TheAsianProductivityOrganization(APO)isanintergovernmentalorganizationthatpromotes productivity as a key enablerfor socioeconomic development andorganizational and enterprise growth. Itpromotesproductivity improvementtools, techniques, and methodologies;supportsthe National ProductivityOrganizations of its members; conductsresearch on productivity trends; anddisseminates productivity information,analyses,anddata.TheAPOwasestablishedin 1961 and comprises 21 members. APO Members Bangladesh,Cambodia,RepublicofChina,Fiji, Hong Kong, India, Indonesia, IslamicRepublicofIran,Japan,RepublicofKorea,Lao PDR, Malaysia, Mongolia, Nepal,Pakistan,Philippines,Singapore,SriLanka,Thailand, Turkiye, and Vietnam. SME PRODUCTIVITYAND INNOVATION IN ASIA:POLICIES FORA RESILIENT FUTURE Dr. Patarapong Intarakumnerd served as the chief expert and volume editor. First edition published in Japanby the Asian Productivity Organization1-24-1 Hongo, Bunkyo-kuTokyo 113-0033, Japanwww.apo-tokyo.org © 2025 Asian Productivity Organization The views expressed in this publication do not necessarily reflect the official views ofthe Asian Productivity Organization (APO) or any APO member. All rights reserved. None of the contents of this publication may be used, reproduced,stored, or transferred in any form or by any means for commercial purposes withoutprior written permission from the APO. Designed by Urban Connections Co., Ltd. CONTENTS FOREWORDVINTRODUCTIONVIIREPUBLIC OF CHINA1JAPAN90MONGOLIA117PAKISTAN145INDIA189NEPAL231LAO PDR262PHILIPPINES300SINGAPORE356THAILAND392TURKIYE500VIETNAM536CONCLUSION560LIST OF FIGURE569LIST OF TABLES573LIST OF CONTRIBUTORS578 FOREWORD Small and medium-sized enterprises (SMEs) form the backbone of many Asianeconomies, contributing significantly to employment, innovation, and economicdynamism. Beyond their role in economic stability, SMEs are essential drivers oftechnological progress and competitiveness. However, their sustained growth dependslargely on their ability to enhance technological capabilities, access finance, and integrateinto evolving global value chains. As the world navigates the post-COVID-19 recovery,SMEs face pressing challenges in productivity and innovation. Strengthening their capacityfor technological advancement is vital for fostering economic resilience and ensuringlong-term prosperity. A thriving SME sector requires not only sound policies but also an environment thatnurtures entrepreneurship, fosters collaboration, and encourages the adoption of newtechnologies. Enhancing financial inclusion, building digital capabilities, and strengtheninglinkages with research institutions and larger enterprises are key to ensuring that SMEsremain dynamic and competitive in an ever-evolving marketplace. This report presents an in-depth exploration of the challenges and opportunities facingSMEs across the diverse economic contexts of the 12 APO members covered in the study.Through a comprehensive analysis of key productivity trends and innovation dynamics, itsheds light on the varying factors that influence SME growth and sustainability. Byevaluating different policy approaches and their effectiveness, this study provides aroadmapfor enhancing SME competitiveness and resilience in an increasinglyinterconnected global economy. Notably, the findings reveal significant variations in SMEproductivity. While high-income economies benefit from structured policies, lower-middle-income economies struggle with fragmentation, which limits SME innovation. Thestudy underscores the critical role of digital transformation, showing SMEs leveragingIndustry-4.0 technologies achieve notable gains in efficiency and market reach. A keyinsight is the impact of demand-side policies, which have proven effective in fosteringSME innovation in certain middle-income economies. The APO extends gratitude and appreciation to all the experts who contributed to thisreport, led by Chief Expert Dr. Patarapong Intarakumnerd, Professor of National GraduateInstitute for Policy Studies (GRIPS), Japan, and national experts from the Republic ofChina, India, Japan, Lao PDR, Mongolia, Nepal, Pakistan, the Philippines, Singapore,Thailand, Turkiye, and Vietnam. It is hoped thatSME Productivity and Innovation in Asia:Policiesfor a Resilient Future serves as a valuable resource for advancing SMEdevelopment in Asia. Creating an enabling environment for innovation and productivitywill be essential in building a more competitive and resilient future for SMEs in the region. Dr. Indra Pradana SingawinataSecretary-GeneralAsian Productivity OrganizationTokyo INTRODUCTION Dr. Patarapong Intarakumnerd Science, Technology and Innovation Policy ProgramNational Graduate Institute for Policy Studies, Japan BACKGROUND According to the 2023 APO reportSME Transformation for Meeting the SDGs in Asia, SMEsconstitute a significant economic force in Asian countries, contributing almost 70% of employment.Enhancing technological capabilities throug