Implementation of the Small Business Act Developing new assessment instruments

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WITH THE FINANCIAL SUPPORT OF THE EUROPEAN UNION

Implementation of the Small Business Act Developing new assessment instruments

1

Antonio Fanelli

Private Sector Development Division - OECD

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WITH THE FINANCIAL SUPPORT OF THE EUROPEAN UNION

Objectives

Overall objective:

•Improving the business environment for SMEs in the Western Balkans + Turkey, set against the Copenhagen economic criteria through a comprehensive and comparative assessment of the implementation of the Small Business Act (SBA).

Specific objectives:

•Providing a monitoring assessment of the progress made in the ten policy principles covered by the SBA

•Promoting the exchange of experiences in policy elaboration and implementation among the pre-accession economies and the OECD countries, through regional meetings

•Analysing and debating key thematic issues on policy elaboration and implementation in relation to the principles covered by the SBA through focus groups and/or company surveys

•Facilitating policy dialogue and programme co-ordination involving policy-makers, private sector organisations, NGOs and donors (IFIs, multilateral and bilateral organisations)

•Presenting results of the policy evaluation exercise in a Report on the Implementation of the

SBA.

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Deliverables

• Development of a new monitoring tool for SME policy, based on the SBA

• SME stakeholder meetings in every partner economy to discuss and validate the assessment results

• Publication of a regional report on the implementation of the SBA, including regional and country-specific policy

recommendations

• Monitoring of specific policy measures / priorities and workshops

to coach the partner economies how to measure the impact of

specific SME policy measures [see end of presentation].

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The SME Policy Index Methodology

SME Policy Index Dimensions

1. Rewarding entrepreneurship and thriving family business

2. “Second chance” Bankruptcy rules 3. “Think Small First” principle

4. Responsive public administration 5. Adapted Public procurement and

State Aid

6. Timely payments in commercial transactions/Access to Finance 7. Benefitting from a Single Market 8. Skills Upgrading and innovation 9. Environment and SMEs

10.SMEs and access to markets

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Access to Finance Indicators

Sources of external finance for SMEs

Legal and regulatory framework

Other factors that affect demand and supply of finance

Credit guarantee schemes Cadastre Financial literacy Public start-up funding Credit information

services

Business Angels network Registration systems for moveable assets

Microfinance Facilities (including Credit Unions)

Collateral and provisioning requirements Availability of

Risk Capital (e.g. venture capital, private equity funds)

Creditor rights

Leasing

Access to stock market

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The SME Policy Index is organised to involve all levels in the evaluation and input process

EC , OECD, E BRD, ETF Core Team

EC/OECD Experts Local Experts Local Consultants

Country Economic Team

Private Sector

 EC, OECD, EBRD, ETF Core Team collects data and interviews OECD,EC, EBRD, and ETF experts to establish a preliminary level of progress for each country in each policy dimension

 Local consultants build from the first

measurement by collecting primary data in the countries and conducting interviews with local experts. The results analysed by the Core Team and incorporated into the level of

progress

 The Private Sector and the National SBA Coordinator’s Team conduct separate evaluation. This provides an opportunity to step back and analyse the measurements in a broader context. After consultation

mechanisms are complete, all parties confirm a final measurement, which is published

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The SME Policy Index relative to other indices

from international organisations Main Differentiating factors of the SME Policy Index:

•Focus on a very specific region where history, culture and geography allow for more relevant benchmarking between countries.

•Tripartite participatory approach to evaluation and measurement including government, private sector, and the EC, OECD, EBRD, ETF.

•Comprehensive evaluation of the SME Policy environment structured along ten key dimensions in line with the European Charter for SMEs.

•Does not only measure but also provides guidance on how to improve through good practices and policy recommendations.

•“Meta – Index” which incorporates existing work already conducted by other organisations (e.g., World Bank’s Doing Business report).

How the SME Policy Index is different from other indices

Process

Participatory/

Collaborative/

Target- oriented

SME Policy Index

Policy-specific evaluation

FIAS reports

External evaluation

EBRD Transition Report, WB/EBRD BEEPS

World Bank Doing Business Report

Country specific

Regional Global

Geographical Coverage

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Strengths and Limitations of the SME Policy Index

IC Core Team

Strengths Limitations

• The indicators have been structured to be fully compatible with the European Small Business Act.

• Combination of original data collected by EC/OECD/EBRD/ETF with existing data from sources such as the World Bank or the United Nations .

• Use of a common ‘scoreboard’

facilitates public-private consultation and encourages action.

•The ‘scoreboard’ approach also helps public officials to communicate better with respect to policy progress and areas where more reform is necessary.

• The SME Policy Index incorporates best practice examples and policy recommendations.

• Measuring effective implementation of government policy can be difficult.

• Distinction between scoring levels can be challenged, especially when above 3.

•A simple Weighting System has been incorporated to give more important indicators a higher weight.

• Not all dimensions have the same importance – the balance of this importance varies between countries

• There tends to be a lack of general national statistics on SMEs, due to

problems such as a uniform definition of an SME.

• The SME Policy Index does not cover all aspects of SME Policy but instead focuses on the Small Business Act.

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Organisation

• The project is jointly implemented by the OECD, the EC, the European Training Foundation (ETF), and the EBRD

• Each organisation is in charge of the SBA areas it has the most expertise in (e.g. ETF: human capital; EBRD: access to finance)

• Co-operated with the OECD Centre for Tax Policy and Administration on the SBA dimension of SME taxation

• Close co-operation with the OECD Centre for Entrepreneurship

on the assessment of Turkey.

