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in voluntarily joining an AEO program and thereby obstructing improvements in its own and
country’s supply chain security.
Challenge 7- Inflexibility and prescriptive nature of security requirement may become
insurmountable barriers for SMEs and prohibit their participation in the program.
Traditionally, small and medium-sized enterprises are defined as firms with 10-250
employees. WTO (2016) reports that SMEs made up two-thirds of formal non-agricultural
private employment in 99 emerging and developing countries using World Bank Enterprise
Surveys. Moreover, export intensity (export/sales) of SMEs is just 7.6 percent in the
manufacturing sector, as opposed to 14.1 percent for large manufacturing companies.
According to WTO (2016), Africa has the lowest export intensity of SMEs at 3 percent,
compared to 8.7 percent for developing countries in Asia. Services export intensity of SMEs is
very small (0.9 percent) as opposed to 31.9 percent for large companies.
The OIC AEO programs seem to favor large businesses. This is due to the fact that the costs
involved in upgrading security systems to meet AEO requirements seem astronomical for
SMEs. Requiring all-over fencing for all AEOs, 24-hour security services and constant tracking
technology for cargo may become prohibitive barriers for the SMEs.
There is a low level of convergence in terms of SMEs’ involvement in the OIC AEO programs.
This may be due to lack of connection between SMEs and Customs Authorities during AEO
design and implementation. The percentage of programs in the OIC economies with specific
SME participation during design is not high. However, many countries do have outreach plans
as discussed in Chapter 4.
A Brief Evaluation of the Convergence Analysis
In the previous sections of this Chapter, a very detailed horizontal (variable level) and vertical
(country level) analyses of the comparator matrix that has emerged as a result of the survey
responses were presented.
The results of these analyses can be used to assess the regional MRA readiness of OIC Member
States with each other. Furthermore, APEC comparisons can be employed to gain insights
about how these two blocs stand with respect to each other in terms of AEO design and
implementation. There may be lessons to be learnt for both parties.
The calculated average of 75 percent vertical convergence among OIC Member States shows
that these 8 countries resemble each other in many ways. Some of these countries have
already involved in regional MRAs (Agadir Agreement) with each other and they show a higher
degree of convergence.
For future MRAs, the horizontal (variable-level) reading of the matrix gives clues about the
success and challenge factors in the design and implementation of AEO programs across
countries. As a result, the horizontal readings provide insights about AEO features where there
is a pressing need for harmonization before attempting a bilateral/regional MRA between OIC
Member States.