Asia Small and Medium-Sized Enterprise Monitor 2021 Volume IV

How Asia's Small Businesses Survived A Year into the COVID-19 Pandemic: Survey Evidence

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• Publisher: Asian Development Bank
• Year: 2022
• Print ISBN: 9789292694869
• eBook ISBN: 9789292694876
• Topic: Economics
• Subtopic: Economic Policy
• Index: Economics

The Asia Small and Medium-Sized Enterprise Monitor (ASM) is a knowledge-sharing product developed as a key resource for micro, small, and medium-sized enterprise (MSME) development policies in Asia and the Pacific. This second volume examines how Asia's MSMEs survived over a year into the coronavirus disease (COVID-19) pandemic and discusses post-pandemic policy actions for MSME development. This study is based on the findings from MSME surveys during 2020 and 2021 in Indonesia, the Lao People's Democratic Republic, the Philippines, and Thailand.

Thematic Impact

This section breaks down the analysis to specific groups: (i) tourism-related MSMEs; (ii) digitally operated MSMEs; (iii) internationalized MSMEs; and (iv) women-led MSMEs. Government mobility restrictions—including travel bans—severely damaged tourism. The pandemic accelerated the ongoing digitalization of businesses. Supply chain disruptions and a drop in foreign demand brought about by national mobility restrictions hit globalized MSMEs hardest. And women-led MSMEs—a critical MSME segment—needed to continue innovating to contribute to economic growth. What was the pandemic’s impact on all these during the first year?

1. Tourism-Related MSMEs

In the August–September 2020 and March–April 2021 surveys, tourism-related firms were defined as those who declared being a member of tourism organizations or associations. They included restaurants, hotels, tour services, transportation services, and souvenir shops. Figure 7 shows a gap in the survey response ratio between tourism-related MSMEs and non-tourism MSMEs. The blue bar indicates a higher impact (a higher percentage share) in tourism-related firms, with the red one showing the opposite. The upper bar is for August–September 2020 and the lower for March–April 2021.⁹

Figure 7: Business Environment—Tourism-Related MSMEs, 2020–2021

COVID-19 = coronavirus disease; MSME = micro, small, and medium-sized enterprise.

Notes: The upper band is for August–September 2020 with the lower band for March–April 2021. The gap in percentage shares of tourism-related MSMEs (firms who are members of tourism organizations/associations) and non-tourism MSMEs. Blue bars are the percentage points (survey response ratio) higher in tourism-related MSMEs than non-tourism MSMEs. Red bars reflect the opposite. For Indonesia, there were 128 valid samples in August–September 2020 and 2,509 in March–April 2021; For the Philippines, 686 valid samples in August–September 2020 and 1,546 in March–April 2021; For Thailand, 520 valid samples in August–September 2020 and 963 in March–April 2021.

Source: Calculated based on MSME surveys in Indonesia, the Philippines, and Thailand, August–September 2020 and March–April 2021.

Tourism-related MSMEs accounted for less than 20% of surveyed MSMEs (Table 3). Overall, the business environment for the tourism sector remained dismal during the first year of the pandemic, affected by the prolonged pandemic and frequently adopted national mobility restrictions. In Indonesia, the drop in foreign demand (from tourists), delayed delivery of products and services, created supply chain disruptions and contract cancellations affected tourism MSMEs more than non-tourism MSMEs (Figure 7A). In the Philippines, a drop in both domestic and foreign demand, supply chain disruptions, and contract cancellations dramatically reduced tourism-related MSMEs during the year, resulting in higher temporary closures than non-tourism MSMEs (Figure 7B). Thailand followed a similar trend; higher foreign demand loss, supply disruptions, contract cancellations, and temporary business closures in tourism-related MSMEs throughout a year (Figure 7C).

In short, tourism-related MSMEs remained stymied a year after the outbreak. In the tourism sector, zero-revenue or temporarily closed MSMEs and/or MSMEs with over 30% revenue losses were more likely to appear and worsen 1 year into the pandemic (Figure 8). Indonesia promoted tourism as part of its stimulus packages from the start of the pandemic in 2020, especially for major tourist destinations like Bali. The Philippines and Thailand also allocated national budgets to stimulate tourism spending in 2020. Despite these assistance programs, tourism-related MSMEs had not recovered as of March–April 2021.

Figure 8: Revenue—Tourism-Related MSMEs, 2020–2021

MSME = micro, small, and medium-sized enterprise.

Notes: The upper band is for August–September 2020 with the lower band for March–April 2021. The gap in percentage shares of tourism-related MSMEs (firms who are members of tourism organizations/associations) and non-tourism MSMEs. Blue bars are the percentage points (survey response ratio) higher in tourism-related MSMEs than non-tourism MSMEs. Red bars reflect the opposite. For Indonesia, there were 128 valid samples in August–September 2020 and 2,509 in March–April 2021; For the Philippines, 686 valid samples in August–September 2020 and 1,546 in March–April 2021; For Thailand, 520 valid samples in August–September 2020 and 963 in March–April 2021.

Source: Calculated based on MSME surveys in Indonesia, the Philippines, and Thailand, August–September 2020 and March–April 2021.

2. Digitally Operated MSMEs

Here we compare the pandemic impact between August–September 2020 and March–April 2021, with digitally operated firms defined as those who are engaged in selling goods and services online or e-commerce.¹⁰ The pandemic and mobility restrictions were an incentive for more MSMEs to go digital. But digitally operated MSMEs were not always successful given the pandemic. The impact of the drop in demand, supply disruptions, and contract cancellations were likely higher in digitally operated MSMEs than non-digital firms surveyed, while those who reported better a business environment than prior to COVID-19 increased in digitally operated MSMEs, although they were a small fraction (Figure 9).

