Too big to ignore globally – #G20SME

| June 25, 2014

Cutting down red tape, simplifing the tax system, easier employment and better infrastructure are key to meeting Australia’s G20 target of 2 per cent growth. ACCI CEO Kate Carnell delivered the following address at G20 Agenda for Growth: Opportunities for SMEs.

Who remembers a time before Facebook; a time when BHP Billiton was a high risk prospecting company; and when Wesfarmers and Rabobank were simple farmer cooperatives?

Almost never are large global businesses created in one step. Mostly they started life as a small business with one of two people involved, a good idea and a fair amount of risk taking.

Just as these well-known firms started small, there are millions of micro, small and medium sized businesses around the world that are run by aspirational people who want to succeed.

Imagine if we could create a scenario where the millions of small and even micro businesses around the world could employ just one more person each.

Imagine if these companies could more easily trade with each other and create products and services demanded by the world’s consumers and not be constrained by the political barriers that are too often a feature of today’s global value chains.

Imagine if there was a system where you could enter your information once and make it available to all the Government agencies, and commercial partners that need the same information and never have to enter it in again.

Now imagine what has to change to fulfil these dreams. That last image is what we have come together to address.

With more than 95 per cent of global businesses being small and medium enterprises, clearly the challenge that the G20 Finance Ministers developed this year, at their February meeting in Sydney, to increase global growth by 2 per cent above trend over the next 5 years, must include invigorating the SME sector in each one of the G20 countries and the world in general.

Critical to achieving these ambitious targets will be:

•+ Significant labour market reforms

•+ Major tax reform

•+ Global trade liberalization

As the world continues to suffer from lower than expected growth, options for continued stimulus become more limited. The debt free stimulus available to the world’s Governments is the completion of the Doha Round of trade talks. It is estimated that completion of the previous Uruguay Round provided benefits of about 1 per cent lift in global GDP. Estimates of the current Doha Round value of benefits could be around 0.5 per cent lift in GDP globally.

The G20 is critical to maintaining the momentum towards a final agreement. In December last year the Governments of the WTO parties demonstrated they were capable of an agreement of this scale.

They agreed to the Bali package which included beneficial aspects on trade facilitation but also some on agriculture. The procedural steps for ratification of this agreement by the required 2/3 of WTO party Governments are underway and Australia has signified its leadership in this field by tabling the agreement in parliament this week and will be one of the first to ratify this before the G20 Leaders Summit in Brisbane in November.

The B20 have been deliberating on these and other issues and ACCI will join our international partners of ICC, BIAC and IOE as delegates to the B20 Summit in Sydney in July. Aligned to this meeting, the G20 trade Ministers will also be meeting. This is the first time this group of Trade Ministers has met since the Mexican host year and so it is an important step in the work plan to achieve the goals set by G20 Leaders to complete the Doha Round, noted in their previous Summit communiques.

But completing Doha is hard work. Multiple Leaders declarations have not resulted in a breakthrough. ACCI and the international business community have identified that Trade needs to be elevated to the same focus within the G20 as financial matters. If this status can be achieved then the Australian host year can be considered a success. With this focus, and with regular meetings between the G20 trade ministers, we are confident that it is possible to reach a finalisation of the Doha Round in the foreseeable future.

Returning to the Growth Target of the G20, this is a platform that enables a national discussion. The targets require each member of the G20 to develop a National Action Plan of unilateral initiatives that each Government can commit to undertaking that will lead to the target being reached. These are driven by national self-interest and don’t depend on group action – simply mutual unilateral action.

In the lead up to the 2013 Australian election campaign, the Australian Chamber of Commerce and Industry conducted a very successful campaign to elevate the awareness of the SME sector as a main stream election issue. That campaign was entitled, “Small Business – too big to ignore”. That campaign has gone on to attract international interest and has been a catalyst to highlight to Governments and business sectors the importance of the SME sector.

The campaign delivered a powerful national platform for small business to identify a small but powerful set of issues for Government to address to kick start Australian growth and SME success.

1. Cut down on the RED TAPE
2. Simplify the TAX SYSTEM
3. Make it easier to EMPLOY PEOPLE; and
4. Build better INFRASTRUCTURE

They are by no means exhaustive, but help to start answering the question ‘what specifically is small business looking for in the G20 and the national growth plans?’

Being more explicit, when we say “Cut down on the RED TAPE”, we mean:
At every level of government, regulation is suffocating small business. The costs and time involved in complying with those regulations is bad enough, and the unnecessary duplication makes it even worse. When it comes to global value chains the costs of crossing borders and moving between economies can be over 15% of the built up costs and add days to the time taken to transition from one market to another.

Let’s cut the red tape and give small business a break.

When we say “Simplify the TAX and FINANCE SYSTEM”, we mean:

Our tax and finance systems are impossible for the average small business person to understand and comply with. Many small businesses [staff under 100] need to employ specialists and the whole process adds unnecessary cost and time while draining entrepreneurship.

G20 Governments might be focussed on the “base erosion” aspects of international tax policy but the businesses in each economy left paying tax when big business doesn’t are the SME’s.

BASEL III requirements place increased burdens on financial providers including increased “know your customer” requirements. It is hard for a large institution to know its small clients and so in some cases around the world this results in reduced credit to the small and micro business, and or higher risk premiums.

Let’s ease the tax burden and make financing simpler for all of us.
When we say “Build better INFRASTRUCTURE”, we mean:

Our roads are congested, our ports bottlenecked and our rail networks groaning with overuse. The availability of the internet and phone services for global connectivity are allowing small simple businesses in developing countries and elsewhere to be “born global” micro multinationals.

3D printing and bitcoin are disruptive innovations that offer SME’s new ways to do business and compete against larger and more conservative firms, thus driving innovation and productivity – but they rely upon open access to fast and reliable telecommunications.

Energy costs, access and availability all impact on competitiveness.

Some Governments are subsidising the costs of energy rather than making energy use more efficient and effective. This affects us all, but is particularly hard on small business.

The recent WTO Bali agreement on trade facilitation doesn’t just address the paperwork. It means that ports, airports, road and rail networks and all the aspects of getting inputs and final products in and out of each country are fast and efficient. It’s time to actually do something about it, let’s build new and better infrastructure.

We acknowledge that it is a difficult time for the world’s economy and for governments to commit to additional funding or reduced revenue. We know this because small businesses feel these pressures most acutely. That is why some of our suggested initiatives don’t cost much money at all and others are investments for future prosperity.

That prosperity will be shared by the community and small business alike. This is because small business is a central part of all local communities that make up each national economy.

Today we will discuss what opportunities lie ahead and how we can overcome any constraints to enable the power of the SME sector to be unleashed and make appropriate national contributions to meeting these targets for global growth.

I look forward to the outcomes of the deliberations today and the working together to ensure that the recommendations are carried forward over the next five years.

Remember, small businesses may be small voices on their own, but together they are too big to ignore.

G20 Agenda for Growth: Opportunities for SMEs was held in Melbourne on Friday 20 June 2014. Kate Carnell is the CEO of Australian Chamber of Commerce and Industry (ACCI).

Read more blogs from the #G20SME topic hub.



One Comment

  1. Catherine


    June 26, 2014 at 4:23 am

    This was an excellent address
    This was an excellent address given at the G20 Conference on SME growth last week which was coordinated by Global Access Partners. Kate Carnell is inspirational in her vision for Australian Small Business.