Transcript Policy priorities to improve the environment for entrepreneurship

ESCWA Conference on “Innovative Sources to
Finance Small and Medium-Sized Enterprises”
Dubai, February 16-17, 2010
Presented by: Lois Stevenson, IDRC, Cairo
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Context in MENA Region
 Employment creation, esp. for youth, is major challenge
 Private sector not large enough to absorb growing number of job
seekers
 SMEs are major driver of private sector, but
 Very small (over 90% are under 5-worker enterprises)
 High level of informality (40%-70% of enterprises & 40%-80%
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employment)
Concentrated in low-growth sectors
Most only have capacity to serve local markets (low exports)
Low use of modern technologies
Low level of product quality and competitiveness
Low innovation
Few women participating in entrepreneurial /SME ownership activity
 Need pipeline of more, and higher quality, entrepreneurs
 Need for more growth-potential SMEs
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SME/entrepreneur challenges
 Regulatory burden to start-ups
 Complex and costly administrative procedures
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affecting entry, operation and exit of enterprises
Low access to formal debt & equity financing
Inadequate access to BDS, entrepreneurship/
management training, business & market information
High social security & non-wage labour costs(affects
hiring practices)
High input costs due to low economies of scale & weak
bargaining power
Constrained access to some markets
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Size and growth dimensions
236 m people, growing at
average of 1.6% a year
Average 2008 GDP growth of
5.2%; 7% (LE & EG), 1.5% (TR)
8%
$14,000
GDP per capita (PPP US$)
90
80
70
60
50
40
30
20
10
0
7%
Population in millions
$12,000
$10,000
$8,000
$6,000
$4,000
6%
5%
4%
3%
$2,000
2%
$0
1%
0%
EG
JO
LE
MA
SY
TN
TR
GDP average annual growth 2000-2007
Population
GGP per capita (PPP)
GDP growth 2008
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Varying sector distribution
100%
100%
80%
Share of labour force
80%
% of GDP
60%
60%
40%
40%
20%
20%
0%
MENA-avg
MA
Industry/GDP
0%
EG
TR
Services/GDP
TN
SY
LE
JO
Agriculture/GDP
MA
Industry share
EG
TR
TN
Services share
SY
LE
JO
Agriculture share
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Labour and business environment context
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due to low participation of
women
Double-digit unemployment,
> twice as high for young
people (& higher for educated
youth)
Mismatch between demands
of labour market and skills of
labour force
Better business environments
in TN and TR
JO and TR have highest degree
of economic freedom
Labour market rigidities
common competitiveness
barrier
180
160
140
120
Country rank
 Low employment rate (43%) –
100
80
60
40
20
0
TN
TR
JO
Doing Business 2007
Doing Business 2009
EG
LE
MA
SY
Doing Business 2008
Doing Business 2010
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The SME sector
 Inconsistent SME definitions
 Lack of timely, comprehensive and comparable data on
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the SME sector
> 95% of private enterprises are SMEs
Estimated 6.5 million SMEs in total, many informal
Less than 1% have more than 50 workers
Average enterprise size – 6.7 (SY), 2.7 (EG)
Low SME ownership by women; very few women with
growth-firms
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Density of entrepreneurs
Self-employment rate of 28%
(12.5% for women), but few
employers
Density of entrepreneurs= 15.6%
of adult population; 5.2% of the
adult population trying to start
a business
35%
50%
% of adult population
Share of total employment
30%
40%
Both
30%
20%
25%
20%
15%
10%
5%
10%
0%
MA
LE
EG
TN
JO
SY
TR
(2009) (2009) (2008) (2009) (2009) (2009) (2008)
0%
SY
LE
MA
Own-account self-employed
TR
EG
TN
JO
Self-employed employer
Established business owner
New business owner
Nascent entrepreneur
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Institutional and policy support for SMEs
 Focus on SME policy is recent in most countries (since 2000)
 Variety of institutional supports – SME laws, SME policy units,
SME agencies, SME delivery organizations (OSSs, BDCs,
incubators, MFIs, NGOs)
 Similar SME policy frameworks (where they exist)
 Reforms to reduce the time & cost of starting & operating businesses,
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regulate MF sector, venture capital industries
Measures to overcome deficiencies in formal lending and risk capital
markets
Programs to upgrade the management & production capacity &
standards of SMEs
Advancement of technology & innovation infrastructure & support for
technology start-ups
Targeted young entrepreneurs programs
Entrepreneurship education initiatives
Strategies to reduce informality
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Promising sectors
Egypt
Agro-industries, tourism, ICT, construction, gas export, ready-made textiles,
