Policy Workshop on Entrepreneurship Indicators ____________________________________

1. Policy Workshop on Entrepreneurship Indicators ____________________________________ The SME Policy Index Methodology, data requirements and results: The case of the Western Balkans Countries ________________________________ Antonio Fanelli Deputy Head – OECD Investment Compact ____________ Istanbul 27 June 2007

2. Content Content • Background and objectives of the SME Policy Index • Methodology and application process • The case of the Western Balkans • How can we improve policy targeting and impact measurements? • Which SME statistics are most important for targeting and impact measurement?

3. Intro to the OECD-IC Introduction to the OECD Investment Compact for South East Europe • Programme active since 2000 • Main objective: assist the countries of South East Europe in attracting private direct investment • Focus on FDI policy and SME Development • Main activities: policy reviews, monitoring and evaluation, policy advice and coaching • Local partners: Ministry of Economy, Investment Promotion Agencies, SME Development Agencies • International partners: EC, EBRD, ETF, World Bank, bilateral donors

4. Intro to the OECD-IC Regional Scope: Southeast Europe

5. OECD Initiatives The OECD IC initiatives in the SME policy area • 2001-2002 – SME Policy Reviews (Romania, fYR Macedonia), conducted by the OECD IC and the EBRD • 2003-2006 – Enterprise Policy Performance Assessments (EPPAs). Scope: all the SEE Stability Pact countries. Methodology: focus group interviews • In parallel: European Charter for Small Enterprise reporting, led by the EC (DG Enterprise and Industry) • 2006-2009 – New unified process, based on the SME Policy Index only for the Western Balkans

6. The SME Policy Index The SME Policy Index • The Index is a tool to monitor SME policy development, from policy elaboration to policy implementation • It covers key policy dimensions related to SMEs, including the business environment, entrepreneurship and skill development, and innovation and technology • The Index is based on a scoring system, which is obtained by converting qualitative indicators into quantitative scores

7. The SME Policy Index The SME Policy Index • The Index was developed for the Western Balkans to support the implementation of the European Charter for Small Enterprise (the Charter), therefore it is based on the Charter framework, structured around 10 policy dimensions • It has been designed by the OECD together with the European Commission, the EBRD and the ETF and in consultation with the Western Balkan SME policy Coordinators • The Index is part of a multi-year process of policy dialogue and cooperation between the Western Balkan countries, the EC, the OECD Investment Compact and the other institutions involved in the process • The objective is to provide a comparative, consistent and independent evaluation of progress on policy implementation on the policy dimensions included in the Charter, across the Western Balkans

8. Approach The SME Policy Index Measures Support To Small Enterprises Along The 10 Dimensions Of The European Charter

9. Approach SME policy cuts across a number of dimensions The Charter 10 policy dimensions can be divided in three categories: • Dimensions related to the SME operational environment (Dimension 2,3,6,7 and 10); • Dimensions related to innovation and competitiveness (Dimension 5, 8 and 9); • Dimensions related to human capital development (Dimension 1 and 4); The country performance is assessed against those three categories

10. Approach Each dimension is broken down into main sub-dimensions Example: Cheaper And Faster Start-up

11. Approach Each sub-dimension is broken down into core indicators Example: Reduce Cost And Time For Start-up Towards The World’s Most Competitive Standards

12. Approach Policy Development Steps • Meaning of levels 1 – 5: • Level 1 & 2: Legislation is being drafted • Level 3: Legislation adopted • Level 4 & 5: Legislation is being implemented

13. Approach Dimensions  Sub-dimensions  Indicators • The ten policy dimensions are disaggregated into 28 sub-dimensions, which are composed of a specific set of analytical indicators; in total there are 56 analytical indicators • A simple weighting system is applied to sub-dimensions and indicators; weights range from 1 to 3 according to the importance assigned by experts and national co-ordinators • However, the ten dimensions are not combined in a single indicator and neither are they weighted • There is thus no one single index-score for the country performance

