MSMEs in the ASEAN Economic Community: Connecting the Blueprint to Real-World Action
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Miguel Jaime Encarnacion examines the goals, challenges and opportunities faced by micro, small, and medium enterprises (MSMEs) through principal ASEAN economic instruments, assessments, and domestic policies.
The ASEAN Community Vision 2045 reaffirms the ASEAN Member States’ (AMS) commitment to building a “resilient, innovative, dynamic, people-centred” ASEAN. A key component of this agenda is the ASEAN Economic Community (AEC) Strategic Plan 2026 – 2030 (AEC Strategic Plan), which succeeds the ASEAN Economic Community Blueprint 2025 (2025 Blueprint). The AEC Strategic Plan focuses on short-term priority measures to further realise a seamless ASEAN single market, promote intra-bloc economic cooperation and enable its timely review.
Apart from strengthening overall regional economic integration objectives, the AEC Strategic Plan and the preceding 2025 Blueprint both highlight the pivotal role of MSMEs in ASEAN’s economic integration. These strategic frameworks emphasise the importance of MSME participation in the ASEAN value chain and MSMEs’ role in cross-pillar community-building.
The 2025 Blueprint was designed to gauge the trajectories of ASEAN economic integration from 2016 to 2025. Strengthening the role of MSMEs in ASEAN was a key element; a structured and targeted programme was put in place to accomplish its objectives.
As soft law, the 2025 Blueprint was complemented by several instruments to map out engagement and monitoring. The Consolidated Strategic Action Plan (CSAP) was formulated to track its overall progress and the ASEAN Strategic Action Plan for SME Development 2016-2025 (SAP SMED) was introduced to support MSME growth and address systemic issues. The SAP SMED outlines a time-bound priority list of actions: a Post Integration Period (2016-2020) for seamless integration with the AEC and regional value chains, followed by a Global Expansion Period (2021-2025) to become globally competitive, innovative, inclusive, and resilient.
Parallel to CSAP, the SAP SMED included an Action Plan and Implementation Roadmap, which articulated strategic goals tracked through key policy indicators (KPIs), desired outcomes, and action lines. Monitoring is guided by the AEC 2025 Monitoring and Evaluation (M&E) Framework, which comprises compliance monitoring, outcomes monitoring and impact evaluation.
Some AMS’ domestic policies have helped to translate these regional aspirations to fit local contexts. For example, Malaysia’s targeted support for Bumiputera MSMEs under its National Entrepreneurship Policy aligns with SAP SMED goals on market access. At the same time, the Singapore Business Federation has an SME Committee that assists with capacity building and competitiveness.
There have been some successes, but challenges to greater MSME participation in the economy remain. The ASEAN Strategic Action Plan for SME Development 2016-2025: 2020 KPI Monitoring Report (2020 KPI Report) underscored issues such as access to finance and internationalisation. Although the lack of data, such as that on regional MSMEs’ international activities, posed difficulties for effective monitoring, the 2020 KPI Report highlighted that impediments to access to finance were mainly due to a lack of reliable information (e.g., audited financial statements and/or business plans). In contrast, the ability to internationalise was constrained by barriers in finding trading partners and financial insufficiency. Interestingly, the same report also observed that MSMEs would first expand within the region due to market familiarity.
In addition to the existing problems of a lack of digital skills and a lack of technical assistance, the COVID-19 pandemic had an adverse impact on MSMEs. The pandemic led to suspended operations, supply disruptions and staff layoffs – making it more difficult for MSMEs to participate in the value chain. To manage these concerns, the 2020 KPI Report proposed measures such as business matching through digital platforms and the development of sound financial infrastructure.
The Mid-Term Review ASEAN Economic Community Blueprint 2025 (AEC MTR) reiterated financing as a barrier to MSMEs. The operation of many MSMEs in the informal sector contributed to the lack of credit information and social protection. The more specific Mid-Term Review of the ASEAN Strategic Action Plan for SME Development 2016-2025 (MTR) emphasised the SAP SMED’s robust structure but pointed out that stakeholder awareness was relatively low. Key recommendations included realigning resources towards the region’s priorities and establishing a more robust M&E system.
The 2024 SME Policy Index analysed the improvement of MSME policies in ASEAN. It echoed the need to facilitate access to finance, noting that progress varied across individual AMS. Lao PDR and Myanmar were in the early stages of developing their finance policies, while Singapore, Malaysia and Indonesia were more advanced. Overall, it stressed that the region should strengthen data collection to support evidence-based policies, which will more specifically identify MSME resource requirements.
Looking ahead, the AEC Strategic Plan continues ASEAN’s aspiration of becoming the world’s fourth largest economy. Strategic measures touching on access to finance, market participation and digitalisation are listed to align with the objective of advancing an “inclusive, innovative, competitive business environment to strengthen MSMEs integration in the regional and global value chains”. With the emergence of new areas of trade, it is imperative to consider the achievements, lessons, and challenges from previous AEC plan cycles. Digitalisation is poised to improve market accessibility, address access to finance and stimulate economic growth, while the circular economy is essential for promoting sustainable development.
The 47th ASEAN Summit in October 2025 in Kuala Lumpur recognised various initiatives made for MSMEs, such as the Implementation Roadmap to Establish Regionally Comparable and Recognised Unique Business Identification Number and the ASEAN Centre of Excellence for MSMEs in Green Transition. In parallel, the ASEAN Business Advisory Council continues to support MSMEs by providing private sector feedback and guidance, including advocating for the simplification of sustainability reporting. The momentum for MSMEs is expected to continue this 2026. The Philippines, as ASEAN Chair, has already identified the integration of the MSME development agenda as one of its deliverables.
Notwithstanding regional and national-level accomplishments, there is a consistent demand for a more streamlined but results-oriented agenda. Commitments must be translated in a business-friendly manner to increase digital and financial literacy in the context of cross-border trade. ASEAN must enhance its impact evaluation to assess how these strategies and goals impact AMS’ socio-economic environments and resolve the regional development gap. Without robust institutional mechanisms, MSME integration into the ASEAN single market will likely slow down.
The AEC Strategic Plan’s success depends on ASEAN’s sectoral bodies and stakeholders exercising strong ownership and domestic policies that support the digital economy and sustainability. All stakeholders must recognise that the political and economic factors shaping individual AMS are dynamic and require proactive strategies. At the same time, ASEAN must be pragmatic and acknowledge that matters on financial access and further integration in regional and global value chains require proactive efforts – private and public – to intensify institutional cooperation and realign focus, where necessary.
Editor’s Note:
ASEANFocus+ articles are timely critical insight pieces published by the ASEAN Studies Centre.
Miguel Jaime Encarnacion is a Research Associate (ASEAN Law and Policy) at the National University of Singapore’s Centre for International Law. He holds an Advanced LLM (European and International Business Law) from Leiden University.
