Strengthening the SME Competitiveness and Business Linkage Program: Policy Challenges in Mongolia: Policy Challenges in Mongolia

Strengthening the competitiveness of domestic enterprises, particularly small and medium-sized enterprises (SMEs), is particularly vital for Mongolia to diversify its economy: a development goal contained in the Millennium Development Goals-based Comprehensive National Development Strategy of Mongolia (2007-2021). An establishment of business linkages between local SMEs and foreign affiliates of multinational enterprises (MNEs) is one of the best and fastest ways for local firms to strengthen their competitiveness. Thus, developing a business linkage program has been a major challenge for many developing countries in relevance to the local SMEs’ competitiveness. Despite of it, however, there has not been any formal business linkage program developed and implemented in Mongolia. The purpose of this paper is, therefore, to identify the national linkage program aimed at exploiting business linkages for strengthening the competitiveness of SMEs in Mongolia. To reach this purpose, the paper deals with comprehensive and partial approaches for linkages building. The government of Mongolia can take a comprehensive approach by setting up policy objectives of the program, identifying targets and policy measures to build linkages, and setting up an institutional framework. A partial approach is about to develop and implement the business linkage program within the context of ongoing and upcoming SME development projects in Mongolia. Due to considerable similarities such as the objectives, policy measures, targets and involved organizations, incorporating linkage programs to ongoing SME development projects deserves to be taken into account. The partial approach could become quite a novel approach to the linkage program establishment in developing countries, including Mongolia where the international organizations’ SME development projects of considerable similarities with the linkage program are implemented. The study reaches a conclusion that quite a long time could be required for Mongolia to take the comprehensive approach due to a less preparedness of the country in terms of policy measures and institutional setup. Thus, the partial approach is better available as the pilot business linkage project in the nearest future for Mongolia.