SMALL AND MEDIUM SIZE BUSINESSES IN THE EUROPEAN UNION AND IN HUNGARY PROF. MIHÁLY LAKI INSTITUTE OF ECONOMICS HUNGARIAN ACADEMY OF SCIENCES October, Sofia „INNOVATION: ENGINE FOR ECONOMIC GROWTH” CONFERENCE

IMPORTANCE OF THE SME SECTOR Across the EU28 last year, some 21.6 million SMEs in the nonfinancial business sector employed 88.8 million people and generated €3,666 trillion in value added. Expressed another way, 99 out of every 100 businesses are SMEs, as are 2 in every 3 employees and 58 cents in every euro of value added. (Annual. 6)

PERFORMANCE

10 principles to guide the conception and implementation of policies both at EU and Member State level. I Create an environment in which entrepreneurs and family businesses can thrive and entrepreneurship is rewarded II Ensure that honest entrepreneurs who have faced bankruptcy quickly get a second chance III Design rules according to the “Think Small First” principle IV Make public administrations responsive to SMEs’ needs V Adapt public policy tools to SME needs: facilitate SMEs’ participation in public procurement and better use State Aid possibilities for SMEs VI Facilitate SMEs’ access to finance and develop a legal and business environment supportive to timely payments in commercial transactions VII Help SMEs to benefit more from the opportunities offered by the Single Market VIII Promote the upgrading of skills in SMEs and all forms of innovation IX Enable SMEs to turn environmental challenges into opportunities X Encourage and support SMEs to benefit from the growth of markets

What is to be done? – making smart regulation a reality for European SMEs, – paying specific attention to SMEs’ financing needs, – taking a broad-based approach to enhancing market access for SMEs, – helping SMEs to contribute to a resource-efficient economy, and – promoting entrepreneurship, job creation and inclusive growth. These actions will only make an impact if based on strong SME governance. ( COMMUNICATION…..)

Positive impacts - permanent monitoring (SMEs' Performance Review) - evaluation and ranking of the governmental efforts and policies - SME on the agenda: ideas advises references – permanent brainstorming

PROBLEMS OF EVALUATION lack of analysis of the coherence of the aims lack of feasibility studies (extent of the EU programs)

Structural analysis: the sector of SMEs is not homogeneous - size (performance differences) - branch structure (construction+manufacturing versus services) -export - innovation

Innovation and SMEs

EXPORT Involvement of SMEs in export activities still limited in EU28: o Share of exporting SMEs below 30% (for trade in goods) o Propensity to export grows with size of the firm o SMEs (particularly micro) are mostly located in sectors with low export intensity October, Sofia

Different business strategies - tax avoiding (contract based +empty businesses ) - singe issue - shop on the corner - subcontracting - growth and/or long term profit oriented

Policy implications?