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					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
                                                1
                                                       Content




                     Content


• 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?

                                                   2
                                                        Intro to the OECD-IC




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 with focus on FDI
    policy and SME Development

   Main activities: policy reviews, monitoring and evaluation,
    policy advice and coaching

                                                                3
                                   Intro to the OECD-IC



Regional Scope: Southeast Europe




                                           4
                                                             The SME Policy Index




                  The SME Policy Index

   The Index is a tool to monitor SME policy development, from policy
    elaboration to policy implementation

   It is based on a scoring system, which is obtained by converting
    qualitative indicators into quantitative scores

   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

                                                                      5
                                                         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
                                                     6
                                                          Approach




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
                                                      7
                                                                                                   Approach



          Each dimension is broken down into main sub-dimensions
                  Example: Cheaper And Faster Start-up

    2 Cheaper And Faster Start-up
                 2.1
                        Reduce Cost And Time For      How long does it take to register an SME?
                       Start-up Towards The World’s   How much does it cost? Silence is
Sub-dimensions




                       Most Competitive Standards     consent principle?
                 2.2

                       Increase On-line Access For    Is there an on-line registration system in
                              Registration            place?




                                                                                              8
                                                                                                                  Approach

                 Each sub-dimension is broken down into core indicators
Example: Reduce Cost And Time For Start-up Towards The
          World’s Most Competitive Standards
    2             Cheaper And Faster Start-up
                  2.1          Reduce Cost And Time For Start-up Towards The World’s Most Competitive
                               Standards
                               2.1.1    Number Of Days For      How long does it take to register a SME?
                                           Registration
Sub-dimensions




                               2.1.2       Number Of            How many administrative steps are required for
                                       Administrative Steps     SME registration? Is there a one-stop-shop?
                                         For Registration
                  Indicators




                               2.1.3   Costs Connected With     What are registration costs as a percentage of
                                           Registration         GNI per capita?
                               2.1.4     Minimum Capital        What are minimum capital requirements as a
                                          Requirements          percentage of GNI per capita?
                               2.1.5                            Is there a unique identification number used in
                                           Administrative
                                                                dealing with all standard functions of public
                                       Identification Numbers
                                                                administration?


                                                                                                             9
                                                                                                                                                            Approach



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



                    2.1.1                                   Registration takes more    Registration takes more    Registration takes less
                                    Registration in more
               Number of Days for                           than 15 days, but less     than 5 days, less than     than 5 days, but more      Registration in 1 day.
                                    than 30 days.
                 Registration                               than 30 days.              15 days.                   than 1 day
Indicators




                     2.1.2
                  Number Of
                                    Registration requires
                 Administrative                             Registration requires 8-   Registration requires 5-   Registration requires 2-
                                    more than 10                                                                                             One-stop-shop.
                   Steps For                                9 administrative steps.    7 administrative steps.    4 administrative steps.
                                    administrative steps.
                  Registration




               Meaning of levels 1 – 5:
               • Level 1 & 2: Legislation is being drafted
               • Level 3: Legislation adopted
               • Level 4 & 5: Legislation is being implemented
                                                                                                                                                       10
                                                                     Approach




    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

                                                                11
                                                                                           Process


The SME Policy Index is organised to involve all key
 stakeholders in the evaluation and input process
                                                 KEY ACTORS:

                                                    EC/OECD Core Team leads project.

              National Charter                      European Training Foundation (ETF) and
               Co-ordinators                         European Bank for Reconstruction and
                                                     Development (EBRD) provide inputs on their
                                                     relevant Charter dimensions.
                                                    ETF: Dimensions 1 & 4 (Human Capital)
                                                    EBRD: Dimension 7 (Finance)
                    EC/
                    OECD
                                                    The National Coordinator’s Team conduct
                    Core
                                                     a self-assessment based on the SME
                    Team
  Private Sector                 ETF and EBRD        Policy Index.

    Local                        contributions
                                                    An independent assessment is conducted
  Consultants                EC/OECD Experts         with the support of a team of consultants
                                                     led by an international consultancy
                                                     company.


                                                                                      12
                                                                                                      Results 2007



         Dimension 2: Cheaper and faster start-up

                             Assessment Framework

          Phase 1                               Phase 2                           Phase 3
       Company                                 Notification                    Compliance
       Registration
 No. of days to obtain company         Administrative identification     Number of days to complete overall
           registration certificate              numbers                             process
 No. of steps to obtain company        No. of days to obtain required    Number of steps to complete overall
           registration certificate              identification numbers              process
 Official cost of obtaining company                                       Application of silence is consent rule
           registratio n certificate                                       Total cost of overall process
                                                                           Minimum capital requirements
                                                                           On-line registra tion




                                                                                                       13
                      1
                          2
                                        3
                                            4
                                                5
            Albania




        Bosnia and
        Herzegovina




            Croatia




     UNMIK/Kosovo




     FYR Macedonia
                                                    Dimension 2: Results




        Montenegro




             Serbia
14
                              Average
                                                                           Results 2007
                                                                      Results 2007




               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




                                                                      15
                                                                          Results 2007




                   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

                                                                          16
                                                              Policy targeting & impact measurements

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:
     Type of SME                                Policy Implication

         Micro enterprises, family                       Particularly
           based, slow growing                          sensitive to
         (Bulk of SME population in                       business
           transition economies)                        environment

          Growing enterprises in                     Part. sensitive to
            traditional sectors                         specific dimensions,
        investing, generating new em-                  e.g. finance, tax &
       ployment, important for tax base                labour policy

                                                    Benefit from policy
       Fast growing and innovative                      measures supporting
               enterprises                               innovation and
                                                     skill development

    Targeting and impact evaluation are at the core of SME policy
                                                             17
                                                                    SME stats



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)
                                                                   18
                                                                    SME stats




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


                                                                  19
                                                                    Next steps




               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)
                                                                   20
                 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




                                                  21

				
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