Naylin Oo

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Integrating GMS SMEs into Global and Regional
Value Chains (Tourism Sector)

• Naylin Oo
• Trade and Investment Division

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Outline
UN ESCAP in a Nutshell
Global and Regional Value Chains
Opportunities and Challenges for SMEs in Value
Chains
Role of SMEs in Global/ Regional Tourism Value
Chains
Supporting GMS SMEs through Sub-Regional
Cooperation
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in a Nutshell

• One of the five United Nations Regional
  Commissions under ECOSOC
• 53 member states and 9 associate member states
• Promoting inclusive and sustainable economic and
  social development
• Trade and Investment
• Trade Policy and Trade Facilitation
• Business for Development Private Sector
  contribution to inclusive and sustainable
  development

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Current Focus

• Integrating SMEs into Global and Regional Value
  Chains
• Bottom-up approach to identify needed changes in
  business environment and trade facilitation
  relating to selected supply-chains (Greater
  Mekong Sub-region)
• Investors for Development (I4D)
• Promoting Global Compact principles and Corporate
  Social Responsibility (CSR)
• Public-private sector dialogues
• Asia-Pacific Business Forum (APBF)
• Business Advisory Council (BAC)

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Why SMEs?
In the era of globalization
Can SMEs compete in the international market?
Can SMEs learn to be competitive?
Will SMEs benefit from the globalization?
Can SMEs survive in the global competition?
What can we do to bring the benefits of
globalization to the poor?

• Tourism industry is largely dominated by SMEs
• 95 per cent of all enterprises

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The Idea is

• Selling products and services directly to the
  international consumers with Brand Presence
  Pricing Power
• Have information related to market/process/product
  
• Have capabilities over the full Value Chain
  (design, production, marketing, distribution,
  etc.)
• Respond effectively to the changing market
  conditions
• Alternate option Reaching the international
  consumer through global and regional value chains

Very difficult for SMEs in developing countries
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Emergence of VCs Drivers

• Multilateral and regional free trade agreements
• Policy liberalization
• Trade, investment, capital finance, HR
• Technological innovation
• Transportation and ICT
• New management strategies
• JIT, ERP, supply chain management

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Global Value Chains (GVCs)

• Full range of value-added business activities
  involved in design, inputs, production,
  marketing, distribution, finance, HR and after
  services across borders
• Firms can focus on one or more activities in a VC
• Typically a lead firm regulates a GVC with
  brands, technologies, channels distributions,
  expertise and/or goodwill

1st TIER SUPPLIER
2nd TIER SUPPLIER
END CUSTOMER
LEAD FIRM
DISTRIBUTOR
Movement of Goods and Services across Borders
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Tourism Value Chain

• Tourism principal Supplier of tourism products
  and services
• Intermediary In charge of bundling, packaging
  and promoting the products and services
• Consumer Tourist and visitor

Tourism Principal
Intermediary
Consumer (Tourist)
Simple Tourism Value Chain
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Traditional Tourism VC
Consumer
National Tourism Organization
Travel Agent
Regional Tourism Org.
Tour Operator
GDS/CRS
Local DMO
Group/ Consortium CRS
Accommodation at Destination
Air Travel
Car Rental
Rail/ Bus
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New Tourism VC
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Tourism and Related Sectors

• Improve product and service standards
• Provide an intermediate export market
• Enhance competitiveness
• Create demand for export products
• Drive exports through joint branding/ marketing

Agriculture
Transportation
Tourism
Accommodation
Production
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Challenges for SMEs

• Lack of awareness, capacity and resources
• Skilled labour
• Capital
• Infrastructure
• Managerial expertise
• Knowledge and technology
• Contacts/networks
• High entry barriers -- International Standards
• Pressure to deliver specified product, required
  quantity and right quality at competitive price,
  agreed delivery times (leadtime), CSR
• Unfavorable national business environment
• Increased risk

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Opportunities for SMEs

• Access to international market through GVCs
• Support from TNC (training/ investment in
  business process/ information sharing etc.)
• Technology and knowledge transfer
• Long term buyer-supplier relationship
• Reputation and brand development
• Opportunity to up-grade and move up to the next
  tier

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To overcome Challenges

• Supply side capacity building Training/
  Counseling and advice/ R D/ Micro Financing/
  Corporate governance (incl. CSR)/ Management
  techniques
• Enabling business environment and policies Laws
  regulations and their enforcement/ ICT and
  logistic infrastructure/ Government
  Institutional support
• Develop opportunities through cooperation (i.e.
  SME clusters) Economies of scale/ joint action/
  information sharing/ enhancing attractiveness to
  global buyers by reducing transaction costs
• Promote GVC mind-set

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SMEs Corporate Strategies

• Reach the global market through existing GVCs
  that are most likely dominated by principals
• Enter into lower tiers with a low-value role in
  GVCs - intermediaries
• Move up GVCs to high-value added activities over
  time
• Find adequate financing for the investments and
  accessing quality workforce
• Collaborate with other SME players vertically and
  horizontally in a GVC
• Value co-creation, rules of interaction
• Synergetic thinking
• Performance monitoring

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Value Chains Management

• To systematically reduce any sources of
  uncertainty in supply and demand through active
  cooperation of the key players
• Value chain governance
• Legislative (setting the standards of production
  and delivery)
• Judicial (monitoring conformance with the
  standards set)
• Executive (helping actors in meeting the
  standards set)

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Sub-regional Cooperation

• Develop GVC mindset in cross-border cooperation
  among GMS countries (need coordinated approach at
  strategic level)
• Facilitate the development of GMS SME
  clusters/networks (consortia/alliances) across
  borders (and share information/ best practices)
• Facilitate cross-border linkages of business
  institutions and services (e.g., GMS BF, BDS)
• Strengthen cross-border (GMS/Sub-regional) trade
  and transport facilitation for tourism GVCs
• Promote inclusive and sustainable tourism (e.g.,
  accessibility, culture and heritage, environment)

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GVC-focused Cooperation

• Mapping value chains within the framework of a
  GMS GVC Working Group
• Holding Sub-regional training workshops on
  Tourism GVC
• Establishing GVC-related ICT training and
  resource centers
• Building SME supplier clusters along the
  corridors
• Building vertical linkages in Tourism GVC
• Fostering sub-regional cooperation in standards
  and certification

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• Thank you!
• Questions?