regional workshop - 11-12 december 2006 study on promoting the role of social enterprises in cee and...

Regional Workshop - 11-12 December 2006 Study on Promoting the Role of Social Enterprises in CEE and the CIS

Study on Promoting the Role of Social Enterprises

in CEE and the CIS(Phase I)

Giulia Galera, ISSANInstitute for the Development of Nonprofit Organizations

Universtity of Trento - Italy

Regional Workshop on Social Enterprises in CEE and the CISDecember 11th and 12th, 2006 - Brussels


Presentation Plan

1. Definitions

2. Research Goals

3. Methodology

4. Historical Overview of the TS in CEE and the CIS

5. Social Enteprises in Western EU Countries

6. Social Enteprises in CEE and the CIS

7. Conclusions/Key Questions

8. Bibliography


• Various definitions used in CEE and the CIS: NGOs, Third Sector, Non-Profit Sector, Social Economy

• Concepts here adopted:– Third Sector (TS) = other than public and for-profit

organizations (associations, coops bound to the pursuit of social goals)

– Social Enterprise (SE) = productive dynamic of both traditional organizations (associations) and newly established ones (Public Benefit Companies, social coops)

1. Definitions


General Goal• Map the SE phenomenon in 12 CEE and CIS

countries

Specific Goals• Identify both bottlenecks that prevent SE expansion

and enabling factors• Provide policy recommendations for the creation of

an environment conducive to the development of SEs

2. Research Goals


3. Methodology (1)

STAGE 1

• Adaptation of the SE concept worked out by EMES to the context of target countries– Economic criteria:

• Activity producing goods and/or selling services• A degree of autonomy• A trend towards paid work

– Social criteria:• An explicit aim to benefit the community or a specific group

of citizens• A decision-making power not based on capital ownership• Exclusion of profit-maximizing organizations


• Identification of 12 National Contacts in:– Czech Republic, Estonia, Lithuania, Poland and

Slovenia (New Member Countries)

– Bulgaria, Macedonia and Serbia (the Balkans)

– Belarus, Kazakhstan, Russia and Ukraine (former Soviet Union)

3. Methodology (2)


STAGE 2• Identification of categories of organizations with

elements in common with EMES SE definition– National Contacts were asked to:

• Provide a country analysis (categories of TS organizations falling under the adapted SE definition)

• Complete a questionnaire designed for each category of SE identified• Provide a final Country Report

• Information processed• Analysis of the re-emergence of the TS and

development paths of SEs in the various countries carried out

3. Methodology (3)


TS Initiatives in Pre-communist Time

• Long-lasting history of foundations, associations, and cooperatives

• Poland: in 1938 there were 10,000 associations and 3,000 foundations• Bulgaria: 1,600,000 people were members of cooperatives at the eve of

communism rise to power• Ukraine: in 1916 2,643 associations called brotherhood

• Rich history contributed to the revitalization of the TS after the collapse of communist and socialist regimes

4. Historical Overview (1)


TS Initiatives under the Planned Economic System

• Incorporated in the public infrastructure/turned into quasi-public agencies• Many foundations and associations dissolved• Coops became part of the planned economy• New mass organizations created top-down

• Considerable differences among countries • Hungary and Slovenia: more liberal regimes• Slovakia/Czech Republic: TS more subordinated to the state • Former Soviet Union Countries: TS under strict state control

• Differences influenced further development paths of the TS




Different Degree of Recognition of the TS• New Member Countries

– Associations and foundations legally/financially recognized– Legal/fiscal environment less favorable for coops– Right to form un-registered organizations guaranteed

• Balkan Countries – First TS initiatives developed within the legal frameworks

inherited from communism (Serbia, Slovenia, Macedonia)– Inconsistent legal environment/lack of legal frameworks



Different Degree of Recognition of the TS

• CIS– Legislation on social/voluntary organizations promptly

introduced– Low degree of autonomy from the state– Government’s mistrust towards citizens’ action– Bias against TS organizations (associations,

foundations, cooperatives)– Associations and foundations fulfill mainly political

functions (Belarus)


Early Transition Approach

• Underestimation of institutional issues and prevalence of market-centered policies– Negative image of cooperatives– Distrust towards economic activities carried out by TS

organizationsBut– Re-emergence of credit (Poland, Lithuania) and housing

coops (Estonia)– Boom of mainly civil society organizations, associations,

foundations• Promoted in the frame of the neo-liberal systems implemented (Polonia,

Bulgaria)• Triggered by Western donors (Macedonia, Serbia, Bulgaria)



Impact of Aid– Significant role of foreign donors in sustaining the re-

emergence of TS initiatives (all countries)• Through training, stays abroad, financial support• Foreign donors still the main source of funding in the Balkans (Serbia,

Macedonia) and CIS (Ukraine)

But• Attention devoted mainly to advocacy organizations• Short-term view – project-based approach • Incapacity to boost locally situated development processes• Insensitiveness to the unique social/cultural contexts of individual countries• Coops and mass-organizations ignored




Size of the TS

• Unavailability of complete and reliable statistical data (most countries)

– Number of workers/ volunteers not yet available– Share over GDP not yet available– Data on coops not always available – Time-consuming and complex registration procedures (Belarus)– Difficulties in terminating organizations (Ukraine, Macedonia)

