Economic integration has increased recognition by regional governments through its potential for a substantial increase in the participation of small and medium enterprise in the generation of regional income, employment, exports, investment, economic growth and competitiveness (OECD,2018). The purpose of this paper is reviewing the economic integration of SMEs in manufacturing sector in Tigray Regional State Mekele City based on empirical evidence and current research on SMEs worldwide with a major focus on Ethiopian SMEs and how to improve their operations. It was assessing the impact of enabling environment on SMEs operation in order to become integrated and competitive in the national market. The process of economic integration has opened an opportunities and increased pressure for SMEs to expand their value and form partnership and strategic alliance with local and foreign organizations to facilitate production and distribution of their products in the global market. It removes the economic barrier such as finance and human capital among one or more economies to share and mutually exchange the common resources effectively through the back and forward linkage in the manufacturing sector. However, competitiveness of SMEs in the study area is determined by access to finance, the capacity of human capital in theory and practice, quality products demanded by consumer, competition among SMEs, supporting facilities provided by the stakeholders, and motivational system provided by government (tax and subsidies).In addition weak enabling business environment (legislation, policies, regulations, and support institutions) are the key factor on the development of the SMEs in in Tigray regional state Mekelle City. The researcher concluded that competitiveness and enabling environment are the main challenges of SMEs operation. Thus, the government should amend rule and regulation to make clear and simple and enhance the capacity of SMEs to penetrate in the local and global market. The Regional governments also should be developed policies and strategies favorable to SMEs development and put them in their development agenda.

Keywords : Economic Integration, Competitiveness, Enabling Environments.