Regional SME Support Strategies in Ukraine and Georgia

1. Regional SME support strategies – case UkraineQazakh, June 17 Regional SME support strategies – GEORGIA Qazakh, June 17e 17support The project “Development of SME strategies and its impThe project “Development of SME strategies and its impact on regional SMEs” benefits from support through the EaP Civil Society Forum Re-granting Scheme (FSTP) and is funded by the European Union as part of its support to civil society in the region. This material has been produced with the assistance of the European Union. The contents of this publication are the sole responsibility of project implementing partners and do not necessarily reflect the views of the European Union.

2. Regional SME As of 2016 data across the whole territory of Georgia the share of SMEs in total business turnover was 17.8% 72% of the total business sector turnover was attributable to Tbilisi Table 1- Share of turnover by size of enterprises by regions, 2016 (%

3. Agriculture In Georgia more than a half of the country’s population is engaged in agriculture, which accounts for meagre 9.3% of GDP There are regions where more than 70% work force works in agriculture, e.g. Guria, SamtskheJavakheti, Mtskheta-Mtianeti. Small farms, subsistence agricultural holdings dominate in the country

4. The State policy for SME development support According to the World Bank Group "Doing Business-2017" Flagship Report - Business production rating, Georgia has moved to 9th place and has been recognized as the leader country of the region; 2014-2017 DCFTA implementation action plan was developed and adopted; Coordination Inter-Agency Subcommittee was created at the Ministry of Economy and Sustainable Development to coordinate implementation of the related part of the Georgia-EU Association Agreement on DCFTA part; SME Development Strategy of Georgia 2016-2020 and the Action Plan 2016-2018 was adopted. The documents are based on the essential principle of the Small Business Act (SBA) for Europe “Think Small First “ The tax system is simplified with 6 types of taxes.According to Georgian legislation, export or re-export from Georgia is exempt from customs duties. was created for SME better opportunities for trade with the European Union and in addition ways are open for EU countries to business investments in Georgia . Positive dynamic of sales with the EU countries, which in time coincides with the DCFTA's launch.

7. Problems and challenges The SME policy should give due consideration to peculiarities of each stage of economic development in the country. The State support to regional SMEs is not systematic and is not oriented on long-term results The issues of raising awareness of small and medium enterprises and their active participation in economic policy and decision-making at all stages, planning and implementation of reforms , remain unsolved. This indicates that there are gaps in the dialogue between public and private sectors (PPD) in region at the level . The practice suggests that coordination of Regional SME policy implementation is still unsustainable. It is advisable to improve efficiency of the activities and enhance coordination , to hold regular joint meetings. It is recommended to introduce joint discussions , to strengthen institutions that support SMEs.

8. Problems and challenges It is especially important to strengthen the work in the regions, particularly among companies without much innovative potential and from remote region,there are still no special programmes for the regional SME development on entrepreneurial skills and access to education, information and modern technologies, events being implemented are not systematic Access to finance is one of the major factors hindering Regional SME development in Georgia. The interest rates on long-term loans in commercial banks vary from 16% to 24%, which is still high for small and medium entrepreneurs. In addition, most of the entrepreneurs are not able to provide collaterals for the loans because they are set at as high as 120% of the loans. Particularly acute is the issue of start-up micro and small businesses including women entrepreneurs, as the owners of real estate are mostly men. It is necessary to implement legislative amendments to simplify financial accounting rules and procedures for small and medium businesses, and create more solid legislative support for its development.

9. Problems and challenges It is important to encourage exports and direct foreign investments in the region . Most of the enterprises are not certified and do not possess international standards. Standards and IPRs are still not attractive to SMEs mainly because their benefits are not well communicated, costs are high and rules seem complicated The measures taken by the state to encourage women entrepreneurship in the regions and effective use of entrepreneurial potential are still not enough. Women-owned businesses do not receive any investment support. There is no policy and program development that will allow a wide range of advancement of women at all levels and in all spheres of business, their promotion and encouragement to start and expand their businesses, which at the same time would help them strengthen private sector competitiveness and growth of export potential.

10. Recommendations It is crucial to establish a strong multi-stakeholder partnership with public and private stakeholders engaged with SMEs’ problems, constructive communication among key stakeholders for DCFTA and SME policy implementation via helping them in developing the needed skills, tools should be translated to the language of business in order to be fit for their purpose to promote growth and employment; Stimulate demand for the SME policy development via regional assistance programs; Raise awareness on perspectives and demands of DCFTA and conduct large-scale campaigns of communication; Improving business promotion services to assist in access to international markets, developing a strategic approach in entrepreneurial education, based on market requirements, study of entrepreneurial skills using best practices of foreign countries; In order to solve the problem of restrictions in the financing of the SME, for a small business development and promotion, a comprehensive approach should be developed, including providing start-up entrepreneurs with cheap credit resources;

11. !Thank you for your attention! NiNOElizbarashvili GAWBGeorgian Association”Women in Business” E-mail:wbusge@gmail.com