Chapter 1. The foundations of SME policy: definitions, statistics, and institutions
This chapter analyses the main reforms undertaken by MED economies since 2014 in terms of the building blocks of SME policy: the adoption of official definitions of micro, small and medium-sized enterprises; the collection and dissemination of business statistics; and the establishment of effective institutional co-ordination and public-private dialogue mechanisms.
Overall, the assessment finds that MED economies are stepping up their efforts in these areas. Nevertheless, more could be done to:
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Adopt official SME definitions that combine various criteria – notably employment, turnover and balance sheet considerations. Doing so would help to better reflect the diverse nature of SMEs operating in different sectors and with different levels of productivity. SME definitions could also have a clear legal or official status – reflected, for example, in SME laws and bills.
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Collect SME data from administrative sources of information (such as business registries, tax administrations, social security administrations) and also from business associations. Apart from reducing the administrative burden on enterprises, this could help to cut data collection costs and increase the availability of statistics.
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Strengthen co-ordination among SME policy actors (public and private), including at the high level (e.g. ministerial), technical level (e.g. agency) and sub-national level. Such co-ordination could be guided by the implementation of multiannual SME and entrepreneurship strategies and the designation of a specialised secretariat (e.g. a SME agency or unit) to execute the strategy.
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Establish public-private dialogue platforms that are representative of the various types of SMEs and entrepreneurs operating throughout each country and in different economic activities.
The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.
The promotion of entrepreneurship and SME growth is a complex endeavour given the number of policy levers and actors on the one hand, and the diversity of firms on the other. SME performance is determined by a wide range of policy dimensions, including horizontal (e.g. infrastructure, public governance, quality of legal framework) and targeted factors (e.g. credit guarantee schemes for women and young people, grants for R&D activities in SMEs). Therefore, in order to be effective, an SME policy requires a well-structured institutional framework and strong mechanisms of policy co-ordination and consultation.
As seen in the previous editions of the SME Policy Index and in this interim assessment, the level of institutional development in the region tends to drive results across a number of SME policy dimensions, including those related to the promotion of entrepreneurship, the provision of services to SMEs, access to finance, and improving business licensing and regulations. Hence, the MED economies with the most developed institutional frameworks tend to perform consistently better across policy dimensions than those with less developed or more fragmented frameworks.
This chapter focuses on key reforms and actions since the SME Policy Index 2014 in adopting SME definitions, improving SME statistics, strengthening inter-governmental co-ordination for SME policy and the strategic framework for SMEs, and fostering public-private dialogue.
There is plenty of scope for developing clear and consistent SME definitions enshrined in legislation
Having a clear definition of micro, small and medium-sized enterprises is important when identifying the firms that are eligible for targeted support programmes, to collect data on the state of the enterprise population, and to have clear parameters for policy monitoring and evaluation. Official SME definitions are also important for SME policy co-ordination and multi-level governance of policies.
Ideally, a single definition of micro, small and medium-sized enterprises should be used across different policy areas and regulations in order to improve the consistency and effectiveness of SME support measures. Clear distinctions between the various types of SMEs (e.g. micro-enterprises and medium-sized businesses) are also needed so that policy measures can be tailored to the needs of each type. Furthermore, SME definitions should not be considered static and should be revised every few years to ensure they are still relevant to the economic context.
Progress since 2014
There has been limited progress at the regional level regarding the adoption of official SME definitions that are 1) enshrined in legislation; 2) consistently used across different policy areas, and therefore recognised by different institutions; and 3) combine employment, turnover and assets criteria. Table 1.1 summarises the results of the interim assessment in this area. Table 1.2 includes summary of all definitions in the MED region.
In terms of adopting an official definition enshrined in law:
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Algeria, in its new SME Law 1702 of 2017, revised the SME definition, and it is now close to the EU’s in terms of employment criteria. However, it is not clear whether that definition is consistently used across different institutions.
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Tunisia adopted a new SME definition in the context of a new Investment Law, but it is mainly based on financial criteria, with no distinction between micro, small and medium-sized firms. Furthermore, although the definition is used by the Agency for the Promotion of Industry and Innovation (APII – one of the institutions in charge of enterprise policy) to delimit its field of action, there are other definitions used by other actors (e.g. the SME bank [BFPME] and the statistics office [INS]).
