OECD Investment Compact ENTERPRISE POLICY PERFORMANCE

1
OECD Investment Compact ENTERPRISE
POLICYPERFORMANCE
A REGIONAL ASSESSMENT
November 2005
2

• The SEE ENTERPRISE FORUM is a partnership of
  national organisations active in the field of
  enterprise policy and support of micro, small and
  medium sized enterprises, including the
  Ministries of Economy, the Enterprise and SME
  Development Agencies, private sector and other
  non-governmental organisations.
• The SEE Enterprise Forum is currently chaired by
  Albania.
• The SEE ENTERPRISE FORUM aims at promoting the
  exchange of experiences, dialogue and
  co-operation among the members of the SME policy
  community in South East Europe and in the OECD
  countries, through
• regular country policy assessments, such as the
  Enterprise Policy Performance Assessments
• peer reviews such as the recent reviews on
  company registration procedures in SEE and on
  enhancing private-public
• dialogue in Romania
• policy studies such as the Investment Compact
  report on the Informal Economy in Albania,
• workshops and seminars.

3
CONTENTS

• Context and Objectives of EPPAs
• EPPA Structure and Process
• Key lessons learned and main policy
  recommendations at regional level
• Next steps for EPPAs in 2006
• Contacts

4
Context

• The Enterprise Policy Performance Assessments
  (EPPAs) were launched in 2002 by the OECD
  Investment Compact and the EBRD
• Following the signature by SEE countries of the
  European Charter for Small Business, the European
  Commission (DG Enterprise) joined the OECD-EBRD
  team in 2003
• Ten EPPA reports (one for each SEE country plus a
  regional report) were published in 2003
• The second series of EPPAs has been published in
  2004/2005

Objectives of EPPAs

• Synthesize the private sector perspective on
  national government policies to improve the
  business environment for local enterprises
• Produce an independent and comprehensive
  assessment on an annual basis of the enterprise
  policies carried out in each of the SEE countries
• Promote exchange of experiences and cross country
  policy evaluation among the SEE countries

5
EPPA Structure and Process
Evaluation process

• Framework for analysis
• Institutional framework for SME policy
• Rule of law and regulatory environment
• Tax policy for small businesses
• Financial instruments for new and small
  businesses
• Advisory services for new and small businesses
• Business incubators
• Entrepreneurship, education and access to
  technology

1. First level measurementDesk research,
secondary sources
2. Second level measurementLocal consultants
with primary dataFocus groups
3. Tripartite debateInvolving government,
OECD/EC/EBRD and private sector
4. Presentation of results
5 Publication of annual report with inputs from
private sector
6
Key lessons learned and main policy
recommendations
Institutional framework

• Centralise policy elaboration in single body at
  ministerial level and co-ordinate policy with
  other ministries
• Co-ordinate and monitor implementation with SME
  Agency or equivalent
• Ensure effective co-ordination between national
  level (Ministry, SME Agency) and local level
  (regional development agencies, chambers of
  commerce, NGOs)
• Consult with business sector at all stages of the
  process

based on variation of EPPA average rating for
Institutional Framework
7
Regulatory environment

• Introduce Regulatory Impact Assessment (RIA)
  (e.g. Bulgaria and Romania)
• Before introducing new regulatory measures, a
  detailed economic analysis and an assessment of
  its likely impact on SMEs should be carried out
• New licenses or permits should be introduced only
  if the benefits significantly outweigh the costs
  of the measure
• Efforts have been made to reduce administrative
  barriers (e.g. Guillotine law in Moldova and
  Bulldozer Initiative in Bosnia and Herzegovina)
  however, business simplification should be an
  on-going process rather than a one-time exercise
• Progress has been made on registration across SEE
  countries (reduction of administrative steps and
  costs e.g. Montenegro and more recently Serbia,
  Bulgaria and Croatia). The final target now
  should be the implementation of a real
  one-stop-shop, one day, on-line procedure within
  the context of an on-line enterprise database
• Outside of registration, strong action is still
  needed on the simplification of the procedures
  for obtaining licenses, permits and certificates
• Licenses and permits should be limited to those
  needed on health and safety hazards, building
  permits or consumer protection
• Introduce the principle silence is consent
  (e.g. Bulgaria and Romania)
• One-stop-shop

