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SME Policy Assessment in the EaP Region

SME Policy Assessment in the EaP Region. Presentation to Civil Society Forum Michaela Hauf, DG ENTR, Unit for International Affairs and Missions for Growth Brussels, 13 th May 2013. The Eastern Partner region is composed of a group of heterogeneous countries.

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SME Policy Assessment in the EaP Region

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  1. SME Policy Assessment in the EaP Region Presentation to Civil Society Forum Michaela Hauf, DG ENTR, Unit for International Affairs and Missions for Growth Brussels, 13th May 2013

  2. The Eastern Partner region is composed of a group of heterogeneous countries The Eastern Partner countries are different in terms of their size, population, resources endowment and their stage of economic and institutional development Sources: World Bank, World Development Indicators Value added of main economic sectors as % of GDP, 2011 Example: Economic structure of EaP countries Armenia, Georgia, Republic of Moldova are small economies, highly dependent on services, agriculture and remittances Azerbaijan, Belarus, Ukraine are resource-rich economies with significant revenues from export of commodities

  3. SMEs in the Eastern Partner countries contribute less to employment and GDP compared to the OECD countries on average Private sector share in GDP, 2010 Contribution of SMEs to employment and GDP, 2010 Sources: OECD (2012 ), SME Policy Index: Eastern Partner Countries 2012 * Share in turnover is used instead of GDP Source: EBRD SMEs today account on average for only about 50% of employment , compared to 60-70% in OECD economies, and contribute on average just over 30% of value added, in comparison to 55% in OECD economies

  4. SME Policy Index 2012: Eastern Partner Countries Assesses SME policies in each EaP country and formulates recommendations Armenia – Azerbaijan – Belarus – Georgia - Republic of Moldova - Ukraine 2010 2013 2015 2009 2012 2014 2011 Eastern Partnership Enterprise Policy Performance Assessment – Phase I – 21 months REGIONAL PROJECT DELIVERABLES KEY QUESTIONS • How to enhance the performance of SMEs in the Eastern Partnership region? • Development of a comprehensive policy assessment tool to assess SME policy frameworks • Recommendations on how to align with the principles of the Small Business Act • How to create an enabling policy environment to support SME growth? • Exchange of best practices through regional policy working groups and capacity building seminars • Which policy tools have or have not worked to support SMEs?

  5. SME Policy Index 2012: Eastern Partner Countries ... follows the principles of the Small Business Act for Europe

  6. SME Policy Index 2012: Eastern Partner Countries ... and is based on a participatory process with all SME stakeholders involved Regional Policy Working Group Six national stakeholder meetings Capacity Building Seminar Regional Policy Working Group Regional Policy Working Group Policy Seminar Policy Seminar Ministries Agencies Private sector associations Government assessment Public authorities European Commission Independent consultant International organisations assessment ETF EBRD OECD

  7. Key findings of the SME Policy Index 2012SBA assessment results at regional level Most EaP countries have started to implement business climate reforms to create a conducive environment for private sector development; However they still face significant challenges in developing a comprehensive approach towards the SME sector to complement these efforts with more targeted measures.

  8. Key findings of the SME Policy Index Key conclusions EaP countries are supporting SMEs and entrepreneurship through business environment reforms; Institutional frameworks for SME policy are developing at different paces in EaP countries; More targeted SME policy tools are still needed to further support SME growth across the region; Data on SMEs remains scarce across the EaP region.

  9. EaP countries are supporting SMEs and entrepreneurship through business environment reforms All Eastern Partner countries: ... are taking a pro-active approach to streamline the operational environment for business activities (company registration, online government etc.) ... have undergone reforms in legislative simplification, although some countries are more advanced than others. ... have started to improve the legal and regulatory framework to expand the financial sector beyond bank lending, however, with mixed results Weighted average score for sub-dimension 4.1: Company registration • Example: sub-dimension 4.1 Company registration • Eastern Partner countries have achieved significant progress in the area of company registration, saving time, reducing costs and removing administrative barriers for SMEs. • All Eastern Partner countries have introduced one-stop-shops for company registration. Georgia and Belarus have managed to integrate all registration and notification procedures within one-stop-shops, while Georgia has introduced Public Service Halls, integrating one-stop-shops with a range of other government services.

