ASSESSMENT OF THE IMPLEMENTATION OF THE SMALL BUSINESS ACT FOR EUROPE Preliminary results 22 May 2013.

ASSESSMENT OF THE IMPLEMENTATION OF THE

SMALL BUSINESS ACT FOR EUROPE

Preliminary results

22 May 2013

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1. Background

2. Methodology and process

3. Overview of preliminary results

4. Key issues for discussion

Agenda

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BACKGROUND

WITH THE FINANCIAL SUPPORT OF THE

EUROPEAN UNION

Euromed-Charter/SBA Assessment

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• Objective: To assess the level of implementation of key principles for SME and entrepreneurship policy– Framework based on the Small Business Act for Europe;

– Focus on policy design and implementation;

– Comparison across countries and time;

– Performance benchmarked against EU and OECD good practices

• Analytical tool: the SME Policy Index; already applied to:– In the Western Balkans and Turkey (2007, 2009, 2012)

– In the Eastern Partnership countries (2012)

– In the Southern Mediterranean (MED countries) (2008, ongoing)

– In the ASEAN (ongoing)

WITH THE FINANCIAL SUPPORT OF THE

EUROPEAN UNION

Euromed-Charter/SBA Partners

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1. Regional Scope: ALG, EGY, LEB, MOR, ISR, JOR, PA, TUN

2. International partner organisations: Assessment and coordination by the European Commission, the European Training Foundation and the OECD; in consultation with the EIB

3. Med partners:a. National coordinators are the main contact point and

facilitator in each country;

b. Government agencies and bodies facilitate information and perform self-assessments;

c. Private sector representative organisations provides substantial input throughout the process

d. Local experts support assessment and collect data and information;

METHODOLOGY

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WITH THE FINANCIAL SUPPORT OF THE

EUROPEAN UNION

The “assessment grid”

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• The Index is built on a number of dimensions organised according to the principles of the Small Business Act;

• Policy dimensions are subdivided into sub-dimensions and those in turn include a number of analytical indicators;

• Progress is assessed on the basis of a five-step policy development path at the level of individual indicator;

The SME Policy Index methodology

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SBA Principles Dimensions Sub-

dimensions Indicators

The policy dimensions of the 2012-2014 Policy Index

1) Education and training for entrepreneurship

2) Bankruptcy and second chance

3) “Think Small First” principle

4) Public administration responsive to SME needs

5) Adapt public policy tools to SME needs

6) Access to finance

7) Encouraging SMEs to benefit from opportunities provided by the European single market

8) Promote skills upgrading and innovation

9) Promote green growth

10) Tapping into the opportunities of growing markets

Dimensions Sub-dimensions

3) “Think Small First” Principle

3) 1. Institutional framework for enterprise policy

3) 2. Better legislation

Subdimensions Indicators

3) 1. Institutional Framework

3)1.1. Delegation of responsibility for enterprise policy

Indicators Level of reform

1 2 3 4 5

Delegation of responsibility for enterprise policy

Co-ordination with other ministries

Enterprise development strategies

WITH THE FINANCIAL SUPPORT OF THE

EUROPEAN UNION

• First Assessment in 2008, based on the Euromed Charter for Enterprise

• Current (2013) assessment based on the SBA for Europe

• Good level of comparability between the two assessments, as the majority of the indicators have remained unchanged

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Evolution

WITH THE FINANCIAL SUPPORT OF THE

EUROPEAN UNION

Time-frame

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1. January-March: Launching of the assessment process. Country team established, local advisors selected

2. March- May: Country assessments conducted

3. 21 May to 18 June: Presentation of preliminary country results at bilateral meetings

4. 25 June: Presentation Meeting of national coordinators and review of results at regional level

5. Mid- October: Finalisation of the results

6. First quarter 2014: Publication and launch of the regional report

WITH THE FINANCIAL SUPPORT OF THE

EUROPEAN UNION

The objective of this meeting is to discuss specific indicators and to compare the evaluation of the country and the independent assessment according to four criteria:

• Scores that are very different from 2008

• Scores that vary between the country and the independent assessment

• Low scores

• Scores where more information is required

Objective

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• National Coordinator: Dr. Nir Ben-Aharon, Ministry of Economy

• OECD advisors and key advisors: Dr. Dan Kauffman and his team; ETF key advisors

• Process launched on 5 March 2013

Israeli SBA assessment partners

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OVERVIEW OF PRELIMINARY RESULTS

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• Over 380.000 enterprise active, 99% SMEs;

• Enterprise class structure similar to the EU, but lower M-Es representation;

• Healthy churning rate, 50% survival rate at the 4th year;

Highlights of the SME sector in Israel

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Preliminary overall performance

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

International organisations

Country as-sessment

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Strengths Challenges

Principle 3:Advanced institutional framework and improved strategic approach

Principle 2:Cumbersome and lengthy bankruptcy procedures, second chance neglected

