ASEAN Urged To Close MSME Gaps To Unlock Growth

KUALA LUMPUR, May 23 (Bernama) -- A prominent Malaysian private sector official has urged ASEAN to prioritise strategies and policies that address the challenges facing micro, small and medium enterprises (MSMEs), to ensure the regional economy fully benefits from their potential.

National Chamber of Commerce and Industry of Malaysia (NCCIM) vice-president Datuk Dr A.T. Kumararajah, said these enterprises have the potential to harness their collective economic strength and contribute to regional growth and development. 

Speaking to Bernama after a pre-recording of Bernama TV’s 'Paarvai' – a Tamil-language magazine programme – he said ASEAN leaders, meeting in Malaysia for their 46th summit, should commit to concrete measures that support MSMEs and close development gaps.

He said the challenges these enterprises face continue to hinder regional alignment and prevent them from realising their full business potential. 

Although MSMEs are considered the backbone of Southeast Asian economies, Kumararajah said they continue to grapple with wide development gaps, limited digital readiness, and significant disparities in institutional capacity.

Structural differences, inconsistent policies, and the absence of harmonised cross-border regulations further constrain MSME growth, he said. These enterprises also struggle with uneven innovation, limited access to finance and export markets, and protectionist tendencies among member states.

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Unless leaders implement targeted and coordinated solutions, ASEAN’s MSME ecosystem will remain fragmented, he said.

With Malaysia holding the ASEAN chair this year, Kumararajah voiced hope for renewed urgency to narrow the divide and unlock the sector’s full potential, in line with the summit theme of “Inclusivity and Sustainability.”

“ASEAN’s SME landscape is highly heterogeneous. This poses a key challenge in achieving deeper digital integration, streamlining cross-border regulations, and developing inclusive support systems that reflect the realities of each member state,” he said. 

Kumararajah added that the economic and structural diversity of SMEs in Southeast Asia was evident in the wide gap in Gross Domestic Product (GDP) per capita. 

He cited how Singapore’s per capita income stood at US$84,734, while at the lower end were Cambodia (US$1,875) and Laos (US$2,075) in 2023. 

“These disparities reflect differences in infrastructure, economic complexity and institutional maturity.

“This makes it unrealistic to apply a one-size-fits-all approach when designing SME development strategies,” he said.

He noted that SME productivity and economic contribution also vary significantly across the region. For example, Indonesia’s SMEs contribute 60.3 per cent to its GDP, while the figure stands at just 18 per cent in Laos. ASEAN also faces uneven progress in innovation, digital readiness and access to export markets.

Kumararajah said uneven access to finance was a pressing concern, particularly in lower-income countries. Citing Asian Development Bank data, he said only 30 per cent of ASEAN SMEs have access to formal financing, with high collateral requirements and limited credit options still common in Cambodia and Laos.

Digital inequality is another hurdle. While Singapore leads in smart technologies and e-commerce, countries such as Myanmar, Cambodia and Laos continue to lag due to inadequate infrastructure, low bandwidth and poor digital literacy, he said. This, in turn, could undermine the rollout of the ASEAN Digital Economy Framework Agreement (DEFA).

Regulatory fragmentation also complicates cross-border SME operations, with varying tax regimes, legal standards and business laws increasing transaction costs. The absence of mutual recognition of certifications and standards limits scalability across the region.

He added that informality remains widespread, especially in Indonesia, Vietnam and Cambodia, where more than 60 per cent of SMEs operate unregistered or semi-formally. This leaves them outside the formal policy framework and without access to legal protections or institutional support.

Kumararajah emphasised that without targeted, country-sensitive interventions and stronger coordination mechanisms, ASEAN’s SME ecosystem will remain fragmented—ultimately holding back the region’s collective economic potential.

-- BERNAMA