Statement at the Geneva Dialogue on the post-2015 Sustainable Development Agenda
Speech by Ms Arancha González, Executive Director, International Trade Centre
Delivered on 29 November 2013 at the Geneva Dialogue on the Post 2015 Sustainable Development Agenda, Palais des Nations, Geneva, Switzerland
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Secretary General Kituyi
United Nations Secretary-General’s Special Adviser on Post-2015 Development Planning, Amina Mohammed Ladies and gentlemen
Thank you for the invitation extended to the International Trade Centre to participate in this extremely important event and to share our vision on the Post 2015 Development Agenda. As a joint agency of the United Nations and the World Trade Organization, the International Trade Centre has a great deal to contribute to this debate; specifically in highlighting the important role that building competitiveness of economies, through supporting small and medium sized enterprises, can play in promoting sustainable development and growth and linking this to poverty reduction. Ultimately this is what the core of the Post 2015 debate is about: sustained development and poverty eradication.
ITC is mandated to work with the public and private sectors to assist small and medium sized enterprises in developing countries and transition economies achieve export success. The focus of ITC’s work is inclusive sustainable economic development, building the supply side capacity of SMEs in developing countries and helping them to access regional and international markets. We have bespoke programmes targeting poor communities, women and the environment. Our work in support of the realisation of the Millennium Development Goals (MDGs) is a strong foundation for a sharpening of focus on sustained, and sustainable inclusive economic growth going into the Post 2015 development agenda.
As further elaborated during the Open Working Group Meeting in New York this week, this agenda is taking shape around three dimensions of sustainable development: Economic development, social inclusion and environmental sustainability. The three pillars are inter-connected and no one pillar can be addressed in isolation.
Dynamic and stable economies and a healthy and resilient environment underpin poverty eradication and sustained and sustainable social and economic development. Collectively we have made formidable strides on addressing absolute poverty. But poverty, including new forms of poverty such as ‘the working poor’, and unequal distribution of the benefits of growth and development still persist. We need to have a more in-depth discussion of the reasons for this poverty and broaden the scope of solutions to address how trade can be effectively harnessed to reduce poverty. We need to think through the elements of what truly delivers inclusive and sustainable economic growth and build this into our goals, targets and indicators going forward.
The Secretary-General of the United Nations, in his report to the General Assembly, ‘A life of dignity for all: Accelerating progress towards the Millennium Development Goals and advancing the United Nations development agenda beyond 2015’, observed “inclusive economic growth with decent employment and decent wages has proven to be a prerequisite for achieving the MDGs, particularly on Goal 1, on eradicating extreme poverty and hunger”. The notion to ‘Create inclusive growth through decent work with decent wages’ is a prescription for what to do but it does not necessarily provide a roadmap on how to do this. I believe I can offer some sign posts on how we can achieve this.
SMEs as engines of growth
Today, the largest untapped source of growth is that of small and medium sized enterprises. Across the developed and developing world SMEs are the main source of employment accounting for almost 80 % of jobs. Given the role of decent employment in supporting economic growth, poverty reduction and protection of vulnerable communities, SMEs as incubators of growth, must form a central part of our debate. The employment created by these SMEs is of particular importance. In developing countries and Least Developed Countries, many of these jobs which will be filled by the vulnerable groups in society such as women and youth- are people who are often operating at the bottom of value chains and excluded from sustained economic opportunities. In vulnerable countries, such as fragile states, post conflict states, land-locked countries and small island developing states, building the supply side capacity and supporting the growth and competitiveness of SMEs are necessary anchors for development – because without jobs, the achievements we make in health, education, peace and security will not be sustainable.
Given their importance to employment, inclusive economic participation of vulnerable groups and undeniable link to poverty eradication, it is critical that we bolster the principle of the importance of SME competitiveness with concrete actions which boost SME competitiveness! This is a multi-dimensional issue. Supporting the growth and competitiveness of SMEs requires good governance and open markets; strong and capable trade support institutions; growth in the services sector, which is especially critical for developing countries; an upgrade in skills including skills to export; a predictable and transparent national, regional and global trade regime including an SME friendly business environment; efforts to bring the informal sector into the formal legal structure of the economy; and avenues for these SMEs to access finance, especially trade finance. These are not just SME competitiveness initiatives, these are ‘whole of economy’ competitiveness prerequisites.
