Preface

Small and medium enterprises (SMEs) are a source of jobs and growth. They also have a role to play in the diversification of output, export and employment, and are a vital source of entrepreneurial human capital. This is particularly important at a time when the countries of Eastern Europe and the South Caucasus strive to make their economies more inclusive and more resilient to shocks. SME development has therefore been central to co-operation within the framework of the Eastern Partnership (EaP), a joint initiative of the European Union and six neighbours – Armenia, Azerbaijan, Belarus, Georgia, the Republic of Moldova and Ukraine.

Today, SMEs generate about half of total business-sector value added in the EaP region, and they account for slightly more than half of total business-sector employment. Their innovation potential and ability to adapt to fast-changing market conditions makes them an increasingly important source of entrepreneurial dynamism.

Since 2012, the SME Policy Index for Eastern Partner countries has been an important source of support for policymakers in the region and for their external partners seeking to design and deliver better SME-support policies. Structured around the ten principles of the Small Business Act (SBA) for Europe, the Index is a unique benchmarking tool designed by the OECD, the EBRD, the European Training Foundation and the European Commission to assess countries’ institutions and SME policies against EU and international best practices.

The report ‘SME Policy Index: Eastern Partner Countries 2020’ marks the third SBA assessment for the EaP region on the basis of the Index. It provides a comprehensive overview of SME policies in the region organised around the SBA principles, and it monitors the progress made since 2016. Across the region, governments have worked to promote better strategies for SME development and to build institutions that can help translate those strategies into action and deliver tangible results. Many recommendations provided in the 2016 assessment have been implemented; particularly those focusing on regulatory policies, institutional frameworks and measures supporting entrepreneurial skills and mindset of women and men.

However, important challenges remain. While the situation varies from country to country, a few broad trends stand out. First, a more demand-driven, collaborative approach to designing support programmes could help ensure a better fit between public action and SME needs. Second, stronger monitoring and evaluation systems, underpinned by well-designed key performance indicators, would enable governments to capture the impact of policies on firms, as well as use public resources more efficiently and adapt and adjust SME policies on the basis of better evidence. Finally, level playing field conditions are critical to the success of any effort to promote entrepreneurship and small firm growth. EaP countries still have much to do to fight corruption and to ensure business integrity, competitive neutrality and equal access to inputs and markets for all firms, regardless of size or ownership. The current report thus includes an assessment of three dimensions of the business environment that transcend the traditional concerns of SME policy: competition, contract enforcement and business integrity. This provides a basis for identifying structural reform priorities that will create a better business environment for firms of all sizes.

We commend the efforts of the Eastern Partner countries to foster private sector development through better SME policies, as well as better implementation of those policies, and look forward to continuing our work with them to deliver better opportunities for firms and citizens across the region.

Angel Gurría

Secretary General,OECD

Olivér Várhelyi

EU Commissioner for Neighbourhood and Enlargement Negotiations

Suma Chakrabarti

President, European Bank for Reconstruction and Development

Cesare Onestini

Director, European Training Foundation