DIGITAL ERA

ASIA'S SMBs REACH CRISIS POINT Asia's SMBs

TRINNA DELEON
Dec 10 - 16, 2007

Governments often focus on areas like education, e-Health, e-governance, and culture to help bridge the digital divide. But there is another route that can bring information, communications & technology (ICT) skills to underdeveloped areas.

Asia Pacific is the world's largest regional Internet market. For many years, mature Asian economies such as South Korea, Singapore and Taiwan have dominated the 'internet revolution'. China is catching up with millions of connected users. But other developing Asian countries show considerably slower growth in ICT usage, partly thanks to poor (or non-existent) infrastructure, high access costs and the slow pace of deregulation.

CASE STUDY: PAKISTAN

As the sixth largest population in the world, Pakistan has 168 million people, with the majority between 18-40 years of age. As the government continues to invest in education, they are faced with increasing numbers of graduating students adding to the country's 10 percent and rising unemployment pool. This trend has resulted in the nationwide Rozgar scheme.

With the goal of providing youth employment opportunities and increasing rural PC adoption, the government (through Rozgar) is investing US$1.4 billion over the next five years. This investment will be split into three segments: connectivity infrastructure and broadband rollout projects; citizen training programs to drive ICT literacy; and financial subsidies for business start-up loans for the unemployed.

The subsidies take the form of subsidised loans from the National Bank of Pakistan, and temporary repayment waivers from financing companies. Loans can be for various ICT businesses such as public calling offices, full-fledged telecentres or internet cafes. The targets are impressive: 1.8 million direct and 3.6 million indirect jobs created in sub-metro and rural Pakistan and of course the follow on revenue and standard of living increases for the SMB owners.

At the last two World Summits on the Information Society (WSIS) held in Geneva and Tunis, governments and world leaders committed to building a people-centred, inclusive, development-oriented Information Society, where everyone can access, utilize and share information and knowledge.

In pursuing this goal, the Asia Pacific region has seen substantial strategic investment in ICT by both public and private stakeholders. Such investments have typically included infrastructure, policy, regulation and promotion. And most focus on recognised areas such as education, e-Health, e-governance, culture and commerce.

But while these efforts are laudable and areas such as education are vital to address, the buck should not stop there. Many countries are beginning to realize this simply produces thousands more students for the "real world", but with the same limited employment opportunities as before. Unless the jobs are available, a (rising) unemployment trend in many Asian markets will merely be accentuated by better education. The key area for improvement is governments' willingness to invest in local talent and small businesses.

THE SMB FACTOR

SMBs make up a startling 32 percent of Asia Pacific PC consumption ( Source: IDC PC Tracker Q3'06). [i] Governments are now starting to recognize the importance of this sector in fostering economic growth, employment and poverty alleviation. But perceptions of SMBs being too diverse or too small can still act as roadblocks for stakeholder and public sector or investment, missing the central issue that SMBs provide thousands of new jobs and cultivate local talent.

Apart from reach, another attractive aspect to SMBs is purely financial. A recent study conducted by AMI Partners showed that 32 percent of the 20 million SMBs in Asia Pacific own PCs. Even more compelling, those that did use PCs had double the annual average growth rates and average annual revenues some eight times higher than non-computerized counterparts. The implications are obvious; SMBs can improve lives through ICT usage.

MAKING THE MOVES

With increasing recognition of the SMB as a driving force, ICT-friendly governments such as South Korea and Pakistan are now beginning to invest in policies, PC adoption programs and subsidies geared specifically towards SMBs.

CASE STUDY: SOUTH KOREA

South Korea is well-known for its well-established IT infrastructure, yet access to information is widening between urban and rural areas. In addition, international FTA and WTO agreements have significantly affected product prices for local agricultural communities, leading to sharp decreases in many household incomes. As a result of this, the Ministry of Government Administration and Home Affairs (MOGAHA), in collaboration with Intel and local OEMs, initiated a subsidy of connectivity and hardware for farmers in the form of the Integrated Network Village (INV) project.

From its initial pilot of 25 connected villages in 2001, the INV project now span a breadth of hundreds of rural communities each backed with its own sustainable customized e-market framework. This has enabled local farmers to trade produce and materials on a regional, not just local level.

Research on the IVNs shows an impressive 43 percent average income increase via e-Commerce business. Farmers now have access to global market information and can sell their goods online, and the investment also reduces unemployment and up-skills the local workforce.

CONCLUSION

There is no doubt that seeding the SMB sector can provide disproportionate dividends to the communities they serve, and the countries they work from. But the biggest barrier to ICT adoption by SMBs anywhere is the lack of understanding of relevance to their business. Price or the cost of ICT is a close second. So the success of digital inclusion projects such as those mentioned depends on removing barriers to ICT participation; and this should not be restricted to any one sector of society.

It should not be about relying on state initiatives, but about public private partnerships where stakeholders contribute according to depth of resource and expertise. Success in the vital SMB space is critical in emerging economies, and calls for a new kind of solidarity between governments, the ICT industry and other ecosystem partners like financing companies, telcos, and ISVs.