SME POLICY INDEX : eastern partner countries 2020.

526 Pages·2020·6.984 MB·English

by  OECD

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ASSESSING THE IMPLEMENTATION OF THE SMALL
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SME Policy Index:
Eastern Partner Countries
2020
ASSESSING THE IMPLEMENTATION OF THE SMALL
BUSINESS ACT FOR EUROPE
This work is published under the responsibility of the Secretary-General of the OECD. The opinions expressed and
arguments employed herein do not necessarily reflect the official views of the OECD member countries, or the official
views of the European Bank for Reconstruction and Development, the European Training Foundation and the
European Union.
This document, as well as any data and map included herein, are without prejudice to the status of or sovereignty over
any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.
Note by Turkey
The information in this document with reference to “Cyprus” relates to the southern part of the Island. There is no single
authority representing both Turkish and Greek Cypriot people on the Island. Turkey recognises the Turkish Republic of
Northern Cyprus (TRNC). Until a lasting and equitable solution is found within the context of the United Nations, Turkey
shall preserve its position concerning the “Cyprus issue”.
Note by all the European Union Member States of the OECD and the European Union
The Republic of Cyprus is recognised by all members of the United Nations with the exception of Turkey. The
information in this document relates to the area under the effective control of the Government of the Republic of Cyprus.
Please cite this publication as:
OECD et al. (2020), SME Policy Index: Eastern Partner Countries 2020: Assessing the Implementation of the Small Business Act
for Europe, SME Policy Index, European Union, Brussels/OECD Publishing, Paris, https://doi.org/10.1787/8b45614b-en.
ISBN 978-92-64-46173-4 (print)
ISBN 978-92-64-33010-8 (pdf)
SME Policy Index
ISSN 2413-6875 (print)
ISSN 2413-6883 (online)
European Union
Catalogue number: OA-02-19-878-EN-C (print)
Catalogue number: OA-02-19-878-EN-N (pdf)
ISBN 978-92-78-42047-5 (print)
ISBN 978-92-78-42046-8 (pdf)
Photo credits: Cover © Designed by Caroline Lee, Spielplatz 13.
Corrigenda to publications may be found on line at: www.oecd.org/about/publishing/corrigenda.htm.
© OECD, ETF, European Union and EBRD 2020
The use of this work, whether digital or print, is governed by the Terms and Conditions to be found at http://www.oecd.org/termsandconditions.
PREFACE  3

Preface
Small and medium enterprises (SMEs) are a source of jobs and growth. They also have a
role to play in the diversification of output, export and employment, and are a vital source
of entrepreneurial human capital. This is particularly important at a time when the countries
of Eastern Europe and the South Caucasus strive to make their economies more inclusive
and more resilient to shocks. SME development has therefore been central to co-operation
within the framework of the Eastern Partnership (EaP), a joint initiative of the European
Union and six neighbours – Armenia, Azerbaijan, Belarus, Georgia, the Republic of
Moldova and Ukraine.
Today, SMEs generate about half of total business-sector value added in the EaP region,
and they account for slightly more than half of total business-sector employment. Their
innovation potential and ability to adapt to fast-changing market conditions makes them an
increasingly important source of entrepreneurial dynamism.
Since 2012, the SME Policy Index for Eastern Partner countries has been an important
source of support for policymakers in the region and for their external partners seeking to
design and deliver better SME-support policies. Structured around the ten principles of the
Small Business Act (SBA) for Europe, the Index is a unique benchmarking tool designed
by the OECD, the EBRD, the European Training Foundation and the European
Commission to assess countries’ institutions and SME policies against EU and international
best practices.
The report ‘SME Policy Index: Eastern Partner Countries 2020’ marks the third SBA
assessment for the EaP region on the basis of the Index. It provides a comprehensive
overview of SME policies in the region organised around the SBA principles, and it
monitors the progress made since 2016. Across the region, governments have worked to
promote better strategies for SME development and to build institutions that can help
translate those strategies into action and deliver tangible results. Many recommendations
provided in the 2016 assessment have been implemented; particularly those focusing on
regulatory policies, institutional frameworks and measures supporting entrepreneurial
skills and mindset of women and men.
However, important challenges remain. While the situation varies from country to country,
a few broad trends stand out. First, a more demand-driven, collaborative approach to
designing support programmes could help ensure a better fit between public action and
SME needs. Second, stronger monitoring and evaluation systems, underpinned by well-
designed key performance indicators, would enable governments to capture the impact of
policies on firms, as well as use public resources more efficiently and adapt and adjust SME
policies on the basis of better evidence. Finally, level playing field conditions are critical
to the success of any effort to promote entrepreneurship and small firm growth. EaP
countries still have much to do to fight corruption and to ensure business integrity,
competitive neutrality and equal access to inputs and markets for all firms, regardless of
size or ownership. The current report thus includes an assessment of three dimensions of
the business environment that transcend the traditional concerns of SME policy:
competition, contract enforcement and business integrity. This provides a basis for
SME POLICY INDEX: EASTERN PARTNER COUNTRIES 2020 © EBRD, ETF, EU, OECD 2020
4  PREFACE

