Micro-businesses need support even as South-east Asia readies for recovery: report

REGIONAL planners will have their hands full with micro, small and medium-sized enterprises (MSMEs), which make up a large share of private businesses in Asia.

That's even as the Asian Development Bank (ADB) anticipated a rebound in the regional economy, on the back of "a healthy global recovery" and vaccination progress, in its annual Asian Development Outlook report on Wednesday.

Said ADB chief economist Yasuyuki Sawada: "Economies in the region are on diverging paths. Their trajectories are shaped by the extent of domestic outbreaks, the pace of their vaccine roll-outs, and how much they are benefiting from the global recovery."

For example, the ADB noted in its report that "despite a positive economic outlook, the poor productivity of Brunei Darussalam's MSMEs is a major policy challenge".

Brunei MSMEs in wholesale and retail trade are counting on a recovery in domestic consumption, while manufacturing and mining MSMEs, which are reliant on foreign markets, face an uncertain year ahead until the Covid-19 pandemic is resolved, according to the report.

The ADB urged Brunei to address digitalisation in its MSMEs and to learn from its neighbours' capabilities - such as startup skills in South Korea and process innovation in Singapore.

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"Understanding the entrepreneurship capacity of the country's MSMEs should help improve the adaptability of support policies to make these firms more resilient to shocks as growth returns to its strong pre-pandemic trajectory," the report advised.

In Indonesia, the ADB said that "reviving MSMEs hit by the pandemic will be essential given their economic importance", after a survey by international organisations found that 52.4 per cent of small businesses had no cash or savings and 51.5 per cent had to cut staff in late 2020.

"Harnessing the digital economy to expand MSME product lines, market reach and productivity could help, as would steps to foster a startup friendly business climate, greater financial access, and clusters and networks of MSMEs that can promote agglomeration and innovation," the ADB added in its report, while noting that MSME support is among the areas covered by the Indonesian government's recovery programme for 2021.

Meanwhile, inflation levels in South-east Asia could double this year, partly on the back of rising international commodity prices, the ADB projected. Consumer prices are expected to increase by 2.4 per cent in 2021 and 2022, compared with 1.2 per cent in 2020.

The ADB expected inflation to inch up in Malaysia, Singapore and Thailand, and to rise more significantly in Myanmar, the Philippines and Vietnam.

But price subsidies and improved supply could keep a lid on inflation in Brunei, while prices in Laos will be contained by higher domestic food production, the report added.

Overall, the South-east Asian economy was forecast to grow by 4.4 per cent in 2021 and 5.1 per cent in 2022, as vaccine roll-outs and public policy support domestic demand. The broader Asian region is tipped to rebound by 7.3 per cent in 2021 and 5.3 per cent in 2022.

The Asian growth outlook jumps to 7.7 per cent in 2021 and 5.6 per cent in 2022 when the industrialised economies of Singapore, South Korea, Hong Kong and Taiwan are excluded.