USAID ADEPT Partnership Quarterly Report October 2013 – December 2013

Roughly 90 percent of the businesses in Myanmar are SMEs, and they employ about 70 percent of the workforce. The Myanmar Government and international agencies need to take proactive measures to help SMEs overcome challenges such as lack of skilled employees, intense competition, poor infrastructure, and difficulty in accessing finance. A success framework was developed to understand the factors that contribute to the effectiveness of SMEs in Myanmar. Building on the technology, organizational, and environmental (TOE) framework, a set of technological, environmental, and organizational factors that explain the success of SMEs in Myanmar was identified. SME success was operationalized using four indicators: sales, profit, growth intent, and bidding success. The framework was validated using a unique dataset of over 3,000 SMEs in Myanmar. Key findings from the study include the consistent association of internet use for business purposes with SME effectiveness. SMEs that used the internet for business operations, such as online orders, research, and communications, experienced a high degree of success in Myanmar. Employee size was the most significant organizational factor associated with sales and profitability, with SMEs having a larger number of full-time employees experiencing more success. However, employee size did not affect growth intent and bidding success. The gender of the owner had no major effect on the success of SMEs, with female ownership increasing from 18.1 percent in 2013 to 25.4 percent in 2016. SMEs in the Yangon region performed better than those in other regions, but this finding should be interpreted carefully due to the lack of data from other regions across different years. There was no discernible pattern of performance difference across different industry sectors, although SMEs in the manufacturing sector performed better than others. The major challenges faced by SMEs in Myanmar include lack of skilled labor, competition, poor infrastructure, difficulty in accessing finance, exchange rate and currency issues, government policy and bureaucracy, and outdated or lack of equipment. The Myanmar Government and international agencies need to take proactive measures to help SMEs overcome these challenges and achieve a high degree of success. This includes providing training and capacity-building programs for SMEs, improving infrastructure and access to finance, and promoting a favorable business environment. By addressing these challenges, SMEs in Myanmar can play a critical role in expanding the contributions of the industrial and service sectors and ensuring the country's economic sustainability and stability. The study highlights the importance of SMEs in Myanmar's economy and the need for proactive measures to support their growth and development. The success framework developed in this study can be used as a tool to identify the factors that contribute to the effectiveness of SMEs in Myanmar and to develop targeted interventions to support their growth. By understanding the challenges faced by SMEs in Myanmar and addressing them, the country can unlock the potential of its SME sector and achieve sustainable economic growth and development. The SME sector in Myanmar is expected to play a critical role in the country's economic development, particularly in the industrial and service sectors. The study highlights the need for a favorable business environment, including access to finance, infrastructure, and skilled labor, to support the growth and development of SMEs in Myanmar. By addressing these challenges, the country can unlock the potential of its SME sector and achieve sustainable economic growth and development.