Analyzing the obstacles faced by the smallest businesses in the Asia-Pacific in their efforts to participate in the formal sector was the theme of an APEC symposium held recently in Peru.
The forum sought to exchange information on regional experience in strengthening the operations of small and micro enterprises and to propose measures for facilitating access to formal business exchange and finance.
Co-sponsored by Peru, Viet Nam and Chinese Taipei, the 'Micro and Small Enterprise Financing: A Tool for Mainstreaming the Informal Sector' symposium brought together representatives of the government and private sectors including a number of small and micro enterprise operators.
The symposium covered a range of areas that included discussion on regulatory frameworks, the costs and benefits of involvement in the formal sector and the effective use of financial services.
Attended by more than 200 delegates, the symposium in Lima was presented with a range of information from around the region on both difficulties and success stories of small and micro enterprise activities.
Victor Tockman, Former Regional Director of International Labor Organization and now Advisor to Chile's President, noted in his address to the symposium that the value of informal enterprises was often not fully appreciated and a new approach was required.
Mr Tockman highlighted the role of small and micro enterprises in generating work that helps people to reduce its poverty in areas where other work is not possible.
"Micro enterprises offer solutions in countries were you can not survive in any other way than being entrepreneur," Mr Tokman said at the symposium. It is important that we establish mechanisms to eliminate high entry barriers and cut red tape for those wishing to join the formal sector."
The symposium was provided with summaries of varied experiences in APEC Member Economies.
In Mexico for example, were 26% of the working population is involve in informal activities, it is estimated that only one out of three enterprises pays taxes. The response from the Mexican Government has been a proactive approach that does not seek to recover back taxes, but endeavors to invest in the future.
Gustavo Melendez Arreola, the Director of the Mexican Centre for the Development of Financing Channels and Enterprise Growth, said the Mexican Government is seeking to strengthen small and micro enterprises so that they will be able to pay taxes in the future.
"It is more important to deal with the factors the cause the informal sector to be generated to begin with, these causes are a lack of work opportunity," Mr Melendez Arreola said.
The symposium heard that there have been improvements in the approach of some banks to extend credit to small and micro enterprises with case examples cited in Peru and Chinese Taipei.
Jose Zapata from the Bank and Insurance Administration of Peru said Peruvian banks are increasingly interested in smaller enterprises.
"The average cost of credit for a micro enterprise is higher than commercial credit due to what was seen as higher perceived risk, but lending rates have been decreasing over the past decade,? Mr Zapata said.
The symposium also heard of the successes of micro-credit in Chinese Taipei where the lending rate for these programs is around 3% per year. This lending assists unemployed people between the ages of 45 and 65 who are not receiving pensions so that they can operate a small business. Up to May this year, 52,000 applications had been approved for this program in Chinese Taipei.
The symposium also included a videoconference between delegates and Mr Sloan Coleman, a Regulatory Specialist from the United States' Office of Financial Assistance in Small Business Administration, accompanied by other panel experts in Washington, DC. The video conference was arranged through the cooperation of APEC and the Global Development Learning Network (GDLN).
A common sentiment that was expressed in a range of presentations at the seminar highlighted the importance of business formalization as being essential for expanding market access for small and micro enterprises.
Ultimately it was felt that developing public policies for business formalization is a challenge faced in a number of areas around the Asia-Pacific with the way to overcome these obstacles requiring strategies to increase competitiveness and productivity.
The findings of the symposium will be published in a report that will be released in the coming weeks.
The Micro and Small Enterprise Financing: A Tool for Mainstreaming the Informal Sector symposium was held in Lima on July 6 and 7.