1997 APEC Small and Medium Enterprises Ministerial Meeting

1. The Fourth APEC Ministers' Meeting on Small and Medium Enterprises was held in Ottawa, Canada, September 18-19, 1997. In conjunction with the conference, a Business Forum and Exposition, hosted by Industry Canada and the Canadian Chamber of Commerce, took place September 17-18.

2. Ministers applauded the Leaders' call for incorporating SME priorities throughout the APEC agenda . Leaders have recognized the prominence of SMEs in all APEC economies and their need for greater support in making the transition to an open trade environment. Building on the foundation laid at previous Ministers' meetings on improving economic conditions to facilitate the growth of SMEs, Ministers committed to strengthen the SME Agenda and to provide policies and activities that will provide meaningful results to SMEs.

3. Ministers underlined the strong contribution of SMEs to economic activity within the APEC region, and their impact on intra-regional trade and investment. SMEs comprise over 90 percent of all enterprises in the region; contribute between 30-60 percent of GDP of APEC economies; generate about 35 percent of the region's exports; and account for between 32-84 percent of employment in APEC economies.

4. Ministers emphasized the importance of policies and programs to support SMEs at both the domestic and international levels . They view APEC initiatives on trade and investment liberalization, trade facilitation and economic and technical cooperation as essential complements to their domestic efforts in helping SMEs penetrate new markets and develop the necessary skills and technology to improve their competitiveness.

5. Ministers agreed with the APEC Business Advisory Council (ABAC) on areas in which APEC is best suited to help SMEs: reducing barriers to trade and investment; helping SMEs take advantage of new opportunities; building a better business environment; and, improving and upgrading government capacity to serve SMEs. Ministers reported a number of accomplishments to address SME needs in these areas.

II. ACCOMPLISHMENTS

6. Ministers endorsed the SME Framework developed by the APEC SME Policy Level Group (PLG) to provide a horizontal SME focus across APEC . They agreed with the Framework's guidelines to: direct APEC activities to respond to needs expressed by the SME community; benefit and involve SMEs directly; and, respond to real needs of the marketplace.

7. Ministers complimented the PLG for the publication of the APEC Report, "Helping Your Business Grow: Guide for Small and Medium Enterprises in the Asia-Pacific Region". The Report communicates to SMEs, APEC's concrete and positive measures to address SME priorities. At a time when profound changes transform national and regional economies around the world, concerted action on the part of APEC helps create an open, efficient trading regime and address the special needs and priorities of SMEs. They recommended that the Report be updated regularly to measure the effectiveness of APEC in supporting the growth of small business throughout the region. (The Guide is attached as Annex A.)

8. Ministers agreed to recommend to APEC Leaders that the APEC SME Framework be considered by all APEC working groups in designing and implementing SME- related activities. Ministers noted that many APEC fora, including the PLG, APEC Committees, and Working Groups had activities underway that could benefit SMEs. The Framework will assist them in this context.

9. Ministers also welcomed the progress on the 13 initiatives undertaken by the PLG in the past year. They noted that these projects will help the public and private sectors better serve their clients and improve the dissemination of information to SMEs in a number of fields.

10. The Chair highlighted the importance to SMEs of the Trade Liberalization and Facilitation Agenda. Ministers agreed that the harmonization and streamlining of customs procedures will facilitate the conduct of business and reduce transaction costs for SMEs. They gave their support to the Sub-Committee on Customs Procedures Collective Action Plan and agreed to convey to APEC Ministers and Leaders its importance in improving the trade and investment environment for SMEs.

11. Fostering an environment conducive to SME growth, including dynamic young enterprises, is a key to job creation and economic prosperity. Ministers recognized that SMEs experience obstacles at their critical growing stage. They emphasized the need to address such difficulties as: entering global markets; adopting existing innovative technologies; recruiting and developing necessary human resources; obtaining financing including risk capital; and accessing information.

Ministers wish to convey to Leaders that it is critical to provide a business environment adapted to SME needs and which encourage the creation of enterprises. They are committed to make the changes at the domestic and APEC levels to create an environment that will facilitate the development and growth of SMEs.

They stressed the importance for policy makers to learn about best practices from examples across APEC economies, and consider how to apply these lessons to reduce barriers to growth, improve infrastructure for SMEs, and foster a tax system consistent with SME development needs.

The Ottawa Meeting considered issues of importance to SMEs in five key areas of access to: markets, technology, human resources, financing, and information. Ministers emphasized that by addressing these issues in all fora, APEC will move significantly towards the Leaders' objective of incorporating the needs of SMEs in its agenda.

