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Policy Workshop on Entrepreneurship Indicators____________________________________

The SME Policy Index

Methodology, data requirements and results: The case of the Western Balkans Countries________________________________

Antonio FanelliDeputy Head – OECD Investment Compact

____________ Istanbul

27 June 2007

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• Background and objectives of the SME Policy Index

• Methodology and application process

• The case of the Western Balkans

• How can we improve policy targeting and impact measurements?

• Which SME statistics are most important for targeting and impact measurement?

Content

Content

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Introduction to the OECD Investment Compact for South East Europe

Programme active since 2000 Main objective: assist the countries of South East

Europe in attracting private direct investment Focus on FDI policy and SME Development Main activities: policy reviews, monitoring and

evaluation, policy advice and coaching Local partners: Ministry of Economy, Investment

Promotion Agencies, SME Development Agencies International partners: EC, EBRD, ETF, World Bank,

bilateral donors

Intro to the OECD-IC

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Regional Scope: Southeast Europe

Intro to the OECD-IC

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The OECD IC initiatives in the SME policy area

2001-2002 – SME Policy Reviews (Romania, fYR Macedonia), conducted by the OECD IC and the EBRD

2003-2006 – Enterprise Policy Performance Assessments (EPPAs).

Scope: all the SEE Stability Pact countries. Methodology: focus group interviews

In parallel: European Charter for Small Enterprise reporting, led by the EC (DG Enterprise and Industry)

2006-2009 – New unified process, based on the SME Policy Index only for the Western Balkans

OECD Initiatives

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The SME Policy Index

The Index is a tool to monitor SME policy development, from policy elaboration to policy implementation

It covers key policy dimensions related to SMEs, including the business environment, entrepreneurship and skill development, and innovation and technology

The Index is based on a scoring system, which is obtained by converting qualitative indicators into quantitative scores

The SME Policy Index

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The SME Policy Index

The Index was developed for the Western Balkans to support the

implementation of the European Charter for Small Enterprise (the

Charter), therefore it is based on the Charter framework, structured

around 10 policy dimensions

It has been designed by the OECD together with the European

Commission, the EBRD and the ETF and in consultation with the

Western Balkan SME policy Coordinators

The Index is part of a multi-year process of policy dialogue and

cooperation between the Western Balkan countries, the EC, the OECD

Investment Compact and the other institutions involved in the process

The objective is to provide a comparative, consistent and

independent evaluation of progress on policy implementation on the

policy dimensions included in the Charter, across the Western Balkans

The SME Policy Index

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Approach

The SME Policy Index Measures Support To Small Enterprises Along The 10 Dimensions Of The European Charter

SME Policy Index Dimensions

1. Education and training for entrepreneurship

2. Cheaper and faster start-up

3. Better legislation and regulation

4. Availability of skills

5. Improving online access

6. Getting more out of the single market

7. Taxation and financial matters

8. Strengthening the technological capacity of SMEs

9. Successful e-business models and top-class business support

10. Developing stronger, more effective representation of small enterprises

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SME policy cuts across a number of dimensions

The Charter 10 policy dimensions can be divided in three categories:

Dimensions related to the SME operational environment (Dimension 2,3,6,7 and 10);

Dimensions related to innovation and competitiveness (Dimension 5, 8 and 9);

Dimensions related to human capital development

(Dimension 1 and 4);

The country performance is assessed against those three categories

Approach

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2 Cheaper And Faster Start-up

Su

b-d

imen

sion

s

2.1Reduce Cost And Time For

Start-up Towards The World’s Most Competitive Standards

How long does it take to register an SME? How much does it cost? Silence is consent principle?

2.2

Increase On-line Access For Registration

Is there an on-line registration system in place?

Each dimension is broken down into main sub-dimensionsExample: Cheaper And Faster Start-up

Approach

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2 Cheaper And Faster Start-up

Su

b-d

ime

ns

ion

s

2.1 Reduce Cost And Time For Start-up Towards The World’s Most Competitive Standards

Ind

ica

tors

2.1.1 Number Of Days For Registration

How long does it take to register a SME?

2.1.2 Number Of Administrative Steps

For Registration

How many administrative steps are required for SME registration? Is there a one-stop-shop?

2.1.3 Costs Connected With Registration

What are registration costs as a percentage of GNI per capita?

2.1.4 Minimum Capital Requirements

What are minimum capital requirements as a percentage of GNI per capita?

2.1.5Administrative

Identification Numbers

Is there a unique identification number used in dealing with all standard functions of public administration?

Each sub-dimension is broken down into core indicators

Example: Reduce Cost And Time For Start-up Towards The World’s Most Competitive Standards

Approach

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Policy Development Steps

Approach

2.1 Reduce Cost and Time of Start-Up

Level 1 Level 2 Level 3 Level 4 Level 5

Ind

icators

2.1.1

Number of Days for Registration

Registration in more than 30 days.

Registration takes more than 15 days, but less than 30 days.

Registration takes more than 5 days, less than 15 days.

Registration takes less than 5 days, but more than 1 day

Registration in 1 day.

2.1.2

Number Of Administrative

Steps For Registration

Registration requires more than 10 administrative steps.

Registration requires 8-9 administrative steps.

Registration requires 5-7 administrative steps.

Registration requires 2-4 administrative steps.

One-stop-shop.

