The performance of and trends in international trade is another measure of economic well being of a nation. The commercial policy of most developing countries was dictated by the belief that integrating into global trading system would help them address growth-related issues. The trade barriers have been dismantled leading to free flow of goods and services among countries as a consequence of globalization and liberalization of economies and coming into existence of World Trade Organization (WTO). The Free Trade Agreements (FTAs) between countries and regions have further smoothened the movement of goods and given a new dynamism to international trade particularly in the past two decades. Since the entire world has now become almost an open economy bringing in numerous opportunities, Small and Medium Enterprises (SMEs) that are discerning could only tap those opportunities to become part of the global value chain.
The globalisation of economies has increased the role of Foreign Direct Investment (FDI) as a vehicle for speedier growth. FDI is believed to be helping countries in improving management skills, inducting new technologies and in improving competitiveness of products.
Consistent with the present trend of increasing role of international trade and FDI in the global economy, countries, particularly the developing ones, need to evolve specific programmes to promote international trade by SMEs and to attract foreign investment in them. However, most SMEs in developing countries have not really reached that stage to play an important role in these two economic areas for various limitations.
But if SMEs, being a dominant segment in an economy, were to play an increased role in a country’s foreign trade, and also in attracting foreign investment, the government’s need to create the necessary conducive environment. Specific steps that should be taken up to promote international trade by SMEs and investment in them are as follows:
- Instituting SME definition comparable to internationally accepted one;
- Eliminating/ minimising procedural hassles for investors;
- Raising the permissible limit of FDI in SME sector in countries where it is pegged at very low levels;
- Identifying/ projecting thrust areas of investment;
- Extending fiscal and other tax incentives to attract investment;
- Instituting focussed policies for SMEs in export thrust industries;
- Facilitating SMEs’ participation in trade related events such as exhibitions, trade fairs, buyers-sellers meet and business tools;
- Assisting SMEs obtain/ source inputs at international prices for export purposes;
- Providing easy access to export financing;
- Assisting SMEs in building their export capabilities by facilitating access to new technologies, market information and commercial intelligence, acquiring export management skills;
- Helping SMEs forge dependable linkages for production, marketing and investment;
- Organising exclusive SME trade fairs and exhibitions to showcase their capabilities and capacities to international audience; and
- Building a reliable data bank of SMEs that a foreign investor/ importer can contact.
ISSME is very actively organizing business matchmaking meetings between entrepreneurs of different countries and facilitating SMEs in participating export related events worldwide. It also conducts training programmes on international trade and help SMEs showcase their trade leads through its platform.