CONTRIBUTION OF SMALLER ENTERPRISES TO OVERALL ECONOMIC GROWTH CANNOT BE UNDERESTIMATED, JAPAN TELLS SECOND COMMITTEE

28 October 1997

Press Release
GA/EF/2777

CONTRIBUTION OF SMALLER ENTERPRISES TO OVERALL ECONOMIC GROWTH CANNOT BE UNDERESTIMATED, JAPAN TELLS SECOND COMMITTEE

19971028 Public-Private Partnerships in Development Also Discussed, As Committee Concludes Consideration of Industrial Development Cooperation

The contribution of small- and medium-sized enterprises to a country's overall economic growth could not be underestimated, the representative of Japan told the Second Committee (Economic and Financial), as it concluded its consideration of industrial development cooperation and business and development.

Small- and medium-scale enterprises created jobs and strengthened support industries in domestic economies, he continued. While foreign direct investment from developed countries and the transfer of technology could aid the small- and medium-scale enterprises, the local support for such enterprises must also be strong. Governments should provide a favourable environment to support the development and growth of small- and medium-scale enterprises.

The representative of Colombia said enterprises in developing countries should prepare to participate in strategic ventures with foreign enterprises in order to obtain an efficient transfer of technology, as well as knowledge about other areas. Such activities would also help to enhance efficiency and productivity in business. Developing countries should also work towards enhancing competition and facilitating foreign direct investment.

A strong public-private partnership was effective and essential in implementing development projects, the representative of the Republic of Korea said. Most developing countries had weak private sectors that needed government assistance through the establishment of support initiatives in the areas of finance, research and development, new technologies and physical infrastructure.

Statements were also made by the representatives of Indonesia, Romania and Malaysia.

The Committee will meet again at 3 p.m. Wednesday, 29 October, to hold a panel discussion on international migration, population and development, which will be moderated by Under-Secretary-General for Social and Economic Affairs Nitin Desai.

Committee Work Programme

The Second Committee (Economic and Financial) met this afternoon to conclude its consideration, under the general heading "sectoral policy questions", of industrial development cooperation and business and development. (For background information see Press Release GA/EF/2776 of 28 October.)

Statements

ARMANDO OLARTE (Colombia) said free world trade and the industrialization of financial systems provided developing countries with both challenges and opportunities. In order to benefit from those, developing countries needed to have a strong public sector and a competitive private sector. Developing countries should design and carry out policies that aimed to deregulate foreign capital and to create an environment beneficial for foreign investment.

Businesses in developing countries must prepare for participation in a globalized economy, he continued. The privatization programmes that the governments of developing countries were gradually implementing in the sectors of energy, communication and infrastructure would require capital. The amount of that capital would most likely exceed the capabilities of the developing countries. Therefore, they would need infusions of foreign capital.

Enterprises in developing countries should prepare to participate in strategic ventures that shared risks with foreign enterprises, he said. In order to enhance competition and efficiency in the rapidly changing world economy, developing countries should be working to facilitate foreign direct investment. Entrepreneurs should merge or combine projects with shared risks, so they could obtain an efficient transfer of technology, as well as knowledge about other areas. Such activities would also help to enhance efficiency and productivity in business.

PRIANTI GAGARIN DJATMIKO-SINGGIH (Indonesia) said Africa's overall poor economic performance was rooted in poor industrial performance. Her delegation supported the substantial and productive work performed by the Economic Commission for Africa (ECA), United Nations Industrial Development Organization (UNIDO) and the Alliance for Africa's Industrialization. They have provided valuable contributions towards improving the competitiveness of the industrial sector in Africa.

It was also imperative to ensure that the Second Industrial Development Decade for Africa (1993-2002) was sustained and strengthened, she said. The programmes and projects of industrial development within the Second Decade's framework should be reoriented, in light of the globalization of trade, investment and technology flows.

Second Committee - 3 - Press Release GA/EF/2777 21st Meeting (PM) 28 October 1997

The UNIDO continued to play a crucial role in the industrialization and development of the developing countries, particularly in Africa, she said. Its role should be further strengthened and supported. It had provided developing countries with an invaluable source of information in the area of industrial development. Her Government supported UNIDO's role in the United Nations system in providing a policy forum, support for institution-building and other forms of technical cooperation and assistance in the field of industrialization. Industrialization was a powerful engine for growth and an important catalyst for propelling technological skills and national capacities. It was also indispensable for the development of Africa.

