NEAT WG Report on
Small & Medium-sized Enterprises Cooperation in
East Asia
Drafted by NEAT China
The NEAT Working Group Meeting on the Small & Medium-sizedEnterprises (SMEs) Cooperation in East Asia was organized by NEAT
China in Changsha, Hunan Province, China on July 2, 2017, at which
about 25 representatives from ASEAN Plus Three (10+3) countries were
present.
Featuring the theme of Enhancing SME Development and Cooperation in
East Asia for Regional Inclusive Growth and Common Prosperity, themeeting aims at the following three objectives: first, exchanging countryspecific knowledge and sharing experience; second, reviewing andsummarizing the development and problems of SME cooperation under
existing regional cooperation mechanisms; third, making viable policy
proposals on the development and cooperation of SMEs in East Asia
through the 10+3 cooperation mechanism. Representatives conducted indepth explorations and reached broad consensus.
This report strives to put forward policy proposals on furthering SME
cooperation in 10+3 countries on this basis of summarizing thepresentations and discussions at the meeting.
I. Current Development of SMEs in East Asia
SMEs refer to economic units whose manpower, capital amount andbusiness scale are smaller than those of big enterprises in the same
industry. The definition of SMEs varies among different industries atdifferent stages of development and among different countries and isconstantly adjusting with economic growth. Generally speaking, it isdetermined by quality and quantity. Quality refers to organizational form
and financing method of an enterprise and its position in the industry
while quantity concerns staff strength, capital amount and business scale.
Though the definition of SMEs differs in 10+3 countries, SMEs are
generally characterized by a small number of staff and a small amount of
capital.

Figure1 Definitions of SMEs in 10+3 Countries
Employed
ManpowerCountry

Total CapitalJapan﹤300 million yen
Manufacturing Industry﹤300﹤100 million yen Wholesale
Business﹤100﹤50 million yen Wholesale
Business and Service Sector

﹤50
﹤200

Singapore
the ROK﹤8 billion won
Manufacturing Industry﹤300﹤8 billion won Mining,
Construction and Transportationindustries

﹤300

﹤200
China

﹤8 billion won Wholesale
and Retail Business﹤200﹤4 billion yuan
Wholesale Business﹤300﹤2 billion yuanBusiness﹤720,000 dollars﹤3.6 million yuan
≤200

Malaysia﹤4 billion yuan Industry﹤8 billion yuanConstruction Industry﹤8 billion yuan

Vietnam﹤660,000 dollars﹤300

Thailand﹤100 million baht

﹤200

Cambodia≤500,000 dollars

≤100

The
Philippines﹤100 million pesos﹤200﹤4 billion kip Production
Industry

﹤100

Laos

﹤100 million Singapore
dollar﹤8 billion yuan
Agriculture, Forestry, Animal
Husbandry and Fishery﹤1000

Indonesia

Annual Turnover≤50 million ringgit
Manufacturing Industry﹤4 billion kip

RetailMyanmar﹤4 billion kyat Production
Industry﹤300

Source: data of 2017 Working Group Meeting of SMEs in East Asia for International
Cooperation, A Study on Promoting SME development in Cambodia (2014 ) by Luo Cheng, The
Current Status of and Policies for SMEs in the ROK (2013) by Lin Cairun, TheNotice of Issuing
Regulations on the Standard of Sizing SMES (2011) by the National Bureau of Statistics andothers.

