An Index Based Approach to Assess the Development of Small and Medium Enterprises: A Case from 32 Asian Countries
Aloysius. N. M.*, Abeynayake. N. R. and Wijeyewardena. H. M. S. L.
Small and Medium Enterprises (SMEs) have been recognized as important to the economy in terms of their considerable contribution to GDP, employment generation, regional development and poverty reduction. Firms in SME sector are less dynamic and underdeveloped as against large scale enterprises in the Asian Countries. This creates the need for more efficient and professional government policies for SMEs to upgrade and strengthen this sector to meet the expectations of the countries in the region. In this study, the levels of SME development in Asian countries were measured under six core policy intervention areas; enabling environment, modern appropriate technology, culture and skills development, access to finance, market facilitation and infrastructure development, by developing six indices. Secondary data for SMEs in 32 Asian countries were collected from the World Bank’s Enterprise Survey and indices were constructed using Principal Component Analysis. Results mainly highlighted that most of the Asian countries have well developed business enabling environment, infrastructure and satisfactory levels of access to finance However, the usage of modern technology by SMEs was found wanting. Culture and skills development and market facilitation were critical in most countries. On that account, the governments of developing nations in the Asian region should conceive better policies for SMEs to uplift marketing facilities, to strengthen the culture and skills of employees working in SMEs and also to provide better knowledge on modern technology. When considering the overall development of SMEs, China was the leading country closely followed by Thailand and Malaysia. Yemen was the country with least developed environment for the SME to thrive.
KEYWORDS: Asian region, Principal component analysis, SME policies