  10. Institutional frameworks for SME policy are developing at different paces in EaP countries • Armenia, Georgia and the Republic of Moldova have started to develop the institutional framework through on-going public-private consultations and effective policy co-ordination mechanisms; • Azerbaijan, Belarus and Ukraine have started to provide support measures to the business sector, but often in an ad hoc manner without a long-term plan and with limited co-ordination between the relevant public authorities. • Example: sub-dimension 3.1 Institutional framework • ... Armenia and the Republic of Moldova have the building blocks for and SME policy making; • ... Georgia has achieved noticeable results following a horizontal approach to business climate development. • ... in Azerbaijan a number of implementation agencies exist with a focus on different areas; however co-ordination between these actors could be further improved to ensure a common approach towards SME development; • ... in Belarus SME policy is developed at ministry level, but no implementation agency exists; • ... in Ukraine an agency for SME policy was re-established in 2012, but its effectiveness will largely depend on mandate and financing. Weighted average score for sub-dimension 3.1: Institutional framework

  11. More targeted SME policy tools are still needed to further support SME growth across the region • Availability of financial and human resources remains a particular constraint to SME performance in all EaP countries. • Support services for SMEs and start-ups are available across the EaP region as a combination of public and donor-funded programmes • Most EaP countries have agencies specialised in export promotion; however policies to support export-oriented SMEs remain weak across the region. • Innovation policies remain inadequate with considerable scope for further development of target policies to encourage SME involvement in the innovation process. Weighted average score for dimension 8B: Innovation policy for SMEs • Example: dimension 8b Innovation policy for SMEs • All Eastern Partner countries have established public research institutions, or initiatives to promote technology transfer • Financial and technical support schemes for innovative companies are provided on an ad-hoc basis in the Eastern Partner region, often with support from donors and international organisations.

  12. Data on SMEs remains scarce across the EaP region • Data on the SME sector remains scarce, even in those countries where policy formulation for SME support is already well advanced. • Despite the existence of specialised institutions, data on the SME sector is often incomplete or entirely lacking. Examples: Indicator 3.2 – Availability of statistical data The official data on SMEs in EaP countries is often incomplete or fragmented, and covers only a limited number of sectors. Indicator 8a.4 – Start-ups No EaP country has been able to provide sufficient statistical evidence on the ratio of start-ups trained and/or those that received business support services. • While countries have made significant progress in data collection, several shortcomings remain: • Weak international comparability • Low accessibility and low level of detail • Limited availability online and lack of regular updates Score for dimension indicator 3.2: Availability of statistical data

  13. Key findings of the SME Policy Index 2012 Guidelines for implementing SME-friendly policies While there is no one-size-fits-all solution for advancing SME policy development, all Eastern Partner countries are invited to take advantage of the following guidelines to structure their own policy reform agenda: Historically outside of the policy making process, the private sector in Eastern Partner countries – especially SME associations – needs to be further integrated into the policy debate at all stages to increase responsiveness of policies to the fast-moving needs of the marketplace. Buy-in from the business community will also ensure more effective implementation of reforms. Consult more closely with the private sector on policy reform Improve co-ordination between government agencies Better co-ordination between different agencies supporting SME development would avoid overlap, ensure better use of resources and increase policy impact. This can be achieved by designing comprehensive SME development strategies with clear and measurable objectives. Develop policy tools to foster SMEs growth, investment, innovation and export capacity in key economic sectors such as agribusiness, information and communications technology, tourism and construction. Such tools are especially critical to improve access to finance, enterprise skills, innovation, business support services and export promotion. Develop targeted SME policy tools Collect better data for better policies Collect more detailed structural statistics to monitor and evaluate public policy tools on a regular basis and assess SME performance both at national and sector level.

  14. Follow-up to SME Policy Assessment • 2 projects based on the SME Policy Assessment to be undertaken by the OECD in cooperation with the European Commission • Assistance to EaP countries with regard to the implementation of policy reforms (focus on particular sectors) – to be launched at the end of 2013 • 2nd Round of SME Policy Assessment with a focus on effective implementation and output (methodology will be revised in line with 'lessons learned') – to be launched early 2014

  15. Institutional Framework and Participation • Apart from dedicated project meetings, discussions on the implementation of SME policies will take place within the framework of the SME Panel of the Eastern Partnership • Eastern Partnership countries will be closely involved through their SBA Co-ordinators • Active participation – also from business representatives – is key to a successful and productive project

  16. For further information please contact: Michaela Hauf Policy Officer Eastern Partnership michaela.hauf@ec.europa.eu

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