8
Tax policy for small business

• The administration of tax policy is as important
  as tax rates
• The tax system should be
• simple the number of taxes should be limited,
  and a simplified single declaration for SMEs
  should be seriously considered
• transparent SMEs should be consulted well in
  advance of changes in the taxes
• efficient enterprises should be able to file
  their tax returns on-line
• Effects on cash flow are particularly important
  VAT refunds should be reimbursed with minimum
  delays (max. 1 month see e.g. Croatia and
  Bulgaria) and intra-tax reconciliation should be
  allowed
• Equally important are inspections detailed
  guidelines for inspections need to be strictly
  adhered to, and fixing a maximum number of
  inspections should be seriously considered

9
Perceptions of Tax Framework
10
Financial instruments for small business

• Significant progress has been made in reforming
  the banking sector throughout the region, but in
  all SEE countries SMEs face difficulties in
  getting access to credit
• The priority for the governments should be to
  approve and implement the legal framework needed
  to move from a system based on cash and personal
  capital to a system based on bank intermediation
  and lending.
• Important instruments to shift to a system of
  bank intermediation and lending include
• Land registration
• Law on collateral
• Law on mortgages
• Law on bankruptcy
• Law on the protection of creditors rights
• (see recent reforms in Bulgaria and Romania)
• Many initiatives have been planned in the area of
  credit guarantee schemes mutual credit guarantee
  schemes have proven to be effective and should be
  encouraged. However, they must be combined with
  sound advisory services to exploit their full
  potential

11
Perceptions of Access to Finance
12
Business advisory services

• Most countries in SEE have introduced some form
  of general business advisory services. However,
  there is an increasing need for more specific
  support
• The range and value added of business services
  provided by the administration should be
  improved. For example, by providing advisory
  services on
• Business planning/feasibility studies
• Export markets
• Access to finance
• Quality standards
• High value added specific services can be
  improved through public-private partnership. For
  example
• As a complement to government advisory services,
  a system of vouchers giving access to consulting
  services from the private sector can be very
  effective (e.g. Macedonia, Croatia)
• Governments should co-operate with the private
  sector to establish quality standards and a
  system of certification for business services
  (e.g. Macedonia)

13
Perceptions of Business advisory services
14
Business incubators

• The objective of business incubators is to foster
  the creation of new companies in innovative
  sectors
• However, in many SEE countries incubators are
  still limited in number and resources, and they
  are more focused on employment creation rather
  than on innovation
• The services offered in incubators should be
  extended beyond physical infrastructure towards
  high value added services. As with business
  advisory services, examples include
• Business planning / feasibility studies
• Marketing
• Access to finance
• Quality standards
• Mentoring/ business angels
• In moving towards a knowledge-based economy,
  incubators should be linked with universities,
  research institutions and innovative sectors in
  order to become an engine for growth and
  productivity

15
Entrepreneurship, education and access to
technology

• Education curricula, especially at secondary and
  tertiary level, need to be reformed in order to
• Embed entrepreneurial behaviour and practical
  skills in class activities
• Include (small) business management education
• Give individuals the skills they need to perform
  in a dynamic market-based economy (i.e.
  adaptability, higher level analytical skills)
• Vocational training needs to be constantly
  monitored in order to ensure an adequate supply
  of the skills most needed by SMEs. Useful tools
  in improving vocational training are
• Greater private sector involvement in the
  definition and the operation of the courses
• Systematic linkages between local enterprises and
  training institutions (e.g. traineeships,
  workshops, joint projects)
• A great emphasis should be placed in helping SMEs
  updating their technologies. Governments should
• Promote technological co-operation between SMEs
• Support in-house training
• Consider using targeted incentives for
  investments in new technologies

16
Next steps for EPPAs in 2006

• Further adapt the EPPA framework around the
  European Charter for Small Enterprises and
  co-operate with the EC Commission in order to
  maximise the impact of the EPPA process (Belgrade
  Declaration of October 2005)
• Create an analytical index to monitor progress of
  implementation of reforms in the SME sector. The
  index would allow for an independent and fully
  comparable evaluation of government policies
• The index will be used to provide targeted
  support on key policy issues through workshops,
  peer reviews and policy reviews
• A first workshop on start-ups will be organised
  in late January / early February 2006 in
  collaboration with the Stability Pact, LEED and
  ETF

17
Contacts
Antonio Fanelli Deputy Head of SEE Investment
Compact 2, rue André Pascal 75775 Paris Cedex 16
- France tel [phone] fax[phone]
93 35 antonio.fanelli_at_oecd.org
Anthony O'Sullivan Head of SEE Investment
Compact 2, rue André Pascal 75775 Paris Cedex 16
- France tel [phone] fax[phone]
93 35 anthony.osullivan_at_oecd.org