As a major pillar of Asian economy, SMEs have made a significant
contribution to economic and social stability and development in Asia.
According to Asia SMEs Finance Monitor 2013 released by AsianDevelopment Bank, SMEs accounted for 98% of enterprises of Asian
countries from 2007 to 2012, providing employment for 66% of labor
force and contributing to 38% of Asian GDP or industrial value added.
SMEs have played an irreplaceable role in absorbing labor force,
especially of low technology, invigorating national economy, facilitating
people’s life and stimulating scientific and technological innovations.
They represent a new potent force for promoting employment, reducing
poverty and achieving inclusive growth. At the same time, they arepartners and assistants of large enterprises. With the specialization andcollaborative development of social production, SMEs have establishedclose collaborative relations with large enterprises through specialized
production, providing strong support for the development of large
enterprises and laying a reliable foundation for their own survival anddevelopment.
East Asian countries are vastly disparate at development levels. Amongthem, Japan and Singapore are developed market economies with soundlaws and regulations and special institutions for advancing SME
development. The main appeals of Japan for SME cooperation in East
Asia are: improving scientific and technological competitiveness of
SMEs of Japan through cooperation and discovering new demands
through innovation, differentiated products and market segment;enhancing SMEs’ research and development and encouraging
technological cooperation; protecting intellectual property transactions byrule of law and cultivating a fair order for market transactions.
SMEs in the Republic of Korea need to increase their competitivenessthrough innovations and technological edges. Due to limited domestic
market, the government of the ROK has emphasized the development oflarge enterprises for a long time, whose unfair transactions and market
monopolies have led to fierce competition among domestic SMEs. The
ROK is ready to lower market access threshold through regional

cooperation to help SMEs expand into the world.
China’s SMEs face overcapacity and the need for structuraltransformation. With increasing labor costs, China’s labor-intensive
industries are confronted with challenges in their internationallycompetitive advantage in price, which justifies the need to move forward
cooperation for structural transformation and upgrading from laborintensive industries to capital- and technology- intensive industries. China
is ready to strengthen cooperation with ASEAN in labor-intensive
industries and with Singapore, Japan, the ROK and other countries whichhave comparative capital and technological advantages to elevate thetechnological level of SMEs.
Malaysian SMEs are mainly composed of micro-enterprises, of which
over 75% to 90% concentrate on service industries. Malaysia is ready toshare the experience with countries in developing SMEs throughorganizing SME international forums; sign bilateral or multilateral SME
memorandum on cooperation and lower market access threshold for
SMEs; initiate bilateral or multilateral SME technological cooperation
projects to boost technological cooperation; urge countries to monitor andimplement relevant provisions in signed FTAs to accelerate SME
cooperation.
Restrained by relatively underdeveloped economy and immature market,
SMEs in Vietnam, Thailand, Cambodia, the Philippines and Myanmar arecomparatively backward.
Generally, SMEs in East Asian countries are faced with financing
difficulties, incompetence in developing international markets and limited
human resources and other development bottleneck at various degrees.
Additionally, to a certain degree, the development of SMEs in East Asia
is also restricted by the overall development level of this region,
entrepreneurship and investment environment, legal and institutional
factors and social factors.
II. SME Cooperation in East Asia: Mechanisms and Development
Countries in East Asia have conducted SME cooperation and achieved
fruitful results under the cooperation mechanism with ASEAN at thecenter, the APEC framework and China-Japan-ROK cooperation
frameworks.
2.1 SME Cooperation with ASEAN Centrality