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Three other MED economies report they are working on the adoption of an SME definition to be enshrined in law and to be used by all SME parties. These are Egypt, which is redesigning its entire SME policy and developing an SME law; and Jordan and Lebanon, which are in the process of adopting SME strategies and SME laws. However, there is no clear indication of when these strategies and laws will be officially endorsed; for example, in the case of Jordan, the SME strategy has been due for adoption since 2015.
Other economies have made revisions to pre-existing definitions:
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Israel has two definitions, one established by Government Decision 2190 and the other used by the Small and Medium Business Agency (SMBA). The SMBA definition has been revised in alignment with the strategic plan of the agency. However, there is no intent to unify the both definitions.
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The 2014 report noted that the Moroccan SME Agency1 had established a definition of SMEs. The definition was revised in 2015 in the context of the “Contractual Framework” between the State and SME Morocco for 2015-2020. Nonetheless, the definition refers only to financial criteria and contains no headcount criterion.
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In the case of PA, an SME definition established by cabinet decree has existed since the SME Policy Index in 2014. This definition has not changed since then, and it is not consistently applied by different agencies supporting SMEs directly or indirectly.
Most SME definitions combine different criteria, but few include financial criteria:
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Only Algeria and PA distinguish between micro, small and medium-sized firms using a combination of employment, turnover and balance sheet criteria along the lines of the European Union’s (EU) definition (see Box 1.1). However, it is not clear that SME definitions are consistently applied across different institutions and programmes in these economies.
The European Commission has published a User Guide to the SME Definition1 aimed at helping entrepreneurs, SME managers and government officials (at the EU, national and local level) to understand the criteria and cases when an enterprise qualifies as a micro, small or medium-sized enterprise and is eligible, for example, to receive specific SME support measures. The user guide details with clear and specific examples how to apply the headcount (employment), turnover and financial criteria. The guide also explains in detail other important factors such as:
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What qualifies as an enterprise, i.e. an entity engaged in economic activity, irrespective of the legal form (e.g. self-employed, family firm, limited liability).
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The level of independence or autonomy of a firm (e.g. whether it is a standalone business or belongs to or owns another firm or group of firms, partly or fully).
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In which cases a firm is considered to have transited from one size-type to the other (micro to small, small to medium, medium to small, etc.).
← 1. European Union (2015), User guide to the SME Definition, available at https://ec.europa.eu/growth/content/revised-user-guide-sme-definition-0_en.
For further action
Overall, the interim assessment shows that there is ample scope for the MED region to adopt legal definitions of micro, small and medium-sized firms that are officially accepted by the various agencies in charge of different policy areas. It is also noted that, compared to other regions covered by the EU Neighbourhood Policy (Eastern Partner countries and the Western Balkans and Turkey), there are no evident efforts towards convergence with the EU definition.
Efforts are ongoing to develop comprehensive and accurate statistics, but work is still preliminary.
Structural and demographic business statistics are essential for analysing the structure and dynamism of an economy. These statistics include indicators such as the number of firms; the shares of micro, small and medium-sized businesses; the economic activities in which they operate; and their contribution to the economy (employment, value added, imports and exports, productivity, etc.). They also include indicators on business dynamics and job creation including business entries, growth and exits, and high-growth enterprises. Other indicators look at the characteristics of the entrepreneurs and their firms in terms of gender, age, education, motivation, etc.
Other indicators measure aspects of the business environment such as the regulatory burden and access to resources like skills and finance, innovation, etc. The sources of these data include economic censuses and surveys by national statistics offices; administrative sources, such as business registries, tax authorities and social security institutes; and other surveys and research by academics, think tanks and international organisations.
Progress since 2014
Although comprehensive and internationally comparable SME and entrepreneurship statistics are still lacking in the region, progress has been done in this area over the past few years. This includes the establishment of SME Observatories to disseminate SME and entrepreneurship-related information and statistics.
