United Nations – Promoting International Investment by SMB

Small and medium-sized enterprises (SMEs) play a crucial role in economic development worldwide. They offer opportunities for growth, diversification, and innovation through international investment. However, SMEs face unique challenges when investing overseas, including financial constraints, regulatory complexities, and a lack of investment promotion geared towards smaller businesses. As a result, foreign direct investment by SMEs has declined in recent years. Governments and investment promotion institutions should focus on supporting SME investment for several reasons. SME investment is beneficial for development as it relies more on local suppliers, partners, and resources, and is less likely to displace local firms. Furthermore, in an increasingly competitive global context, SMEs can be game changers as large-scale projects become scarce and international tax reforms reduce incentives for larger multinational enterprises. This report discusses ways to reduce the bias towards large multinational enterprises in investment policies and promotes the role of SMEs in south-south and intraregional investment. It also introduces a framework to assess existing investment policies and presents policy options to facilitate SME investment, including adjusting investment promotion services, establishing support networks, improving competitiveness through innovation and digitalization, facilitating access to capital, simplifying regulations, and promoting SME participation in trade. By implementing these policies, governments can create an enabling environment that supports SMEs in their international investment efforts and maximizes the development benefits they bring.