Answer to Question #209223 in Management for Ashneel

Question

Question 2 (15 marks)

Small businesses are making a significant contribution to the economies of the Pacific island nations. Critically discuss the numerous economic contributions that small businesses make to the economies of these Pacific Island countries. What policies can be used to boost these small businesses? Use examples from Pacific Island countries to illustrate your answer.  

Answer 1

Small businesses make numerous economic contributions to the economies of Pacific Island countries, including:

They create new employment opportunities - collectively, small enterprises in the Pacific Island countries employ a higher proportion of indigenous people. These opportunities further lead to a more skilled workforce which can transfer its skills and expertise to others. Many small businesses process fish and agricultural products and produce handicrafts in the small islands.

They encourage redistribution of wealth -they generate wealth and therefore offer power to the community, resulting in a more stable social system and contribute to national cohesiveness.

They offer a flexible response - small enterprises supply goods and services appropriate to local needs, which widens consumer choice and reduces reliance on inappropriate commodities imported from overseas.

They contribute to the region's economic growth - by creating employment opportunities, generating wealth and introducing new technologies, these island communities contribute to economic growth. e.g. almost all the islands grow coconuts, some through small-scale farmers, which are a major export.

Even so, Pacific Islanders in small businesses face negative socio-economic and political problems in the process. Policies that can be used to boost these small businesses include:

tax incentives on small enterprises, deregulating the economy, allowing free market forces to stimulate future growth and island nations' governments reducing dependence on imported commodities.