Beneath Southeast Asia’s glittering cityscapes and bustling metropolises lies a powerhouse of economic activity driven not by towering skyscrapers or multinational corporations, but by small, often family-run enterprises.
These micro businesses – comprising nearly 99 per cent of the region’s private sector – operate as the silent pulse of the local economy, creating jobs, supporting families and connecting communities in ways that often escape the spotlight.
According to the policy brief Empowering Micro Businesses in Southeast Asia: Addressing Challenges and Harnessing Opportunities for ASEAN Economic Integration by Haris Zuan and Muhammad Faliq Abdul Razak from the Institute of International and Malaysian Studies (IKMAS), and Intan Murnira Ramli from the Economic Research Institute for ASEAN and East Asia (ERIA), micro businesses employ over 140 million people across the region and are indispensable to Southeast Asia’s economic stability.
Yet, these enterprises face significant barriers that threaten their potential to thrive.
OPPORTUNITY AND CHALLENGE
Southeast Asia is home to over 70 million micro, small, and medium-sized enterprises (MSMEs), employing more than 140 million individuals. Among these, micro businesses dominate, accounting for 40 to 99 per cent of all businesses in ASEAN member states.
Often family-run and informally operated, these enterprises play a pivotal role in providing livelihoods, especially for youth and women. However, their informal nature presents challenges – from limited access to funding and regulatory support to vulnerability during economic downturns.
What’s holding them back? A lack of standard definitions and fragmented regulations across ASEAN member states makes it difficult to quantify and formalise these businesses.
Without clear recognition, many micro enterprises remain in the shadows, unable to access the social protections and financial tools essential for growth.
THE DIGITAL WAVE
Digitalisation is reshaping the landscape for micro businesses in Southeast Asia. The rapid adoption of mobile broadband, coupled with the proliferation of e-commerce platforms, is bridging gaps in market access and operational efficiency.
In a region where youth make up a significant proportion of the workforce, the embrace of digital tools is not merely a trend but a necessity. Take the example of cross-border digital payments. With ASEAN’s push for integrated payment systems, micro businesses now have the potential to tap into markets beyond their borders.
However, disparities in digital skills and infrastructure – especially between wealthier member states like Singapore, Brunei, Indonesia, Malaysia, the Philippines and Thailand, and emerging economies like Cambodia, Laos, Vietnam and Myanmar – pose significant barriers.
To address this, ASEAN has introduced initiatives like ASEAN Access and the Asia Small and Medium-Sized Enterprise Monitor.
These platforms provide micro businesses with resources ranging from market insights to financial literacy tools, fostering an environment where even the smallest enterprises can thrive.
BRIDGING THE GAPS
While progress has been made in empowering micro businesses across Southeast Asia, significant challenges remain. According to the policy brief authors, addressing these requires a multi-faceted approach that integrates digital transformation, regulatory reform, youth empowerment, and cross-border collaboration.
Digital transformation is a critical component of this effort. Governments and private stakeholders must prioritise investments in robust digital infrastructure, particularly in underserved rural areas where most micro businesses operate.
Providing tailored financial products, such as micro loans and e-wallet solutions, can help close funding gaps, enabling these enterprises to thrive in an increasingly digital economy.
Streamlined regulations are equally important. Simplifying business registration processes and adopting a harmonised definition of micro businesses across ASEAN countries would pave the way for better formalisation and access to support systems.
Platforms like ASEAN Access should be actively leveraged to offer clear guidelines, strategies, and best practices, empowering micro business owners with the tools they need to succeed. Youth empowerment must also take centre stage. With young people representing the largest demographic in micro, small, and medium-sized enterprises (MSMEs), targeted programmes to enhance digital literacy and entrepreneurial skills are essential.
Encouraging youth ownership of micro enterprises can ignite innovation and foster greater economic integration across the region. Finally, cross-border collaboration is vital for seamless regional connectivity.
Harmonising digital payment standards and regulatory frameworks will facilitate smoother transactions and unlock new opportunities for micro businesses.
Public-private partnerships should be encouraged to accelerate the development of infrastructure and promote the sharing of knowledge and resources.
By adopting these strategies, Southeast Asia can unlock the immense potential of its micro business sector, driving inclusive growth and strengthening the foundation of its regional economy.
THE ROAD AHEAD
Micro businesses are more than just economic units; they are cultural hubs and innovation engines. As ASEAN strives for greater economic integration, these enterprises are poised to play a central role.
By addressing systemic challenges and harnessing opportunities in digitalisation and regional collaboration, Southeast Asia can transform its micro businesses from necessity-driven ventures into powerhouses of creativity and growth.
Imagine a future where a home-based craftsperson in Laos can seamlessly sell their products to a customer in Indonesia, supported by a digital ecosystem that ensures swift payments and fair trade practices.
Or consider the young entrepreneur in Brunei whose tech start-up gains regional traction through ASEAN’s integrated platforms. These aren’t distant dreams – they are attainable realities with the right focus and collective effort. – Izah Azahari
