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NEWS UPDATES 2 July 2010

Asean SME fund due

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The Asean region is attempting to set up a fund to develop small and medium-sized enterprises (SMEs), but the process may take years, say experts in the field, the Bangkok Post reports.

‘‘What is important is the correct mechanism to support it,’’ says Mr. Cope, while Mr Chaiyuth (below) says the starting point is to create a ‘‘gap analysis’’ of each country. The Group Meeting on the Asean SME regional development fund, held by the Office of Small and Medium Enterprise Promotion (Osmep), is part of the Asean Economic Community (AEC) blueprint, which is to be established by 2015.

The regional fund would provide finance through existing country funds to meet a country's specific needs.

Under the model used in Europe, the needs of developed and non-developed countries are different, and this point is applicable to Asean, said Graham Cope, the head of regional business development for the European Investment Fund (EIF).

In the United Kingdom, the venture capital industry has been active for 80 years. Countries such as Lithuania, on the other hand, have no history of venture capital until today. ''In an immature economy we try to create something from nothing,'' said Mr Cope.

The EIF, which provides money through financial intermediaries, is responsible for managing 11 funds for countries in Europe.

The EU model established a goal of a 50-50 split from the private and public sectors, but in reality every one euro of government funding is met with 66% of that amount by private funding, said Mr Cope.

''I think SMEs are extremely important. They are the lifeblood of the economy. What is important is the correct mechanism to support it. An Asean regional fund is a good idea, and if it works it will be a benefit,'' he said.

In Europe, it took four years from making the decision to start a fund to getting the money. The first two years involved analysis in each of the marketplaces, while the second two years was implementation such as choosing the right banks to invest in SMEs.

Chaiyuth Sudthitanakorn, the Asian Development Bank's executive director for Brunei, Burma, Malaysia, Nepal, Singapore and Thailand, said the starting point was to create a ''gap analysis'' of each country.

This includes issues such as the loan limits for each industry, whether new SMEs stand a chance and how much credit guarantees SMEs need, said Mr Chaiyuth, who supports an initial stage focusing on Thailand, Indonesia, Malaysia, Singapore and the Philippines.

Although contributions from each country have not been decided, he said currently sources of funding originate from the public sector. No decisions have been made yet on who will manage the fund.

Within two years the concept should be complete. However, the actual practice will likely be a long way in the future due partly to different procedures in each country, said Mr. Chaiyuth

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