How to use markets as a partnership and the three dimensions of sustainable development?
I would like to thank the organizers of this panel for the invitation to this though-provoking discussion, at a time when we are settling the priorities for the post-2015 agenda.
Still today nearly half of the world’s population subsists on less than US$ 2 per day. There is no denying that poverty is a worldwide phenomenon. We already know the tool to tackle this scourge: economic growth. The issue is that we do not know how to do it right, that is, generate sufficient and equitable economic growth, a growth that would benefit not a small portion of the world population, but all, and especially poorer communities.
Because we are not empowering the right stakeholders. I think that SMEs are the left-behind of our economy, while I think that SMEs could be the ones able to generate the economic growth we lack. Therefore, we need to ensure that markets represent opportunities for SMEs to grow as fundamental partners for sustainable development, and this for three reasons.
1. First, SMEs are crucial agents of economic growth. In OECD countries, SMEs generate 55% of GDP. They are an important source of innovation and can adapt to market needs very easily thanks to their small size. It has to be noted though, that SMEs are not all in the formal sector, some, and up to 50% in developing countries, operate in the informal sector. Fair and equitable taxation will be essential to reduce the size of informality. Governments should partner with SMEs to reduce costs and procedural burden of joining the formal sector. The private sector could also contribute by integrating SMEs in value chains. Such changes could lead to greater social stability while generating tax revenues that could be reinvested back in societies.
2. Second, SMEs are vectors of inclusiveness for women, youth and poor communities. In developing countries, SMEs account for 60-70% of employment, up to 97% in Indonesia. They are an important source of job creation, especially for low-skilled workers, who are often women and young people; two groups of population that generally face with higher rates of unemployment. Youth and women are two groups that we are trying to empower at the ITC, because we believe that it is a smart economic decision. Indeed, women economic empowerment generates employment, but also leads to sustainable development, as women reinvest up to 90% of their earnings in their families and communities. SMEs thus lift the most vulnerable ones out of poverty while generating sustainable economic growth.
3. Last but not least, SMEs are critical to ensure good practices in mitigating climate change and use of resources in a sustainable way. SMEs represent over 95% of the firms, but, because of their small size, they are unlikely to be concerned about their impact on the environment. Altogether though, the impact of SMEs on the environment is non-negligible. By helping them to meet with environmental standards, through training and access to information, government and businesses can help SMEs integrate a sustainable development approach into their production.
In a nutshell, SMEs are in position to play a much greater role in the global economy, boosting economic growth, alleviating poverty and paving the way for sustainable development. On their own, they can do little. By partnering with government and businesses though, they could do a lot. But for these partnerships to emerge, SMEs should be given more voice in political and economic decision-making. SMEs need to be integral part of post 2015 development agenda, embedded into the Sustainable Development Goals (SDGs), and considered at the heart of any partnership strategy in financing development for greater impact.