APEC Workshop on SME : The Dynamics of SME: Informality and Women Entrepreneurship 2-3 September 2013 Nusa Dua Bali Indonesia

Organizer: Indonesian SMEWG/R&D for Cooperatives and SMEs Resources, Ministry of Cooperative and SME Co-organizer: Center for Industry, SME and Business Competition Studies, USAKTI Source of fund: APEC Support Fund

Objective 1) to discuss key issues on development of SMEs in the region related to informality and women entrepreneurship; 2) to cultivate the capacity of officials from APEC member economies to develop policies that facilitates capacity building in SMEs the development of women entrepreneurs; and 3) to discuss how to facilitate cooperation and build a network among policy development officials from APEC member economies in dealing with the issues

Main addressed issues: 1) Key constraints facing SMEs in APEC 2) Differences in the dynamics of SMEs growth and in characteristics of entrepreneurs between low –and high-income economies; 3) importance of informality as a potential source of dynamic SMEs; 4) negative and positive consequences of formalizing informal enterprises; 5) Effect of regulatory constraints to formalization on the performance of informal enterprises;

6) main reason of women to conduct their own firms in less-income economies); 7) Differences in characteristics of women entrepre-neurs between low- and high-income economies; 8) Main reason that majority of women having own businesses in low income economies are found in the informal sector; 9) policies which are successful in encouraging women to start own businesses, not in informal but in formal enterprises

Key Results 1) all invited speakers from e.g. Indonesia, United States, Chinese Taipei, Japan presented their ideas/thoughts; 2) participation: 64 participants from 14 member economies; 3) new evidence was presented and discussed; 4) new policy recommendations for APEC government officials.

Most important debates: 1) Do informal enterprises need to be formalized; what are the main benefits for them? 2) Do women entrepreneurs need a special treatment (e.g. special policies or regulations) 3) Within MMEs, do female-owned enterprises face more constraints than male-owned enterprises?

Policies Recommendations 1) as domestic demand is the key market for the majority (if not all) SMEs, the survival or the ability of local SMEs to growth depends much on the easiness to market their products. Policy recommendations: - policies or regulations to remove or eliminate all marketing barriers; - no direct market intervention, but protection of indigenous products is needed; - provide supports for promotion activities.

2) two key constraints facing SMEs are often mentioned, i.e. lack of access to finance and difficulties in getting raw materials. Policy recommendations: - eliminate input market distortion and barriers to access to formal sources of finance; - not subsidized interest rate but more easy access to bank credit or other formal sources of finance; - special bank or SME bank needs to be established (some APEC member economies have already); -Different financial instruments are needed for different groups/categories of SMEs, i.e. micro/cottage/household enterprises, SEs and MEs; informal and formal enterprises; export and non-export oriented SMEs; SMEs by sector or by group of industry.

3) with respect to women entrepreneurship or development of women-owned SMEs, policy recommendation: -no need special treatment or special policies to support women entrepreneurs, but policies that -Remove all including cultural barriers and policies that focus on access to education and training, finance, networks, policy makers/government officials (through e.g. strong women entrepreneurs association); -policies that create an environment where SMEs in general and women-owned SMEs in particular can grow ;

4) With respect to digital trade or SMEs' integration into e-trade, policy recommendations: - regulations/policies to promote digital free trade; - policies to help telecom operators to expand their services to remote areas; - education/training for SMEs owners and employees to be aware of the importance of ICT and to use it; - policies to protect data sovereignty/privacy (cloud).

5) create mechanisms to bring the informal into the formal: need some kind of incentive, including easy doing business in the formal sector (e.g. cheap and easy registration procedures, simple licensing processes). 6) Other policy recommendations: - Improve access to business information - support SMEs-related business associations -reduce corruption by government officials -promote public-private dialogues, e.g. government ministries with e.g. chamber of commerce, SMEs related association; -support networking and mentorship programs.

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