ABSTRACT
This chapter aims to evaluate the actual and potential importance of small- and medium-scale industries (SMI) in employment, income and output growth in Association of South East Asian Nations (ASEAN) countries, the majority of which face difficulties in providing adequate employment for their rapidly increasing labor forces. The evidence available for the 1970s shows substantial differences in employment and value added shares among ASEAN countries and between ASEAN countries and industrialized countries in which SMIs continue to play an important role in manufacturing production. The competitiveness of SMIs is influenced by the efficiency of resource use in their operations. The assessment of economic efficiency provides only a static view since the analysis is based on prevailing prices. Reduced access of SMIs to formal credit was largely the consequence of regulated interest rate spreads too narrow to cover the transaction costs associated with SMI lending. The impediments to SMI development are reflected in establishment characteristics analyzed at the micro level.
