Growth and Efficiency of Small and Medium Industries in ASEAN Countries

There has been increasing interest among policymakers in developing countries in the potential of small-scale and medium-scale industries (SIs and MIs) for generating additional employment opportunities. The rate of labor absorption in the industrial sector has remained low in many developing countries despite relatively high rates of growth of industrial output. It is generally considered that SIs and MIs are more labor-intensive than large-scale industries, and that they therefore could contribute to increasing the level of employment in the industrial sector. It has also been argued that SIs and MIs do not operate as efficiently as larger establishments, i.e., they require more labor and capital per unit of output than large-scale industries. Therefore, the creation of employment opportunities by promoting SIs and MIs could well be at the expense of lower growth in output — a proposition that may not be acceptable to many developing countries…