• Secondary data provided by the 12 researchers– TS most developed in new member countries (associations and foundations)– Cooperatives registered an overall dramatic decrease in number – Additional legal forms not yet exploited (Poland, Czech Republic, Slovenia, Lithuania) – Statistics on Balkan countries and CIS not available


5. SEs in Western EU Countries (1)

• Also Western EU countries witnessed a general underestimation of the roles of TS organizations, especially productive ones

• TS initiatives suffocated under the 2 poles paradigm– Market: produced/allocated private goods– State: supplied public goods and goods characterized by market failures

• TS organizations acknowledged as entities entitled to advocate recognition of fundamental rights by the state

• Tax regulations consistent with the role assigned to the TS– TS organizations not allowed/not fully enabled to carry out economic

activities


5. SEs in Western EU Countries (2)

• In the 80s, following the crisis of the dual model, the scenario started to change

• SEs have been gradually acknowledged as enterprises endowed with a high innovation potential, in terms of:

– New products/services delivered– Institutional arrangements set up

• Recent evolution has been institutionalized 1. Recognition of specific legal frameworks designed for specific activities (social

coops in Italy)2. Recognition of more general legal frameworks for a wide range of activities (Uk:

CIC and Italy: Social Enterprise)

• Fiscal regimes have been designed to compensate the disadvantages that SEs accept to deal with


6. SEs in CEE and the CIS (1)

• A similar evolution towards social entrepreneurship can be noticed especially in new member countries

However• SEs are still a rare practice:

– Lack of understanding of the phenomenon – Weak political and legal recognition– Difficulties in assessing the dimension of the sector

• SEs are still far from being legitimized as actors of new welfare systems

• A number of problems inherited from the previous model continue to jeopardize SE development



Main ObstaclesProblems to be faced to support SE development:• Insufficient recognition• Unavailability of suitable legal forms/unfavorable

legal environment• Insufficient/distorted financing• Low skills• Ambiguous or weak public policies• Weak networking capacity within and among families

of the TS• Insufficient involvement of TS community in the

process of legitimization of SEs



Permissibility of Economic Activity by the TS

• Engagement in economic activities allowed to some extent in almost all countries (exceptions include Macedonia and Belarus)

• Associations and foundations not allowed to conduct economic activities as primary activity, although the profit generated is aimed at supporting the organization’s mission (exception Slovenia)

• Hence, marginal role of TS organizations in the production of services


Main Development Trends• Recent development of innovative best practices of SEs• Three main trends:

– Institutionalization of SEs in some new member countries: legal frameworks designed for SEs introduced in:

• Poland and Hungary (Social cooperatives)

• Czech Republic, Croatia, Slovakia, Hungary (Public Benefit Companies)

• Slovenia (Not-for-Profit Institute)

– Creation of subsidiary commercial enterprises to conduct economic activities (for instance: Macedonia, Belarus, Bulgaria, Ukraine, Croatia). Production of goods/services consistent with the social mission of the founding organization

– SEs accepted when integrating disadvantaged workers • In all countries: cooperatives/enterprises for the disabled



Progress/Opportunities

• Increasing interest of relevant stakeholders at national level (policy makers; TS community; researchers)

• Increase in number of seminars/workshops on related topics (Equal projects, international seminars)

• New university courses launched (Czech Republic, Hungary, Poland)

• Increasing interest of international organizations (UNDP, OECD, World Bank, etc.) and bilateral donors



Progress/Opportunities

• Decentralization of competences• Increasing interest of public administrations to

contract-out• Networking experiences (for example, cooperative

movements) • EU programs, membership, and alignment



• SEs can turn into effective poverty-reduction agents, as they:

– provide access to basic public-interest services also to people that are unable to pay (social, educational, health)

– contribute to support the economic development of deprived communities

– as a consequence of the new services supplied, contribute to create new employment

– favor the work integration of disadvantaged people, minority groups, single-women, etc.

7. Conclusions/Key Questions (1)


• What strategies should national governments adopt to exploit SEs’ social and economic contribution?

• What strategy should institutional donors adopt to enhance the ability of SEs to tackle the high poverty levels of target countries?

• How can Western EU TS organizations support effectively the development of SEs in CEE and the CIS?

7. Conclusions/Key Questions (3)


• Carlo Borzaga and Jacques Defourny, The Emergence of Social Enteprise, London and New York: Routledge, 2001

• Carlo Borzaga and Roger Spear, Trends and Challenges for Co-operatives and Social Enterprises in developed and transition countries, Trento: Edizioni31, 2004

• Ewa Les and Maria Jeliazkova, The Social Economy in Central East and South East Europe, Background Report, OECD, 22-24 September 2005, Trento-Italy

• Peter Murrell, Institutions and Firms in Transition Economies, in Claude Ménard and Mary Shirley, Handbook in New Institutional Economics, Dordrecht: Springer, 2005

• Annette Zimmer and Eckhard Priller, Future of Civil Society, Making Central European Nonprofit-Organizations Work,, Heidelberg: Robert Bosh Stiftung, verlag für Sozialwissenschaften, 2004

• Papers presented at the Seminar, Emerging Models for Social Entrepreneurship: Possible Paths for Social Enterprise Development in Central East and South East Europe, promoted by OECD, LEED, USAID-Croatia and ISSAN, 28-29 September 2006

8. Bibliography

regional workshop - 11-12 december 2006 study on promoting the role of social enterprises in cee and...

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