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Jordan has launched an SME Observatory run by a unit of the Jordan Enterprise Development Corporation (JEDCO), the SME agency. Its objective is to strengthen SME data collection, analysis and dissemination. The SME Observatory has already published comprehensive statistical reports based on official data and other sources such as the Global Entrepreneurship Monitor (GEM).2 It is also planning to launch a web portal to widely disseminate its information.
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One of the most important initiatives over the past few years has been the establishment by Morocco of an SME and Entrepreneurship Observatory tasked with producing and disseminating ample information. It is based on a collaborative approach between eleven founding agencies.3 The SME Observatory is already operational and has started signing collaboration agreements with other agencies to establish an institutional and legal framework for consolidating information on private enterprises.
Furthermore, all MED economies except Lebanon have official data from statistical offices or other administrative sources, with descriptive SME structural statistics and information about their contribution to the economy (see Table 1.3).
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In Algeria the Ministry of Industry and Mines collects and publishes extensive and regular statistical bulletins with detailed information on SMEs based on the official definitions.4 The 2017 SME Law mandates the National Agency for SME Development (ANDPME) to implement an SME information system to serve as a planning and decision-making tool, equivalent to an SME Observatory.5 The system is being developed under the Project for the Support of SME Development (PAD-PME) with the African Development Bank (AfDB).
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In Egypt the Central Agency for Public Mobilisation and Statistics (CAPMAS) is the main source of SME statistics through the Establishment Census, which is conducted every few years. The results of the latest edition (2017) were published in December 2017. The Egyptian Banking Institute (EBI), the financial development arm of the Central Bank of Egypt and CAPMAS conducted a SME survey in 2010-2011. The EBI provided access to the full database to the banking sector and relevant governmental agencies. For the first time, Egypt will participate in the OECD Scoreboard on Financing SMEs and Entrepreneurs, in the 2019 edition.
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Israel continues to participate in the main OECD statistical instruments on business indicators: the OECD-Eurostat Entrepreneurship Indicators Programme (EIP) and the OECD Scoreboard on Financing SMEs and Entrepreneurs. EIP provides comprehensive internationally comparable statistics on SME and entrepreneurship performance based on official sources.6 The Scoreboard on Financing SMEs and Entrepreneurs comprises an important set of indicators on debt, equity, asset-based finance and framework conditions for access to finance.
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In Tunisia the National Statistics Institute (INS) publishes an annual report on Statistics from the National Enterprise Compendium. This includes structural, demographic and business dynamics (firm entry and exit) indicators.
For further action
There is extensive SME and entrepreneurship data collection across the region from official sources. All MED economies are also covered by most international business environment and entrepreneurship gauges such as the Doing Business indicators, the World Bank Enterprise Surveys, and the Global Entrepreneurship Monitor. MED economies could step up their efforts towards international data harmonisation and dissemination by participating in the OECD-Eurostat EIP and the OECD Scoreboard on Financing SMEs and Entrepreneurs. This would allow them to compare their SME performance internationally. Some of the required data are already collected through official sources such as economic or enterprise censuses. It could also represent an incentive to gather data that are still missing in the region (for example, timely indicators on enterprise entry, exit and growth).
MED economies could also work towards the development of institutional, legal and technical mechanisms to exploit administrative sources of information on enterprises from business registries, tax offices, social security, etc. These sources of information could complement the statistics obtained from economic or enterprise censuses undertaken every few years and could lead to more timely and accurate business statistics. Furthermore, such data- and information-sharing initiatives could reduce red tape for businesses since companies and entrepreneurs would not need to provide the same information to different agencies. Nonetheless, privacy and confidentiality issues would need to be addressed for such a system to be operational.
Decisive action is still needed to make SME and entrepreneurship policy more coherent and strategic.
There are five important elements to consider when developing and implementing an effective SME policy agenda. The first is to ponder whether a country has a wider economic development strategy or agenda, and how SME policy fits within it. Policy objectives might include fostering economic diversification, reducing unemployment, or promoting the development of specific economic activities or sectors.
A second element is the enactment of a medium-term strategic framework (i.e. SME strategy) defining the policy priorities, goals and responsibilities of different actors. Such strategies reflect the economic priorities and approaches in each economy. For example, “laissez faire-minded” economies could prioritise the removal of barriers to doing business, whereas others could focus on providing more direct incentives to enterprises in certain economic activities deemed as a priority.
