Over the last ten years, SME policy, and more recently policies which promote entrepreneurship, have become important priorities for GCC policymakers as a means to support economic growth and diversification, productivity, innovation and employment.
Most of the economies in the region have implemented reforms and launched public programmes in order to support horizontal and targeted policies aimed at fostering entrepreneurship and creating a more business-friendly environment. These reforms and programmes represent significant investments on the part of GCC leadership.
The economic dynamism inherent in entrepreneurship is generated through an ongoing process of “creative destruction”, a result of a continuing process of entry and exit of business (usually small firms). This process is believed to be an important way to safeguard the long-run viability and competitiveness of national economies. Yet, little is known in the GCC region about the characteristics of this process either at sub-national, national or regional level, and even less empirical evidence has been made available to policymakers, despite regional and national policy initiatives aimed at supporting business creation and providing easier access to credit to entrepreneurs.
The OECD in partnership with Dubai SME, an agency of the Department of Economic Development co-organised this first regional meeting, which is technical in nature, with the following aims:
a) Present and compare level of entrepreneurial activity in the GCC countries;
b) Review tools and measures for SME policy development;
c) Develop awareness and share good practices with regards to evidenced-based policy-making; d) Share good practices developed in OECD economies with regard to data collection (i.e. statistical methods, data armonization) and review current statistical capacities in GCC economies; and
e) Bring together entrepreneurship/SME policy experts and those responsible for producing the pertinent data in National Statistics Offices in order identify the needs of MENA economies for a general measurement framework on entrepreneurship and targeted issues such as access to finance.
Measurement Methodologies and Tools:
At the meeting, the following measurement methods and tools were discussed:
The SME Policy Index
The SME Policy Index is a benchmarking tool that monitors and evaluates progress in implementing the main policy framework for small and medium-sized enterprises. The tool is based on qualitative indicators covering ten critical policy dimensions measuring the framework conditions and targeted policy measures that affect SMEs, benchmarked against international good practice. The methodology, developed in 2006, has been applied to economies in the Western Balkans, Eastern Europe and the Caucuses, and MENA economies in the Mashreq and Maghreb.
The aim of the benchmarking exercise is to benefit governments by:
a) Providing an overview of each country’s performance on small enterprise development.
b) Benchmarking country performance relative to peers in the region.
c) Comparing country progress to previous assessments.
d) Setting priorities to further improve the small enterprise environment, and
e) Providing direction on how to make improvements within each policy dimension by adopting OECD and international good practices.
OECD-Eurostat Entrepreneurship Indicators Programme (EIP)
Since 2006 the OECD Statistical Directorate has been working with Eurostat to develop a joint OECD-Eurostat Entrepreneurship Indicators Programme (EIP). Its objective is to develop internationally comparable data on entrepreneurship. The EIP is a coordinated effort to agree on a policy-relevant, analytical model, build a measurement infrastructure and gather high-quality comparable data. Its current geographical coverage extends to over 23 countries, including emerging economies. The goal of the Programme is to establish a framework of relevant indicators for the study of entrepreneurship and to encourage countries to use the definitions, methodologies and classifications of the framework as much as possible when producing the data.
EIP consists of a combination of a series of indicators aimed at examining the determinants of entrepreneurship and performance of entrepreneurship. It aims to measure, depending on the availability of data, the following:
a) Structural indicators on enterprise population;
b) Entrepreneurial performance;
c) Timely indicators of entrepreneurship; and
d) Entrepreneurial determinants.
OECD Scoreboard on SME and Entrepreneurship Financing Data and Policies
The global financial crisis has once more highlighted that the lack of timely data on SME financing is a critical obstacle for policy makers and stakeholders to design adequate policy responses in this area. To respond to this need, the OECD has developed a project on an OECD Scoreboard on SME and Entrepreneurship Financing Data and Policies. The aim of the scoreboard is to:
a) Improve the understanding of business financing needs and therefore provide a basis for a better informed public discussion
b) Give the suppliers of finance a more comprehensive understanding of their clients’ needs, thus enabling them to design better products and services
c) Facilitate policy makers’ assessments of whether firms’ financing needs are being met and help with evaluating the effectiveness government policies and programmes.
