A Better Normal for Businesses

The impact of the COVID-19 pandemic on micro, small and medium enterprises (MSMEs) is significantly negative from both the economic and social perspectives. MSMEs are amongst the worst affected, and yet they provide the majority of jobs and income for vulnerable groups, such as migrant workers, women workers, low-income earners, and people living in remote or less-developed areas unlikely to be reached by bigger businesses.

Fiscal and monetary support measures by governments have been critical for the survival of business during the crisis, so that workers can maintain their employment and have some support during this difficult period. The Association of Southeast Asian Nations (ASEAN) and its member-states are encouraged to continue allocating resources and take policy actions to support MSMEs. The following policy interventions are suggested:

1. Create an environment that is conducive for MSMEs to adapt their business operations as quickly as possible to a new normal:

• Ensure trade flows both in domestic and regional markets
• Facilitate MSME business reopening safely
• Support MSME adaptation to a new normal
• Encourage MSME financing flows
• Protect MSMEs from being crowded out and dominated by the interest of big business

2. In the long run, policy actions should transform MSMEs to a stronger strategic positioning through:

• Promoting the ASEAN common market as an attractive investment destination as global value chains are being restructured due to disruption risks and geopolitics
• Supporting business digitalization for MSMEs
• Facilitating the MSMEs’ adjustment to changes in consumer behavior, demand, and sectoral and market changes
• Creating a favorable environment and supporting MSME to embrace e-commerce
• Enabling MSMEs to grow in responsible, sustainable, and environment-friendly ways to ensure a more resilient business development for the whole region

3. Parallel to providing business support, policy actions are needed to ensure better social protection and development for MSME employees from the formal and informal sectors. This may include:

• Expanding healthcare insurance coverage where it is still not universally available
• Expanding social and unemployment insurance coverage
• Facilitating the transition of informal businesses into the formal sector
• Providing skill training/skill upgrading for workers from both formal and informal sectors
• Design and deliver special programs to reach women workers and people from disadvantaged groups including those from the informal sector or less developed areas

These policy actions, implemented in coordination, will contribute to realizing the vision of globally competitive, innovative, inclusive, and resilient MSMEs in 2025 in the ASEAN region.