SME Survey in Mongolia - First Results The Mongolian SMED SME Survey

Mongolia SME Observatory Results During the course of 2014, the SME Department of the Ministry of Labor (now the SME Policy Implementation and Coordination Department of the Ministry of Industry) undertook its first independent and country-wide survey of SMEs as part of the process of developing its own capacity. This action was supported by an EU-funded project managed and directed by the European Bank for Reconstruction and Development (EBRD). This presentation sets out the processes adopted by the SME Department for the survey, which is a key element of an SME Observatory, that will be created over the period to 2016.

Mongolia SME Observatory Results The objectives of this survey, which may be repeated in 2015 and 2016, were as follows: To provide an evidence base which can be used for the development of policy and specifically for SME development programs covering a medium- term framework (three years); To provide an evidence base for service providers to the SME sector, so that demand for services can be ascertained; To provide a channel through which SMEs can inform state agencies what particular problems they are experiencing in fields such as start-up finance, workspace and so on, but in a forward-looking manner, not just describing the current situation.

Mongolia SME Observatory Results As the survey sought to meet its objectives, it therefore differs in some ways from a standard statistical/data oriented approach: 1.SMEs were not only asked what their current situation is, but what they had done in the past (e.g. how they registered, how they found their seed capital and so on); 2.SMEs were also asked to assess what their future actions might be (for example, will they employ more labor, will they need more of certain types of business advisory services and so on); 3. SMEs were also asked to give their views on trends, such as whether they are experiencing changes in the competitive environment, will they invest more in innovation and so on. The concentration on current and future trends follows the model of policy-based surveys in EU observatories and is designed to take into account that fact that government private sector require time to design, fund and implement measures of value to SMEs in Mongolia. These trends should be tracked in further surveys in 2015 and 2016.

Mongolia SME Observatory Results The first task was the design of the questionnaire. This was undertaken on the following basis: A variation of the model EU Observatory questionnaire was used as the starting point; This standard model was adapted during the course of four round tables attended by key stakeholders. These stakeholders included the SME Department, Capital City, National Statistical Office, Chamber of Commerce and some representatives of the aimags; The questionnaire was polished further as a result of test runs at local level. Overall, the questionnaire was designed and reviewed from March to August A number of items proposed by stakeholders were not adopted, in part because the objective was to be as specific as possible without asking SMEs to commit too much time to this first exercise. There was also a need to avoid duplication where there is already data from other sources, such as that held by the NSO

Mongolia SME Observatory Results As previously stated, the questionnaire was subject to a process of refinement based on trial exercises. These were as follows: In April 2015 the questionnaires were used to interview a focus group of 6 SMEs to determine whether there were any issues of interpretation and how long each interval was likely to take. This indicated that each interview would take up to 40 minutes and that certain terms, unfamiliar to the focus group, would require particular attention when designing the explanatory notes and user manual; In May-June 2015 one district of UB and one aimag were used for the next test, in which 60 SMEs were interviewed: this led to further modification of the questionnaire and also identified areas for additional explanatory support; In July 2015 all 30 UB districts and aimags conducted 6-10 test interviews as practice for the interviewers: in total, over 250 SMEs were interviewed. Although this exercise was not designed to provide policy inputs, some of the results were considered when designing the SME Development Program. For the Observatory, they allowed us to test the system across the country and make any final adjustments before the main survey activities. It should be noted that the SME Department, supported by EBRD, provided extensive training throughout the above process and that this was attended by representatives of all UB districts and aimags. In total, over 90 staff attended these training events and this usually resulted in the creation of a core team of 2+1 for the survey in each of them. However, is some cases, 4-5 local staff were engaged in the survey.

Mongolia SME Observatory Results This was the first such exercise and one of the key issues was the sampling approach. A number of problems had to be considered in this area: Participation in the survey interviews on the part of the SMEs was voluntary, so the target sample at local level had to be fairly flexible. Districts and aimags were given an overall number of SMEs to interview and an indication of the sectors that the participants should ideally be from, based on National Statistics Office data. The voluntary nature of participation is also important for interpretation: if a survey question was not answered, this may not have been an error, but a matter of choice by the SME and some questions were clearly not very popular, such as registration and taxation; The survey had to allow for interviewing unregistered businesses and those not registered for tax: a key policy objective is to encourage such businesses to move into the formal sector. An easier sampling base would be the business register, but this would automatically exclude a proportion (probably substantial) of entrepreneurs; Not all SMEs are easily accessible in a country with a scattered population like Mongolia, so there was a certain concentration on aimag centers and adjacent urban areas. However, in some aimags SME Department local staff interviewed outlying SMEs: for the next survey, we need to see how to spread the coverage geographically within time and budget constraints; The total numbers to be interviewed at local level were allocated on a basis that could not be strictly representative of the whole SME population. This is because the number of registered SMEs differs between districts/aimags so sharply. So for this survey, territories were grouped by size (number of registered SMEs) and a standard number of interviews was stipulated for each territory depending upon into which group it fell. For 2015, this will need reviewing, but one of the key constraints is the number of staff available to conduct interviews in each district/aimag: this effectively placed a ceiling of 80 interviews for the larger aimags/UB districts.

Mongolia SME Observatory Results The first full survey was conducted in September 2015, with a total of 1511 interviews across the 30 UB Districts and aimags: the results are set out in summary in each of the nine presentations covering a specific subject area. September was chosen as the best time for each survey based on the average business cycle for most SMEs: it also dovetails with the planning and budget process for the subsequent calendar year, allowing for policy to be updated or modified as needed. Obviously, different sectors have different cycles, but there are consistency issues if we were to collect data from different sectors at different times. At present, similar surveys are planned for 2015 and There will be some design modifications, but the overall approach will be geared to maintaining comparability between surveys as far as possible, with any additional questionnaire items forming supplements to the existing model wherever possible.