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