14. Process The SME Policy Index is organised to involve all key stakeholders in the evaluation and input process KEY ACTORS: • EC/OECD Core Team leads project. • European Training Foundation (ETF) and European Bank for Reconstruction and Development (EBRD) provide inputs on their relevant Charter dimensions. • ETF: Dimensions 1 & 4 (Human Capital) • EBRD: Dimension 7 (Finance) • The National Coordinator’s Team conduct a self-assessment based on the SME Policy Index. • An independent assessment is conducted with the support of a team of consultants led by an international consultancy company. National Charter Co-ordinators EC/ OECD Core Team Private Sector Local Consultants ETF and EBRD contributions EC/OECD Experts

15. Process Gathering information for evaluation followed a specific process

16. Results 2007 Phase 1 Phase 2 Phase 3 Company Notification Compliance Registration No. of days to obtain company Administrative identification Number of days to complete overall § § § registration certificate numbers process No. of steps to obtain company No. of days to obtain required Number of steps to complete overall § § § registration certificate process identification numbers Official cost of obtaining company Application of silence is consent rule § § Total cost of overall process § registratio n certificate Minimum capital requirements § On - line registra tion § Dimension 2: Cheaper and faster start-up Assessment Framework

17. Results 2007 Dimension 2: Results Average

18. Results 2007 Key Issues – Dimension 2 • Good overall progress on company registration • First priority: systematically tackle issue of licences and permits • Second priority: further improve the notification phase and move to one-stop-shop system • In the medium term: develop electronic business registers

19. Results 2007 Overall Conclusions • In terms of enterprise policy development and Charter implementation, the Western Balkans can be divided into three groups: • Legal institutional framework still under development, average score around 2: Albania, BiH, UNMIK/Kosovo • Legal institutional framework largely complete, beginning of implementation, score around 3: fYR Macedonia, Montenegro, Serbia • Implementation well advanced, score between 3 and 4: Croatia

20. Policy targeting & impact measurements How can we improve policy targeting and impact measurements? • SME population is large, very diverse and its composition changes rapidly, even in the small Western Balkan countries • In a typical transition economy, the bulk of the SME population is made of micro enterprises, family based, slow growing, but they are still essential for e unemployment and poverty reduction • There are also a certain number of enterprises that are growing, are investing, are generating new employment and are important for the broadening the tax base, but they are operating in traditional sectors • There are finally a small number of fast growing and innovative enterprises

21. Policy targeting & impact measurements How can we improve policy targeting and impact measurements? • The first group is particularly sensitive to the general business environment • The second group to specific dimensions, such as access to finance, tax policy, labour policy • The last group will benefit from policy measures supporting innovation and skill development Targeting and impact evaluation are at the core of SME policy

22. SME stats Which SME statistics are most important for targeting and impact measurement? • Ideally, a business register should keep track of key characteristics of registered companies throughout their life-cycle, as much as a civil register does for people • Dynamic company data combined with quantitative company surveys and qualitative focus group interviews are key tools for impact measuring • A reliable business register should be therefore be the source for: • A wide range of data that can be aggregated whenever and however necessary • Company surveys (i.e. full contact details, key information for sample selection and stratification)

23. SME stats Which SME statistics are most important for targeting and impact measurement? • SME statistics, at least in the Western Balkans, are generally of poor quality and incomplete, allowing for limited cross-country comparison • For targeting impact measurement, reliable aggregated statistics are necessary (e.g. employment, turnover, value added contribution per enterprise class and sector). • BUT: most important is a reliable and regularly updated business register

24. Next steps SME Policy Index: Next Steps • For the Western Balkan countries we are: • Improving the indicators of the SME Policy Index 2007 • Understanding the process of policy targeting for a set of specific dimensions (innovation and competitiveness) • Introducing more advanced tools for policy impact measurement – we are exploring a combination of company surveys and focus group interviews to complement quantitative and qualitative information • Simultaneously we are exploring the application of an adapted version of the Index to other geographical areas (e.g. the Mediterranean/North Africa)

25. You can download the SME Policy Index 2007: Report on the Implementation of the European Charter for Small Enterprises from our website: www.investmentcompact.org