Small enterprises and local economic development policies in Croatia

1
Small enterprises and local economic development
policies in Croatia

• Slavica Singer
• CEPOR

2
Problems in Croatia

• low competitiveness
• unemployment
• low entrepreneurial activity
• shortage of companies with growth potential
• low productivity
• centralized public administration
• regional development imbalance

3
Low competitiveness (1)

• Growth competitiveness Index
• Croatia 58/80 rank
• Italy 39/80
• Economic growth, long term
• technology
• public institutions
• macroeconomic environment

4
Low productivity (2)

• Microeconomic competitiveness Indeks
• Croatia 52/80 rank
• Italy 24/80
• Sustainable productivity level
• Business operations and enterprise strategy
• National business environment qualitys

5
Our reality

• Low entrepreneurial activity
• (TEA index)
• Insufficient number of businesses with a growth
  potential, inovative businesses
• (FEA indeks)
• Profitability of SMEs is under average

6
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.)



7
Growth businesses
of employed in growth businesses World
12.3 vs. Croatia 4.50 (39.)
Italy 13.21 (18) Slovenia 17.1
(7.)



8
Innovative businesses?

• 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

9
Entrepreneurs profile

• 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
  knowledge
• TEA 11.96 TEA
  0.21

10
Causes

• not enough knowledge and skills for
  entrepreneurship
• uncoordinated government policies
• administrative barriers
• financial market is not developed

11
Obstacles in entrepreneurship development

• Education
• Government policies/programmes
• Culture and social norms

12
Values

• Self-employment desirable career?
• 58 yes
• Entrepreneurs have high social status?
• 48 NO, 28 yes, 24 dont know
• Successful entrepreneurs stories are presented
  through media?
• 48 NO, 40 yes

13
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

14
Small enterprises, big challenge

• SME - dominant structure of economy
• SME - only source of new employment
• employment in big enterprises is halved
• employment in small enterprises has doubled

15
SMEs and regional development
16
Regional imbalances

• TEA 2002 2003
• Zagreb 4.38 4.30
• Istria, Primorje, Gorski Kotar 4.47 3.05
• Dalmatia 3.45 2.43
• Northern Croatia 2.83 1.99
• Lika and Banovina 2.18 1.78
• Slavonija and Baranya 2.11 1.00

17
ibenik-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, Licko-senjska county 2.72

18
ibenik-Knin County - ICE

• Rogoznica 3.07
• Tisno 2.32
• Drni 2.20
• ...
• ibenik 1.43
• Knin 1.36
• Primoten 0.88
• Murter champion, 100 increased value

19
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
  SMEs,
• but tightly connected with
• education for growth and development
• rule of law, compatible with the EU
• cost and price competitiveness
• innovation and technology development
• regional development and clusters
• leadership mindset

20
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 SMEs (38)
• Establish productivity benchmark (39)
• Encourage the export mentality among SMEs
  (40)
• Diminish regional development inequalities
  clusters (41)

21
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 ???

22
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
• ?

23
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
• ?

24
Stimulate the development of the capital market

• Recommendations
• Regulatory framework for business angels and
  social investors
• Stimulate SMEs for usage of equity funds, ESOP,
  IPO...)
• Government plans
• Subsidized financing
• Young
• Women
• Defenders
• Turism
• New ways of financing???

25
Set up an institutional infrastructure to provide
professional services to SMEs

• Recommendations
• An impact analysis of all government and
  international programs to support the development
  of institutional infrastructure for the SMEs
• Elaborate strategy for developing professional
  services markets for SMEs
• Elaborate a map of infrastructure institutions
• To identify market segments
• Certification for consulting services
• Government plans
• Financing development odcenters for
  entrepreneurship, incubators, business areas
• Certification for consulting services (HAMAG)
• Analyses, strategies???

26
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) ???

27
Encourage the export mentality among SMEs

• 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

28
Diminish regional development inequalities
clusterss

• Recommendations
• Clusters
• Government plans
• Clusters

29
Contact

• SME Policy Center - CEPOR
• Trg J.F. Kennedy 7/I
• HR-10000 Zagreb, Croatia
• telephone [phone]
• fax [phone]
• www.cepor.hr
• E-mail cepor_at_zg.htnet.hr