Small and Medium-Scale enterprises are very important for the economic growth and political stability of developing countries. However, their work is connected to a variety of problems including the economic, technological, political, social, legal, environmental, and ethical ones. In the following sector of the paper, possible solutions of these problems along with their advantages will be addressed. Overall, the evaluation of the situation shows that the state government’s support including providing adequate legal, regulatory frameworks, standards and policies will solve the major problems that SMEs face. Besides, to solve the existing problems, the leaders of SMEs should continue looking for ways to be competitive at the markets where they work by means of constant progress in the area of technological advancement and marketing innovation to be able to compete with global corporations.
As the majority of problems that SMEs face in developing countries are connected with the lack of appropriate support from governments, to solve those problems, it is important for state governments to change their politics in the field. State governments should be aware of the fact that rising of their GDP mainly depends on the effectiveness of SMEs work. On this account, it is in governments’ best interest to create a viable regulative system that will guarantee fair conditions for the development of SMEs in their countries. In this vein, the first important regulation is connected to creating valid and equitable taxable system (Adeoti, 2000). The importance of this factor is explained by need to overcome the economic problems that are associated with the development of SMEs in a number of developing countries, where governments imposed such high levels of taxes on SMEs companies that their very existence was threatened. Also, as it has been noticed that government policies do not directly aim at SMEs, it is important for high officials to have a new approach to regulating SMEs activity that will offer them new opportunities in accessing human, technical and financial resources (Roxas, Lindsay, Ashill & Victorio, 2007). This approach will offer SMEs better grounds for supporting their productivity and high levels of performance at the market. For example, if the state fiscal policies are aimed at meeting the interests of SMEs, they will be able to have an access to money lending under advantageous conditions, and this, in turn, will help them be more competitive in the conditions of global financial instability. The other example of changes in governmental policies that will help improving the efficiency of SMEs work is introducing regulations, governing technological integration at the country’s market, which will provide a basis for being commercially viable in competition with global corporations.
The other angle of approach to solving problems that SMEs face in developing countries is connected to the activity of the management of SMEs companies themselves. In this vein, the leaders of these companies are to be looking for ways to be competitive at their local markets and constantly work on entering the new markets (Knight, 2005). For this, the SMEs leaders should regularly invest in technological and marketing innovations to be capable to offer their customers products and services of high quality.
Economical advantages from implementing the offered solution are multiple. First of all, effective work of SMEs is a stable source of annual GDP growth. The examples of leading countries of the world such as the United Kingdom, the United States, Germany, and Japan irrevocably prove this tendency (Adeoti, 2000). Secondly, as traditionally in SMEs, the majority of working population of developing countries is employed, the effective work of such companies is a guarantee for employment stability. Thirdly, as SMEs provide the biggest amounts of tax collections into the economies of their countries, the economical and political progress of developing countries will be facilitated in case of their effective work (Knight, 2005). Also, it has been noted that due to SMEs activity, the development of industrial sectors rather than agricultural in the countries of the third and second world has become possible (Roxas et al., 2007). This factor is of a special importance for developing states as their problem of being the countries with economies based on agriculture is well known, and this problem particularly is the key problem, preventing them from further economical growth.
Social advantages from implementing the offered solution are also considerable. As the economy of any country is closely connected with the social sphere, the improvements in the life conditions of the local population will definitely occur in case there is a stable growth in the performance of SMEs. In particular, major social problem of having enough financial means for social payments in the state budget will be solved. Also, the population will have a wider range of job offerings that will create better conditions for choosing the best fitting vacancies. Besides, the population of developing countries will benefit due to a wider range of choice of offered services and products at the market.
Political advantages from implementing the offered solution are no less significant. Due to the improvement of the economic and social situation in a country, its political weight also grows. As a country’s economy acquires a better level of stability in its small and medium sectors, its governors are able to secure better economical positions for the development of gross sectors on a global level. Also, the economic and social stability achieved due to the effective work of SMEs in a country provides a secure basis for the political stability there (Roxas et al., 2007).
The importance of SMEs effective work for the economical growth of developing countries cannot be underestimated. However, these companies face a lot of problems while organizing their activity in the countries of the second and the third world. To solve these problems, the most important factor is a well-elaborated interference from state governments. Governments should develop and introduce new legislation and economic regulations that will target facilitating advantageous conditions for the work of SMEs. In particular, the valid and equitable taxable system for SMEs should be created; a viable financial system providing SMEs with convenient conditions for money lending should be organized; and fair policies regulating introducing technological innovations should be launched. The advantages of implementing this solution are multiple including guarantying stable level of GDP growth, improving the state of affairs with the high levels of unemployment in developing countries, providing firm conditions for financing state budgets by means of tax collections from SMEs, and improving the conditions in the social area due to better economic supply, achieved by means of SMEs work.
Adeoti, J. (2000). Small Enterprise Promotion and Sustainable Development: An Attempt at Integration. Journal Of Developmental Entrepreneurship, 5(1), 57.
Knight, R. V. (2005). Knowledge-based Development: Policy and Planning Implications for Cities.Urban Studies (Routledge), 32(2), 225-260.
Roxas, H., Lindsay, V., Ashill, N., & Victorio, A. (2007). An Institutional View of Local Entrepreneurial Climate. Asia-Pacific Social Science Review, 7(1), 27-44.