YUTAKA YOSHINO (Japan) said the formation of the small- and medium-scale enterprises clearly played an important role in the development process in developing economies. They created jobs and strengthened support industries in domestic economies. Their contribution to the overall economic growth of a country could never be underestimated. Government must support the development and growth of small- and medium-scale enterprises by providing a favourable environment.

Since the domestic market in many developing countries was not large, industries in those economies must be competitive and the key to competitive exports was to build strong small- and medium-scale enterprises, he said. Although foreign direct investment from the advanced countries and transfer of technology could help the development of small- and medium-scale enterprises, the local support for such enterprises must be strong.

Calling on UNIDO to pursue rigorous efforts to improve industrial development in Africa, he said UNIDO must act primarily as a planning and implementing agency in the United Nations system for the Second Industrial Development Decade for Africa. It should focus more on new development strategies and on activities that would bolster private-sector participation in trade and investment.

EUY TAEK KIM (Republic of Korea) said one of the most pressing challenges facing the international community was to reverse the worsening disparity between developed and developing countries. In that context, his Government appreciated the efforts of UNIDO and the ECA for the implementation of the programme for the Second Industrial Development Decade for Africa. The Republic of Korea also supported the strengthening of UNIDO's role in fostering the industrial development of developing countries.

Capital accumulation was a key factor in promoting economic growth, he said. Although most of the financial resources for development came from domestic savings, foreign direct investment tended to yield greater efficiency in the use of resources and increased productivity. That was achieved through the transfer of technology and by opening local partners access to international markets. It was important for least developed countries to

Second Committee - 4 - Press Release GA/EF/2777 21st Meeting (PM) 28 October 1997

foster enabling environments for foreign direct investment. His Government encouraged the United Nations to further strengthen its support for the capacity-building of least developed countries in that area.

While the private sector was weak in most developing countries, it needed government assistance in establishing support initiatives in such areas as finance, research and development, new technologies and physical infrastructure, he said. A strong public-private partnership was effective and essential in implementing development projects. A micro-credit programme, particularly one aimed at attaining gender objectives, could also make important contributions to alleviating poverty and establishing market economies in the least developed countries and economies in transition.

SORIN TANASESCU (Romania) said there was a close relationship between globalization and the development of small- and medium-scale enterprises. The growth of small- and medium-scale enterprises symbolized economic renewal at the microeconomic level. Such enterprises were increasingly becoming the engine for development. Their contribution to the gross national product of countries continued to grow. The development of small- and medium-scale enterprises was central to Romania's economic restructuring programme.

Noting that his Government continued to provide such enterprises with an enabling environment, he said a national centre for the promotion and support of small- and medium-scale enterprises was created six years ago in Bucharest. Plans were now being made to transform it into a regional centre for small- and medium-scale enterprises in eastern Europe.

SHAFIE APDAL (Malaysia) said small- and medium-sized enterprises faced several problems, among them constraints in adopting advanced technologies, employing skilled workers and increasing production capacity. Given their inability to expand their markets, such enterprises often failed to benefit from economies of scale derived from large-scale production. Technology and finance were central to strengthening small- and medium-sized enterprises.

Some countries had emphasized financial support, rather than technical support, he continued. That resulted in small- and medium-sized enterprises becoming dependent on financial incentives and protective measures, rendering them uncompetitive in the global marketplace. Those businesses needed to establish links with large local and multinational corporations to make an impact on the market. In Malaysia, that could be achieved through vendor development programmes or by taking part in localization programmes.

In the current global environment, the business sector would find it increasingly difficult to achieve competitive leadership without government support, he said. Yet, the government could not supplant strategic business decisions. The government could help providing the necessary regulating

Second Committee - 5 - Press Release GA/EF/2777 21st Meeting (PM) 28 October 1997

framework and initiating a spirit of collaboration and cooperation with the private sector.

Malaysia's competitiveness in the world economy had been made possible thorough a number of factors, including the close cooperation between the private and public sector, he said. Privatization programmes could enable the government to withdraw from certain economic activities and to utilize its limited resources in areas that commanded no private sector interest. His Government was aware of the excesses of privatization and had, therefore, taken steps to protect and promote the public interest.

* *** *