Meaning of levels 1 – 5:

• Level 1 & 2: Legislation is being drafted

• Level 3: Legislation adopted

• Level 4 & 5: Legislation is being implemented

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Dimensions Sub-dimensions Indicators

The ten policy dimensions are disaggregated into 28 sub-dimensions, which are composed of a specific set of analytical indicators; in total there are 56 analytical indicators

A simple weighting system is applied to sub-dimensions and indicators; weights range from 1 to 3 according to the importance assigned by experts and national co-ordinators

However, the ten dimensions are not combined in a single indicator and neither are they weighted

There is thus no one single index-score for the country performance

Approach

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

EC/ OECD CoreTeam

ETF and EBRD contributions

EC/OECD Experts

National Charter Co-ordinators

Private Sector

Local Consultants

KEY ACTORS:

EC/OECD Core Team leads project.

European Training Foundation (ETF) and European Bank for Reconstruction and Development (EBRD) provide inputs on their relevant Charter dimensions.

ETF: Dimensions 1 & 4 (Human Capital) EBRD: Dimension 7 (Finance)

The National Coordinator’s Team conduct a self-assessment based on the SME Policy Index.

An independent assessment is conducted with the support of a team of consultants led by an international consultancy company.

Process

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Gathering information for evaluation followed a specific process

Process

OECD/EC Evaluation

• Desk Research

• Partner Organisations: EBRD, ETF.

• Local Consultant Research: interviews with local experts, input from private sector organisations.

• Entrepreneur and Private Sector Perceptions: 2006 - use of EBRD and other data. 2007 - focus groups and surveys.

Government Self-evaluation

• Governments perform self-evaluations.

• Set priorities for the next period.

Bilateral Meetings

• Government, EC, OECD, experts, private sector and SME representatives conduct policy dialogue based on the OECD/EC evaluation, government self-evaluation and list of priorities.

• Finalisation of list of priorities.

Final• Synthesis of all inputs and final report

• Final Report launched in Dubrovnik on 27 March 2007

• April - June 2007: Dissemination of the report in the Western Balkans

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Dimension 2: Cheaper and faster start-up

Assessment Framework

Results 2007

Company Registration

Notification Compliance

No. of days to obtain company registration certificate

No. of steps to obtain company registration certificate

Official cost of obtaining company registratio n certificate

Administrative identification numbers

No. of days to obtain required identification numbers

Number of days to complete overall process

Number of steps to complete overall process

Application of silence is consent rule Total cost of overall process Minimum capital requirements On- line registration

Phase 1 Phase 2 Phase 3

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1

2

3

4

5

Alb

ania

Bos

nia

and

Her

zego

vina

Cro

atia

UN

MIK

/Kos

ovo

FY

R M

aced

onia

Mon

tene

gro

Ser

bia

Average

Dimension 2: Results

Results 2007

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Key Issues – Dimension 2

• Good overall progress on company registration

• First priority: systematically tackle issue of licences and permits

• Second priority: further improve the notification phase and move to one-stop-shop system

• In the medium term: develop electronic business registers

Results 2007

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Overall Conclusions

In terms of enterprise policy development and Charter implementation, the Western Balkans can be divided into three groups:

1. Legal institutional framework still under development, average score around 2: Albania, BiH, UNMIK/Kosovo

2. Legal institutional framework largely complete, beginning of implementation, score around 3: fYR Macedonia, Montenegro, Serbia

3. Implementation well advanced, score between 3 and 4: Croatia

Results 2007

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How can we improve policy targeting and impact measurements?

SME population is large, very diverse and its composition changes rapidly, even in the small Western Balkan countries

In a typical transition economy, the bulk of the SME population is made of micro enterprises, family based, slow growing, but they are still essential for e unemployment and poverty reduction

There are also a certain number of enterprises that are growing, are investing, are generating new employment and are important for the broadening the tax base, but they are operating in traditional sectors

There are finally a small number of fast growing and innovative enterprises

Policy targeting & impact measurements

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How can we improve policy targeting and impact measurements?

The first group is particularly sensitive to the general business environment

The second group to specific dimensions, such as access to finance, tax policy, labour policy

The last group will benefit from policy measures supporting innovation and skill development

Targeting and impact evaluation are at the core of SME policy

Policy targeting & impact measurements

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Which SME statistics are most important for targeting and impact measurement?

Ideally, a business register should keep track of key characteristics of registered companies throughout their life-cycle, as much as a civil register does for people

Dynamic company data combined with quantitative company surveys and qualitative focus group interviews are key tools for impact measuring

A reliable business register should be therefore be the source for:

– A wide range of data that can be aggregated whenever and however necessary

– Company surveys (i.e. full contact details, key information for sample selection and stratification)

SME stats

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Which SME statistics are most important for targeting and impact measurement?

SME statistics, at least in the Western Balkans, are generally of poor quality and incomplete, allowing for limited cross-country comparison

For targeting impact measurement, reliable aggregated statistics are necessary (e.g. employment, turnover, value added contribution per enterprise class and sector).

BUT: most important is a reliable and regularly updated business register

SME stats

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SME Policy Index: Next Steps

For the Western Balkan countries we are:– Improving the indicators of the SME Policy Index 2007– Understanding the process of policy targeting for a set of specific

dimensions (innovation and competitiveness)– Introducing more advanced tools for policy impact measurement – we

are exploring a combination of company surveys and focus group interviews to complement quantitative and qualitative information

Simultaneously we are exploring the application of an adapted version of the Index to other geographical areas (e.g. the Mediterranean/North Africa)

Next steps

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You can download the

SME Policy Index 2007: Report on the Implementation of the European Charter for Small Enterprises

from our website:

www.investmentcompact.org