DEVELOPMENT OF ENTREPRENEURSHIP AND SMEs IN SEE & CITs Dr. Antal Szabó, Regional Adviser on Entrepreneurship and SMEs UNECE 24 May 2005
PART OF THE GENERAL ECONOMIC POLICY There is no unique way of elaborating such policies; they clearly depend on a number of factors, such as national endowments of a country, the degree to which entrepreneurship already play a part of economic activity, the existence of entrepreneurial skills.
CATEGORIES OF THE SME DEVELOPMENT Emerging market economies (V4, 3 BALTIC STATES: EE, LV, LT, SI) Countries making rapid progress (EU candidate countries: BG, CR, RO + RF) Countries at an intermediate stage of transition (AL, AR, AZ, Serbia & Montenegro; MD KY) Countries making slow progress with less commitment (majority of the CIS countries)
Definition of SMEs The majority of the associated countries adopted the recommendation of the EU definitions of SMEs and generally follow the EU recommendations. A mechanical copying of the criteria concerning number of employees and financial criteria (balance-sheet and annual turnover) is not appropriate in all cases, because countries should take into consideration the scale of national economies.
Definition of SMEs The definitions of SMEs in the CIS countries are very inhomogeneous and it is very difficult to compare the share of the SME-sector of individual countries. In Azerbaijan, Belarus, Kazakhstan, Republic of Moldova, Russian Federation, Tajikistan and Turkmenistan there is no defined criteria of mediumsized enterprises at all.
SME POLICIES Every CIT is developing some kind of national SME policy and programme. Experience shows that more and more countries are following the integrated approach to SME development suggested by the UNECE when developing the private and SME sector in the transition economies
INTEGRATED APPROACH OF SME SECTOR DEVELOPMENT (i) STRATEGIC level (policy making); (ii) INSTITUTIONAL level (support institutions); (iii) ENTERPRISE level (entrepreneurs and business entities)
SME POLICIES SOUTH-EASTER EUROPE Albania (Law on SMEs, No 8957 17 October 2002.) Bulgaria (National Strategy on the Development of Small and Medium-sized Enterprises in Bulgaria for the period 2002-2006); Croatia (Law on Small Business Development Encouragement, prepared by the Ministry for Crafts and SMEs, accepted in 2002, Small Business Development Program till 2004); The former Yugoslav Republic of Macedonia (National SME Strategy, 2002); Romania (Establishing the National Credit Guarantee Fund for SMEs and Measures for Simulating, the Starting up and Developing SMEs, 2002) Serbia Strategy for the Development of Small and Mediumsized Enterprises and Entrepreneurship in the Republic of Serbia 2003-2008, January 2003; and Law on Business Registration Agency as of 21 May 2004
SME POLICIES CAUCASIAN TRANSITION ECONOMIES Armenia (SME State Support Programs for 2002/2003) Azerbaijan (Changing the Law on State Support for Small Entrepreneurship, 04 November 2003; President Decree 2002: State Program on Development of Small and Medium Entrepreneurship) Georgia (Decree No 309 Prove Small and Medium Enterprise State Support Program 2002-2004);
SME POLICIES COMMONWELATH OF INDEPENDENT STATES Belarus (Program of the state support of small business in Belarus 2002.) Kazakhstan (Decree of the President of the Republic of Kazakhstan (RK) of 29 December 2003, N1268, On State Program for Support and Development of Small Business in 2004-06 ); Kyrgyzstan ( Ratification of the State Programme on Entrepreneurship Development in the Kyrgyz Republic in 2001-2003, August 2001); Republic of Moldova (State Programme for the development of Small and Medium sized Enterprises 2006-2008); Russian Federation (Decree No 118 on Creation of Russian Development Bank aiming at financing small enterprises including farming entities); Uzbekistan (Law on Guarantees for the Freedom of Entrepreneurial Activities, May 2002).