The OECD Scoreboard consists of 14 indicators. Each of the indicators analyses an aspect of SME access to financing and together reveal significant insights into patterns of both the supply and demand sides of SME financing. For example, the indicators help to understand how well SMEs are doing in accessing finance compared to larger firms, and how SMEs are using loans (i.e. to fund current operations or expansion). The indicators examine the credit supply and how access to finance has affected cash flow and SME survival.
The Scoreboard was carried out across 11 countries, namely Canada, Finland, France, Italy, Korea, the Netherlands, New Zealand, Sweden, Switzerland, Thailand and the United States. In 2011-12 the Scoreboard will be improved and extended to other countries. The OECD Scoreboard should give policy makers a tool to assess the real situation of SMEs in terms of access to finance and to judge the effectiveness of their policy responses.
Outcome for the GCC Region:
A first outcome of the meeting could be to introduce a regional process of dialogue and cooperation on SME policy built around the OECD SME policy experience. This will involve the benchmarking of regional experiences against OECD policies and the introduction of a common regional platform for SME policy monitoring and evaluation.
The second outcome, complementary to the first one, will be to launch the EIP and Scoreboard with a pilot set of countries, where statistical capacities could be assessed and matched with policy priorities. In parallel, a series of regional and national capacity building workshops would be held (bringing together policy-makers and statisticians) in order to share good practices in the collection of SME, entrepreneurship and SME financing statistics.
As a further step, a simplified set of indicators would be developed, based on the priorities of the GCC countries. These indicators would be used in order to compare determinants and performance of entrepreneurship in GCC economies and access to finance patterns. If possible, the collected set of statistics would be compared with the dataset already available for OECD and emerging economies participating in both statistical exercises.
The meeting and potentially resulting projects would underline the importance of evidence-based policy-making in the region, and would assist policymakers in the design of effective SME policy measure and in the efficient allocation of public resources towards SME/entrepreneurship. It would build a policy knowledge base, statistical capacities and infrastructure and allow for the evaluation of performance on a regional/international basis. It will also support economic diversification in the region. The regional process would building on effective cooperation and collaboration to support knowledge sharing and economic integration. Furthermore, the tools would allow for a bench mark in terms of policy performance with OECD economies.
About 60 participants from the GCC countries representing SME development agencies, entrepreneurship organizations, chambers of commerce, and statistical bodies attended the 2-day meeting. 7 experts from OECD shared with participants their expert views on the key topics of interests.
Abdul Baset Al Janahi, CEO of Dubai SME, hailed the meeting as a “landmark moment for GCC SME & entrepreneurship development agencies and related bodies to learn, share and advocate for changes back home. And we are honored to have the OECD experts provide the expertise to bring us to the next level. Co-operation and networking is key, hence the theme of “working together, growing together”. SME development is a stake-holder driven activity, with a clear champion played by the SME development agency that brings all interests together. Dubai SME is happy to host and co-organize this historic meeting for the social and economic betterment of all.
This is only the start, as the real work begins after we leave for home. With the continued and kind assistance of OECD, we hope to develop a GCC SME Framework of Co-operation to share best practices for learning and capability Development. This is a passionate journey to develop our countries’ entrepreneurs and SMEs for the good of our economy. Once this GCC SME Co-operation framework is launched, GCC SME agencies can take turns to host the next meeting and bring it to the next level”.
Antonio Fanelli, Deputy Head – Private Sector Development Division, Directorate for Enterprise and Financial Affairs, OECD remarked:
“SME and entrepreneurship are widely recognized as key drivers of employment and economic growth. Effective policy making can foster enterprise creation and growth. However, there are no predetermined formulas securing the success of SME promotion and support policies. To be effective they policies have to be based on strong evidence, they have to respond to the ever changing economic and business environment and they have to pass the test of rigorous evaluation.
The OECD has built up an extensive experience in review SME policies in developed and emerging economies and in distilling good practices and sharing knowledge. This regional meeting of GCC countries is an excellent opportunity to review the actions taken in the region and in the OECD countries in promoting entrepreneurship and enterprise growth, to share experiences and to set the basis for a productive cooperation between the OECD and the GCC countries in the area of SME development”.