Ministers recognized that SMEs face special problems related to their size and that, in the context of rapid trade liberalization, SMEs need to develop capacities to take advantage of the opportunities of a more open regional trading system. They noted that SMEs have specific challenges in finding partners or agents for joint ventures. They acknowledged the detrimental effects on SMEs of the lack of international harmonization of standards and professional qualifications, including investment laws and taxation procedures. They also pointed out the lack of adequate, cost-efficient, and competitive transportation systems outside of the sub-regional arrangements, especially across the Pacific Ocean. They encouraged the Transport Ministers to look at measures to ensure adequate and competitive transport arrangements. They noted the potentials of the Internet as a marketing tool, and noted the efforts of the Telecommunications Working Group to develop a framework for electronic commerce transactions. Ministers welcomed the progress made in reducing tariff and non-tariff barriers to trade, and encouraged action on harmonization of customs procedures, better protection for intellectual property, and improvement of the investment environment. They encouraged the work undertaken to establish best practices studies and seminars on market development.

Ministers observed that in a knowledge-based economy, applications of information and communications technology can be a great equalizer for SMEs; however, when SMEs have limited access or understanding of these technologies, their prospects are reduced. Ministers welcomed technology-related initiatives such as the APEC Technomart II, the Study of Best Practices in the Management of Technological Extension Programs, and the Cross-Border Inter-Firm Linkages project, which will facilitate technology transfer from industrialized to developing economies.

Ministers discussed the implications of an emerging knowledge-based economy on the need for constant training and skills upgrading for SMEs in both developed and developing economies. Ministers recognized that Human Resources Development (HRD) for SMEs needs a comprehensive approach including: social structures and systems such as educational reforms or nourishing entrepreneurship in the society; a labour market mechanism and self-help by each enterprise; and governmental support. They emphasized that APEC, and its member economies, should involve SME support groups in strengthening and deepening their activities related to HRD to foster human resources of SMEs in the region. They welcomed the numerous initiatives that will be launched in 1997, including: an APEC Centre for Entrepreneurship; a study on women entrepreneurs; a benchmarking database; a workshop to promote diagnosis and guidance skills; and, a Distance Learning Program and Certification Standards for Small Business Counsellors.

Ministers reviewed the results of a recent consultation of APEC business associations which revealed that many SMEs lack awareness of financing resources and programs available from commercial banks and other private sector and government sources, and that they have difficulty defining and articulating their financing needs. The Report stressed the need for the financial institutions to be responsive to the needs of SMEs, and for continuing simplification of trade documentation. Ministers also welcomed the initiatives being taken by business associations to increase the competitiveness of their SME members.

Ministers congratulated the export credit agencies (ECAs) for taking the lead in exploring measures to support SME exporters such as: surveying the export and import financing needs of APEC SMEs; producing a report on the best practices of APEC ECAs to address the key issues of importance to SME exporters; actively seeking ways to increase awareness of and access to APEC ECAs services through innovations like Internet websites on ECA services; seeking ways to involve commercial lenders more fully in trade finance; working on areas of common concern to most APEC ECAs including support for SME service exporters and the benefits of Credit Scoring foreign buyers; and, developing a Protocol of Understanding among APEC ECAs to be signed at the Heads of APEC ECAs' meeting in November in Vancouver.

Ministers recognized the importance of providing cost savings to SME exporters through policy actions such as: encouraging APEC economies to eliminate withholding taxes on any export financing provided by commercial lenders supported by ECAs; and discussing with the appropriate authorities the possibility of reducing or eliminating the risk weighted capital requirements on financial institutions backed by ECAs for export and import transactions involving SME companies. Ministers recommended that these issues be referred to the APEC Finance Minister process for consideration as part of their action plan for 1998.

Ministers agreed that access to accurate and timely information is crucial for SMEs to compete and grow in a global market environment. They recognized the important role that governments play in providing information to SMEs and believed that APEC may make the greatest near-term contribution towards information access. The Ministers acknowledged that to benefit SMEs, government information must be relevant, timely, and effectively and efficiently transmitted. It must not impose unnecessary compliance costs on SMEs. Ministers highlighted projects undertaken in several economies and from various APEC fora focusing on ways to provide accurate and timely data, benchmarks, essential information, intelligence, and knowledge, such as one-stop shops, electronic information systems and integrated delivery systems. They also highlighted ongoing initiatives to disseminate information on regional infrastructure development projects. They urged the PLG to intensify its work, in concert with other APEC bodies, to gather and disseminate information that will be useful to SMEs and policy makers in the region.

The Ministers noted that business associations are placing a strong emphasis on information gathering and dissemination and welcomed their proposals to share information among themselves across APEC economies.

12. In recognition of the need to further the significance of SME-related activities throughout APEC, Ministers endorsed the 1997 APEC SME Action Plan. They congratulated the PLG for developing infrastructures that will provide lasting benefits for APEC economies, in particular: the Network of Institutes for Small Business Counsellors, the APEC Centre for Entrepreneurship, and the Benchmarking Database. They also welcomed initiatives to reduce wastage of resources, time and cost in accessing information and new markets, and they appreciated the latest project undertaken by China. The achievements of this project will provide basis for China to create progressively a more open operational environment for SMEs in China. (The 1997 SME Action Plan is attached as Annex B.)

