The Industrial Revolution 4.0 offers opportunities and challenges to SMEs: APEC

The Industrial Revolution 4.0 offers opportunities and challenges for SMEs, according to a report from the Asia Pacific Economic Cooperation (APEC) forum.

Therefore, some policies can be applied with a broad focus for SMEs in general in developing economies or a narrow focus for competitive SMEs in industrialized economies to motivate these companies to continue to improve and be more innovative.

In particular, e-commerce and regional and global value chains can enable SMEs to overcome some of the major barriers to trade by offering channels through which SMEs can more easily internationalize.

The Industrial Revolution 4.0

According to Teten Masduki, Indonesian Minister of Cooperatives and SMEs, there are several major constraints SMEs experience, such as lack of capital, poor management capacity and poor technology.

To meet the challenges, suggests Masduki, SMEs must be able to accelerate their adoption of the digital economy to meet the challenges of The Industrial Revolution 4.0.

Masduki also emphasized that the global economy has become a strong industrial competitor in the Asia Pacific economies in recent years.

It is no longer enough to produce faster, cheaper and have a higher quality product than competitors to maintain a competitive advantage.

Therefore, he says, the industry should implement a new type of innovative and «digital» production strategies to maintain a long-term competitive advantage.

It must be supported to pave the way for the digital transformation of traditional SMEs into smart factories.

SMEs in the APEC region tend to vary between members, but the number of employees is a main criterion that is frequently used to classify companies as SMEs in almost all APEC economies.

There are almost 150 million SMEs in the APEC economies, representing around two-thirds of employment.

Employment and GDP

In most APEC economies, more than 98% of companies are considered SMEs.

Micro-enterprises tend to represent the highest proportion of all SMEs, followed by small and medium-sized enterprises, which often comprise a very low proportion of all SMEs.

Several key characteristics distinguish micro, small and medium enterprises, such as formality; organization and management; used workers; production process; market orientation; owner’s profile; technology used; owner; motivation; and entrepreneurial spirit.

SMEs contribute more than 60-80% of total employment in APEC economies.

Also SMEs contribute 40-60% of GDP or value added in most APEC economies.