Transcript AN ARAB SPRING FOR ENTREPRENEURSHIP SME Advisors …

Salvatore Zecchini
Chairman OECD WP SMEE
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Rapid change in economy and social
spheres characterizes all the region
Wind of economic liberalization blowing
Ambitions and expectations of better living
and more jobs are at all time high
But reality is not encouraging, because of
slowdown in world economy and limited
room for expansionary fiscal policies in
MENA region.
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Oil exporting countries are benefiting from
sustained oil prices, rising government
spending and a positive business climate.
In oil importing countries, economic activity
is still under the impact of social unrest,
political and institutional uncertainty,
declining external demand and steep oil
prices.
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What factors can lead to a sustained and
general improvement of economic
prospects?
Can entrepreneurship, start-ups and SMEs
be the keys to renewed growth, particularly
without having to add to fiscal imbalances?
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1) The constraints and weaknesses SMEs
are facing in MENA countries;
2) The government measures to support
them;
3) The shortcomings in their policies;
4) The priority areas where governments
should intervene decisively to fully exploit
the potential of entrepreneurship.
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In MENA region, such an approach is
uncertain
It all depends on an “Arab Spring for
Entrepreneurship”
It means a complete overhaul of the
economic and financial systems, together
with support policies for entrepreneurs
To this end, road ahead is still long because
environment is far from being favourable to
business activity
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According to WB “Ease of Doing Business”
index, UAE rank has risen from 118th in year
2000 to 33th position in 2012 in world
ranking.
But major improvements are still needed in
legal environment to provide certainty in
business and credit relationships in business
and credit relationships.
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Source: S.Hertog,
Benchmarking SME policies …
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opacity about their conditions,
weak corporate governance,
inadequate management structures,
poor bookkeeping and accounting practices,
insufficient collateral
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Jobs less secure than in public
administration
Wages lower than in P.A. and large firms
Work conditions are less attractive
Labour market is heavily regulated and rigid
As a result, workforce at SMEs is made out
mainly of low skilled labor
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Simplification of procedures to start a business
Diffusion of business incubators and business
centres
Funding of industrial zones
Promotion of SME participation in value chains
Labor training programs
Promotion of links with universities and
research centers
Financial assistance through tax preferences,
grants, credit guarantees and subsidies, soft
loans, “private equity” investment, incentives
to banks to lend to SMEs, public procurement
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Uneven use of policy tools and wide differences
in policy commitment across MENA countries
Inadequate coordination in tool applications
Lack of coherence with different industrial
policy measures
Inadequate targeting of measures with the
consequence of room for benefits being
captured by less competitive firms or wellconnected entrepreneurs
Poor attention to the implementation and
evaluation of outcomes
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Hence, need of an “Arab Spring for
Entrepreneurship” to overhaul the system
To this end, renewed efforts by both,
Government and SMEs
Both have to take their share of
responsibility to improve current conditions
for business activity
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SME financing impediments;
Shortage of technical and managerial skills
which can match enterprises’ needs;
Easing the burden of regulation and
bureaucracy to allow more business
initiatives, higher competition and
innovation.
No real policy alternatives for governments,
but use all tools to customize policy mix to
the specificity and intensity of SME
problems in each country.
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Overcoming banks’ reluctance to lend to
SMEs,
Fostering a broader recourse to equity
investors,
Promoting leasing, factoring, hire-purchase,
bond issuance for SMEs and other alternative
funding means.
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An obligation to provide the lender with certified
data on SME conditions;
A compulsory recording in a central register of all
loans to enterprises, a register that can be
accessed by all financial institutions;
A radical change in the system of collateral for
financing (particularly, mortgages and
foreclosures) through a reform of the legal and
judicial system.
A special support to mutual credit guarantee
schemes, since they imply a sharing of risk
among participating firms and consequently a
closer monitoring among themselves.
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Support should be tightly focused on the SMEs’ needs,
Be demand-driven and managed together with business
associations,
Should leverage the national educational system,
especially the technical universities and vocational training
institutions through joint programs, incubators and
voucher schemes.
Government funding of “internship programs” at
universities and management institutes for small
entrepreneurs,
Funding for “Hiring programs for new graduates”,
Programs to engage students for a work experience in
small firms.
An active gender policy to bring the human capital
represented by women to contribute to build a strong and
competitive enterprise-based economy.
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By removing regulatory and bureaucratic
obstacles to business creation and expansion in a
competitive market.
It is not just a question of facilitating business
entry, as gauged by WB indicators, but to make it
easier for small firms to expand, invest, innovate
and compete.
To this end, the EU Small Business Act is a model
to be heeded, since it is bringing about a true
revolution in the way governments shape their
policy making at all levels.
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provide good public services to SMEs,
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such as information infrastructures,
efficient utilities,
functional industrial areas,
mentoring,
a level playing field in the marketplace
procurement practices that are favorable to
SMEs.
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interacting among themselves with
cooperative attitudes,
entering into networking arrangements,
supply chains, innovation chains,
exploiting the synergies of business clusters
being transparent about their activities
investing in human resources, knowing that a
skilled workforce is both a valuable asset for
the enterprise and a prerequisite to lower the
currently high unemployment, particularly
among the young.
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But the true spirit of the “Arab Spring ” should also
be reaffirmed in the economic domain,
i.e. overhaul not just institutions, but people’s
cultural attitudes.
Social norms and a widespread culture currently
take a tarnished view of entrepreneurship.
No Arab Spring for the economy can succeed
unless such attitudes are countered by all means
by government, starting from education at school
level.
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Only an entrepreneurs-friendly culture
throughout the entire society can
really make entrepreneurship the
driver of the long-sought-after
economic and social progress.
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