Introduction. Innovation and SME Development -Korea s s Perspective and APEC Cooperation. Korea s SME Structure. Introduction. ASCC Conference 2005

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1 Introduction Innovation and SME Development -Korea s s Perspective and APEC Cooperation ASCC Conference Nam, Sang-yirl Korea Institute for International Economic Policy!APEC includes a broad spectrum of member economies. - However, APEC share large part of concerns and interests in the area of SMEs.!APEC SMEs are experiencing structural changes due to rapid globalization. - Underrepresented in terms of international economic activities 2 Introduction!Innovation is one of the key factors for SME development and APEC Cooperation. - need to lower SMEs entry barriers to innovation and globalization with the help of ICT and networking!in the following parts - analyze structure of Korean SMEs - review discussions in APEC SME process - identify policy implications for cooperation!manufacturing as a whole, SMEs explain: % of establishments % of employees % of value added % of tangible asset (2002 survey data)!no significant differences among 23 manufacturing sectors in the SMEs share of number of establishments: mostly 98% and plus 3 4

2 !However, wide gap among manufacturing sectors in SMEs share in - number of workers: 21.4% to 98.2% - value added: 6.4% to 97.1% - tangible asset: 2.2% to 93.9%!Divide into 15 SME-oriented sectors and 8 large-enterprise-oriented sectors - some per capita indicators are compared between the two groups!smes reveal frail condition: manufacturing sector as a whole, SMEs per capita index corresponds to % relative to large enterprises in wages and salaries % in value added % in tangible asset!smes per capita indexes relative to large enterprises are significantly smaller in most large-enterprise-oriented sectors. 5 6 Productivity Growth!For example, SMEs per capita tangible assets relative to large enterprises are significantly smaller in - basic metal: 1.4 (by setting that of large enterprises to 100.0) - fabricated metal: coke and refined petroleum: other transportation equipment: electronic and communication equipment: !Total Factor Productivity (TFP) growth rates by Korea s manufacturing sector are relatively high in mostly large-enterprise-oriented sectors - electric and electronic products: 7.2% - metal products and machines: 5.2% - transportation equipment: 5.0% ( annual average)!export growth rates seem to be one of the most important factors for TFP (corr.=0.93) 8

3 Exports and Overseas Investment! SMEs share is smaller relative to large enterprises in - Korea s exports (39.1%, Jan-Sep. 2004) - overseas investment (37.8% in 2004)! To improve SMEs underdeveloped potential in international economy - require active participation in the globalization process - more favorable environment: lower barriers! The first three SMEMM years ( ) - establish broad targets and offer visions for SME cooperation -major topics: facilitation of SME growth and development deregulation of SME related policies improving SME infrastructure 9 10! The next three SMEMM years ( ) - broadening and substantiating discussion topics identified in the previous period - strengthening of SMEs access to market, technology, human resources, finance, and information; lowering trade barriers; consulting with private sector! The third period ( ) - characterized by discussions on meeting new challenges and SME environment - redirected to SME cooperation in the new environment such as Knowledge-Based Economy (KBE), electronic commerce, innovation and sustainable growth - establish APEC Integrated Plan of Action for the Development of SMEs (SPAN): OAA based 11 12

4 ! Recent two years ( ) - discussions transformed into identifying active role of SMEs to participate in the new environment - entrepreneurship: theme for the two consecutive years - emphasize implementation in key areas: regulation, financial accessibility, human resources, innovation and technology, capacity building on globalization! APEC SME theme: Promoting Innovation of SMEs - emphasize innovation with entrepreneurship and globalization -three subthemes Technology and HRD through I-A linkage Enhancing availability of capital to innovative SMEs Networking and clustering for innovative SMEs Environment for SME Innovation! Appropriate environment includes: - Market-consistent economic institutions - Globalization (competition and cooperation)! Need to encourage active role of SMEs with flexibility and potential SMEs Development Cooperation! SME development: common interests of APEC! Starting point: collective identification, evaluation monitoring of impediments to SMEs - for example, institutional barriers on and beyond border, ROO, TBT, SPS, environmental regulations - examine any structural differences between SMEs in developed and developing economies or between SMEs and MEs 15 16

5 SMEs Development Cooperation! Priority setting for implementation - evaluate potential impact of each impediment - some members related to the impediment assigned or volunteer based approach! Establish a comparable definition and database - include information on basic factor input and output, productivity, international trade and investment, impediments in business SMEs Development Cooperation! Identify best practices and develop action plan for collective implementation by short-, mid- and long-term - if appropriate, set some concrete targets based on comparable indexes - besides, collect and compare SME-supportive policies Summary Thank You for Your Attention!! Require SMEs active role for innovation and globalization - for domestic measures, APEC is an appropriate forum to identify best practices in HRD, R&D, financing, information - for foreign trade and investment related issues, APEC can be a focal point to identify impediments and to find solutions collectively synam@kiep.go.kr Korea Institute for International Economic Policy (KIEP)! Networking within and among APEC members based on ITC will also enhance the efficiency: eg. APEC Center for SME Innovation 19 20