ASEAN Economic Community Blueprint proposes “balancing regional
economic development, including SME development and ASEAN
regional integration initiative”. ASEAN is facilitating the implementationof The ASEAN Policy Blueprint for SME Development 2004-2014 toenhance the competitiveness and vigor of ASEAN SMEs. It calls on
ASEAN countries to promote networking of SMEs and their participationin the building of regional production and distribution networks andexpand financing by providing policy support regarding capital,technology and market so as to narrow the gap between ASEAN
countries different at development levels.
The Action Plan for ASEAN Plus Three SME Network was a collaborative
project adopted at the Fifth ASEAN Plus Three Economic and Trade
Ministers Meeting in September 2002. The project focuses on
establishing a “10+3 SME cooperation website” jointly by ten ASEAN
countries, China, Japan and the ROK and the ROK is responsible for its
maintenance and operation. The site, mainly through mutual website links
and information exchange, promotes SMEs and their product informationand provides more trading opportunities for the region. It also enables
more enterprises in the world to understand 10+3 enterprises and theirproducts through the internet.
In 2016, Premier Li Keqiang expressed his willingness to discuss with allparties the establishment of the 10+3 SME Service Alliance at the 19th
ASEAN-China-Japan-ROK Leaders’ Meeting to help SMEs gain more
benefit from regional integration.
With the establishment of China-ASEAN FTA, China and ASEAN havedeveloped various forms of SME cooperation based on the principle ofmutual benefits. China-ASEAN Business and Investment Summits haveheld 13 sessions since 2004, providing a platform for the flow of ASEAN
commodities into China and the investment of Chinese enterprises in
China-ASEAN free trade area. In 2009, China-ASEAN Economic
Cooperation Ministerial Meeting issued the Joint Ministerial Statement
and approved the establishment of a website for China-ASEAN free tradearea, which aims at building a “highway” for information connection
among China and ASEAN countries to encourage SMEs development by
providing e-commerce services for China-ASEAN SMEs. The platform
was put into operation in June 2010. With its major responsibility of
supporting the development of SMEs, China-ASEAN Center has carriedout various activities to promote economy and trade since its inception in
2011, such as the establishment of China-ASEAN Commodity Trading
Center in Yiwu, Zhejiang Province, presentations of China-ASEAN FTA

policies and visits of Chinese enterprises to ASEAN. Besides, ChinaASEAN SME Trade Promotion Platform and China-ASEAN SME
Cooperation Committee have also provided more opportunities forincreasing exchanges and industrial connections between China-ASEAN
SMEs.
The 16th round of Regional Comprehensive Economic Partnership(RCEP) negotiations closed in Tangerang, Indonesia on December 10,
2016. Representatives from 16 countries including China, Japan, theROK and ASEAN completed negotiations of the SME chapter. It is thesecond chapter that has been concluded since the commencement of
RCEP negotiations. The completion of the SME chapter negotiations will
enhance information sharing and cooperation between RCEP
participating countries, improve the capacity of SMEs in these countries
and help them make fuller use of the opportunities created by the RCEP
agreement.
2.2 SME Cooperation
Frameworks

