Southeast Asia place more emphasis on economic development and free markets than on the values traditionally associated with democracy.

Some Southeast Asian countries are plagued by pessimistic views of democracy, as the system of transparent elections and/or government accountability are severely lacking in certain contexts.

In determining how to bolster democracy in places where it faces many threats, it is important to first take a step back and ask the bigger questions.

For example, does economic growth trigger democratization? Or does a democratic society spur economic growth? According to the World Economic Forum, democratic societies are based on policies and institutions that lay the foundations for democratic principles, such as liberty and equality. These democratic policies and institutions benefit firms and individuals, who in turn act as engines for the overall economy. On the contrary, the Brookings Institution has articulated the reverse theory, demonstrating that economic institutions are the source of democratic growth around the world.

At the Center for International Private Enterprise (CIPE), we believe that functioning democracies and market economies are essentially two sides of the same coin, as they commonly share principles of transparency, fairness, accountability, and responsibility. This post will focus on how democracy is generally recognized in Southeast Asia and will highlight CIPE’s endeavors to build market-oriented democracies in the region.

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