The development of strategies can facilitate co-ordination among public authorities and provide a platform for dialogue with the private sector, and notably SMEs. Hence, SME strategies should be based on a clear diagnosis of the main constraints confronting SMEs and grounded in the country’s broader socio-economic or development strategic framework. They should also include prioritised and sequenced reforms and initiatives, a clear division of responsibilities, and targets and performance indicators to monitor progress and evaluate final results. Their implementation is ideally guided by regular action plans.
SME and entrepreneurship strategies are especially useful in economies with an emerging or transitioning private sector, where co-ordination and communication among actors is still nascent. A number of economies have introduced or are introducing SME laws, which officialise SME policy by giving legal status to SME definitions, co-ordination mechanisms, policy responsibilities and leadership, and funds allocated to undertake an SME policy, among other things.
The third element is to set up a comprehensive and well-structured inter-governmental co-ordination mechanism. This is essential given the cross-cutting nature of SME development policies and the involvement of several government ministries, agencies and departments. Governments need to introduce formal co-ordination mechanisms to avoid policy fragmentation while ensuring effective communication and collaboration across institutions. This can be done through inter-ministerial committees or working groups, or through a specialised SME development department (typically in the ministry of economy or industry) with a co-ordination mandate.
The fourth element is the existence of an SME agency, or a specialised department within an appropriate ministry (e.g. economy or industry), that can act as secretariat or technical co-ordination body for the implementation of the strategic framework. Strong political support and adequate human, technical and financial resources are necessary for such entity to deliver its mandate. In some countries SME agencies provide services, whereas in others they act at the policy level, ensuring coherence across support initiatives implemented by others. What is important is that there is an entity in charge of co-ordination, regardless of whether it is an autonomous SME agency or a unit of a ministry, and whether it provides services or not.
The fifth element is the existence of monitoring and evaluation (M&E) mechanisms to assess the effectiveness in the execution of the individual measures identified in the action plans of the SME strategy as well as the overall impact of the strategy. Here the SME agency or unit can also play an important co-ordination and execution role.
Progress since 2014
The SME Policy Index 2014 noted a lack of cohesive approaches to SME policy making in the MED region. Only Israel and Morocco had put in place all the building blocks of a comprehensive and co-ordinated SME policy, while Jordan was making progress through the development of an SME strategy. The other MED economies did not have formal and effective institutional co-ordination mechanisms framed by an SME strategy.
The study recommended three actions: 1) developing a comprehensive medium-term strategy through a participatory process in those economies which did not already have one; 2) clarifying policy mandates and clearly defining the roles of the institutions responsible for policy development and implementation; and 3) introducing regular monitoring and evaluation mechanisms to assess accurately the effectiveness of SME policies and programmes. There has been relatively little progress in this area since the SME Policy Index 2014 (see Table 1.4).
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Morocco continues to have a relatively well-structured institutional framework for SME and entrepreneurship policies. The Ministry of Industry, Trade, Investment and Digital Economy is in charge of overseeing SME policy and developing and implementing industrial strategies, namely the Industrial Acceleration Plan for 2014-2020. Morocco SME adopted a new “Contractual Framework” for 2015-2020, which aims to increase SME competitiveness and to foster entrepreneurship, including high impact entrepreneurs.
Others have in recent years implemented major reforms to improve the policy framework:
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Algeria continues to put economic diversification and import substitution at the centre of its general policy agenda. As such, it gives SME policy an important orientation towards industrial development, notably as “sub-contracting” (sous-traitance) or finding local suppliers for imported goods. A significant development was the approval of SME Law 1702 of 2017, which 1) sets the basis for policy co-ordination and the development of a strategy and 2) creates a funding mechanism: the National Fund for the Upgrading of SMEs, Supporting Investment and Promoting Industrial Competitiveness.
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The Law designates the National Agency for the Development and Modernisation of SMEs (ANDPME) as the leading body to implement the “SME development strategy”, which is yet to be developed. The AfDB PAD-PME project will support the development of a strategy and the reorganising of the ANDPME. The SME law also foresees the creation of a public-private consultation body, the National Consultation Council for SME Development (CNC), which should be formed by organisations and professional associations representing SMEs.