withinOther

Regional

Cooperation

Currently, SME cooperation under the APEC framework is the mostimproved and mature cooperation mechanism in the Asia-Pacific region,
including APEC SME Ministerial Meeting, SME Cooperation Working
Group Meeting and APEC SME Technology Conference and Fair. Since
1994, APEC SME Ministerial Meeting was held annually to identify
priorities in SME cooperation in the Asia-Pacific region and coordinatedpolicies of relevant countries to stimulate common development of SMEs
in member countries.
Formerly known as the APEC interim policy group for APEC SMEs,
APEC SME Working Group (SMEWG) aims at reporting theimplementation of the APEC SMEWG annual work plans, analyzing KPI,
the key performance index of development and relevant action plans of
the APEC SMEWG and sharing best practices and results in promoting
SME development. APEC SME Technology Conference and Fair
(SMETCF) is an important cooperation project carried out by China
under the framework of APEC, aiming at providing a platform for APEC
members to present their new products, driving innovative developmentof APEC SMEs and promoting cooperation and exchanges of SMEs
among APEC members. Since its establishment in 1996, SMETCF has
successfully held nine sessions, playing an important role in propellingtrade and investment in the Asia-Pacific region, promoting technologicalexchanges and innovation and entrepreneurship, optimizing the businessenvironment for SMEs and advancing the healthy development ofregional economy.
SME cooperation among China, Japan and the ROK has long been active.
At the 2nd China-Japan-ROK Leaders’ Meeting in 2009, Wen Jiabao,
then Premier of the State Council of China, put forward the building of ademonstration base for China-Japan-ROK circular economy, which
received active responses from Japan and the ROK. In June 2015, theNational Development and Reform Commission approved thecomprehensive building of China-Japan-ROK circular economy
demonstration base in Dalian Economic Zone of Circular Industry andCaofeidian Industrial Zone, which has become a major platform forcooperation among China-Japan-ROK SMEs in green and low-carbon
circular economy and advanced technology. The China-Japan-ROK(Bohai Rim) SME Green Industry Summit 2012 held in Tianjin aimed atstrengthening green economic cooperation among China-Japan-ROK
SMEs and seeking cooperation in resources conservation, environmental
protection, new energy and new materials so as to cultivate new growthareas for trilateral economic cooperation. The sixth China-Japan-ROK
Leaders' Meeting held in 2015 released the Joint Declaration for Peace
and Cooperation in Northeast Asia, which underscored the important role
SMEs have played in sustainable development and called for increasing
cooperation of SMEs in the three countries.
III. Problems and Challenges Facing SMEs in East Asia
Although East Asian countries have made great achievements in SME
cooperation within different levels of frameworks, they are inevitably
confronted with problems and challenges in institutionalization, financing
and capacity building.
3.1 Inadequate Institutionalized Cooperation
Bilateral and multilateral mechanisms for SME cooperation in East Asia
are yet to raise their institutionalized level. At present, without mature
official mechanisms such as SME ministerial meetings, cooperation
within the 10+3 framework is confined to loosely organized activities
such as forums, exhibitions and expositions that are less result-oriented.
The 10+3 countries are lacking in a programmatic action plan or roadmap on how to promote regional SME cooperation and also in sustainedcooperation projects of large scale and covering a wide area as a support.
As a result, they are unable to meet the actual needs of regional SMEs.
This phenomenon is ascribed to two aspects. As far as concepts areconcerned, various levels of economic development and opening up led
to disagreements of East Asian countries about the concepts andstandards of SMEs. As far as the alignment of rules and regulations isconcerned, East Asian countries face not only unbalanced development of
departments and regions and clashing regulations in their own countries,
but also uncoordinated and unaligned policies, standards and regulationsin the whole region.
3.2 Lacking Key Regional Financial Arrangements
East Asian SMEs also face daunting difficulties in financing.
Individually, they are not competent enough of financing themselvesbecause of weak capability building, unsound financial systems andfluctuating performance as well as absence of credit basis and collateral.
Nationally, many governments fail to provide sufficient financial support
for SMEs and a majority of countries are still yet to fully develop theircapital markets and improve financial systems. All these problems resultin insufficient financing channels. Regionally, there is no financing
platform or capital source that directly aims at SMEs in the whole region.
3.3 Vulnerabilities of SMEs in East Asia
SMEs in East Asia are still vulnerable individually and internationally.
Individually, they have difficulty in competing with large enterprises as aresult of insufficient capital, scattered operation and low degree ofconcentrated production. At the same time, they are prone to legal risks
on account of lack of rigid regulations on organizational structure,
personnel, financial accounting and business operation. Besides, in theabsence of senior managerial talents versed in multiple languages,
experienced in managements and familiar with international rules andoverseas markets, SMEs have failed to fully utilize regional trade andinvestment facilitation measures. Internationally, export-oriented
economy of East Asian economies subject SMEs to trade frictions, tradeprotection, exchange rate fluctuations and legal risks and otherinternational affairs as well as to international financial crisis, geopoliticalrisks, non-traditional security threats, bilateral political relations andunexpected political incidents on special occasions. Both the 1998 Asianfinancial crisis and the 2008 international financial crisis caused many
SMEs to bitterly struggle with survival. Occasionally, historical issues,
territorial disputes and maritime challenges common in East Asia also
exert a negative influence upon SME cooperation within the region.
IV. Proposals

