Business growth sibenik-toscana, 24.06.2005. Small enterprises and local economic development...

business growth sibenik-toscana, 24.06.2005.

Small enterprises and local economic

development policies in Croatia

Slavica SingerCEPOR


Problems in Croatia: low competitiveness

unemployment

low entrepreneurial activity

shortage of companies with growth potential

low productivity

centralized public administration

regional development imbalance


Low competitiveness (1)Growth competitiveness Index:

Croatia 58/80 rankItaly 39/80

Economic growth, long term: technology public institutions macroeconomic environment


Low productivity (2)

Microeconomic competitiveness Indeks: Croatia 52/80 rankItaly 24/80

Sustainable productivity level:

Business operations and enterprise strategy National business environment qualitys


Low entrepreneurial activity

(TEA index)

Insufficient number of businesses with a growth potential, inovative businesses

(FEA indeks)

Profitability of SME’s is under average

Our reality


Low entrepreneurial activity 2002-2003 average, 41 country

New businesses (TEA)World 9.9 vs. Croatia 3.10 (41.)

Italy 4.60 (23.)

Growth businesses (FEA)World 2.0 vs. Croatia 1.12 (36.)

Italy 2.05 (24.)


Growth businesses

% of employed in growth businesses

World 12.3 vs. Croatia 4.50 (39.) Italy 13.21 (18) Slovenia 17.1 (7.)


•new products? For nobody, 81 %

•competitiveness level? high, even 48 %

•export? only 17 %, more than 50 % of total income prihoda

•more than 20 employees after 5 years? only 5 %

•new technology? no, even 94 %

Innovative businesses?


Men are 2.6 times more entrepreneurs than women

Highest entrepreneurial activity is between years 25 – 34

Knowledge and skills are important:Have knowledge vs Do not have knowledgeTEA 11.96 TEA 0.21

Entrepreneur’s profile


not enough knowledge and skills for entrepreneurship

uncoordinated government policies

administrative barriers

financial market is not developed

Causes


Obstacles in entrepreneurship development

Education

Government policies/programmes

Culture and social norms


Self-employment – desirable career?o 58 % yes

Entrepreneurs have high social status?o 48 % NO, 28 % yes, 24 % don’t know

Successful entrepreneur’s stories are presented through media?o 48 % NO, 40 % yes

Values


Entrepreneur is being born, one can not become entrepreneur? No, education has very important role.

People with RELEVANT knowledge and skills are more likely to use entrepreneurial opportunity – more advantage for national economy

11.96 TEA (with knowledge and skills) vs. 0.21 TEA (without knowledge and skills)

GEM 2003


SME - dominant structure of economy

SME - only source of new employment

employment in big enterprises is halved

employment in small enterprises has doubled

Small enterprises, big challenge


SME’s and regional development

N ov os tvorena vrijednostkod m alih i s redn jih poduzetn ikapo župan ijam a (u m il. kn)

GRAD ZAGREB

PRIMORSKO-GORANSKA

ISTARSKA

ZAGREBAČKA

OSIJEČKO-BARANJSKA

VARAŽDINSKA

SPLITSKO-DALMATINSKA

MEĐIMURSKA

ZADARSKA

KARLOVAČKA

KRAPINSKO-ZAGORSKA

BJELOVARSKO-BILOGORSKA

DUBROVAČKO-NERETVANSKA

KOPRIVNIČKO-KRIŽEVAČKA

SISAČKO-MOSLAVAČKA

ŠIBENSKO-KNINSKA

VUKOVARSKO-SRIJEMSKA

BRODSKO-POSAVSKA

POŽEŠKO-SLAVONSKA

VIROVITIČKO-PODRAVSKA

LIČKO-SENJSKA

14.509

2.902

2.601

2.090

1.363

1.358

1.047

890

760

733

662

616

582

538

494

437

429

357

270

234

69


Regional imbalancesTEA 2002

2003

Zagreb 4.384.30

Istria, Primorje, Gorski Kotar 4.47 3.05

Dalmatia 3.452.43

Northern Croatia 2.831.99

Lika and Banovina 2.181.78

Slavonija and Baranya 2.11 1.00


Šibenik-Knin County GDP per capita (2003.)

2030 USD, Croatia 6385 USD, City of Zagreb 18.843 USD

ICE (intellectual capital effectiveness) 1.58, Croatia 2.28, Ličko-senjska county 2.72


Šibenik-Knin County - ICE Rogoznica 3.07 Tisno 2.32 Drniš 2.20 ...

Šibenik 1.43 Knin 1.36 Primošten 0.88

Murter – champion, 100 % increased value


How to achieve changes? 55 policy recommendations for raising Croatian

competitiveness, National Competitiveness Council, 2004. – accepted by Government

8 of them are directly focused on streghtening SME’s,

but tightly connected with education for growth and developmentrule of law, compatible with the EUcost and price competitivenessinnovation and technology developmentregional development and clustersleadership mindset


8 recommendations Develop an open entrepreneurial culture (#34) Formulate consistent government policies and

instruments to encourage entrepreneurial activity (#35)

Eliminate administrative barriers (#36) Stimulate the development of the capital market

(#37) Set up an institutional infrastructure to provide

professional services to SME’s (#38) Establish productivity benchmark (#39) Encourage the “export mentality” among SME’s

(#40) Diminish regional development inequalities –

clusters (#41)


Develop an open entrepreneurial culture Recommendations

Formal education – TASK FORCE? Student enterprise Student enterprise trade fairs – Zagreb fair Best students business plan

Government plans: Students cooperatives Education ???? Student business plans, student enterprise trade fairs ???


Formulate consistent government policies Recommendations:

Task force to coordinate policies, instruments and programs that encourage entrepreneurial activities in educations, tax, export and financial policy

Government plans: ?


Eliminate administrative barriers Recommendations

Time to register 3 days (20 days 2004., 16 days 2005, 12 days 2006., 8 days 2007., 3 days 2008.)

Number of necessary forms and documents: 5 Number of licences and certificates: 1

Government plans : ?


Stimulate the development of the capital market Recommendations

Regulatory framework for business angels and social investors

Stimulate SME’s for usage of equity funds, ESOP, IPO...)

Government plans Subsidized financing

Young Women Defenders Turism

New ways of financing???


Set up an institutional infrastructure to provide professional services to SME’sRecommendations

An impact analysis of all government and international programs to support the development of institutional infrastructure for the SME’s Elaborate strategy for developing professional services markets

for SME’s Elaborate a map of infrastructure institutions To identify market segments Certification for consulting services

Government plans: Financing development odcenter’s for entrepreneurship,

incubators, business areas Certification for consulting services (HAMAG) Analyses, strategies???


Productivity benchmark Recommendations

Comparative analysis of the material costs, labour costs and profit margins in Croatia and EU

FINA(financial agency) indicators publicly available Stimulating quality certification

Government plans : Subsidizing quality certificates Analysis??? FINA(financial agency) ???


Encourage the “export mentality” among SME’s Recommendations:

Research in foreign market niches Loans for export programs Participation in international trade fairs

Government plans: Loans for export programs Participation in international trade fairs


Diminish regional development inequalities – clusterss Recommendations

Clusters

Government plans: Clusters


Contact SME Policy Center - CEPOR

Trg J.F. Kennedy 7/IHR-10000 Zagreb, Croatiatelephone: +385 1 2305 363fax: +385 1 2345 577www.cepor.hrE-mail: [email protected]

Business growth sibenik-toscana, 24.06.2005. Small enterprises and local economic development...

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