SME Promotion
In the wake of structural adjustment programmes and comprehensive external trade liberalisation, competitiveness of small and medium enterprises (SMEs) has deteriorated relatively. Obvious indicators for this lack of competitiveness are for instance products of little attraction and insufficient quality, low productivity, outdated plants and production processes, stagnating sales markets, low level of qualification of the entrepreneur and his staff. Therefore, SMEs need business development services such as information about new markets, technologies or quality standards as well as advice and training in various fields.
Efforts that entrepreneurs may undertake themselves to remedy these deficiencies on the enterprise level will only be successful within limits. In many countries there is no supportive institutional environment that will assist them in their modernisation endeavors in an efficient and competitive way. Existing services offered by private or public providers frequently do not correspond to their needs or they are too expensive. As SMEs are underrepresented in established business associations and their own SME associations are weak and politicized, they are lacking an efficient lobby. Therefore, the creation of an enabling institutional environment for SMEs, including service providers specialised on SMEs as well as competent lobbying organisations, is an important task in SME promotion.
Economic policies as put up by governments usually do not compensate for disadvantages that SMEs have in competition. To the contrary, laws and regulations often represent a burden to SMEs with disproportionate procedures and costs, and thus further diminish the competitiveness of the sector. Taking this target group into account when designing economic and political framework conditions thus has an important leveraging effect on the development opportunities of SMEs.
An example of SMEs in rural areas and centers: Agribusiness enterprises
SME Promotion Interventions
Interventions need to be geared towards strengthening the performance and competitiveness of enterprises. Target groups are medium-sized businesses and small businesses that have a sustainable potential for growth.
Interventions include
Promotion of the sector-political dialogue between SME representatives (e.g. chambers, associations) and the government administration (e.g. ministries) through capacity building on both sides and intensifying the dialogue;
Improvement of framework conditions and the creation of an enabling environment through advice to ministries for industry and economic affairs and other relevant public institutions on the design of economic, legal and institutional frame conditions for the private sector;
Organisational development of SME organisations, thus enabling them to contribute to improved SME competitiveness through enhanced lobbying capability and professional competence;
Facilitating access to business development services through the development of a market for services (BDS). Private and public providers need to offer specifically those services that SME ask for and are willing to pay for. Support for such a market includes networking, role clarification and advice to different protagonists (private service providers, SME promotion agencies, ministries, donors, etc.)
Support of horizontal and vertical cooperation between enterprises, in particular by using cluster and value chain approaches including advice for building up linkages between several SMEs, and between SMEs and large or international enterprises;
Supporting the integration of SMEs into local and regional economies by way of Promotion of the Regional Economy (PRE), approaches including advice to municipalities and the establishment of networks between local and regional political stakeholders
Export promotion for the SME sector through brokering of contacts to German and European importers and of information about quality standards, market trends and participation in fairs;
Management and business consulting on enterprise level through capacity building of local consultants and consulting firms including advice in order to increase efficiency in all enterprise domains such as procurement, production, sales and financing as well as special issues such as joint ventures and privatisation.
Experiences in SME promotion over the last years have shown that an improvement of SME competitiveness cannot be achieved solely on the level of the individual enterprise. What is needed is an approach where interventions target different levels simultaneously: the macro level (stability oriented and enabling economic policy), the meso level (capacity building of private sector organisations, development of support strategies and policies for enterprises) and the micro level (enhancing enterprise performance and their horizontal and vertical integration into a network of linkages and subcontracting relationships). As a consequence, today's SME promotion ties together many different partners simultaneously.
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