INFORMAL WORKING GROUP ON MSMES

Indelox SERVICES PVT LTD

The following communication, dated 24 July 2024, is being circulated at the request of the Coordinator of the Informal Working Group on MSMEs.

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The information reproduced in Annex was provided by Mr Jeevan RaoSahib, Founder and Director of Indelox Services Pvt. Ltd. as a follow-up from the WTO MSME Group Meeting with the private sector on 5 July 2024. This document is circulated for information only.

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Annex

Follow-up from the WTO MSME Group Meeting with the private sector
on 5 July 2024

There are several points that policymakers should consider for Authorized Economic Operator (AEO) Programmes for micro, small and medium-sized enterprises (MSMEs), including:

1._    The cost of certification and maintenance of the certification calls for investment. AEO certification does not automatically translate into business revenue, and it is not easily recoverable and requires support of grant or a subsidy.

2._    Among AEOs, individual competence is not differentiated, and a highly proficient business may not be distinguishable from a broker that is less organized.

3._    There is a wide gap between the number of registered MSMEs in an organized sector compared to the certified AEO status holders and many of these AEOs are vendors of large firms and therefore do not trade overseas directly.

4._    Outreach programs alone will not increase applications for AEO status. Rather, AEO status requires commitment and competence to excel in business.

5._    As the SAFE standards prescribe parameters which are core to the maturity of an organization, it will be difficult for MSMEs to qualify for certification.

6._    Generally, MSMEs in manufacturing and trading are conversant and comfortable to stay focussed on their core passion and seek support and advice from outside.

7._    Creating a diluted regulatory regime for MSMEs is not desired as regulations cannot be created at two levels: one for large multinational enterprises and another set for MSMEs. It will also be difficult at borders to manage this differentiation and may lead to exploitation of MSMEs in some form.

8._    General information available online for AEO programmes requires an expert to explain and guide MSMEs to achieve compliance. Regulations at some level will not be easy to understand by simply reading.

9._    Not every MSME, especially the micro and small business who intend to venture into new markets, are equipped with the competence to independently handle compliance as an AEO and require hand holding.

10._  The import export procedures on many occasions compel MSMEs to trade locally and give up the opportunity to trade internationally as they lack resources, energy and confidence to spend extra efforts without a trusted support system.

11._  Compliance, documentation, permits, licenses, etc. are being added with new requirements. To keep pace, MSMEs require a source to go to in person to ask questions and learn procedures.

12._  Further the new evolving regulation on environment and forced labour require expert resources, time and money to handle efficiently.

13._  Even in the U.S. where trade systems are established, there are continuous & collaborative efforts to educate, develop competence of MSMEs and keep their businesses compliant and current.

14._  On most occasions, forwarders and Customs Brokers handhold a novice in international trade to help them follow procedures.

15._  Few big forwarders are joining hands with Government to support MSMEs to trade internationally and take the burden of educating and training in compliance.

16._  Regular training, education and refreshers should be established in a structured manner so that all businesses can access them, understand, prepare and learn from experience. All of this happens over periods, which means it will be a graduation into each level.

17._  There are abundant resources available to manage the gap and assist MSMEs to grow with a win-win approach. AEOs will be one of the methods for transition and maturity of a MSME into an efficient business, to trade internationally.

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