Figure 9: Business Environment—Digitally Operated MSMEs, 2020–2021

COVID-19 = coronavirus disease; MSME = micro, small, and medium-sized enterprise.

Notes: The upper band is for August–September 2020 with the lower band for March–April 2021. The gap in percentage shares of digitally operated MSMEs (firms engaged in online selling or e-commerce) and non-digital MSMEs. Blue bars are the percentage points (survey response ratio) higher in digitally operated MSMEs than non-digital MSMEs. Red bars reflect the opposite. For Indonesia, there were 128 valid samples in August–September 2020 and 2,509 in March–April 2021; For the Philippines, 686 valid samples in August–September 2020 and 1,546 in March–April 2021; For Thailand, 520 valid samples in August–September 2020 and 963 in March–April 2021.

Source: Calculated based on MSME surveys in Indonesia, the Philippines, and Thailand, August–September 2020 and March–April 2021.

The profitability of digitally operated MSMEs was mixed during the pandemic. In Indonesia, the share of those with a more than 6% income increase was likely higher in digitally operated MSMEs than non-digital MSMEs in August–September 2020 (Figure 10A). They were mainly small firms selling essential daily goods, food, and health-care products and delivering them. However, toward 2021, the share of those with no revenue or more than a 30% decrease in income likely increased in digitally operated MSMEs than non-digital MSMEs. They were mainly firms involved with nonessential goods and services. In the Philippines, those profitable and less profitable co-existed among digitally operated MSMEs, with two streams of businesses—those which were hurt by the pandemic and those which benefited. This became clearer toward 2021 (Figure 10B). Thailand followed a similar trend as Indonesia (Figure 10C).

Figure 10: Revenue—Digitally Operated MSMEs, 2020–2021

MSME = micro, small, and medium-sized enterprise.

Notes: The upper band is for August–September 2020 with the lower band for March–April 2021. The gap in percentage shares of digitally operated MSMEs (firms engaged in online selling or e-commerce) and non-digital MSMEs. Blue bars are the percentage points (survey response ratio) higher in digitally operated MSMEs than non-digital MSMEs. Red bars reflect the opposite. For Indonesia, there were 128 valid samples in August–September 2020 and 2,509 in March–April 2021; For the Philippines, 686 valid samples in August–September 2020 and 1,546 in March–April 2021; For Thailand, 520 valid samples in August–September 2020 and 963 in March–April 2021.

Source: Calculated based on MSME surveys in Indonesia, the Philippines, and Thailand, August–September 2020 and March–April 2021.

This suggests MSMEs that retained demand—such as essential goods and services, daily products, and food—could continue to operate successfully. As the pandemic wore on, other MSMEs dealing with nonessential products and services likely faced greater operational difficulties, even if digitalized (e-commerce).

3. Women-Led MSMEs

The pandemic had a mixed impact on women-led MSMEs—or MSMEs run or owned by a woman. Some faced a sharp drop in demand, supply disruptions, and saw their business hurt more by the pandemic harder than men-led MSMEs. Others reported a better business environment than before the pandemic (except in Indonesia) (Figure 11). This subsection compares the impact on women-led MSMEs between March–April 2020 and March–April 2021. Similar to the previous subsections, the blue bar indicates a higher impact (a higher percentage share) in women-led MSMEs compared with men-led MSMEs, and the red band shows the opposite.

Figure 11: Business Environment—Women-Led MSMEs, 2020–2021

COVID-19 = coronavirus disease; LAO = Lao People’s Democratic Republic (Lao PDR); MSME = micro, small, and medium-sized enterprise.

Notes: The upper band is for March–April 2020 with the lower band for March–April 2021. The gap in percentage shares of women-led MSMEs (firms owned/managed by women) and men-led MSMEs. Blue bars are the percentage points (survey response ratio) higher in women-led MSMEs than men-led MSMEs. Red bars reflect the opposite. For Indonesia, there were 525 valid samples in March–April 2020 and 2,509 in March–April 2021; For the Lao People’s Democratic Republic (Lao PDR), 355 valid samples in March–April 2020 and 94 in March–April 2021; For the Philippines, 1,804 valid samples in March–April 2020 and 1,546 in March–April 2021; For Thailand, 1,147 valid samples in March–April 2020 and 963 in March–April 2021.

Source: Calculated based on MSME surveys in Indonesia, the Lao PDR, the Philippines, and Thailand, March–April 2020–2021.

In Indonesia, the business environment for women-led MSMEs was harsh throughout the first year of the pandemic (Figure 11A). While the share of those reporting no change was slightly higher than men-led MSMEs, women-led MSMEs were more likely to face supply disruptions, delayed product delivery, and temporary business closures than men-led MSMEs. In the Lao PDR, women-led MSMEs more likel...

Table of contents

• Front Cover
• Title Page
• Copyright Page
• Contents
• Tables, Figures, and Box
• Foreword
• Acknowledgments
• Abbreviations
• Executive Summary
• Introduction
• Country Responses to COVID-19
• Methodology
• Data Structure
• Company Profiles
• The COVID-19 Impact on MSMEs during the First Year of the Pandemic
• Thematic Impact
• Policy Implications
• Conclusion
• Appendixes
• Footnotes
• Back Cover