13. Ministers welcomed Japan's initiatives to foster SME diagnosis and guidance skills in the APEC region. This project emerged from the discussion and agreement at the last Ministerial meeting in Cebu to encourage involvement of SME support groups in developing tangible outcomes that will directly benefit SMEs. Ministers also welcomed Korea's initiative to conduct a study on women entrepreneurs, owners and managers of SMEs in the APEC economies.

14. Ministers noted the improvement in information sharing and coordination of activities among APEC working groups, and the efforts of each group to address Leaders' priorities. Ministers encouraged PLG members to continue working closely with their counterpart working groups as well as the private sector and support organizations to ensure initiatives that will bring real benefits to SMEs.

15. Ministers welcomed the views of the APEC Business Advisory Council (ABAC) and urged PLG members to work closely with them in developing policies supportive of SMEs. They recognized the efforts and progress made during the year in taking action on ABAC 1996 SME recommendations to Leaders -- APEC Network of Networks, SME Finance Round Tables, and SME Statistical Indicators. They welcomed the Philippines' and Japan's initiative in linking APEC economies' websites and creating an SME business homepage to provide easy access to information.

16. They also appreciated the significance for trade acceleration, and of measures to facilitate financing for SME exporters and importers. They commended the United States for its survey of SME Trade Financing issues and Canada's leadership in consulting business associations and export credit agencies to explore measures to address these issues. Ministers recognized the importance of APEC measuring progress at the firm level, and believed that the Philippines' work on statistical indicators will be key in helping APEC groups assess their performance.

17. Ministers congratulated the APBNet for the success of the Business Forum, the quality of speakers and the relevance of information and tools provided under the four themes of the Forum: market access and partnership strategies, financing strategies, business skills development, and technology innovation and commercialization.

As an overall recommendation, the Business Forum urged APEC SME Ministers to establish a results-based business plan targeted to SMEs, complete with timelines, deliverables, objectives and priorities. Key action items among the recommendations were: upgrade the APEC Economy Home Pages on the Internet, with linkages to major private sector Internet sites in the respective economies; implement an APEC Multiple Entry Business Visas providing stays of 90 days in order to improve access of business persons to APEC economies; expand SME Finance Roundtables; address SME concerns on financing and in particular export financing; ensure information is provided to SMEs in a form which meets their needs; and reduce documentation burden imposed on SMEs from a wide variety of sources.

18. Ministers recognized the significance of the business sector recommendations to ensure SMEs have a growing role in trade liberalization and investment. They directed PLG members to use these recommendations in developing the 1998 Action Plan.

19. Ministers also heard from young entrepreneurs who actively participated in the Business Forum. Ministers welcomed the recommendations from the young entrepreneurs at their "Business Leaders of Tomorrow" meeting. The Ministers supported their objective to promote a culture of entrepreneurial spirit, economic growth and to encourage greater cross-cultural understanding among youth to meet the needs of a globally competitive economy. Ministers directed the PLG to assist the young entrepreneur associations to achieve their objectives . Ministers noted that several of the key initiatives being undertaken in the next year would actively promote the growth and development of young entrepreneurs in Asia-Pacific.

20. The Women Leaders' Network called on the SME Ministers to recognize gender as a concern that cuts across many issues, and to integrate a gender perspective at all levels of SME work. They called on them, as well, to ensure the full participation of women through equitable representation at all levels of APEC fora with a target of at least 30 percent women participants at senior levels by the year 2000. Ministers agreed to promote gender sensitive policies and measures related to the development of SMEs to empower women in technical, managerial, and entrepreneurial fields . They directed PLG members to consider actions recommended by the Women Leaders' Network to support the development and growth of women entrepreneurs.

21. Ministers complimented the Alliance of Manufacturers & Exporters Canada for its initiative in convening the first meeting of business associations throughout APEC to develop an action plan to assist their SME members. They called on the business sector and business organizations to lead in facilitating greater participation by SMEs in APEC trade and investment opportunities and encouraged the PLG to partner with them in creating a better business environment for SMEs.

22. Ministers welcomed the offer by Malaysia to host the Fifth APEC SME Ministers' Meeting in Kuala Lumpur on September 10 and 11, 1998. They expressed their support for Malaysia's decision to provide fora for delegations representing businesses, business associations, export credit agencies, young entrepreneurs and women leaders, in conjunction with the Ministerial meeting.

23. Ministers thanked Canada for its guidance in chairing the meeting, and the people of the National Capital Region for their hospitality in welcoming the government and business delegations.