Outcomes of the 2018 OECD Ministerial Conference on SMEs & the way forward SME Envoys Network 23 March 2018 Copenhagen Miriam Koreen Deputy Director Centre for Entrepreneurship, SMEs, Regions and Cities
Outline The OECD s work on SME policy Why SME policy matters and key messages from the Ministerial Conference The way forward: an OECD SME Strategy and an SME Outlook Upcoming meetings and events 2
The OECD WPSMEE is a global platform for policy discussion on SME policy SME Financing Scoreboard and G20/OECD High Level Principles on SME financing Benchmark of SME performance, framework conditions and targeted policies forward-looking analysis SME Financing Country Reviews WPSMEE Global Platform for SMEs SME Policy Outlook Thematic Studies In-depth country reviews of SMEs policies and issues, support for the design of SMEs Strategies at national level Evidence-based studies on key challenges facing SMEs, with formulation of policy recommendations 3
The 2018 OECD SME Ministerial Conference in Mexico City set the agenda for future work Ministers and high-level representatives from 55 OECD Member and Non- Member countries, the European Union, and 12 international organisations gathered in Mexico City on 22-23 February 2018 at the 3 rd OECD Ministerial Conference on SMEs Building on the two outcome of the preceding Ministerial meetings in Bologna 1, Italy in 2000 and in Istanbul 2, Turkey, in 2004, participants agreed on the OECD Declaration on Strengthening SMEs and Entrepreneurship for Productivity and Inclusive Growth of Mexico City Source: http://www.oecd.org/cfe/smes/ministerial/ 1: Bologna Charter on SME policies; 2: Istanbul Ministerial Declaration on Fostering the Growth of Innovative and internationally competitive SMEs 4
Outline The OECD s work on SME policy Why SME policy matters and key messages from the Ministerial Conference The way forward: an OECD SME Strategy and an SME&E Outlook Upcoming meetings and events 5
SMEs in the OECD area account for about 2/3 of employment and ½ of value added Employment and Value added shares of SMEs in Manufacturing and Services in OECD countries 2014 or latest available year Employment share, % 100 90 80 70 60 50 IRL HUN BRA MEX DEU Manufacturing KOR GRC PRT LVA TUR ITA EST OECD LUX Employment share, % 100 90 80 70 60 50 Services GBR ITA GRC KOR MEX EST AUT OECD 40 USA 40 30 30 20 20 10 10 0 0 10 20 30 40 50 60 70 80 90 100 Value added share, % Source: OECD Small, Medium, Strong, 2017, and OECD Structural and Demographic Business Statistics Database. 0 0 10 20 30 40 50 60 70 80 90 100 Value added share, % 6
SMEs are key to strengthening productivity and delivering more inclusive growth Productivity gap between large firms and smaller SMEs has widened since the crisis Value added at factor cost per person employees, current USD PPP 100 = Large firms (250+ employees) Manufacturing Business services Source: OECD Structural Business Statistics (database), November 2017 7
especially in face of the Mega-trends that are shaping the global economy MEGA TRENDS Globalisation Digitalisation Important effects on productivity and income distribution SMEs can help deliver more inclusive growth The new industrial revolution Changing nature of work Demographic trends Policy should enable SMEs to thrive in a more open environment
The OECD SME Ministerial Conference focused on nine main policy areas Plenaries Parallel sessions Enabling SMEs to scale up Improving the business environment through effective regulation Business transfers as an engine for SME growth Enhancing SME access to diversified financing instruments Developing entrepreneurship competencies Promoting innovation in established SMEs Fostering greater SME participation in a globally integrated economy Strengthening social inclusion through inclusive entrepreneurship Monitoring and evaluation of SMEE programmes Source: http://www.oecd.org/cfe/smes/ministerial/documents/ 9
SMEs that scale up and innovate can have a considerable economic and social impact Young firms are a key driver of job creation Employment, job destruction and job creation by firm size Source: Criscuolo et al. (2014) based on the OECD DynEmp Express database 10
Stronger participation in global markets can strengthen SMEs contributions Structural shift in the international division of labour associated with the rise of global value chains (GVCs). SMEs have new opportunities to participate in global markets: As exporters As suppliers to large firms that export As importers of competitively priced foreign inputs and technologies, specialising in specific segments of production By accessing cheaper and higher quality inputs and capital goods, as well as foreign technologies, products and knowhow SME export activity, value added and employment shares, 2013 Source: OECD Structural and Demographic Business Statistics and Trade by Enterprise Characteristics databases. 11
The G20/OECD Principles on SME Financing can help governments foster access to finance SUPPLY SIDE DEMAND SIDE G20/OECD HL Principles two-pronged approach Strengthening bank lending Diversifying the sources of finance for SMEs Transparency in SME markets Leveraging intangible assets to support access to finance SME financial literacy and strategic vision Increase investor-ready projects Tax treatment of different instruments 12
An effective, transparent regulatory setting is essential for levelling the playing field Barriers to entrepreneurship, 2008 and 2013 Scores from 0 (least restrictive) to 6 (most restrictive) Index 6 Administrative burden on start ups Complexity of regulatory procedures Regulatory protection of incumbents Barriers to entrepreneurship, 2008 5 4 3 2 1 0 Source: OECD Small, Medium, Strong, 2017 and OECD Product Market Regulation Statistics database. 13
Easing business transfer is key to address challenges from demographic trends RISK Problematic business transfer can make economically sound SMEs disappear from the market POLICIES In many OECD countries: Gift and inheritance tax preferences Special financial facilities Measures to develop transparent markets for business transfers OPPORTUNITY Business transfer can allow SMEs to rethink its vision and business model, innovate and seize new opportunities CHALLENGES Raise awareness among entrepreneurs of early succession planning as well as of take-over opportunities Administrative burdens and regulatory complexities Tax burdens when SMEs are sold Lack of appropriate financing opportunity to smooth the transition Scarce evidence base on business transfer trends 14
