The economic importance of small and medium-sized enterprises (SMEs) is widely recognized and acknowledged by researchers and policymakers in Southeast Asia. This is not surprising as SMEs typically account for about 97–99 per cent of total enterprises and 60–80 per cent of total employment in Southeast Asian countries (Lee and Zhang 2016). Such statistics notwithstanding, SMEs are often viewed as being disadvantaged compared to large firms because they lack economies of scale and face resource constraints (Harvie 2015). In the theoretical and empirical trade literature on heterogeneous firms, these disadvantages translate into low productivity which affects SMEs’ exporting behaviour. For countries in Southeast Asia, this is a serious problem given the fact that many, if not all, countries in the region are committed to achieving greater intra- and inter-regional economic integration. This is to be achieved via the formation of the ASEAN Economic Community (AEC) as well as participation in bilateral and regional free trade agreements (FTAs). The question that follows then is this — can manufacturing SMEs participate effectively in economic integration given the disadvantages they experienced? It was with this question in mind that the Economic Research Institute for ASEAN and East Asia (ERIA) and ISEAS – Yusof Ishak Institute (ISEAS) collaborated to undertake a research project to better understand the current state of manufacturing SMEs’ participation in economic integration. This book is a collection of the research papers from the project.
The chapters in this book are organized into two sections. The first part covers country papers. The countries included are Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Thailand and Vietnam. These are based on primary data collected in the research project. The second part covers linkages between multinational enterprises (MNEs) and SMEs in Southeast Asia. Chapters in this category rely on secondary data and fieldwork interviews with MNEs operating in the region.
For the country studies, several methodological challenges were encountered right from the inception of the project. These affected the sampling approach to be adopted for the surveys. First, due to financial constraints, the project could only cover 200–300 firms per country. Due to this relatively small sample size, it made sense to focus mainly on a few key industries. The main criteria for the choice of these industries was the importance of these industries to the country (see Table 1.1).