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Egypt is taking important steps to address the fragmentation of its SME policy framework.7 In April 2017, a Prime Ministerial Decree was issued to establish a new micro, small and medium-sized enterprises Development Agency (MSMEDA) under the directive of the Minister of Trade and Industry. The MSMEDA has absorbed the responsibilities of the Social Fund for Development (SFD) and the Industrial Training Centre (ITC) as well as responsibilities related to entrepreneurship and SME support of the Industrial Modernisation Centre (IMC). MSMEDA is in charge of strategic planning, implementing, co-ordinating and monitoring SME support initiatives and access to finance for SMEs. Its work will be guided by an institutional strategy, which is being developed with the support of the EU project “Support for the Implementation of Strategies to Foster MSME Development in Egypt” (MiSMESIS); the national SME and entrepreneurship strategy, also under development; and the National Strategy for Enhancing Industrial Development and Foreign Trade 2016-2020.
There has been little change in a few of the MED economies:
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In Israel the Ministry of Economy continues to oversee and implement SME policy through the Small and Medium Business Agency (SMBA). Over the past few years the SMBA has increased and improved the provision of support services to SMEs by reshuffling and extending its network of business development centres. However, although SMBA is in charge of the co-ordination of SME and entrepreneurship policy, there is no formal mechanism in place for this purpose (OECD, 2016). There is no inter-ministerial SME and entrepreneurship policy committee, and there are no focal points in government ministries and agencies.
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Furthermore, the SME Bill, which has been discussed since 2014 and is intended to strengthen the co-ordination role of the SMBA, is not yet approved by the Knesset (parliament). Finally, there is no integrated policy document setting out a strategic policy framework for SME and entrepreneurship development (OECD, 2016).
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In Jordan the institutional framework has not changed much during the past decade. The Ministry of Industry and Trade continues to be in charge of enterprise and SME policy development, with the support of JEDCO as the main SME agency. The Ministry of Planning and International Co-operation continues to be responsible for implementing the broader country development strategy and mobilising donor support, while SME policy implementation is delegated to a number of specialised agencies.
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The 2013-2020 SME and Entrepreneurship Development Strategy was finalised in 2014, but it has not been approved yet, and there appear to be difficulties related to funding its action plan. JEDCO and the OECD are currently working on operationalising the governance mechanisms foreseen in the SME Strategy, even if the document is still pending final approval.8 The pending approval of the SME Strategy of Jordan means that institutional co-ordination is still very limited and that JEDCO does not have yet the convening power it should. Furthermore, the large influx of refugees into Jordan and the significant stress on public finances and donor priorities has meant that SME policy support budgets have been reduced in some cases. In this context, JEDCO has seen its budget and policy areas of intervention reduced.
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In Tunisia, as in 2014, the SME policy framework and institutional co-ordination continue to be fragmented. The Ministry of Industry is the main authority responsible for SME and entrepreneurship promotion, notably through the General Directorate for SMEs (DGPME) and the Agency for the Promotion of Industry and Innovation (API). A new Investment Law was approved in September 2016 and includes some provisions affecting SMEs. Although the Investment Law has created a specific governance structure for the investment regime, it is not a specific instrument or strategy for SME development. There is an unresolved issue with SME co-ordination. Each ministry or institution has some mandate to work with SMEs, typically by sector; for example, the Ministry of Agriculture supports SMEs in the agribusiness sector and the API focuses on the industrial sector. However, there is no strong co-ordination mechanism.
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Neither PA nor Lebanon have registered changes since the SME Policy Index 2014. In PA the Ministry of National Economy continues to be in charge of private sector development and the improvement of the business environment. In Lebanon, SME policy continues to be fragmented: although the Ministry of Economy and the Ministry of Industry oversee various support activities, other agencies are also involved. The government developed an SME Strategy 2020 with the support of the United Nations Development Programme (UNDP), but the level of implementation is unclear. The SME unit at the Ministry of Economy is in charge of implementing the SME Strategy. There are also plans to develop an SME Law based on the strategy, but no concrete details or indications about what these plans are.