Advocacy on ‘Three Es’
This being the case, the paucity of references to small and medium sized enterprises and to the related need to enhance and support entrepreneurship in the current debate around the sustainable or post 2015 development goals is cause for concern. It belies a deeper assessment about the kinds of structural impediments to SME growth that constrain their success. To put it simply, factors that undermine SME competitiveness undermine job creation and economic growth.
If a successful women entrepreneur for example, received an order for twice her current production in the coming year, her inability to access finance and any other required inputs, restricts her productive capacity – and the number of employees – to current levels. There is no actual growth despite a potential for growth. There is no innovation. This is why, at ITC, we are advocating a focus on three ‘E’s’, which seeks to take a more inclusive and sustainable approach to economic development by recognising that improved entrepreneurship leads to economic growth which in turn creates employment. ITC’s Three E initiative: Entrepreneurship for economic growth and employment focuses on building entrepreneurship of SME exporters and of SMEs who have a potential for becoming exporters.
ITC is on the cusp of celebrating, in 2014, 50 years of service and support for SMEs’ export success. Our experience in this field has been that small businesses will develop, grow and transform into engines of growth when they are (1) competitive; (2) supported; and (3) connected – all of which needs to be tracked, including through the collection of disaggregated data to better understand the impacts and the challenges and to ensure that the priorities of vulnerable groups are being addressed.
In the Post 2015 world and beyond, these three things will remain relevant and should be key priorities of the economic dimension of a post 2015 development agenda which seeks to anchor economic development within the overarching goal of sustainable poverty eradication. Allow me to briefly elaborate a bit more on these three elements.
On SME competitiveness it is important to strengthen institutions that foster entrepreneurship. Many of these institutions play a dual role in building capacity to operate a business as well providing collective learning opportunities for technical skills development and upgrade related to the production of goods and services. Trade support institutions such as trade promotion organisations, sector associations and women’s business organisations are also a conduit to government on changes that could be made to the legislative, regulatory and administrative frameworks that could improve the domestic business environment to in turn, improve SME competitiveness, foster diversification and ensure greater local value addition.
On the notion of ‘support’, ITC continues to provide the necessary assistance and tools to SMEs to enable them to become export ready. One of the ways we do this is through Aid for Trade capacity building based on in-country demand premised on quantifiable evidence. As an active member of the MDG Task Force in measuring the trade-related target 8b (“Address the special needs of the least developed countries”), ITC collects data against related indicator 8.7 (“Average tariffs imposed by developed countries on agricultural products and textiles and clothing from developing countries”) and what we have learnt from tracking progress under the MDGs, is that it is non-tariff barriers that are posing some of the biggest obstacles to trade. Hence, our Aid for Trade support is increasingly focused on helping SMEs and developing countries to build institutions and supply side capacities to identify, address and meet these non-tariff measures. And just next week in Bali ITC will release the findings of its latest SME survey which show the growing prevalence of NTMs as barriers to SME trade.
On the issue of connectivity, there continue to be calls for a robust, rules-based multi-lateral trading system. On the eve of the WTO Ministerial, there remains uncertainty as to how this will be delivered. I maintain the view that a potential multilateral Agreement on Trade Facilitation will have a wide ranging positive impact on SME competitiveness and connectivity by addressing the unnecessary barriers to trade which may restrict their growth. High transaction costs impact SMEs’ ability to diversify into the supply of different goods and services and capture a greater part of value-added production in regional and global value chains
In conclusion, as we accelerate progress towards the MDGs, and shape the United Nations development agenda post 2015, we need to remember our three ‘Es’: Entrepreneurship for economic growth and employment.’ There were no direct references to SMEs or competitiveness or entrepreneurship in the MDGs, neither at the goal, target nor indicator levels. Let us not make that mistake again. ITC will be pleased to lead further reflection on that aspect of the debate.