The European Economic Development Society

suggests a new dimension in the debate on improving EU SMEs performance

We want to focus EU leadership attention on EU SUPPORT SYSTEM FOR SMEs

SBAct, Brussels Instructions, annual reviews, Envoys, EEN ARE THEY ENOUGH for the European SMEs to make the dramatic improvement needed ?

The Global Framework

 Europe is facing the consequences of a reassessment of global balances.  The emergence of new powers is preventing the EU from recovering its traditional influence.  Challenges are also pressing from within: the ongoing gap of competitiveness among member states.

Addressing the challenge

 Rebound passes through the complete recovery of Southern economies dramatically hit by the crisis.  EU policy makers need to rethink the economic system through greater coordination and strategic management.  Small and medium enterprises are the backbone of our economy, a fundamental source of jobs and growth.

Just one example… RISK ? OPPORTUNITY?

Europe is racing with unusual speed towards Free Trade Agreement with the US This Is not about lowering tarrifs and fees This is much more about building SINGLE TRANSATLANTIC MARKET Reason: reflecting the new trends in global economy

However… This will affect directly the EU SMEs  SMEs account for the 99,8% of the EU non-financial enterprises, that is 20,7 million.  SMEs provided an estimated 67,4% of jobs in the non- financial business in  SMEs in the EU employed 4,22 people in 2012 (4,34 in 2005).  SMEs have provided 2/3 of the total private employment and around 80% of new jobs created over the past 6 years

ARE THE EUROPEAN SMEs READY TO TAKE THE PRESSURE? ESPECIALLY THE LESS COMPETITIVE SOUTH?

SOME FACTS AND TRENDS  Productivity – EU vs US Comparable only Noth EU vs US avarage  Cost of energy – EU vs US Power costs are now up to 40% lower in the US than in Europe  Cost of money US: Interest rate limited for SME ; Bank Guarantee provided by US Small Busness Administration EU: bank guarantee not provided; interest rate too high  Average time for SMEs to grow – EU vs US US – 7 years – 60% vs. EU – 7 years –10-20%  System supportung SMEs growth US – unified, well structured,well funded EU – different for each country, not well structured, underfunded, fragmented

Just couple of lines for comparing support… How the US Small Business Administration (SBA) supports the SME in access to capital? SBA does not provide grants neither direct loans SBA provides loans guarantee: 1. Borrower applies for a SBA loan to Lender (Bank..) must be small, for profit, legal, success oriented, able to repay  interest rate limit: 2,25%-4,75% 2. Lender has to approve loan subject to SBA guarantee up to 85% or 75% guarantee, loan limit of $1,500, Lender submits guarantee request to SBA SBA charges the lender a fee of 2%-3,5% 1. Borrower repays the loan: working capital - 5 years, franchises - 10 years, machinery equipment - useful life, real estate - 25 year

if we put our SMEs in direct competition by building Trans-atlantic Single Market, We should compare the SME Support Systems both sides

EU Small Business Act vs US Small Business Administration

HOW THE US SMEs SUPPORT SYSTEM LOOKS LIKE?

Small Business Administration Mission Created more than 50 years ago, nationwide network of partners helps millions of potential and current small business owners  To start, grow and succeed  To compete effectively in the marketplace  To strengthen the overall U.S. economy. SBA offers help in the following areas:  Counseling  Capital  Contracting  Disaster Assistance  Advocacy and the Ombudsman All SBA programs and services are provided on a nondiscriminatory basis

SBA Key Activities Adjudication  Office of Hearings and Appeals (OHA) Office of Hearings and Appeals (OHA) Working On SMEs Behalf  Advocacy Advocacy  Ombudsman Ombudsman  Inspector General Inspector General  SBA Programs SBA Programs

SBA Structure Headquarters offices – Washington DC SBA Regional Offices SBA District Offices – 73 (minimum 1 office per state)) Disaster Center Offices – 7 Local Partners standardized local service delivery points half – funded by Federal Budget; half-funded by regional § Local governments. Click on the link, insert a zip code and review the opportunities which any US SME enjoys for free, or symbolic payment

SBA Partners Local Partners (900 local service delivery points) SBA works with a number of local partners to counsel, mentor, and train small businesses W20 Group Cooperation SBA § W20 Group

SBA Programs

Local Partners (900 local service delivery points) SBA works with a number of local partners to counsel, mentor, and train small businesses Click on a state and see what kind of services US SMEs enjoy

 US SBA agency provides grants to support counseling partners serving as the SBDCs.  There are 900 service delivery points throughout the U.S. mostly hosted by universities, these centers employ around 5000 people.  These centers provide no cost professional business advising, low-cost training, and other specialized services.  2011 SBDCs budget was around $230 million, $107.5 million came from SBA, the rest came from state and local governments, institutions of higher learning, private enterprises and local nonprofit economic development organizations.  SBDC avarge annual budget – apx USD  SBDC avarage number of staff – apx 5 people

Comparing with the EU SMEs Support System

The EU equivalent: European Enterprise Network

Studying the US Small Business Administration we detected 6 types of services which each Business Development Center delivers free of charge.  Start up business assessment  Weekly and monthly training  One-on-one counseling on buisness management  One-on-one counseling on access to capital  Mentoring  One-on-one counseling on procurement We launched DIAGNOSTIC SURVEY In number of EU countries in order to compare the access of EU SMEs to these services at local level Countries: Bulgaria, Romania, Malta, Cyprus, Italy, Spain, Poland, Hungary Netherlands, England, Sweden Most of the respondents were EEN members

SURVEY SUMMARY

Findings  Overall, the services delivered on local level in the EU countries subject of the survey reach 50% as a most compared to the level of delivery in the US.  Government spending cuts are affecting the delivery, especially at a local level.  Regional and local delivery is what the SMEs demand.  In Bulgaria § Romania: no strategy, no public support, no infrastructure for this matter.

 There are significant disparities in the delivery in different countries  Start-up Assessment and Capital is the most common service delivered, while Mentoring and Procurement are the least frequent.  There is a need for an EU integrated strategy for creating unified, well funded, well structured system for SMEs support on local level

The European Economic development Society suggests European Working Group on SMEs Support System Optimization

Goals  Research the current state of the EU SME Support System (SBA implementation Review)  Research the current state of the global EU competitors’ SME Support System  Build a Concept for optimization/reformation of EU System for SME Support  Elaborate project proposal for Centralized EU Project aimed on: Building unified European System of Certified Local Business Development Centres

Thank you for your attention! EEDS Project Team Nadya Gabriel – Team Leader Giulia Tagliavini – Regional Coordinator for South Europe Francesco Sanua – Regional Coordinator for East § Central Europe Marti Puigbo – Regional Coordinator for North Europe Laura Cantador – Regional Coordinator for North West Europe Contact: Phone: