White Paper on MSMEs-ISMIT

The paper goes through the challenges MSMEs face in international trade and explains how eServices platforms can provide solutions for transport, finance, border clearance and other in support of MSMEs.

In most economies, the Micro-, Small- and Medium-sized Enterprises (MSME) sector is the largest business sector with 95 percent of the business entities being MSMEs 1 and generating many employment opportunities. The definition of MSMEs varies across countries and organizations. The most commonly used factors in defining a MSME are the number of employees, followed by turnover and assets. One commonly used definition defines MSME as an enterprise employing up to 249 persons. In developing countries, the threshold will be lower, between 50 to 100 employees. In developed countries, 78 percent of exporters are MSMEs.

However, these MSMEs only account for 34 percent of the exports, suggesting that there is a concentration of exports among a few large business enterprises. Most of the time, big conglomerates are more productive 1 as they benefit from economies of scale (e.g. cost per unit decreases with an increased production). Such concentration is more significant in developing countries where direct exports only account for 7.6 percent of the total sales of MSMEs. One of the deterring factors is cost. Here, it is important to distinguish between per-unit costs and fixed trading costs. Per-unit costs include freight carrier costs, tariffs, and any costs that
are subject to the amount of traded goods and distance. Fixed trading costs are costs which do not vary with export volume, such as costs for regulatory compliance, for building sales network, for brand advertising, for translation, etc. Fixed trading costs limit the ability of an enterprise to export its products. To reduce fixed trading costs, international standards and recommendations play a crucial role by providing guidelines to overcome these red-tape barriers.