How big are small businesses in Asia? Apparently, very very big. Did you know, for example, that in Asia small and medium enterprises (SMEs) contribute between 25% to 60% percent to a country’s gross domestic product (GDP), constitute 16% to 69% of its exports, and employ between 52% to 97% of its workforce?
Anu Madgavkar, senior fellow at the McKinsey Global Institute, shared these and more interesting insights into small businesses in Asia during a sharing session organized by search giant Google. She also delved into the impact of the Internet on small businesses in Asia, and highlighted how a country’s infrastructure can aid or limit the impact of small business on its economy.
Here’s a more in-depth look of the breakdown the small business impact on the economy by country:
As you can see, small businesses employ most of a country’s workforce – even Singapore, the region’s lowest, stands at over half of its workforce. For China, small businesses essentially make up the country’s economy, contributing to 60% of its economy, hiring up to 3/4 of its workforce and fueling 69% of its exports. Interestingly, Indonesia has a lot more small businesses (54 million) than China (54 million), despite having a population only a quarter of the world’s most populous country.
The impact of the Internet has also opened up possibilities for small businesses seeking growth in both domestic and international markets. In a 2011 and 2012 survey conducted by McKinsey of SMEs in Asia, SMEs who use the Internet say it has helped them gain revenue as well as reduce costs. Many SMEs also reported an average of 13% improvement in productivity from using web technologies such as Google Apps. Here’s a look at seven Asian countries:
It’s pretty clear from the chart that the Internet provides huge benefits to small businesses – revenue, reduction in cost of goods sold (COGS) and cost of operations/administration has all improved for the better, whether to a bigger or lesser extent. In Vietnam, a 2011 McKinsey survey revealed that Vietnamese SMEs reported a 19.3% increase in productivity from using web technologies.
If the Internet is that critical to the growth of small businesses in Asia, it can also be said that the biggest bugbear in the system would be the provision of adequate infocomm infrastructure in these countries to help facilitate and spur that growth. Here’s a look at some of the concerns reflected by SMEs on the constraints of available infrastructure:
The chart above clearly shows that the key constraints to growth is actually low bandwidth speeds and cost of Internet access, outstripping even the cost of equipment, lack of education or even the cost of smartphones or mobile plans in all countries.
A key takeaway? Government authorities whose charter is growing their country’s small and medium sized businesses should take note and work closely with their counterparts in charge of the country’s Internet infrastructure.