promoting entrepreneurship - the oecd experience for ksa (saudi international smes forum –...
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PROMOTING ENTREPRENEURSHIP - THE OECD EXPERIENCE FOR KSA (Saudi International SMEs Forum – Riyadh 28-29 May 2013)
Salvatore ZecchiniChairman OECD WP SMEE
Most governments are trying to promote entrepreneurship and SMEs
The MENA region is no exception
In Saudi Arabia it is considered by government as a necessary route to
diversify the economic system, to spur innovation and to expand job opportunities
for Saudis
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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OECD countries’ Government approach to support SMEs and entrepreneurship
Government programmes to facilitate SME access to financing (2008-2010)Modification of Government Policy Responses
Countries Policy Response and/or Institution Name
Type of Policy
Response Additional Capital/Funding Increased limit for loans/guarantees Extended Scope/Time Guarantee
Ceiling % Date of
Implementation
Belgium Credit Mediation Programme
Credit Mediation
Extended to include mediation for credit
insurance.
Canada Canada Small Business Financing Programme Loans
Increased maximum loan value to CAD 350 000 (EUR 231 000),
CAD 500 000 (EUR 330 500) for real property.
January 2009
OSEO Guarantees & Loans
Additional funding from French Government of
EUR 6 billion^ Extended through to 31
December 2010* ^March 2009 *July 2009
Strategic Investment Fund (FSI) Loans Total capitalisation increased
to EUR 20 billion October 2009 France
Credit Mediation programme
Credit Mediation Extended through to 31
December 2010 Announced July 2009
Kreditanstalt für Wiederaufbau (KfW) &
European Recovery Programme
Export Facilitation
Increased size of programme by EUR 700 million
KfW IPEX Bank -Long-term export financing
Export Facilitation
EUR 1.5 billion dedicated to export credits guaranteed by
Federal Government Announced
December 2009
Wirtshaftsfonds Deutschland
Loans & Guarantees Extended through 2010
Kfw Sonderprogramm Loans
Faster provision of liquidity, longer maturities and fixed interest rates, more flexible
loans
January 2010
Germany
Bürgschaftsbanken Guarantees Can guarantee loans up to
EUR 2 million (formerly up to EUR 1 million)
Up to 90% (from 80%)
Italy Fondo di Garanzia (Guarantee Fund) Guarantees Increased to EUR 1.88 billlion
(for years 2009-2012) Increased limiti (from EUR 500.000 to EUR 1.5 million) Extended to craft sector 2009
Credit Guarantee Programme Guarantees
Special safety net programme now covers 100% of SME debt
liability in case of default.
Extended until 31 March 2011 February 2010
Japan Safety net loans from Japan Finance Corporation and
Shoko Chukin Bank Loans Expansion of loan capacity and
reduction of interest rates. Extension until 31 March
2011
United Kingdom
Enterprise Finance Guarantee Guarantees
Further GBP 500 million (EUR 563 million) made
available Extension into 2010-11
United States
Small Business Administration (SBA)
Guarantees and Loans
Additional USD 125 million to be lent until February 2010. Extension until February
2010 December 2009
Source: Country Responses to the OECD WPSMEE Questionnaire to Policy Makers on the Impact of the Global Crisis on SMEs and Entrepreneurship Financing and the Policy Responses, follow-up launched November 2009 and publicly available information.
Public credit guarantees Direct public funding Interest subsidies Labour training centers Business incubators Mentoring and tutoring services Marketing assistance Export promotion Support to research activities
MENA contries have followed same path through similar means:
Still, widespread sentiment that in both OECD and MENA countries more has to be done to promote
entrepreneurship and expand the SME sector.
OECD experience is useful for policy makers, but there is no single OECD model that fits all countries.
There are instead some common findings and outcomes stemming from various policy approaches.
First, know the hurdles and shortcomimgs SMEs are facing in your counry to start and expand a business.
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Problematic factors for doing business in MENA region
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Similarities and differences with the EU
Global Competitiveness Index
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More difficulties for SMEs than for large firms in KSA
Source: S.Hertog, Benchmarking SME policies …
In KSA two additional shortcomings: 1) gender imbalance in business participation; 2) GEM-TEA index 45° out of 55 countries
1. To expand the supply of potential entrepreneurs;
2. To remove barriers to the birth of enterprises and provide support to new entrepreneurs
3. To promote conditions allowing small firms to take roots and expand to reach appropriate scale to compete in the market place.
OECD evidence: gvts have to create appropriate environment for SMEs and
tackle 3 sides of problem
Deal only with one side of problem and not all of them
Bankruptcy law strictness
Policy fragmentation, inconsistencies and lack of coordination
Shower all SMEs with plenty of aid measures
Common shortcomings
Two avenues have been followed :
1) Develop a favourable attitude among people
2) Invest in education and training programs
How to expand the pool of potential entrepreneurs
How to turn entrepreneurs potential into reality
Simplify and streamline administrative requirements and procedures
Look at EU Small Business Act and Think Small First approach
Level the playing field in market place Expand supply of skills Improve the legal environment Create a bridge between research centers and
SMEs Promote networking, participation in supply
chains and innovation chains
Remove regulatory and bureaucratic obstacles to business creation and expansion in a competitive market.
It is not just a question of facilitating business entry, 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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To unleash entrepreneurial spirits
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Problematic institutional environment
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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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Upgrading skills and management capacity
Holistic approach within government and coordination mechanism
Systematic dialogue with SME associations
Carry out periodic ex-post evaluation of support programs and individual support measures
To sum up, three main suggestions to KSA policymakers
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