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Southeast Asia's Microbusinesses Go Digital to Compete

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May 13, 2020   The Asia Foundation

By Eelynn SimMeloney C. Lindberg

 

Covid-19 is hitting Southeast Asia hard. Women, young people, low-wage workers, and the underemployed have been devastated. Mom-and-pop small businesses, particularly traditional handicrafts and small-scale trading and tourism, were under financial pressures long before Covid-19. As other enterprises move online to survive, can Southeast Asia's microentrepreneurs compete without digital tools? It will be a challenge.

 

Economic shocks like this reverberate, and traditional supply chains break. This is especially true for the micro, small, and medium enterprises (MSMEs) that are the lynchpin of Southeast Asia. MSMEs account for 99 percent of businesses in several key sectors, employ 80 percent of the workforce, and contribute 50 percent of the region's GDP. The tourism sector, with millions working as tour guides, drivers, and handicraft makers, accounts for more than 20 percent of GDP in Thailand and the Philippines. Travel bans, especially from China, the region's largest source of inbound tourism, have sent this vital industry into free fall.

 

MSMEs account for 99 percent of businesses in several key sectors, employ 80 percent of the workforce, and contribute 50 percent of the region's GDP.

 

As the world's fifth-largest economy, the ten member states of ASEAN are moving towards greater economic integration yet are severely constrained by a growing digital divide—now more pressing in this global crisis. Easy access to computers, online mobile platforms, and social media and the skills and training needed to use these tools to reach markets and participate in the gig economy are not ubiquitous across the region. While many men in urban hubs are connected, women and youth in rural communities are trapped on the fringes of the digital economy. This divide between the under-connected and the hyper-digitalized will only deepen during the pandemic, exacerbating inequalities and sapping the potential for recovery and growth. 

As we confront Covid-19, the only way to ensure an inclusive economic recovery is to rapidly equip these microentrepreneurs and informal workers to secure a foothold in the digital economy. Here are three critical actions so microbusinesses will not just survive, but thrive:

 

Mobilize digital tools now. Digital technologies can no longer be tools of the elite or those in urban hubs. To weather the coronavirus crisis, small enterprises must expand and gain access to markets beyond their own communities. In a March Covid-19 communique, ASEAN economic ministers called for digital trade and technologies to keep businesses operating, especially MSMEs.

 

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2020-05-19