05.Jan .2021 21:00

MSMEs’ Opportunities and Challenges under Technological Transformation

MSMEs’ Opportunities and Challenges under Technological Transformation
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The COVID-19 pandemic has significantly accelerated the adoption of digital technologies. The moment should be seized to use TradeTech to make global trade more efficient, inclusive and equitable. As the Fourth Industrial Revolution sets in, MSMEs face both opportunities and challenges in this wave of technological transformation.

New technologies in trade, such as cloud computing, blockchain, IoT, big data and AI, present MSMEs with opportunities to tap into the technological edge previously only available to large firms. Pursuant to the latest report  of the World Economic Forum, the application of new TradeTech can help MSMEs save costs, improve efficiency, streamline operations and scale up. Software as a service (SaaS) and e-commerce platforms have made trade more inclusive as there are no upfront costs.

E-commerce helps MSMEs reach global market

E-commerce is helping MSMEs enter the international market. An ITC survey shows that around 80% of companies that engage in international trade through e-commerce only are micro and small enterprises. However, these companies still face setbacks. MSMEs in developing countries report particular challenges, including the lack of technical knowledge, poor online visibility, the high cost of and difficult access to global e-commerce platforms, and the lack of adequate infrastructure and delivery options. The ITC’s survey reveals that the share of logistics costs over final price is almost double in developing countries than in developed economies.

Moreover, MSMEs are agile in technology adoption once they have easy and affordable access to these technologies. This is especially true in cases where the adoption of technologies would reduce fixed costs associated with entering the international market. The adoption of digital platforms has helped MSMEs cut the cost of exporting by 83%, as compared with offline channels.

Challenges for MSMEs to adopt TradeTech

The burden of TradeTech challenges differs with company size. The Forum survey reveals that smaller companies stress difficulties in dealing with different regulations in different jurisdictions and the lack of digital skills. Meanwhile, larger companies tend to be more concerned with the increasingly higher capital requirements of technology applied in the trade ecosystem.

The increasing demand on knowledge and skills may further increase the competitiveness gap between MSMEs and large firms, especially for micro and informal businesses in developing countries.

It remains to be seen how using rather than developing TradeTech and data might affect trade possibilities in the long term. MSMEs may have a competitive advantage because they can adopt technologies faster than MNCs given their flexibility, particularly as data sets become more available. MNCs may still have a competitive advantage in owning larger data sets, key to developing new business models, and in proving and scaling new technologies first and adjusting their development to their needs.

Supporting TradeTech adoption by MSMEs

Governments could support MSMEs in a number of ways, including by:

– Promoting education and IT skills development, through the inclusion of IT in school and university curricula, and encouraging public-private partnerships through internship programs;
– Facilitating big data and AI tools that help MSMEs reduce market research costs and improve online visibility;
– Improving information and communications technology (ICT) and logistics infrastructure;
– Providing cybersecurity training;
– Setting up a TradeTech network, composed of key stakeholders, that has the potential to maximize the scope and outreach of any given solution while encouraging the development of local solutions (for instance, a single web page might compile and easily display all the resources, tools and services offered by the members of the TradeTech network); given the lack of skilled human resources affecting companies, external experts might bridge the gap by providing qualified advice;
– Establishing a benchmark for TradeTech adoption by MSMEs, which could help incentivize government reform actions to promote TradeTech adoption.

Internationally, an increasing number of trade agreements include chapters on e-commerce and digital trade. Recent agreements, such as the Digital Economy Partnership Agreement (DEPA), include provisions on MSMEs and digital inclusion specifically. Commitments go from information sharing to enhancing public-private dialogue and cooperation involving e-commerce platforms.