Role of SME in Poverty Alleviation in SAARC Region via Panel Data Analysis

Faiza Manzoor,Longbao Wei,Qazi Abdul Subhan,Mohammad Nurunnabi

doi:10.3390/su11226480

Abstract

The key objective of the formation of the South Asian Association of Regional Cooperation (SAARC) is to join hands collectively for slow economic growth, poverty eradication, deprived health and education sectors. In the 12th SAARC Summit, it has been declared that poverty eradication is the main area of concentration and SAARC countries would strive their best to minimize all types of poverty with the help of any possible strategy. The main objectives of the current study are to evaluate the development of the agenda of poverty eradication in SAARC countries through small and medium enterprise (SME) development because it would be considered as a short-routed remedy to mitigate poverty. The poorest 20% income holder as a percentage of GDP has been used as the proxy for poverty in the SAARC region. SME development has been measured through the SME share in GDP in respective countries. The panel dataset has been developed for the period of 1990 to 2015. The fixed effect method (FEM) and regression equation techniques were used to analyse the observed data. The results of the FEM were misleading. The regression equations for the respective countries were used for empirical analysis. The results have identified that there are three main factors that are essential in reducing poverty in the SAARC region: SME growth, openness of trade and social sector development.

Highlights

The South Asian Association for Regional Cooperation (SAARC) region was formed to make collective efforts against major problems of this region [1]
There is an immense need for further investigation, the present study has focused on SAARC countries in the perspectives of small and medium enterprise (SME) and poverty alleviation
The findings showed that SMEs have a positive and significant impact on unemployment and export, SME’s have a negative and significant impact on gross domestic product and foreign direct investment

Summary

Introduction

The South Asian Association for Regional Cooperation (SAARC) region was formed to make collective efforts against major problems of this region [1]. There are multiple issues pertaining to small and medium enterprises (SMEs) that are getting the highest priority among the policymakers of SAARC due to their confirmed multidimensional contribution to the socio-economic situation of a country These enterprises are very easy to launch, need comparably less capital, generate more employment and produce commodities that meet local demands as well as contribute to export earnings [2]. The SME sector is a significant source of generating employment for the people It helps in amplifying economic growth which reduces poverty in society. According to the TRIPS agreement, all member countries should comply with the treatment of MFNs unconditionally for the promotion of trade among member countries In this regard, regional trade agreements (RTAs) are playing an essential role in trade liberalization to reduce the extent of poverty. The purpose of this paper is to analyses the role of SMEs on poverty alleviation in the SAARC region

Theory and Empirical Literature Review

SME in Global Perspective

SME and Poverty Alleviation in SAARC

Data and Choice of Variables

Data Analysis

Empirical Results and Discussion