For further action
Overall, the MED region has advanced little in this area since the 2014 assessment. There are no new platforms established to improve the co-ordination among different SME actors. The Jordanian SME Strategy – which foresees a full co-ordination mechanism, including at the top political level and at the sub-national level – is not yet adopted. Egypt is starting to improve SME policy co-ordination and is deploying a new SME agency.
MED economies could do much more to improve the effectiveness of their SME policies. There are already many SME and entrepreneurship support actors – public, private, non-governmental, donor and other organisations – targeting different types of firms and profiles of entrepreneurs (SME agencies, ministries of economy, finance and industry, credit guarantee providers, etc.). There are also many other actors working to improve the business environment and whose actions can have direct or indirect effects on SMEs (central banks, business licensing and regulatory bodies, tax authorities, etc.).
Stronger political leadership is necessary for the creation of effective inter-ministerial committees and technical committees in different agencies, including at the subnational level. Furthermore, the development and effective implementation of SME strategies could provide a concrete framework for the operation of these high-level and technical committees, including through the identification of concrete goals, targets, actions and responsible parties. Nearly all MED economies lack operational or functioning SME development strategies, although several are in the process of developing them.
Finally, the existence of an SME agency or a specialised unit within a relevant ministry (e.g. ministry of economy or industry), with a clear but strong mandate and with sufficient financial, human and technical resources, could greatly facilitate policy co-ordination and effectiveness. These schemes could be further underpinned by relevant legislation such as SME or enterprise laws, which contain legal provisions that consider the importance and the needs of SMEs in all types of policy making. The “think small first” principle would be particularly relevant in this regard.
Some public-private dialogue initiatives in the region could be of inspiration for MED peers, yet the voice of SMEs and entrepreneurs through business associations could be enhanced.
Public-private dialogue (PPD) is an essential element for an articulate SME policy given the very heterogeneous nature of SMEs and the large number of policy areas affecting SME performance. Consultations with private-sector organisations that are truly representative of different types of SMEs are necessary throughout the policy cycle, including needs analysis, design, implementation, and monitoring and evaluation. PPD should follow a formal and transparent structure (e.g. regular meetings, electronic consultations). Participants should understand clearly the policy implications or results of the consultations. Furthermore, private sector organisations should effectively disseminate the information from PPD among their associates.
Progress since 2014
This interim assessment shows that although PPD is a common practice across all MED economies, the formality and regularity of the consultations differs from place to place. Furthermore, it is not clear how well different types of SMEs and entrepreneurs are represented in policy making.
Morocco and Israel already had strong PPD mechanisms, and there have been few advances in the past four years:
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Morocco continues to have a strong PPD mechanism through the National Committee for the Business Climate (CNEA), which provides a formal platform for various governmental and non-governmental actors, including from the private sector, to identify design and execute actions to improve the business environment. The most important organisation from the private sector is the General Confederation of Moroccan Enterprises (CGEM), with about 88 000 members representing different sectors and regions. The CGEM is formed by “commissions”, one of which is devoted to representing the interests of SMEs. Since its creation in 2009, the CNEA has contributed to significant improvements of the business climate in Morocco, as reflected in the Doing Business and the Global Competitiveness Index rankings.
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Israel continues to have a well-developed system of PPD, especially around regulatory reform. The SMBA holds quarterly meetings with the SME community. Organisations such as the Independent Businesses Association (LAHAV), the Federation of Israeli Chambers of Commerce (FICC), the Manufacturers Association of Israel and the Enterprise Europe Network Partners have been very active in PPD processes.
New platforms for PPD have been created in Algeria and Tunisia, but they are at an early stage:
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Tunisia’s transition has involved a complex process of political and economic dialogue among numerous actors in recent years. This has been reflected in important achievements such as the adoption of a new Constitution in 2014 and economic reforms such as the adoption of the new Investment Law. In 2014, building on the strong process of multipartite political and economic exchange of ideas, Tunisia launched the National Business Agenda (NBA) to create a public-private dialogue platform to advance business climate reforms. The NBA includes the government, the Tunisian Union of Industry, Commerce and Crafts (UTICA), the Tunisian Union of Agriculture and Fisheries (UTAP) and the Arab Institute of Business Leaders (IACE).