Entrepreneurship competencies are a key driver of innovation and SME growth Entrepreneurial behaviour is crucial for growth and innovation in firms Competencies can be developed through entrepreneurship education Public policy can play an important role by: A progressive approach to entrepreneur-ship education over the student s lifetime Specialised entrepreneur-ship education training and support for teachers Strengthened business start-up support in vocational and higher education institutions Improved linkages between education institutions and existing business support organisations 15
The contribution of SMEs to innovation has increased in recent decades Shift towards an Open innovation paradigm (thanks also to the digital transition) has reduced the need for innovation-related capital investments SMEs and large firms rely equally on externally developed goods and service innovations Supporting innovation in established SMEs can foster inclusive growth by favouring small business scaling-up, enhancing productivity and reducing wage gaps between SMEs and large companies 16
SMEs and entrepreneurship are important vectors of economic and social inclusion SMEs that generate value added and jobs are an important channel for inclusion and poverty reduction Create job opportunities across geographic areas and sectors Employ broad segments of the labour force, including lowskilled workers Provide opportunities for skills development Allow disadvantaged or marginalised groups, including young people, women, seniors, migrants, ethnic minorities and the disabled to participate in the economy 17
Monitoring and evaluation of SME policies are needed to deliver strong outcomes Needs of policy makers Assess the economic efficiency of SME and entrepreneurship policy actions Inform the design and mix of SME and entrepreneurship policies Instrument Effective monitoring and evaluation Key issues Increasing the application of rigorous evaluation techniques Better specifying policy objectives, targets and indicators Making better use of data, including existing national administrative data sets for purposes such as tax and social security Seizing the potential of Big Data 18
Outline The OECD s work on SME policy Why SME policy matters and key messages from the Ministerial Conference The way forward: an OECD SME Strategy and an SME&E Outlook Upcoming meetings and events 19
An OECD SME strategy would address important policy challenges Why an OECD SME strategy? Because a crosscutting approach is needed to: Identify better policies for SMEs to support inclusive growth Face the Megatrends that are affecting SME contributions and the role of policy Help Governments, that are taking steps but face important challenges The OECD SME Strategy will build on knowledge/experience with designing, implementing and monitoring SME strategies at national and supranational level 20
The building bocks of the strategy will provide considerable value added to policy makers Principles and Conceptual Framework Strategic priorities and mega-trends Evidence base for Measuring & Evaluation OECD SME STRATEGY S BUILDING BLOCKS Guidance and operational tools for implementation 21 Understanding of combined effects of structural reforms
The OECD is working on a new biennial publication, the OECD SME&E Outlook New OECD SME&E Outlook PURPOSE Provide policy makers with recent evidence on SME performance, benchmark business environment across countries and better link SME and Entrepreneurship performance and policies SCOPE Provide OECD countries and G20 with a forward-looking approach on upcoming challenges (productivityinclusiveness nexus, digitalisation, ageing, transition to low-carbon economy etc.) 22
that will require enhanced capacity and international cooperation BUILDING CAPACITY Initiatives Build a Data infrastructure Structure a cross-cutting approach to analyse policies Objectives Leverage the OECD data analysis capacity Leverage the potential of SME-relevant policy activities Launch a targeted policy survey on national SMEE policy initiatives Address our current knowledge gaps Stimulate international cooperation Identify key issues, collecting comparable data, coordinating efforts, sharing best practices 23 23
to address the key issues in SME and entrepreneurship policy Financial context and economic conditions of low demand and low investment for SMEs activities Business sustainability, role of SMEs in green economy and circular economy Key issues under discussion for the first 2018 OECD SME&E Outlook R&D/Innovation impact on productivity, digitalisation and technological change SME networks and SME participation in supply chains SME access to services (especially publiclyfunded services) SME access to skills SME access to alternative sources of funding 24
Outline The OECD s work on SME policy Why SME policy matters and key messages from the Ministerial Conference The way forward: an OECD SME Strategy and an SME&E Outlook Upcoming meetings and events 25
The next session of the WPSMEE will be in Paris in April 2018 The 53 rd session of the OECD Working Party on SME and Entrepreneurship will take place at the OECD on 23-24 April 2018. The agenda will include: A discussion on the outcomes of the 2018 OECD Ministerial Conference on SMEs in Mexico City and the way forward The preparation of the new SME and entrepreneurship outlook flagship publication Thematic discussions on SMEs and digitalisation, country work on Indonesia, the launch of the Financing SMEs and Entrepreneurs 2018 and the implementation of the G20/OECD High Level Principles on SME Financing Discussion about the next PWB and a potential OECD strategy for SMEs Presentation of country experiences by The Netherlands, Egypt and Belgium YOU ARE ALL VERY WELCOME TO JOIN US! 26
THANK YOU! MIRIAM.KOREEN@OECD.ORG 27