Principle 5: Wide range of services to SMEs and good accessibility

Principle 3:Regulatory reform at an initial stageRIA not yet fully introduced

Principle 6:Flexible and diversified range of financial products and services, including provision of risk capital

Principle 4:No proper One Stop Shop, no on line registration

Principle 8:State of art support to innovative and technologically oriented companies, particularly high tech start-ups

Principle 9:Lack of instruments to support adoption of environmental standards by SMEs

Key strengths and challenges

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• Institutional framework: lack of strategy, limited coordination and fragmented implementation

• No systematic tackling of administrative burden

Areas for improvements highlighted in the 2008 report

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• Institutional framework:SME development strategy

introduced, implementation under way

Transformation of the SME Authority into the Small Business Agency, with clear mandate on policy coordination, advocacy and programme implementation

Main policy improvements since 2008

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• Regulatory simplification: Work started on priority areas:

business licence requirements, expedited business licence;

Amendment to the VAT ActSteps to introduce systematic

application of RIA

Main policy improvements since 2008

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ISSUES FOR DISCUSSION

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• Israel has developed a well structured and innovative SME policy framework;

• We observed an increased convergence towards the EU SBA framework, with Israel more advanced than the EU in areas such as support to innovative enterprises and access to finance for high-tech and high growth enterprises;

• Israel has still to catch-up on regulatory reform and administrative simplification

Key challenges in SME policy

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• Point of strength of the Israeli policy framework:

Intense dialogue with the private sector and constructive public-private cooperation;

Government action can focus on areas where its actions benefit most (i.e. promoting entrepreneurship in marginalised communities)

Extensive network system supporting dynamic enterprises;

Key challenges in SME policy

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• Downside risks: Two speed enterprise sector: high-tech

versus low tech, centre versus periphery, export oriented enterprises versus enterprises serving the domestic market.

Growing missing middle syndrome: limited domestic market force company to choose between going international or staying small.

Key challenges in SME policy

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Principle 2: ensure that honest entrepreneurs who have faced bankruptcy quickly get a second chance

• Key issues:

– Bankruptcy procedures: low score for “cost (% of the estate)”

– Second chance: low score for “Promoting positive attitude towards giving entrepreneurs a fresh start”

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• Key issues:

– Low score for “Cost-benefit analysis of new enterprise legislation and regulation” (RIA)

Principle 3: Design rules according to the “think small first” principle

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• Key issues:

– Low score for “Official cost of obtaining the company registration certificate”, “Silence-is-consent” principle and “On-line registration”

– One-stop-shop, not really in place? divergence between the two assessments.

– Different current configuration of the registration/notification/compliance process, divergence between the two assessments.

Principle 4: Streamlining public administration to be responsive to SME needs

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• Key issues:– Ensuring that payments are made on time –an issue that

quite often SMEs are complying on, mainly on payments of municipals and public, non-governmental entities.  

– Availability of information on business service providers, what is provided by public or by private sector? divergence between the two assessments.

– Business incubators: Hi-tech oriented incubators versus non-hi-tech incubators. divergence between the two assessments.

– Online information for enterprises: what is the status of the AMBA portal? divergence between the two assessments.

Principle 5: Adapting public policy tools to SME needs

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• Key issues:

– Micro-finance: Unclear how the Micro-finance sector looks like. More information is needed on key players to determine the score. divergence between the two assessments.

– Private equity: Strong bias towards high-technology start-ups

– Financial literacy: where we stand by today?

– General legal framework versus specific law: leasing, risk capital, and capital market

Principle 6: Facilitate SMEs’ Access to Finance and develop a legal and business environment supportive to timely payments in commercial transactions

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• Key issues:– Low score for “Level of computerisation of

procedures for foreign trade”– Low score for “ Virtual one-stop-shop to

deal with the formalities of foreign trade”– Low score for “ Euro-Med inter-firm

clusters and partnerships”– Low score for “ Euro-Med networks of

business support services”– Enterprise Europe Network

Principle 7: Help SMEs to benefit more from the opportunities offered by the single market

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• Key issues:– Budget provision for SME innovation–most

innovation funds are spent by the Chief Science Office of the Ministry of Economy for technological innovation. For these funds, there are almost no distinctions between small and big companies

– Good performance of “Incubators serving innovative start-ups which are linked to technology content”

– What about supporting non technological innovation?

Principle 8: Promote the upgrading of skills and all forms of innovation

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• Key issues:

– Low score for: “Promoting the use of environmental management systems and standards”

Principle 9: Enable SMEs to turn environmental changes into opportunities

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• Key issues:

– Export promotion strategy: divergence between the two assessments

Principle 10: Encourage and support SMEs to benefit from growth markets