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In Algeria, broad economic issues continue to be tackled by a Tripartite Council (la Tripartite) comprising the government, the General Union of Algerian Workers (UGTA) and numerous private sector associations. Most recently, the National Consultation Council for SME development (CNC) was created as stipulated by the SME Law of 2017.
Less progress has been made in most of the other MED economies covered, although there are ongoing discussions to take action:
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Egypt continues to have a very fragmented landscape of business organisations representing SMEs.9 Private sector organisations are considering establishing departments for SMEs, while the MSMEDA is expected to promote stronger PPD. Of the three boards in the MSMEDA – the Advisory Board, the Board of Directors, and the Board of Trustees – the first two include representatives from the private sector and from non-governmental organisations (NGOs).
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Public-private consultations were already a common practice in Jordan. The Economic and Social Council was the main conduit for public-private consultations, meeting at least twice a year. The preparation of the national SME Strategy in 2013-2014 involved extensive consultations with different participants. Yet the pending implementation of the SME Strategy means that the PPD mechanisms foreseen in that document, especially the creation of an SME Advisory Committee composed of private sector and non-governmental organisations, are not functioning. JEDCO and the OECD are currently working on making such mechanisms operational.
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In 2014 the main initiative promoting PPD in Lebanon was the multipartite platform Improving the Business Environment in Lebanon (IBEL). However, IBEL is no longer operational. The Ministry of Industry is developing an action plan to institutionalise PPD in the SME policy-making process through a ministerial decree.10 The SME Strategy to 2020 and its action plan include provisions to foster PPD through regular roundtables, the establishment of a web portal and mobile application to facilitate the engagement of SMEs, and a yearly SME forum to gather stakeholders.
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Public-private dialogue was already a common practice in PA. The main PPD forum still is the Private Sector Coordinating Council, but it no longer holds regular consultations. Additionally, SMEs were often sidelined as SME associations did not play a significant role. The Palestinian Export Council was created to implement the National Export Strategy and works as an advisory council with the private sector. The Ministry of National Economy is also implementing a Clusters Development Project to promote five business agglomerations: leather and shoes, palm and dates, stone and marble, tourism, and furniture. The project builds on a strong PPD mechanism representing hundreds of SMEs.
For further action
Public-private dialogue is a common practice across the MED region. However, there is little or unclear information on what the modalities of PPD are: how formal PPD platforms are; how often the consultations are held; and, how satisfied different types of SMEs and entrepreneurs are with their representation in PPD.
There is ample scope in the region to improve public-private dialogue during the full policy cycle and to enhance the representation of SMEs in that dialogue, including also the sub-national and sectoral levels.
The way forward
Overall, MED economies continue to put into place and reinforce the building blocks of SME and entrepreneurship policy: establishing official SME definitions, collecting and disseminating SME and entrepreneurship statistics, strengthening institutional co-ordination and cohesive approaches in all SME policy areas, and further engaging SMEs in public-private dialogue. This interim assessment puts forward the following additional actions for MED economies:
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SME definitions could be revised to include a mix of criteria, especially employment, turnover and balance sheet considerations. Some MED definitions do not include employment criteria and some others do not even distinguish between micro, small and medium-sized firms. Furthermore, almost no definition seems to explicitly address the independence or autonomy of SMEs (i.e. whether they should be eligible for government support when a SME belongs to or has ownership over other company or companies). Doing so would help to better reflect the diverse nature of micro, small and medium-sized enterprises operating in different sectors and with different levels of efficiency and productivity. SME definitions could also have a clear legal or official status – reflected, for example, in SME laws. This should help to unify the many definitions used by different institutions.
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The adoption of official SME definitions, especially those including employment criteria, is important for the collection of more and better official statistics on SMEs and entrepreneurship. Economic and enterprise censuses could use these definitions to gather data and publish indicators. Efforts to gather SME data from official sources (e.g. business registries, tax administrations, and social security administrations) and business associations could ease the burden on enterprises and reduce data collection costs by making it unnecessary to conduct costly censuses every few years. The data collected directly from these administrative sources could also be useful to take the pulse of SMEs and entrepreneurship by producing timely indicators on enterprise entry, exit, growth and job creation and losses. In economies with significant informal sectors, the data could be complemented by surveys covering informal employment.
