Islamabad: Disruptions in the Strait of Hormuz risk pushing small and medium-sized enterprises (SMEs) out of global value chains as rising costs hit smaller firms harder than large companies, UN Trade and Development (UNCTAD) warned Tuesday.
According to Anadolu Agency, UNCTAD's report highlights that large companies can spread risks across suppliers, markets, and financing sources, whereas SMEs typically have fewer options. The report notes that higher energy, transport, and financing costs can squeeze margins, disrupt supply chains, and force smaller businesses to cut production, delay investment, or exit altogether.
The agency cautions that smaller firms could remain excluded from value chains even after global trade volumes recover, with rising energy bills, freight rates, insurance premiums, and financing constraints placing heavier burdens on them. This disparity is especially pronounced in developing economies, where compliance with import requirements costs small firms an average of 19.4% of the value of directly imported products, compared to 8.3% in developed economies. For medium-sized firms, the respective costs are 17.5% and 7.8%, while for large firms, they stand at 14.7% and 7.6%.
Smaller firms also encounter greater barriers to financing. In developing economies, 48% of small firms view access to finance as an obstacle to their operations, compared with 42% of medium-sized and 38% of large firms. In developed economies, the respective shares are 28%, 23%, and 20%, according to UNCTAD data covering 90,120 firms across 114 developing and 43 developed economies.
UNCTAD warns that when SMEs are pushed out of value chains, unemployment can rise, household incomes decline, and social vulnerability increase. "Trade resilience requires SMEs to remain part of value chains," the report states. "Otherwise, recovery may simply mask greater concentration among larger firms." The report calls for stronger access to trade finance, liquidity, and working capital, along with affordable logistics and measures to help SMEs maintain and diversify supplier and customer relationships.
"As engines of job-creation, micro, small, and medium-sized enterprises are critical to every country's future," UN Secretary General Antonio Guterres said in the report.
The Islamabad memorandum, signed in June following mediation by Pakistan and Qatar, provides for an end to hostilities and a framework for negotiations between Tehran and Washington. Iran has accused the US of failing to implement key provisions of the understanding, including measures related to sanctions and the naval blockade, while Washington and Gulf countries have called for free and unrestricted navigation through the Strait of Hormuz.
Iran and Oman have since been holding talks on a temporary transit route through the strategic waterway, with Tehran stating the arrangement would be temporary while discussions continue on a permanent mechanism.