Report sees improved conditions for SMEs in Western Balkans and Turkey

By Axel  Reiserer


 

 

  • Environment for small businesses has improved, says SME Policy Index: Western Balkans and Turkey 2019
  •  Sector’s potential remains far from fully exploited
  •  Progress needed in regulation, productivity and integration

The countries of the Western Balkans and Turkey are making progress in exploiting the potential of their small and medium-sized enterprises (SMEs), yet much remains to be done, a study presented at the EBRD Annual Meeting in Sarajevo today finds.

The SME Policy Index: Western Balkans and Turkey 2019 states that “significant strides in building a more SME-friendly policy environment have been made” in the pre-accession economies Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, Serbia and Turkey, the subject of the report, in comparison to the latest examination in 2016.

Since the last assessment, the seven EU pre-accession economies have made progress across a number of areas. The most significant improvements can be seen in the area of public services available to SMEs, including the roll-out of e-government services and easier registration, licensing and tax compliance procedures which greatly help reduce the administrative burden on small businesses.

Public procurement procedures have been simplified which should make them more accessible to SMEs. There is further room for improvement, but this is a significant step toward a public procurement framework that supports greater participation by small businesses, allowing them to tap into this important market.

After years of post-crisis difficulties in the banking sector, especially in the Western Balkans, access to credit is improving in a number of economies, including to SMEs. However, lending to small businesses remains subdued across large parts of the region. Bank lending is supported by government-sponsored financing or guarantee schemes and some economies have made efforts to improve their design in order to be more market and user friendly. Legal reforms have started or been implemented in a number of economies to lay the groundwork for the development of non-bank financing alternatives such as leasing and factoring. Few economies also explore venture capital and crowdfunding to allow for a wider range of funding sources.

Pierre Heilbronn, Vice President for Policy and Partnerships at the EBRD said: “Developing a dynamic and competitive SME sector has become even more of a priority for the region’s governments as they advance toward EU accession. The EBRD is committed to supporting this process with a mix of investments and engagement in policy reforms. Our record total investment of more than €1.1 billion in the Western Balkans last year spurs us to do even more in the following years together with our partners, in particular the EU.”

When opening the lauch of the SME Policy Index Katarína Mathernová (Deputy Director-General, European Commission) said: "The SME Policy Index provides valuable recommendations to policy makers of the region. The SMEs are the centre of the EU external policies as they are the backbone not only of the EU’s but also of our partners’ economies. To scale up and grow they need concrete advice on access to international financing and markets."

Although the small business sector is critical to these economies, its potential remains “largely untapped”, the report says: “SMEs are under-represented in international trade and their contribution to value added remains low as they have difficulties in moving or expanding into high-value added activities.”

The report makes the following recommendations:

• Enhancing regulatory conditions to improve SMEs competitiveness: Governments need to intensify their engagement with the private sector in cutting red tape and when developing new policies affecting SMEs

• Help SMEs further improve their productivity and to scale up: Credit guarantee schemes and greater use of alternative financial instruments would further enable SMEs to grow by facilitating their access to finance and inclusion into international value chains would open up new growth opportunities

• Expand regional co-operation over SME development: Given the size of the Western Balkan economies, better regional co-operation in providing certain resources – such as innovation and quality infrastructure – would be a cost-efficient way to help them scale up beyond their domestic capacities

• Systematic evaluation of support programmes: To guarantee efficiency and best use of public funds.

The SME Policy Index: Western Balkans and Turkey 2019 is a flagship publication, providing a comprehensive overview of the implementation of the ten principles of the Small Business Act for Europe (SBA) in the seven EU pre-accession economies over the period 2016-18. It monitors progress against similar assessments performed over the past decade, identifies challenges affecting SMEs in the region and makes recommendations to overcome them.

The SME Policy Index 2019 is the fifth edition in this series, following assessments in 2007, 2009, 2012 and 2016. It is the outcome of work conducted by the Organisation for Economic Co-operation and Development (OECD) and over 600 government officials and other stakeholders in seven pre-EU accession economies, in co-operation with the European Bank for Reconstruction and Development (EBRD), the European Training Foundation (ETF) and fully funded by the European Commission. The report is available here

The report was launched today during the Western Balkans Enterprise Development and Innovation Facility (WB EDIF) SME Forum at the 2019 EBRD Annual Meeting in Sarajevo. The Forum, hosted by the EBRD and co-ordinated by the European Commission and the European Investment Fund (EIF), brought together key stakeholders from the private and public sector to discuss the challenges and opportunities for SMEs in the Western Balkans to grow and develop. Two interactive panel sessions took place at the event—the first focused on discussing the results of the SME Policy Index 2019, the second focused on exploring experiences of small businesses on the ground.