Korea's Cooperation Schemes to Development of Small and Medium Enterprises in Ethiopia

5 Pages Posted: 25 Jan 2014

See all articles by Sungil Kwak

Sungil Kwak

Korea Institute for International Economic Policy

Hyelin Jeon

Korea Institute for International Economic Policy

Seuk-hoon Baik

Korea Institute for International Economic Policy

Date Written: December 6, 2013

Abstract

The purpose of this study is to analyze the roles of Korea in the promotion of SMEs in Ethiopia as a means of development cooperation. SMEs in Ethiopia are experiencing the following barriers: low infrastructure, business-related policies and regulations, constraints to access credit, and the lack of government-led technical supports. We show that those constraints are linked and affect each other.

To remove those interlocking constraints hindering the development of SMEs, this study presents two policy suggestions. The first is the use of micro-finance. The constraint to access credit causes the lack of capital to block the accumulation of human capital and technology so that the SMEs cannot grow. Korea can provide ODA to the micro-finance institutes as a form of public-private partnership (PPP) projects to support the development of SMEs in Ethiopia. The second policy suggestion is to provide a comprehensive aid program. Before establishing the program, Korea must join the Development Assistance Group (DAG) in Ethiopia. Korea has to avoid making the decision that Korea alone will support the project the recipient country requests. Instead, Korea in consultation with major donor countries should select proper projects. Through this consultation process, we can clearly identify effective aid areas and achieve the harmonization of aid. First, each donor country proposes projects in the sectors of comparative advantage. Combining the proposed projects in consultation with other donors establishes a comprehensive program. This program could provide a means to untangle the tangled constraints. That is to say, interlocked constraints could be overcome through this program.

Suggested Citation

Kwak, Sungil and Jeon, Hyelin and Baik, Seuk-hoon, Korea's Cooperation Schemes to Development of Small and Medium Enterprises in Ethiopia (December 6, 2013). KIEP Research Paper No. World Economic Update-13-54. Available at SSRN: https://ssrn.com/abstract=2384381 or http://dx.doi.org/10.2139/ssrn.2384381

Sungil Kwak (Contact Author)

Korea Institute for International Economic Policy ( email )

[30147] Building C, Sejong National Research Compl
Seoul, 370
Korea, Republic of (South Korea)

Hyelin Jeon

Korea Institute for International Economic Policy ( email )

[30147] Building C, Sejong National Research Compl
Seoul, 370
Korea, Republic of (South Korea)

Seuk-hoon Baik

Korea Institute for International Economic Policy ( email )

[30147] Building C, Sejong National Research Compl
Seoul, 370
Korea, Republic of (South Korea)

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