Enhancing favourable trading environment

The growth and survival of SMEs in a globalizing world economy require the adoption at the national and international level of policies and programmes which allow them to compete both at home and abroad. At the national level, new supporting structures are needed, including programmes for entrepreneurship and innovative capacity-building, ability to meet new standards being set in international negotiations, and information on market opportunities. A number of measures can be taken to increase SMEs' access to markets, finance, business skills and technology. The need for new international standards for product quality and the environment should be taken into account, with the full participation of developing countries in future standard-setting. Since SMEs excel at job creation, and job creation is key to reducing poverty, policies and programmes to support SMEs should be promoted.

The state has a role to play in creating a favourable framework and market conditions for the development of entrepreneurship and of enterprises, including SMEs. This implies the creation of a favourable macroeconomic framework for creating business confidence and reducing commercial, financial or investment risks associated with unexpected or sharp tax, interest rate or currency movements. Such conditions, together with appropriate government support and financial markets regulations, will help to mobilize savings, develop financial institutions and markets and encourage investment, including foreign investment. Macroeconomic stability will also facilitate structural adjustment, including any industrial restructuring, designed to achieve more open markets and competitive enterprise. It also implies creating a sound policy and commercial framework for business development, in which markets can function efficiently, through the adoption of appropriate policies, including those relating to factor markets, the organization of the firm and support services, product markets and intellectual property, environment and standards. Such policies range from price deregulation, promoting greater flexibility and mobility in labour markets, development of financial markets and institutions, promoting competition to policies concerning human capital and infrastructure development. At the same time, the commercial framework – including rules, laws and regulations governing the establishment and operations of companies, market entry and exit, as well as legal enforcement procedures – needs to be clear, stable, predictable and effective.

Market failures are not just a matter of deficiencies in financial or other markets. The lack of communications infrastructure, including roads and telecommunications, causes other forms of market failure. Telecommunications are the lifeline of business activity: markets cannot function without effective flows of information. It is hardly possible to conceive of networking, so essential for the development and modernization of SMEs, without adequate telecommunications. Subcontracting cannot be extended to SMEs in rural areas without adequate roads to such areas. Likewise, the lack of an educated labour force, or of entrepreneurial and other skills needed for the business world, may also have a constraining effect on efficient market development.