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

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.

WITH THE FINANCIAL SUPPORT OF THE EUROPEAN UNION 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].

WITH THE FINANCIAL SUPPORT OF THE EUROPEAN UNION 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

WITH THE FINANCIAL SUPPORT OF THE EUROPEAN UNION 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 schemesCadastreFinancial literacy Public start-up fundingCredit information services Business Angels networkRegistration 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

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

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 RegionalGlobal Geographical Coverage

Strengths and Limitations of the SME Policy Index IC Core Team StrengthsLimitations 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.

WITH THE FINANCIAL SUPPORT OF THE EUROPEAN UNION 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.

WITH THE FINANCIAL SUPPORT OF THE EUROPEAN UNION 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

WITH THE FINANCIAL SUPPORT OF THE EUROPEAN UNION 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 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.

WITH THE FINANCIAL SUPPORT OF THE EUROPEAN UNION Example of Output (II): progress in scoring between 2007 and 2009 regional reports

WITH THE FINANCIAL SUPPORT OF THE EUROPEAN UNION Example of Output (III): scores for individual dimensions in Serbia’s 2009 assessment Score

WITH THE FINANCIAL SUPPORT OF THE EUROPEAN UNION 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

WITH THE FINANCIAL SUPPORT OF THE EUROPEAN UNION 15 SME Company Survey Results for Serbia

WITH THE FINANCIAL SUPPORT OF THE EUROPEAN UNION I. General Information – Serbia 16 Results based on a sample of 70 companies.

WITH THE FINANCIAL SUPPORT OF THE EUROPEAN UNION I. General Information – Serbia 17 Results based on a sample of 70 companies.

WITH THE FINANCIAL SUPPORT OF THE EUROPEAN UNION I. General Information – Serbia 18 Results based on a sample of 70 companies. Average Years in Operation Average Number of Employees Head Office and Location of Operations Ownership Structure Position of Interviewee 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%

WITH THE FINANCIAL SUPPORT OF THE EUROPEAN UNION II. Operational Environment 19 Serbia Average Company Turnover 2010 Average Investment Average Forecast Investment ,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%

WITH THE FINANCIAL SUPPORT OF THE EUROPEAN UNION II. Operational Environment – In Comparison 20

WITH THE FINANCIAL SUPPORT OF THE EUROPEAN UNION II. Operational Environment – In Comparison 21

WITH THE FINANCIAL SUPPORT OF THE EUROPEAN UNION II. Operational Environment – In Comparison 22

WITH THE FINANCIAL SUPPORT OF THE EUROPEAN UNION II. Operational Environment – In Comparison 23

WITH THE FINANCIAL SUPPORT OF THE EUROPEAN UNION II. Operational Environment – In Comparison 24

WITH THE FINANCIAL SUPPORT OF THE EUROPEAN UNION 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

WITH THE FINANCIAL SUPPORT OF THE EUROPEAN UNION III. Perception of Government Policy 26 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

WITH THE FINANCIAL SUPPORT OF THE EUROPEAN UNION III. Perception of Government Policy 27 Serbia: Perceived Performance of Government Policies for SMEs Very PoorFairExcellentGood Very PoorFairExcellentGood

WITH THE FINANCIAL SUPPORT OF THE EUROPEAN UNION III. Perception of Government Policy 28 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 PolicyPriority Improvement