identifying structural reform priorities that will create a better business environment for
firms of all sizes.
We commend the efforts of the Eastern Partner countries to foster private sector
development through better SME policies, as well as better implementation of those
policies, and look forward to continuing our work with them to deliver better opportunities
for firms and citizens across the region.

Angel Gurría Olivér Várhelyi Suma Chakrabarti Cesare Onestini
Secretary General, EU Commissioner President, Director,
OECD for Neighbourhood European Bank for European Training
and Enlargement Reconstruction and Foundation
Negotiations Development
SME POLICY INDEX: EASTERN PARTNER COUNTRIES 2020 © EBRD, ETF, EU, OECD 2020
FOREWORD  5

Foreword
About a decade ago, in May 2009, Armenia, Azerbaijan, Belarus, Georgia, the Republic of
Moldova and Ukraine, together with the European Union launched a strategic and
ambitious partnership – the EU Eastern Partnership (EaP). In an effort to build a more
prosperous and resilient region, this endeavour is based on shared values, mutual interests
and commitments, bringing EaP countries closer to the European Union through economic
integration and by developing stronger ties among the partner countries themselves, to
deliver tangible results for their citizens.
Economic and private sector development play an essential role in achieving this objective.
Looking back at the past decade, significant efforts have been made to develop stronger,
more diversified and dynamic economies across the region. Small and medium-sized
enterprises (SMEs) have been instrumental in driving this agenda forward. In fact, thanks
to their capacity to innovate and adapt to fast-changing market conditions, SMEs can
facilitate the shift towards a modern, more diversified and demand-driven economy, acting
as an engine for higher-quality employment generation and sustainable growth. However,
their potential in the EaP region remains untapped. Although representing up to 99% of all
firms, they currently generate around half of total business-sector value added and account
for only half of total business sector employment.
The SME Policy Index: Eastern Partner Countries 2020 – Assessing the Implementation of
the Small Business Act for Europe is a unique benchmarking tool for assessing and
monitoring progress in the design and implementation of SME polices against EU and
international good practice. It is structured around the ten principles of the Small Business
Act for Europe (SBA), which provides a wide range of pro-enterprise measures to guide
the design and implementation of SME policies. This report marks the third edition in this
series, following assessments in 2012 and 2016. It provides a comprehensive overview of
the state of play in the implementation of the ten SBA principles, and monitors progress
made since 2016. It also identifies remaining challenges affecting SMEs in the EaP
countries and provides recommendations to address them based on EU and international
good practice examples. The 2020 edition also features a novelty: an assessment of three
new dimensions – competition, contract enforcement and business integrity – that goes
beyond core SME policy to look at key structural reform priorities that are critical to
establishing a level playing field for enterprises of all sizes.
The 2020 assessment reveals significant progress, with many of the 2016 recommendations
having been implemented. An essential precondition for SMEs to grow and prosper is the
existence of an adequate regulatory policy and institutional framework, an area in which
all six EaP countries have demonstrated sustained commitment to reform. Across the
region, governments have made considerable progress in designing strategies for SME
development and building strong institutions that can help deliver tangible results and
translate policies into action. They have acknowledged the crucial role of a responsive
government and effective institutions in promoting SME development, encouraging
investment, and reducing informality and corruption – laying the foundation for a healthy
business environment in which enterprises of all sizes and ownership types can thrive.
SME POLICY INDEX: EASTERN PARTNER COUNTRIES 2020 © EBRD, ETF, EU, OECD 2020
6  FOREWORD

