The Presidential Candidate of the Labour Party in the 2023 election, Mr. Peter Obi, has underscored the importance of Small and Medium Enterprises (SMEs) to global economic growth. He also explained why small businesses are the engine of growth across the globe, especially in areas of job creation, innovation, and domestic investment.
Obi’s position was contained in the remarks he made over the weekend at a global conference organized by the Bangladesh Government in conjunction with the Commonwealth Enterprise and Investment Council, in Dhaka, Bangladesh.
The Labour Party standard bearer argued in his address at the international conference that SMEs are emerging as the undisputed engine of rapid economic expansion and growth globally.
Buttressing his position with various data, Obi noted that “World Bank records (2020), show that SMEs account for roughly 90% of businesses and more than 50% of jobs created globally. While formal SMEs contribute up to 40% of national income (GDP) in developing and emerging markets (DEMs), their impact and contribution are significantly higher when informal ones are included (World Bank, 2020).
According to the former Anambra state Governor, ‘In Bangladesh, SMEs contribute about 40% to GDP, in Nigeria 48% and China 60% with about 7 out of every 10 formal jobs created by SMEs.
It has the same immense impact in India where SMEs account for over 40% of the total workforce.
Obi urged the Commonwealth nations to pay very special attention to small businesses, which have proven to be the fulcrum upon which sustainable and inclusive growth and development can be achieved across Commonwealth countries.
He noted that “If we enhance the functionality and impacts of SMEs across Commonwealth countries through formalization and internationalization, we would have done it across the world with lives, communities, and economies positively impacted.
“Endowed with a population of about 2.5 billion people, a home to over a billion young consumers and exports of over $1 trillion, the need for better support for SMEs cannot be over-emphasized.”
He further explained that small businesses, especially in developing and emerging markets, face many challenges arising from a lack of formalization and internationalization. He revealed that many small businesses are not registered and licensed and lack international affiliations, export less than large companies, and barely exploit the benefits of international trade, which limits the growth opportunities of both the SMEs and the countries.
“To harness the full contributions and impacts of SMEs, Obi admonished that reforms such as proper formalization and internationalization are needed to address the identified challenges.
“Formalization involves bringing SMEs into the formal economy through registration of their businesses and complying with legal and regulatory requirements.
“Expectedly, the process of formalization will be beneficial not only to the SMEs but the overall business environment and economic stability as significant segments of SMEs operate in the informal sector due to a lack of resources or awareness of the formalization benefits.
Noting that this limits their access to credit, markets, and government support which consequently results in reduced investment, innovation, and growth opportunities.
“Proper formalization and internationalization of SMEs particularly in today’s globalized economy therefore require urgency and full support of all stakeholders as it allows SMEs to tap into global markets, access international resources, and grow their businesses with immeasurable positive global impacts,” Obi said.
Obi further explained that this is critical especially to Commonwealth nations, as the Commonwealth controls a combined wealth of about $150 trillion, which is over 10 times their combined GDP of about $14.5 trillion today, and over 30 times the global trade and export value of about $4.8 trillion.
Arguing further on these untapped benefits, Obi said that the Commonwealth, despite controlling one-third of the global population only contributes below 15% of the World GDP of $100 trillion and with a global GDP per capita of $10,700; while that of the Commonwealth is $3500. “This shows a huge growth potential, which can be enhanced by investment in SMEs where the bulk of the youths are domiciled, especially within the Commonwealth family.
“SMEs in Commonwealth countries are essential drivers of economic development and poverty reduction. Formalization and internationalization are crucial pathways to unlocking their potential, fostering innovation, and increasing competitiveness.
While noting that the challenges are many, Obi stated that supportive policies, capacity-building initiatives, and strategic partnerships can empower SMEs to thrive in the global economy.
“And by investing in the formalization and internationalization of SMEs, the sustainable socio-economic growth and development of Commonwealth Organisation and Countries can be significantly enhanced.
To achieve this the Presidential Candidate said it will require a high level of involvement of all stakeholders particularly the Commonwealth Organisation and the Government of Commonwealth Countries,” Obi stated.
On the sidelines of the conference Obi in a meeting with the Honourable Prime Minister of Bangladesh, H. E Sheikh Hasina, congratulated her and her team for what they have been able to achieve in their nation, with the support of SMEs in the last 15 years noting, however, that more still needs to be done.
Obi at the meeting corroborated with the Managing Director of City Bank in Bangledesh, Mashrur Arefin, that 80% of job creation and a higher percentage of growth in Bangledesh today are created by SMEs. He said, “This shows an example of what I have said over the years. In 2009 when I visited Bangladesh, their GDP was $102 billion, with a GDP per capita of $688. Today, their GDP is $460 billion and a GDP per capita of $2700. Their unemployment rate in June 2009 was between 9 and 10%, today it is below 5%. The poverty rate also greatly reduced and they have maintained growth of over 6% within the said time.”