1. 1 Policy Workshop on Entrepreneurship Indicators ____________________________________ The SME Policy Index Methodology, data requirements and results: The case of the Western Balkans Countries ________________________________ Antonio Fanelli Deputy Head – OECD Investment Compact ____________ Istanbul 27 June 2007

2. 2 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

3. 3 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

4. 4 Regional Scope: Southeast Europe Intro to the OECD-IC

5. 5 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

6. 6 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

7. 7 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

8. 8 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

9. 9 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

10. 10 2 Cheaper And Faster Start-up Sub-dimensions 2.1 Reduce 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-dimensions Example: Cheaper And Faster Start-up Approach

11. 11 2Cheaper And Faster Start-up Sub-dimensions 2.1 Reduce Cost And Time For Start-up Towards The World’s Most Competitive Standards Indicators 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? 2.1.5 Administrative 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

12. 12 Policy Development Steps Approach 2.1 Reduce Cost and Time of Start-Up Level 1Level 2Level 3Level 4Level 5 Indicators 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

13. 13 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

14. 14 The SME Policy Index is organised to involve all key stakeholders in the evaluation and input process EC/ OECD Core Team 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

15. 15 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

16. 16 Dimension 2: Cheaper and faster start-up Assessment Framework Results 2007 Company Registration Notification Compliance  No. ofdays to obtain company registration certificate  No. ofsteps to obtain company registration certificate  Official cost of obtaining company registration certificate  Administrative identification numbers  No. ofdays to obtain required identification numbers  Number ofdays to complete overall process  Number ofsteps to complete overall process  Application of silence is consent rule  Total cost of overall process  Minimum capital requirements  On-line registration Phase 1 Phase2 3

17. 17 Average Dimension 2: Results Results 2007

18. 18 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

19. 19 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

20. 20 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

21. 21 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

22. 22 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

23. 23 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

24. 24 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

25. 25 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