East Asian countries are neighbors with similar cultures, high economic
complementarity and close trade relations, providing favorable conditions
and laying a solid foundation for SMEs to leverage comparativeadvantages and conduct cross-border trade and investment. Looking into
the future, East Asian countries should work together to drive thecommon prosperity and development of SMEs and regional economy bystrengthening communication and cooperation in the following aspects:
4.1 Building Consensus on Objectives and Principles of Cooperation
SMEs in East Asia should realize the following three objectives: first,
include SME cooperation in East Asia into national development
strategies to create enabling business environment for the development of
SMEs; second, encourage SMEs to engage in the global chain in an effort
to promote the expansion of SMEs; third, put forward regional-level
policy initiatives and accelerate SME growth through capability,
institutional and infrastructure building to give fresh impetus to East
Asian economic development and integration.
4.2 Implementing Regional Institutional Arrangements
1. Establish a 10+3 SME ministerial meeting mechanism as soon as
possible. It is suggested that the 10+3 SME ministerial meeting be held
annually to enhance policy communication and coordination in the
direction, objectives and road-map of SME cooperation in East Asia.
2. Set up a 10+3 SME governance summit mechanism. It is proposed thatthe summit be held annually to provide a platform for sharing experience,
knowledge and information among East Asian countries and facilitating
connection and cooperation of SMEs in East Asia.
3. Fully leverage 10+3 SME cooperation websites to provide regional
SMEs with such services as information sharing, legal consultation,technological innovation, intellectual property protection and humanresources development, and step up connection and integration of SMEs
cooperation institutions and networks of all countries with these websites.
4. Authorize and set up 10+3 SME service alliances as soon as possible toimprove organizational structures and function by founding special
service committees.
4.3 Strengthening Regional-level Financial Support

1. Establish 10+3 SME cooperation funds through proportional
contributions from governments and social capital. It is advisable that
East Asian countries introduce market-based approaches and competitive
distribution methods to spur the support from venture investment
organizations, guarantee organizations and public service institutions indeveloping SMEs.
2. Introduce cross-border venture capital investment mechanisms.
International practice has proved that venture capital is an effective way
to solve the difficulty that SMEs, especially of high technology face infinancing. It is advisable that East Asian countries attract international
capital to co-establish venture capital investment funds and emphasize thefunds’ guidance and support for SMEs.
3. Enhance cooperation with international financial institutions. East
Asian countries should beef up cooperation with APEC, World Bank,
Asian Development Bank, Asian Infrastructure Investment Bank（AIIB） to fully utilize the capital and projects of the above institutions
to strengthen support for the development and cooperation of regional
SMEs.
4.4 Fully Utilize Regional Think-tank Networks to Stimulate
Regional Cooperative Research
1. Establish 10+3 SME research center that specialize in research on
macro-policies for development and cooperation of SMEs and on micropolicies for industries and specific countries. International cooperation in
R&D should be stimulated to raise the overall research level of the region
through resources integration and complementary advantages. It isadvisable to make full use of NEAT to provide support for the initialresearch and design of the mechanism.
2. Propel relevant research of existing regional and internationalorganizations, including research on SME policies made by AMRO and
ADB and increase research on the participation of SMEs in Asian
infrastructure construction to secure more favorable policies of AIIB for
SMEs.
4.5 Consolidate Cooperation among Local Governments in East Asia
The role of local governments in regional cooperation on SMEs should beenhanced since most of the Asian SMEs are local enterprises and local

governments are very much active in participating in regional cooperation
as well. Therefore, it is recommended that a platform or mechanism on
SMEs cooperation among regional local governments should beestablished, which could promote knowledge sharing, experienceexchange and pragmatic cooperation through regularly conducting
forums, meetings and etc. .
4.6 Develop a Cross-border E-commerce Platform to Encourage
Cross-border Consumption
Regional cross-border e-commerce has registered rapid growth in recent
years, becoming an important platform for promoting SME cross-borderbusiness and cooperation. By simplifying customs procedures, crossborder e-commerce has cut transaction costs, raised operation efficiency,
lowered market access threshold and enabled cross-border operation andcooperation for most SMEs. It is advisable that 10+3 countries build aregional e-commerce platform with participation of competitive SMEs in
East Asia, encourage the alignment between SMEs and e-commerce
platforms of regional countries, and enhance cooperation between SMEsof regional countries. The 10+3 governments should provide services
including certification, guarantee, quality control and supervision for the
SMEs development,