5 November 2014: Small and medium-sized enterprises (SMEs) need a sound business environment, access to finance, and institutional support to identify and take advantage of market opportunities, according to a report from the World Trade Organization (WTO) and the International Trade Centre (ITC). The two organizations launched the report, titled ‘SME Competitiveness and Aid for Trade: Connecting Developing Country SMES to Global Value Chains,’ at the World Conference of Trade Promotion Organizations, which is taking place in Dubai, United Arab Emirates (UAE).

According to the report, SMEs are strongly linked to poverty reduction, employment, income distribution and women’s economic empowerment in developing countries. It highlights SMEs as critical for private sector development and inclusive, sustainable development, particularly in Least Developed Countries (LDCs), noting that SMEs account for 60-70% of private sector employment and offer an important route for economic diversification.

The report discusses constraints faced by SMEs in 23 LDCs when they engage in international trade and seek market opportunities. It highlights bottlenecks faced by SMEs, including: access to finance and technology; availability of skills; business environment; difficulties entering new markets and defending their interests; and trade costs. The report also identifies region-specific bottlenecks, such as lack of a skilled workforce in Central Africa, limited institutional support in Oceania and trade costs in Southern Africa landlocked developing countries (LLDCs).

Aid for Trade initiatives represent one avenue for SMEs to address competitiveness challenges and benefit from development finance institutions (DFIs), the report notes. It recommends collaboration between the private sector and partner country governments in implementation, as well as long-term solutions to market failures.

The report concludes by posing two questions for the trade and development community to consider in future work, related to: scaling up trade support to SMEs without institutions and instruments losing focus and impact; and maintaining trade into SME project design, implementation and reporting.

The report is a contribution to the Aid for Trade Work Programme for 2014-2015 in preparation for the Fifth Global Review of Aid for Trade.

The ITC has a joint mandate from the WTO and UNCTAD, and seeks to “foster sustainable economic development and contribute to achieving the Millennium Development Goals in developing countries and countries with economies in transition through trade and international business development.” [ITC Press Release] [Publication: SME Competitiveness and Aid for Trade]