1994 APEC Small and Medium Enterprises Ministerial Meeting

1. The first APEC SME ministerial meeting was held on October 22-23, 1994, in Osaka, Japan, consistent with the November 1993 Informal Leaders' Meeting's call for strengthened APEC dialogue on SMEs and in the firm conviction that enhancing the vitality of SMEs is of pivotal importance in maintaining Asia-Pacific dynamism into the 21st century.

2. Ministers welcomed the participation of representatives of the private sector, including the members of the Pacific Business Forum, who were invited so that APEC's work on SME issues would reflect private sector needs and support its objectives in expanding regional trade, investment and economic cooperation. Ministers also noted the valuable report of the Pacific Business Forum, which clarifies a number of critical issues before APEC, including those concerning SMEs.

3. Healthy SMEs not only stimulate domestic economies but also play an increasingly important role in cross-border economic activity. As such, SMEs are increasingly important both as a cause of and a means of heightening economic complementarities and development in the region.

4. Rapid technological innovation and diversification in market requirements are generating significant shifts in industrial activity and dramatically transforming many economies from primary output to the manufacture of high value-added products and from the production of goods to the provision of services. As a consequence, all economies, regardless of their stage of development, need to develop and produce an increasingly diverse array of high value-added goods and services. This is an area in which the capability of SMEs to respond flexibly works to their advantage, and SMEs can provide the locomotive power for further structural sophistication and sustained economic growth.

5. The accelerating globalization of industry, particularly in the manufacturing sector, creates a prime opportunity for every economy to encourage the establishment and growth of domestic industry and to nurture a highly efficient and productive industrial structure. Such industrial development must, however, be premised upon the presence of SMEs with appropriate managerial and technological know-how. It will also depend upon the development of suitable financial infrastructure for SMEs. Supporting industries constitute an essential part of the industrial infrastructure needed for expanding foreign direct investment, stimulating the formation of regional production networks, and contributing to domestic and regional economic growth.

6. SMEs in the Asia-Pacific region at the dawn of the 21st century are well-positioned for business expansion. Sustained economic growth and new employment creation in the region depend to a great extent upon SME growth and development.

7. The ability of SMEs to adapt effectively to this emerging environment is crucial not only to their continued viability and competitiveness but also to that of member economies. Ministers agreed that APEC's role in support of SMEs should focus first on addressing the areas where SMEs face the greatest handicaps. These include human resource development, access to information, technology and technology sharing, the availability of finance and market access. They are of even greater significance in economies where the industrial infrastructure is wanting. Discussion centered on how APEC could broaden cooperation in the Asia-Pacific to address these important issues.

8. Ministers also solicited and received the advice of representatives of the private sector, who held concurrent meetings focused on the same issues, and Ministers appreciate their efforts in rendering the overall discussion more fruitful.

9. Ministers applauded the Uruguay Round's achievement in securing the alleviation or elimination of many formal barriers to trade and investment. They called for the full and speedy ratification of the Uruguay Round's results as essential in strengthening the business environment for SMEs. Ministers agreed that further efforts toward deregulation and trade and investment promotion would significantly facilitate SME development and would serve to enhance regional economic interdependence.

10. While Ministers recognized the diversity among SMEs which reflects the specific economy and economic sector in which they operate, they nonetheless believed it imperative, given the importance of SME growth in furthering the APEC region's dynamic growth, that the characteristics APEC-region SMEs share should be emphasized so that APEC members can cooperate more effectively on SME issues. Furthermore, the diversity among SMEs should be explored and utilized to attain complementarities that would bring about more efficient production, greater employment opportunities and mutual benefit among APEC economies. These beliefs underlie the direction of the following policies.

11. Free market mechanisms can provide the most favorable environment for SME growth, and it is essential that the APEC economies work out and implement market-oriented SME policies to help SMEs maximize their responses to market mechanisms.

12. While the policy mix deployed in each economy will necessarily differ depending upon the economy's stage of development and other special circumstances, addressing problems in the areas of human resources development, access to information, technology and technology sharing, the availability of financing and market access should be priorities of all APEC member economies. Ministers stated the belief that APEC members should cooperate to the maximum extent in dealing with these and other issues affecting SME development.

13. In this respect, Ministers believed that APEC members should support Leaders' initiatives and the SME-related activities of the CTI and the various Working Groups within the APEC framework.

14. Ministers discussed a range of initiatives, including human resource development (APEC Center for Technology Exchange and Training for SMEs= networking of SME-related HRD initiatives), access to information (private/business sector networking= EDI and electronic commerce), technology and technology sharing (APEC Technomart= networking among SME promotion organizations related to technology) and financing (APEC Venture Capital Workshop=investment scheme to facilitate the globalization of SMEs in the region).

15. Further deregulation can level the playing field and allow SMEs to take full advantage of their special characteristics of fulfill their potential. Ministers urged all APEC members to facilitate freer SME activities in their respective economies. Ministers also urged all APEC members to improve market access and to participate positively in the World Trade Organization (WTO) and other activities intended to promote trade and investment liberalization.

16. In addition, it is imperative that trade and investment facilitation efforts be accelerated to enable SMEs to fulfill their potential. The establishment of non-binding investment principles is one such concrete measure that would reduce SME investment risks and expand investment incentives. Other measures integral to facilitating SMEs' offshore expansion include provision and mutual recognition of standards and conformance, and simplification of customs procedures, and Ministers urged the CTI to step up its efforts in these areas.

17. It is axiomatic that all SME-related APEC policies should be WTO-consistent.

18. Facilitating SME development demands a sound grasp of the growing economic interdependence within the Asia-Pacific region, and SME policy-making would benefit from a shared outlook on APEC's future industrial structure. Ministers therefore recommended that APEC commission in-depth studies of the impact of regional interdependence, more open trade and deregulation on SMEs and suggestions on assisting SME adjustment to this environment. The proposed studies should take account of existing work on SMEs within APEC.

Ad-Hoc SME Policy-Level Group

19. Ministers stated their belief that SME policy dialogue can contribute importantly to the formulation of effective SME policy and enhance SME policy transparency.

20. Ministers agreed that the various SME-related activities in APEC would benefit from more effective and systematic coordination to ensure that SME-related concerns can be adequately addressed.

21. Ministers therefore recommended that the present APEC Experts' Meeting on SMEs be upgraded at the next Ministerial Meeting into an ad-hoc policy-level group on SMEs, meeting as needed under the direction of the APEC Senior Officials Meeting. This group should report to the APEC Senior Officials Meeting.