APEC benefiting small traders?

By Juni Thamrin and Charlene Simpson

BANDUNG (JP): The 1997 Action Plan for small and medium enterprises (SMEs) has been hailed by APEC as the key to strengthening SMEs dynamism. Under closer inspection, the plan contains some glaring oversights which have the potential to further shackle Indonesian SMEs, and widen gaps in wealth and opportunities.

Since 1994, when APEC conducted a survey of SMEs in the Asia- Pacific region, and found that the 40 million of them account for about 90 percent of all enterprises, SMEs have been targeted by APEC as ascendant players in the coming free market era. APEC believes that SMEs, because of their "innovative and flexible" nature, are better equipped to respond positively to the challenges of increased trade liberalization plans to broaden access to markets.

Unfortunately, APEC's market access plans treat all SMEs as if they already enjoy access to computer technology and other advantages which put them on an equal information footing with larger enterprises. In fact, 97.6 percent of all SMEs in Indonesia have an annual turnover of less than Rp 50 million (1993 data from the Ministry of Cooperatives and Small Enterprises). For small SMEs in Indonesia, owning a computer is currently unimaginable. Does this mean only the elite of the SMEs will be able to benefit from the first point of the plan?

The third point of the plan deals with facilitating technology transfer from developed to developing countries. In accordance with the APEC theory, in a free market economy SMEs in developing countries will ideally have greater access to cheaper technology, and technologically skilled workers; encouraging competitiveness and greater efficiency among SMEs.

The reality, however, is likely to be far different due to APEC's adoption of the policies of Intellectual Property Rights (IPRs) laws, established during the GATT Uruguay Round. IPRs agreements involve the protection of patents and trademarks, outlawing unauthorized use of patented products. IPRs can be divided into two broad areas: IPRs concerning technology patents, and IPRs concerning biodiversity patents. Both have far reaching implications for Indonesian SMEs.

Indonesia is full of imitation products like fake Chanel bags, and phony Levi's. Indonesia's shoe and garment industries in particular rely on manufacturing imitation products for sales. SMEs which have based their business on imitating prestige products and selling them at low prices will be most effected by the new IPRs laws. The U.S. Trade Representative already has targeted Indonesia as a major violator of IPRs laws.

Of particular concern to Indonesia are the affects of biodiversity IPRs, that will hit the agriculture industry which accounts for 63.8 percent of all SMEs. With IPRs on biodiversity, transnational corporations can take local plants and livestock species, develop them into profitable patented products, and sell them back to local farmers at higher prices. Small farmers will not be able to reproduce or modify seeds which have been biotechnological developed, without paying royalties to the corporations which patented them.

U.S. transnational corporations are the winners under the new IPRs laws, potentially reaping high profit from poorer buyers in developing countries. APEC's commitment to "transferring technology" may in practice merely means the sale of technology from industrialized to developing countries. Certain technologies are highly monopolized by U.S. transnational giants such as Texas Instruments, IBM and Microsoft, making it difficult for SMEs in developing countries to compete for comparative advantage in the free market, and eroding incentives for new technology innovations.

More problems can be seen in the fourth point of the Action Plan: access to finance. APEC highlights the role that Export Credit Agencies will play in supporting SME exporters; again with reference to the use of the Internet to identify and contact Export Credit Agencies. Once more, small Indonesian SMEs without computer access will suffer from lack of awareness about APEC supporting programs.

The fifth point in the plan directly addresses the urgent need for information among SMEs. Unfortunately, it again relies on computers and electronic information systems to provide "accurate and timely" market information to SMEs without addressing how or who should be supplying access to these technologies.

One Stop Shops are also cited as solutions for the dissemination of information. While an excellent idea, the APEC plan must provide guidelines which insist on the decentralization of such facilities. If located in only in cities, One Stop Shops may provide no benefit to those SMEs in rural areas; equally, if located in Java, SMEs on outer islands will be at a disadvantage.

APEC is yet to define what it means by SMEs, and definitions of SMEs vary from one member nation to another. The implications of a lack of an umbrella definition itself may create problems for Indonesia's SMEs, especially those at the lower end of the scale. In the past, inadequate differentiation between micro, small and medium-sized enterprises in ASEAN SME support programs has led to larger SMEs being able to take far greater advantage of the benefits provided. The same could occur if APEC does not address its own lack of definition. Lack of definition has the potential to cause great inequality among SMEs; between large and small SMEs on a national scale, and between SMEs in developing nations and those in industrialized nations.

Indonesian SMEs have to cope with a high-cost business environment. Enormous numbers of levies, illegal and legal, are a part of daily life for SMEs in Indonesia due to bureaucratic corruption. Monopolies and oligopolies tend to favor doing business with large enterprises, raising the prices of their products for small enterprise and reducing their competitiveness.

APEC has a positive role to play in the region as an agent of globalization that insists on greater transparency in all economic matters. The recent closing of 16 insolvent banks is an example of how globalization, and the IMF's insistence on greater transparency has already effected Indonesia. APEC's requirement of transparency in member economies may eventually remove the weaknesses in Indonesia's economy which cause today's high-cost business environment.

Indonesian SMEs need more than vague promises to survive in the neoliberal economic era to come. APEC must take seriously its dedication to "sustainable and equitable" development and not leave issues of social and economic equity up to individual governments. Implications for workers and SME entrepreneurs at the lower end of the scale need to be taken into account by APEC.

First priority should be given to finding a regional umbrella definition of SMEs. APEC working groups already exist in such areas as marine conservation; another should be established to protect the rights of small SMEs, especially from developing countries. Local NGOs could make use of working groups as a forum for recommendations to APEC and lobby to protect the rights of the smaller SMEs.

Small and medium enterprises in the Asia-Pacific region do have enormous importance and potential. Economic liberalization policies need to be tailored to the needs of all the players in the SMEs category, and not just to a small percentage who are already at an advantage.

If APEC continues to encourage nations to adopt its aggressive free trade policies without paying greater attention to the possible negative impact those policies can have, we need to question whose interests does APEC serve?

Who really benefits from the APEC SMEs agenda? Is it the 40 million SMEs in the Asia-Pacific region, or only a small percentage of SMEs from the industrialized nations and elite SMEs in developing countries?

Juni Thamrin, senior researcher, and Charlene Simpson, a volunteer at the AKATIGA, a Bandung-based public policy research organization.