Nevertheless, more remains to be done to further build SME capacities, so that they become
more productive, more competitive and innovative, and better integrated into global
markets. Policies need to better match SME needs, which will require a demand-driven
approach to designing support programmes through a collaborative approach. Monitoring
and evaluation systems must be considerably strengthened and backed up by key
performance indicators, to capture the impact of policies on businesses, favouring the
optimal use of public resources and advancing evidence-based policy making. Lastly, all
the above-mentioned efforts would be in vain if level-playing-field conditions are not in
place to ensure competitive neutrality and equal access to inputs and markets for all firms,
regardless of their size and ownership type.
This report is the result of a collaborative effort by the Organisation for Economic Co-
operation and Development (OECD), the European Bank for Reconstruction and
Development (EBRD) and the European Training Foundation (ETF), with the support of
the European Commission and the governments involved. The views of a wide range of
stakeholders, including SMEs themselves, were sought and are reflected throughout the
publication.
SME POLICY INDEX: EASTERN PARTNER COUNTRIES 2020 © EBRD, ETF, EU, OECD 2020
ACKNOWLEDGEMENTS  7

Acknowledgements
The SME Policy Index: Eastern Partner Countries 2020 – Assessing the Implementation of
the Small Business Act for Europe is the result of work conducted by the OECD and six
Eastern Partner countries (Armenia, Azerbaijan, Belarus, Georgia, Republic of Moldova,
and Ukraine), in co-operation with the European Bank for Reconstruction and
Development (EBRD), the European Commission and the European Training Foundation
(ETF).
The report was written under the guidance of Andreas Schaal, Director of the OECD Global
Relations Secretariat and William Tompson, Head of the OECD Eurasia Division.
The project was managed by Daniel Quadbeck, Senior Policy Analyst, OECD Eurasia
Division, and co-ordinated by Francesco Alfonso and Alena Frid, OECD Eurasia Division.
The project benefitted from the early guidance of Meryem Torun, former OECD Eurasia
Division. Extensive support in finalising the report for publication was provided by Carlotta
Moiso, OECD Eurasia Division. It further profited from inputs by Marzena Kisielewska,
Head of the OECD South East Europe Division, as lead reviewer of the publication.
The work of the partner institutions was overseen by Simone Zeh Atanasovski, Principal,
Svenja Petersen, Principal, and Christian Cronauer (all EBRD), Rafaella Boudron and
Kristi Raidma, Project Managers (European Commission), and Olena Bekh, Senior
Specialist in Human Capital Development (ETF). This report was made possible thanks to
the contributions of the National Small Business Act (SBA) co-ordinators who supported
the data-gathering and verification process. We extend our gratitude to all government
officials and other stakeholders who have been actively involved across the region, and
whose support and dedication have made the development of this publication possible. In
the EaP countries, the following SBA co-ordinators led their countries’ participation in all
stages of the project: Karen Gevorgyan (Armenia), Elchin Ibrahimov, Emil Ismaylkhanov
and Vusala Jafarova (Azerbaijan), Tatyana Bykova and Irina Babachenok (Belarus),
Ekaterina Mikabadze and Tsisnami Sabadze (Georgia), Iulia Costin, Constantin Turcanu
and Oxana Paladiciuc (Moldova), and Olexandr Palazov and Andriy Slabinskiy (Ukraine).
Principal authors of the report are:
Executive summary Alena Frid, Daniel Quadbeck
Policy framework and structure of the Francesco Alfonso, Carlotta Moiso
report
Overview of key findings Carlotta Moiso, Cecilia Trasi, Olena Bekh (ETF)
Economic context Déborah Pereira, Hubert Massoni, Carlotta Moiso
Level playing field Lyudmyla Tautiyeva; Sabine Zigelski (OECD Competition Division)
Pillar A – Responsive Government Antonio Fanelli (external consultant), Hubert Massoni
Pillar B – Entrepreneurial Human Capital Olena Bekh, Anthony Gribben, Pirita Vuorinen (all three from ETF)
Pillar C – Access to Finance Christian Cronauer, Jan Keller, Svenja Petersen, Simone Zeh Atanasovski (all from
EBRD)
Pillar D – Access to Markets Patrik Pruzinsky; Knut Blind, Florian Münch, Simone Wurster (all three from Technische
Universität Berlin); Daniel Ivarsson (external consultant)
SME POLICY INDEX: EASTERN PARTNER COUNTRIES 2020 © EBRD, ETF, EU, OECD 2020
8  ACKNOWLEDGEMENTS