DECLARATION ON SMEs BOLOGNA CHARTA June 2000; CEI DECLARATION ON SMEs AT THE DAWN OF THE 21 st CENTURY 24 November 2000, Budapest; EUROPEAN CHARTER OF SMEs June 2000, Santa Maria de Feira; EXPANDING THE EU CHARTER April 2002 Maribor; BSEC DECLARATION ON SMEs September 2001, Istanbul; OSCE DECLARATION ON SMEs May 2003 Bern; EXPANDING THE EU CHARTER BY WESTERN BALKAN 21 June 2003 & MOLDOVA in 2004
REVIEW OF THE IMPACT OF THE BSEC DECLARATION The Permanent International Secretary of the Organization of BSEC in cooperation with the United Nations Economic Commission for Europe prepared this Questionnaire in order to review the impacts of the declaration on the development of entrepreneurship and SMEs sector. As of 20 May 2005 the following countries send their self-evaluation report: AR, AZ, RM & the Republic of Montenegro
INDEX OF SME DEVELOPMENT Complex economic indicator, which incorporates - share of private ownership; - share of SMEs in GDP; - share of the labour force of SMEs in the total labour force of a country, expressed in terms of percentage and/or GDP per capita
Emerging Market Economies SHARE OF PRIVATE SECTOR IN TOTAL ECONOMY [%] 75.6% SHARE OF SME-SECTOR IN GDP [%] 48.6% SHARE OF EMPLOYEES IN SMEs IN TOTAL EMPLOYMENT [%] 58.4% INDEX OF SME DEVELOPMENT 1,238 [US$/capita]
Countries Making Rapid Progress SHARE OF PRIVATE SECTOR IN TOTAL ECONOMY [%] 68.9 % SHARE OF SME-SECTOR IN GDP [%] 43.7% SHARE OF EMPLOYEES IN SMEs IN TOTAL EMPLOYMENT [%] 48.8% INDEX OF SME DEVELOPMENT 396 [US$/capita]
Countries with intermediate stage of transition SHARE OF PRIVATE SECTOR IN TOTAL ECONOMY [%] 51.7 % SHARE OF SME-SECTOR IN GDP [%] 37.3% SHARE OF EMPLOYEES IN SMEs IN TOTAL EMPLOYMENT [%] 54.8% INDEX OF SME DEVELOPMENT 119 [US$/capita]
Countries Making Low Progress SHARE OF PRIVATE SECTOR IN TOTAL ECONOMY [%] 50.6 % SHARE OF SME-SECTOR IN GDP [%] 27.4% SHARE OF EMPLOYEES IN SMEs IN TOTAL EMPLOYMENT [%] 25.7% INDEX OF SME DEVELOPMENT 25 [US$/capita]
THE ROLE OF GOVERNMENTS Creation of an enabling business friendly environment; Creation of an adequate legislation; Formulating & implementing national SME support programmes; and Building SME support infrastructure.
GOVERNMENT POLICY SHOULD BE Legislation should be oriented on creation of a suitable laws on company creation, acceptable taxation, social security & insurance systems, compliance with the labour & environment requirements, creation of a simplified accounting systems; It should be predictable, coherent, consistent and transparent. The creation of a supporting infrastructure should be based on the establishment of an entrepreneurial fostering infrastructure.
SME SUPPORT INFRASTRUCTURE The key elements, which required for a successful national SME support programme in CITs and emerging market economies is the establishment and strengthening of infrastructure/institutions and networks promoting the creation and growing the SMEs.
GOOD GOVERNANCE FOR SMEs review corporate governance practices in advanced market economies, the new EU candidate countries as well as in CITs; analyze the models of the SME-sector governance in associated EU countries and economies in transition; and explore the situation at the micro-level, how do the SMEs understand corporate governance, what are their problems and what governments and non-governmental organizations can do to help them.
LEGISLATION Parliaments and Governments should review their legislative acts on enterprises, especially small ones without juridical personality and start-up smallsized incorporated enterprises with juridical personalities. It would be advisable to prepare of a documents with all legislation in this field.
SME REGISTRATION Parliaments and Governments are encouraged to review the practices of enterprise registration including procedures and fees to be paid. Governments should elaborate e- government procedure for registration of start-up small enterprises, which allow their registration within a period of time of two-to-three weeks.
Please contact us: Dr. Antal Szabó Regional Adviser on Entrepreneurship and SMEs Phone: (+41 22) 917 2471 Fax: (+41 22 917 0178 antal.szabo@unece.org