environmental technologies & services, health care, private education &
training, retail & franchising, business process out-sourcing
Jordan
Pharmaceuticals, ICT, medical tourism, Dead Sea cosmetics, garments &
textiles, food products, non-conventional sources of energy, low-cost nonconventional water -saving technologies, tourism & professional services
Lebanon
Financial & business services, ICT sector, construction, niche markets around
jewellery & wine, high-end niche markets in agricultural products, tourism
Morocco
Off-shoring (software development, call centres, data processing, ICT); auto
parts; aeronautics; specialized electronics parts; agro-foods; sea products;
leather, textiles & handicrafts; modernized retail & wholesale sectors
Syria
Telecom, financial services, health & education services, media &
entertainment, tourism, diversification in the agro-foods sector
Tunisia
ICT, textiles, mechanical & electrical engineering, tourism, manufacturing
Turkey
Automotive parts; clothing, textiles, jewellery design; ICT; new technology
applications in engineering, architecture & technical consultancy services;
SME cluster initiatives, tourism, commercialization of R&D; agro-food;
organic agricultural production; renewable energy
The way forward for SMEs & entrepreneurship
 MENA economies need a more vibrant and robust private sector & more
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& stronger SMEs to drive private sector growth, deal with youth
employment challenge, reduce poverty, produce sustainable growth
SME sector is fragile, uncompetitive in global markets and
underdeveloped (high degree of informality)
Limited access to financing, business development services, information
on opportunities, technology and markets
Entrepreneurs of young enterprises, most SME owners do not have
sophisticated management, production & marketing skills - exposed to
very limited opportunities to gain knowledge on how to start, manage &
grow an enterprise
Many business opportunities exist in developing economies with
growing GDP and populations, plus access to new markets through FTAs
To capture these opportunities, potential & existing entrepreneurs need
entrepreneurial ability & knowledge, access to the necessary resources
and information, business friendly environments
Base of entrepreneurs exist – with proper support can produce growth in
the economy and other economic and social returns
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…to strengthen the SME sector
 Target tailored SME and entrepreneurship development
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programs to foster the entrepreneurial potential of women and
young people, especially among post-secondary graduates
Support integration of entrepreneurship at all levels of the
education system with links to the private sector entrepreneurs.
Offer more diverse types and sources of SME financing
Provide more widespread, comprehensive and sustainable access
to mentoring, training, and business advice directed to
entrepreneurs and SMEs
Remove regulatory and procedural barriers to the entry and
growth of SMEs and to dissolution of an enterprise
Reduce the costs of registering businesses and enforcing
contracts
Implement strategies to encourage the formalization of
enterprises
Reform rules regarding property rights.
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…to pursue SME-related opportunities for
investment
 Pool funds to invest in the R&D stage of emerging technologies
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identified by governments as promising sectors
Pool funds to invest in promising new start-ups and spin-off
enterprises that are seeking to commercialize new or innovative
technologies
Invest in microcredit funds that are flexibly structured to
increase loan amounts commensurate with the financing needs
of client enterprises as they grow
Support programs to develop the potential of young educated
entrepreneurs and their enterprises
Invest in women entrepreneurs with growth-potential
enterprises (with financing, mentoring and market linkages)
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…to inform public policy and foster exchange
 Improve the quantity, quality and timeliness of data on SMEs,
the growth & development of the SME sector, & the level &
nature of entrepreneurial activity, an evidence base needed to
formulate effective tailored policies & measure the impact of
business environment reforms and support programs and
initiatives
 Publish this analysis in annual reports for wide dissemination
among stakeholders (e.g. regional SME Observatory and
Entrepreneurship Monitor involving country-level partnerships)
 Create regional forum for sharing knowledge & experiences of
what has worked well and what has not in the various areas such
as SME access to financing, OSSs, young entrepreneur programs,
SME upgrading schemes, business and technology incubators,
developing women’s entrepreneurship, etc
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