APEC benefiting small traders?

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.