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Timeline

April 2011: Launch of the project

April 2011 – September 2011: Tripartite assessment:

i. Local consultants’ independent assessment with focus on private sector ii. Desk research by partner organisations

iii. Self-assessment by Western Balkan governments

October – November 2011: Country stakeholder meetings to compare assessments

February 2012: Regional meeting to finalise assessment scores

June 2012: Publication of regional report

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Example of Output (I)

SME Policy Index 2009 Regional Report:

- 300 page regional report on the

implementation of the SBA in the Western Balkans

- Analysis and scoring of over 70 policy indicators across the region including a comparison between 2007 and 2009

- Regional and country-specific policy recommendations - Special section on policies to support high growth SMEs

- Report launching at high-level conference including European

Commission Vice President and five Western Balkan Ministers.

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Example of Output (II): progress in scoring between 2007 and

2009 regional reports

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0.00 1.00 2.00 3.00 4.00 5.00

SRB

Example of Output (III): scores for individual dimensions in Serbia’s 2009 assessment

Score

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First results emerging from the 2011/12 assessment

Serbia has shown progress in several areas:

• Institutional framework and regulatory reform;

•Company registration and e-government;

•Innovation policy

•Export promotion

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WITH THE FINANCIAL SUPPORT

OF THE EUROPEAN UNION 15

SME Company Survey

Results for Serbia

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I. General Information – Serbia

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Results based on a sample of 70 companies.

47%

16%

9% 7% 7% 6% 3% 1% 1% 1% 1%

0%

10%

20%

30%

40%

50%

Sh ar e o f T o tal

Operating Sector

Distribution of SMEs by Operating Sector

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I. General Information – Serbia

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Belgrade 14%

Nis 20%

Novi Sad 19%

Other 47%

Distribution of SMEs by Location

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I. General Information – Serbia

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Average Years in Operation Average Number of Employees Head Office and

Location of Operations Ownership Structure

Position of Interviewee

18 34

The same location – 81%

Different locations – 19%

Limited liability company 74%

Entrepreneur/Sole proprietorship 14%

Joint stock company 10%

Other 1%

Owner - 53%

Manager - 37%

Other - 10%

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II. Operational Environment

19

Serbia

Average Company Turnover 2010 Average Investment 2009-2010

Average Forecast Investment 2011-2013

1,260,777 EUR 154,328 EUR 210,978 EUR

Exporting Companies Yes – 63% No – 37%

Share of Exports

Gov’t finance schemes applications Government finance schemes

Successful applications

1-15% - 58%

16-30% - 16%

31-50% - 5%

Over 50% - 21%

Yes – 50% No – 50%

Yes 97%

No 3%

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II. Operational Environment – In Comparison

20

0.8

3.6

16.5 2.2 2.7 3.6

1.3

5.2 0 2 4 6 8 10 12 14 16 18

ALB BIH HRV KOS MKD MNE SRB TUR

Millio n s

Average Company Turnover

(2010, mn EUR)

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II. Operational Environment – In Comparison

21

142

454

58

811

29 1,458

154

557 0 200 400 600 800 1,000 1,200 1,400 1,600

ALB BIH HRV KOS MKD MNE SRB TUR

Tho u san d s

Average Company Investment

(2009-2010, th EUR)

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II. Operational Environment – In Comparison

22

164

355

81 1,509

37 1,318

211 1,140

0 200 400 600 800 1,000 1,200 1,400 1,600

ALB BIH HRV KOS MKD MNE SRB TUR

Tho u san d s

Average Company Forecast Investment

(2011-2013, th EUR)

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II. Operational Environment – In Comparison

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83%

63% 58%

79%

51%

33%

63%

53%

0%

20%

40%

60%

80%

100%

ALB BIH HRV KOS MKD MNE SRB TUR

Exporting Companies

(% of all companies)

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II. Operational Environment – In Comparison

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0%

10%

20%

30%

40%

50%

60%

ALB BIH HRV KOS MKD MNE SRB TUR

Applications to Government Finance Schemes (% of total companies)

Successful Applications Denied Applications

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II. Operational Environment

25 Note: Ranking calculated taking into account all responses and by awarding 5 points for priority 1, 4 points for priority 2, etc.

Serbia - Top 5 most important business environment conditions

Stronger consumer demand More stable economic environment

Receiving business friendlier loans from banks More stable regulatory conditions with easier access to licenses/permits and less bureaucracy

More and better qualified personnel available

Ranked as top priority by:

33%

22%

20%

10%

3%

Of respondents

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III. Perception of Government Policy

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Serbia: Top 3 Most Sought-After Government Policies for SMEs

Support in export promotion and financial support Improved business regulation: simplification, better

assessment for new legislation, Public-Private- Consultations

Easy access to loans and credits

Ranked as top priority by:

35%

19%

10%

Of respondents

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III. Perception of Government Policy

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Serbia: Perceived Performance of Government Policies for SMEs

Very Poor Fair Good Excellent

Promotion of entrepreneurial learning Enhanced bankruptcy procedures, fast second chance for SMEs Improved business regulation: simplification, better assessment …

Simpler procedures for business: company … Transparent public procurement and SME support services

Easy access to loans and credits More benefits from the Single Market through better technical …

Support in innovation and upgrading skills of SME staff Promotion of environmental management systems and standards Support in export promotion and financial support

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III. Perception of Government Policy

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Serbia: Priority Improvements for Government Policies for SMEs

More benefits from the Single Market through better technical regulations, standardizations, accreditation

Simpler procedures for business: company registration, simplified rules Transparent public procurement and SME support services

Support in innovation and upgrading skills of SME staff Easy access to loans and credits

Improved business regulation: simplification, better assessment for new legislation, Public-Private-Consultations

Enhanced bankruptcy procedures, fast second chance for SMEs Promotion of entrepreneurial learning

Promotion of environmental management systems and standards Support in export promotion and financial support

More financial resources allocated

Better coordination among support programmes

Better promotion of support programmes