BY: PHETANONG INSARN YGMS, MEKONG INSTITUTE KHON KEAN UNIVERSITY, THAILAND OCTOBER, 2012 SME Cluster and Export Consortium in Lao PDR Organized by The Mekong Institute Khon Kaen in Thailand

1. The Overall of SMEs Situation in GMS Counties 2. SMEs Situation in Laos 3. The Component of SME Cluster 4. Concept of Export Consortium 5. Identity SMEs Cluster in Laos 6. Prospective of SMEs Cluster in Laos Contents

The Overall of SMEs Situation in GMS Counties SMEs Situation in GMS countries Small and Medium Enterprises (SMEs) are integral to the economic development and growth of the ASEAN Member States. SME plays important role to promote national economy through employment generation and incomes. Although there has been impressive economic growth in ASEAN community, at the same time there is a gap growing between the increasing prosperity of the other ASEAN member states compared to Cambodia, Lao PDR, Myanmar and Vietnam – collectively known as the CLMV countries.

The Overall of SMEs Situation in GMS Counties CambodiaMicro Small Medium < Employee ChinaSmall Medium <300 employees; turnover < 30 million yuan 300-2,000 employees; turnover million yuan Employment and turnover Lao PDRSmall Medium ≤ 19 ≤ 99 Employee MyanmarMicro Small Medium < Employee ThailandSmall (production and service) Medium (production and service) ≤50 employees or capital ≤50 million baht employees or capital million baht Employment and capital Viet NamSME≤300 employees; capital ≤VND 10 billion Employment and capital GMS SMEs Definition

Current Structure of Economy Lao PDR is a land lock country and on an increasingly sustainable development path. It is located in one of the fastest growing regions of the world economy. Natural resources - forestry, agricultural land, hydropower, and minerals - comprise more than half of the total wealth of Lao PDR. The economy has expanded on table PeriodEconomic Growth Rate % % Source information: SMEs Situation in Laos

Direction and Policy for SME Promotion and Development 1. Creating a friendly regulation to support the business operation 2. Improving the access to the financial support 3. Creating new SMEs in different sectors 4. Encouraging and creating the favorable conditions 5. Boosting the corporation between SME and major companies. 6. Promoting the productivities to be become effective 7. Providing the market for SMEs and expanding the new market. SMEs Situation in Laos (Cont)

The concept of clusters – as a “sectoral and geographical concentration of enterprises”- has been present in industrial economics literature since the late 19 th century. The concept is a somewhat nebulous one however, lacking a common definition. However their essence is about proximity, networking and specialisation, as recognised by Porter: “Clusters are geographically close groups of interconnected companies and associated institutions in a particular field, linked by common technologies and skills. They normally exist within a geographic area where ease of communication, logistics and personal interaction is possible. Clusters are normally concentrated in regions and sometimes in a single town”. The Component of SME Cluster

A consortium is an association of two or more individuals, companies, organizations or governments (or any combination of these entities) with the objective of participating in a common activity or pooling their resources for achieving a common goal. Consortium is a Latin word, meaning “Partnership”, association or society' and derives from consors “partner”, itself from con- 'together' and sors 'fate', meaning owner of means or comrade. (by: Giovanna Ceglie,1999. UNIDO) An Export consortium is a voluntary alliance of firms with the objective of promotion the goods, services (And Knowledge) of its members abroad and facilitating the export of these products through joint actions. Members realize that cooperation must prevail over competition in order to access key Export markets and the latest technology. It is temporary! An export consortium can be seen as a formal medium-to long –term strategic cooperation between firms that acts as a service provider specialized in facilitating access to foreign markets. Most consortia are non-profit entities. Concept of Export Consortium

Cluster Mapping Donors Governance Development Agency NGOs Bank SMEs Founding National - International Market Government Facilitators/Technical support MarketSilk Cluster and Export Consortia

“ Silk handicraft” It is the traditional product from Laos which it had a specific design and way of produce. Therefore, it had a potential to access to the international market What are important? For many centuries, Lao women have woven their own clothes and created their own designs and patterns.They use 100% silk and cotton grown in Laos as well as all natural dyes.Nowadays, Lao’s people still give continues to wearing Lao skirt (Sinh) and also there are many shops are selling Sinh in individual business. So, it is very important that if SMEs need to find out the international market and export their products successfully they should combine together to gain more a power and competency like stay in the group cluster. Identity SMEs Cluster in Laos

Cluster management skills –Lack of entrepreneurial attitude or competence –Lack of trust in alliance partners and involved institutions (shortcomings in the alliance culture) –Lack of knowledge of partners –Lack of informal networking Access to Market –Intensified competition –Internationalization –Trade and investment liberalization Identity SMEs Cluster in Laos

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