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MED economies could do much more to maximise resources devoted to SME and entrepreneurship development by enhancing co-ordination among the many policy actors active in this area. High-level co-ordination and leadership would provide strategic coherence at the national level and could also be invaluable as a source of SME policy advocacy. Technical-level co-operation and sub-national co-ordination would help to avoid policy overlaps and address policy gaps, including in less developed interior areas. Such co-ordination could be guided by the effective implementation of multiannual SME and entrepreneurship strategies identifying key objectives, key performance indicators, responsible parties, and budgets to be mobilised. The designation of an SME agency or unit as secretariat for the implementation and co-ordination of the SME strategy could be highly valuable as long as that agency has the appropriate political mandate and the necessary human, technical and financial resources.
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Comprehensive PPD platforms for the participation of private sector associations, non-governmental actors and, when relevant, donor agencies, are also important in ensuring that the co-ordination and implementation of strategies is coherent. To be effective, these PPD platforms have to be truly representative of the various SMEs and entrepreneurs operating across the territory and in different economic activities.
Bibliography
European Union (2015), User guide to the SME Definition, https://ec.europa.eu/growth/content/revised-user-guide-sme-definition-0_en.
OECD (forthcoming), SME and Entrepreneurship Outlook 2018.
OECD (2016), SME and Entrepreneurship Policy in Israel 2016, OECD Publishing, Paris, https://doi.org/10.1787/9789264262324-en.
Notes
← 1. Morocco’s SME agency was called ANPME in 2014, and it has now been renamed Morocco SME.
← 2. http://www.gemconsortium.org/.
← 3. They include Morocco SME, the Central Bank (BAM), the Ministry of Industry, the National Confederation of Moroccan Enterprises (CGEM), the credit guarantee agency (CCG) and the statistics office (HCP).
← 4. The bulletins include total SME population, SME entries and exits, employment, and exports and imports. They also comprise information on SMEs by economic activity and territorial distribution. The data is obtained from official sources such as the National Social Security Institute (CNAS) and its equivalent for the self-employed and independent professionals (CASNOS).
← 5. The following institutions are involved: the National Statistics Office (ONS), the business registry, the CNAS and CASNOS, the tax administration, the customs administration, the chamber of commerce and industry, and the Association of Banks and Financial Institutions (ABEF).
← 6. This includes extensive information on the structure and performance of the enterprise population (firm demographics, value added, employment, etc.), productivity, business dynamics (entry, exit, high growth firms, etc.), job creation, international trade and other indicators.
← 7. The SME Policy Index 2014 noted a blurred separation between the functions of policy development and implementation. Policy development responsibilities were split between different ministries: Trade and Industry, Investment and Finance, and Planning. In terms of implementation, the Social Fund for Development (SFD) was in charge of micro and small enterprises, while the General Authority for Investment and Free Zones (GAFI) focused on small and medium-sized enterprises with high growth potential. The Ministry of Trade and Industry, through the Industrial Modernisation Centre (IMC) and other affiliated organisations, supported small-to-large enterprises operating in industrial sectors.
← 8. The SME Strategy includes a complete policy framework covering six strategic pillars and a governance structure including: 1) a high-level committee (formed by relevant ministers, the governor of the Central Bank and private sector organisations); 2) a technical-level committee composed of focal points in relevant public sector institutions; 3) an SME Advisory Committee composed of private sector and non-governmental organisations (which are very active in providing SME and entrepreneurship support in Jordan); and 4) SME regional committees in each governorate. The SME Strategy also foresees designating JEDCO as the SME co-ordination agency and the secretariat to the high-level committee.
← 9. Some of the most important private sector organisations are the Federation of Egyptian Chambers of Commerce, the Federation of Egyptian Industries, the Egyptian Business Association, the Egyptian Junior Business Association, the Egyptian Federation of Investors, the Alexandria Business Association, and the Women’s Business Association.
← 10. The government is working in collaboration with national and international experts, and receives support under the Enhancement of the Business Environment in the Southern Mediterranean (EBESM) project.