Further policy levers to support Asean SMEs available: HSBC

Against the backdrop of shifting supply chains across Southeast Asia, and Covid-19 impacting the region's growth strategy of large-scale infrastructure development and FDI-enabled export-led manufacturing growth, HSBC has released a series of recommendations ahead of the Asean economic ministers' annual summit on Saturday. "Mitigating the impact of Covid-19 on supply chains - particularly for smaller sized companies - has become a first order issue for Asean policymakers. Given their commercial and employment importance, we have seen all Southeast Asian countries fire fiscal bazookas at this segment to support them in these turbulent times," said HSBC's Asia Pacific head of commercial bank, Stuart Tait. "However, as fiscal measures begin to taper off and economic headwinds continue, several pincer and practical measures should be adopted to support companies particularly given how trade-dependent and internationally focused most businesses in the region are."

Some of their recommendations, highlighted in their policy note "Covid-19 and Asean supply chains" are as follows:

1. Improve SME's access to trade finance: There are opportunities to standardise trade finance regulations, policies and processes across the region in order to reduce the complexity, costs, and administration for smaller companies operating across borders, and to ensure that working capital becomes more accessible. As companies seek to strengthen their business resilience post-Covid-19, policymakers need to consider ways to help businesses create more sustainable long-term operations. The finance sector will play a critical role in all these processes, but it needs to be enabled by innovative public policy and regulatory reforms, said the bank,

2. Facilitate reforms that attract foreign investment: To claim a greater share of the declining FDI pie, further country reforms are needed. Each country can take an individual approach to improving labour mobilisation and productivity, including: easing labour laws and restrictions (i.e. Indonesia and the Philippines); transitioning labour to more formal and productive sectors (i.e. Vietnam), and/or encouraging greater immigration to supplement the domestic labour force (i.e. Thailand) noted the report. Governments should also continue to remove non-tariff barriers, such as increased automation of customs clearance, around the flow of goods and services to increase inbound investment.

3. Fast-track policies that support the digitisation of trade: Policymakers can support SMEs in their shift toward online channels and service-focused business models. This can be achieved by fully implementing already agreed upon digital frameworks such as the Information Communications & Technology Masterplan 2020 and the Asean Digital Integration Framework Action Plan, that will harmonise specific country regulations on issues such as the cross-border movement of commercial data; IP protection; and cybersecurity.

4. Drive critical mass in sustainability adoption: With multinational buyers beginning to invoke environmental, social and governance (ESG) frameworks upon their supply chains, governments can help SMEs make the transition. Suggestions raised by the report include establishing an "Asean SME sustainability hub" focussed on equipping SMEs with the knowledge, information, capability, and resources necessary. In addition, a regional taxonomy to define what is considered "sustainable" or "green" across different sectors will be helpful, and in doing so authorities can help grow low-carbon sectors and decarbonise high-carbon ones.

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5. Ratify multi-lateral trade agreements like RCEP: Multi-lateral trade agreements such as the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) could kickstart a new era of trade and investment integration and create certainty for SMEs and other trade-dependent businesses. "We would also encourage Thailand, Indonesia and the Philippines to seek in-principle inclusion into CPTPP," said the bank.