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November 2011

Expert’s opinion Prepared by: Marija Iličković, Deputy director in Directorate for SME development

A “Small Business Act” for Europe “Think Small First” Managing the transition towards a knowledge-based economy is a key challenge for the EU today. Success will ensure a competitive and dynamic economy with more and better jobs and a higher level of social cohesion. Our capacity to build on the growth and innovation potential of small and medium-sized enterprises (SMEs) will therefore not only be a decisive factor for the future prosperity of the EU Member States, but also for the Western Balkan countries. The EU has thus firmly placed the needs of SMEs at the heart of the Lisbon Growth and Jobs Strategy, notably since 2005, with the use of a partnership approach which has already achieved tangible results. Since the signing of the Thessalonica Declaration of June 2003, Montenegro, through the Directorate for SME Development, has participated in the implementation of the European Charter for Small Enterprises, and is one of the initiators of its application in the Western Balkan region. The Act for Small Enterprises (SBA) was politically endorsed by the EU Council of Ministers in December 2008 to ensure the full commitment of the Commission and the Member States, as well as by the Western Balkan countries. This act also ensured that its implementation would be regularly monitored. The “Small Business Act” aims to improve the overall policy approach to entrepreneurship and to irreversibly anchor the “Think Small First” principle in policy-making from regulations to public service. It also aims to promote SMEs’ growth by helping them to tackle the remaining problems which hamper their development. The following 10 principles are at the heart of the SBA: I Create an environment in which entrepreneurs and family businesses can thrive and where entrepreneurship is rewarded II Ensure that honest entrepreneurs who have faced bankruptcy quickly get a second chance III Design rules according to the “Think Small First” principle IV Make public administration responsive to the needs of SMEs V Adapt public policy tools to meet SMEs’ needs: facilitate SMEs’ participation in public procurement and use it to make better State Aid opportunities for SMEs VI Facilitate SMEs’ access to finance and develop a legal and business environment that is supportive to timely payments in commercial transactions VII Help SMEs to benefit more from opportunities offered by the Single Market VIII Promote the upgrading of skills in SMEs along with all forms of innovation IX Enable SMEs to turn environmental challenges into opportunities X Encourage and support SMEs to benefit from growth in markets The report emphasizes that the most developed component in both the enterprise and industrial policies is the SME policy, which is fully in line with other SME policies in the EU. Progress can be reported in the area of enterprise and industrial policy principles. A new development strategy for 2011-2015 for small and medium-sized enterprises (SMEs), prepared in close cooperation with business representatives, was adopted by the Government in January 2011. The action plan for its implementation for the year 2011 was prepared in March and is now monitored by a coordination team that was established for this purpose. In June, the Government adopted a similar strategy which is focused on the promotion of competitiveness at a micro level during the period 2011-2015. This same strategy was previously adopted by the Council for Promotion of Competitiveness. The latter was established in November 2010 and is aimed at coordinating all relevant activities. Further action, particularly the improved coordination of various institutions and the provision of better data on the SME sector, is needed to secure the effectiveness of these strategies

There has been some progress in the area of enterprise and industrial instruments. Montenegro is continuing to participate in the Entrepreneurship and Innovation Program. The Investment and Development Fund has started its funding operations, both directly and via intermediaries, and has also started to assess possible cooperation with international financial institutions. However, it is too early to evaluate the effectiveness of its instruments The coordination of institutional support for SMEs from the Ministry of Economy, from the Directorate for the Development of SMEs (SMEDD, from regional and local centers, from the Chamber of Commerce and from other financial institutions (IDF, micro-credit providers and commercial banks) is developing but still needs to be further strengthened.

In designing and implementing the SME policy, Montenegro is applying the principles of the Small Business Act and is thus participating in the process of monitoring, led by the European Commission and the OECD. In the area of business registration, further progress has been made by implementing the 'Unified Registration of Enterprises' in tax administration. Montenegro is continuing its efforts to promote entrepreneurial education and to strengthen the technological capacity of SMEs, but further work still remains to be done.