Pillar E – Innovation and Business Alena Frid, Francesco Alfonso; Guy Halpern (OECD Environment)
Support
SBA country profiles The general parts of the profiles were drafted by Lyudmyla Tautiyeva (Armenia, Ukraine),
Alena Frid (Belarus, Georgia) and Patrik Pruzinsky (Azerbaijan, Moldova), while
dimension-specific parts were drafted by the same authors as above. In addition, pillar B
sections were written by Florian Kadletz (Armenia, Azerbaijan), Kristien Van den Eynde
(Ukraine), Anthony Gribben (Georgia, Moldova) and Pirita Vuorinen (Belarus) (all four from
ETF).
Annexes Alena Frid, Lyudmyla Tautiyeva, Carlotta Moiso
Note: All authors are from the OECD Eurasia Division, unless specified otherwise.
The report was reviewed and benefitted from further inputs provided by the OECD
Environment Directorate; the OECD Directorate for Enterprise and Financial Affairs (Anti-
Corruption Network, Competition and Investment Divisions); the OECD Centre for Tax
Policy and Administration; the OECD Directorate for Science, Technology and Innovation,
and OECD SIGMA (Support for Improvement in Governance and Management). At the
EBRD, inputs were provided by the SME Finance and Development Group; the Economic
Policy and Governance Department; the Office of the General Counsel, Local Currency
and Capital Markets; and the country teams in the Eastern Partner region. Pillar E benefitted
from additional comments provided by the Innovative Policies Development Section of the
UNECE.
The publication was also reviewed and supported by the European Commission’s
Directorate-General Neighbourhood and Enlargement Negotiations (DG NEAR);
Directorate-General Internal Market, Industry, Entrepreneurship and SMEs (DG GROW);
and the EU Delegations in the Eastern Partner countries. In particular, the OECD team is
grateful to the contributions from Hoa-Binh Adjemian (DG NEAR), Maxime Bablon and
Tom Diderich (DG GROW).
The independent assessments were conducted with the support of local consultants:
EV Consulting (Armenia), Yulia Aliyeva (Azerbaijan), UNITER (Belarus), Lali
Gogoberidze (Georgia), CIVIS (Moldova) and Institute for Economic Research and Policy
Consulting (Ukraine). The competition assessment was conducted with the support of
Maksym Nazarenko (Sayenko Kharenko Newlaw Firm). ETF’s national experts Jemma
Israyelyan (Armenia), Sadaqat Qambarova (Azerbaijan), Irina Tochitskaya (Belarus),
Giorgi Kobaladze (Georgia), Ghenadie Ivascenco (Moldova) and Bogdana Aleksandrova
(Ukraine) provided important support to the assessment of human capital dimensions.
The final report was edited and prepared for publication by Elisa Larrakoetxea, Kristin
Sazama, with the strategic support of Vanessa Berry-Chatelain (OECD Global Relations
Secretariat) and Carmen Biezma Fernandez (OECD Public Affairs and Communications
Directorate). It was edited and proofread by Chris Marquardt. The implementation of the
project was assisted by Eugenia Klimenka, Maria Ferreira, Mariana Tanova and Jolanta
Chmielik (OECD Global Relations Secretariat).
This SBA assessment project is implemented within the EU4Business initiative, benefitting
from the financial assistance of the European Union. The views herein can in no way be
taken to reflect the position of the European Union or the Member States.
SME POLICY INDEX: EASTERN PARTNER COUNTRIES 2020 © EBRD, ETF, EU, OECD 2020