The International Day of Micro, Small and Medium Enterprises (MSMEs)
Today we celebrate MSME Day thanks to fruitful collaboration between UNCTAD, DESA, the International Council for Small Business and the Permanent Mission of Argentina.
The unprecedent challenges of the pandemic affect millions of MSMEs worldwide. The pandemic led to a 5% drop in global trade in the first quarter, and our latest forecasts project a 27% drop for the second quarter with a 20% annual decline for 2020. According to our World Investment Report 2020, global FDI flows will shrink by up to 40% from their 2019 value to below $1 trillion in 2020.
MSMEs represent about 90% of businesses and more than 50% of employment worldwide; formal MSMEs contribute to 40% of GDP in emerging economies, and the number is considerably higher when informal ones are included. That is why, early in April, the UN General Assembly Resolution A/RES/71/279 designated 27 June as the Micro-, Small and Medium-sized Enterprises Day to raise public awareness of their contribution to the global economy.
The coronavirus is set to cause sharp adverse impacts on MSMEs. Small businesses are most affected within the private sector & a high proportion of these businesses are ceasing operation, in a wide range of sectors, particularly non-essential services. The exact definition of these services varies by country, but they are generally recreational businesses, such as catering, entertainment and tourism.
MSMEs face multi-faceted challenges: in the short term, isolation measures have stunted their operations; in the medium term, economic recession, unemployment and reduced income and market demand threaten their survival. While reopening their businesses, MSMEs need to rely on a well-functioning supply chain and sufficient production factors, especially labour. A major challenge also lies on the demand side, as many consumers remain cautious. In the long run, the new normal will be very different from the pre-COVID situation, requiring significant adaptation and restructuring of firms.
The outbreak of the COVID-19 pandemic is speeding up a major economic transformation, already underway since the financial crisis 10 years ago, changing how people commute, communicate and consume. As more and more activities have been shifted online, a rapid digital transformation is on its way. Strong entrepreneurial and innovative capacities at the firm level are essential for the digital transformation. Entrepreneurs and MSMEs should play an important role here.
As the pandemic accelerates in the developing world, concerted policy efforts are needed to contain and defeat the virus, to find an appropriate balance between short-term disease control and long-term economic development, and to ensure an inclusive and sustainable recovery. International cooperation, at all levels and with the involvement of all stakeholders, is crucial in this regard.
In this regard I am very pleased to announce launch of a new project on global response to post-Covid-19 economic resurgence through MSME-driven growth in developing countries. The project is led by UNCTAD with financial support from the UN Development account, in cooperation with all UN Regional Commissions as well as DESA.
MSMEs create jobs that offer hope to the most vulnerable in our communities. They are the spine of our local, national and global economy and must be front and centre in our COVID-19 response and recovery strategies. The first and most urgent step is to provide necessary support for their survival.
UNCTAD stands ready to help. In the area of entrepreneurship, we offer Empretec -- a flagship capacity-building programme to help entrepreneurs and MSMEs. In addition, our Entrepreneurship Policy Framework aims to support our member states in the design of policies and institutions to promote entrepreneurship for sustainable development. Thank you for your attention.