Outlook for small and medium sized enterprises in the Western Balkans is improving, finds OECD/EC report

The Western Balkans has recently made good progress in improving the policy environment for small enterprises, the backbone of the region’s economies. But more needs to be done, notably in Albania, Bosnia and Herzegovina and UNMIK/Kosovo, to support small and medium-sized firms (SMEs), according to a new report by the OECD and the European Commission on enterprise policy in six Western Balkan countries (Albania, Bosnia and Herzegovina, Croatia, the former Yugoslav Republic of Macedonia, Montenegro and Serbia) and the province of Kosovo.

‘Enterprise Policy Development in the Western Balkans: a report on the implementation of the European Charter for Small Enterprises’ finds that while Croatia has taken a general lead in the overall environment for SMEs, Serbia, Montenegro and the Former Yugoslav Republic of Macedonia have made important strides in the right direction and may shortly be able to catch up with Croatia.

The situation in Albania, Bosnia and Herzegovina and UNMIK/Kosovo warrants a renewed commitment for the introduction and implementation of business friendly policies over the next years. In Bosnia and Herzegovina a new push to adopt a state level policy framework (SME strategy and implementing capacities) remains important. In Albania the challenge lies mainly in the modernisation and speeding up of company registration procedures, in line with what the region’s other countries have recently achieved.

Across the region, most progress has made in dimensions directly related to improvements in small enterprises’ operational environment: more rapid registration for start-up, taxation and finance, and SME representation and public/private dialogue. In regulatory reform and the development of access to the Single European Market, progress has been slower and uneven across the region. There are more encouraging results in technological capacity and e-business models than in improving on-line access.

Scores in the dimensions ‘human capital development, entrepreneurship education and training’ and ‘availability of skills’ are comparatively low. Making good progress in these two dimensions will require the introduction of complex structural reforms in the education and labour markets. These reforms will only show results in the medium to long term.

In some policy areas the Western Balkan economies are advancing together. For example, each country will soon have an SME Development Strategy and an SME Agency. Regarding entrepreneurship education, pilot projects have been initiated in each of them. With a few exceptions, all countries are advancing in speeding up company start up procedures.

In other areas there are clear differences. Croatia, for example, is ahead of the other Western Balkan economies in the dimensions associated with technological development, the promotion of competitiveness and gearing up business for work in the information society where online access and information portals offer new potential to reduce the burdens on entrepreneurs.

The Western Balkan governments which have not already established the basic operational environment for SMEs in areas such as business registration, taxation and access to finance need to do so rapidly. In addition, government resources, both human and financial, need to be increased as a high dependence on donor funding risks making reform fragile and unsustainable. With the Western Balkans moving along in the EU integration process and the first impacts of the approach to the EU single market being felt, a dedicated push to boost competitiveness and innovation also becomes critical.

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The report was presented on 26 and 27 March 2007 at an official launch organised by the European Commission and the Croatian Ministry of Economy, Labour and Entrepreneurship in Dubrovnik, Croatia. The assessment is based on, and analyses 10 dimensions: entrepreneurship education and training, cheaper and faster start-up, better legislation and regulation, availability of skills, improving on-line access, getting more out of the single market, taxation and financial matters, strengthening the technological capacity of SMEs, successful e-business models and top class small business support, representation of small enterprises’ interests.

The report was prepared by the OECD Investment Compact for South East Europe and the European Commission’s Directorate General for Enterprise and Industry, in consultation with the European Training Foundation and the European Bank for Reconstruction and Development. The assessment is based on the European Charter for Small Enterprises, a key guidance document for policy making on improving the business environment within the EU, which the countries of the Western Balkans adopted in June 2003. A new report assessing progress will be published in 2009.

Contact: Mr. Antonio Fanelli, Deputy Head, OECD Investment Compact for South East Europe

             Antonio.Fanelli@oecd.org / + 33 1 45 24 97 07.

To download the report click here.