SMALLER ENTERPRISES - In an International Conext

Smaller Enterprises in an International Context Small and Medium Enterprises – SMES – the Key Engines of Sustainable Economic and Social Development

Norbert W. Knoll von Dornhoff Guest Authors: Agrawal Arun, India, Beya Donatien Tschidibu, Africa, Crawford Pauline, UK, Kabungulu Emmanuel, Democratic Republic Congo, Juneja Joginda Singh, India, Varela Villegas Rodrigo, Latin America, Yan Lin Zhuo, China

Foreword by Dr. Gian Franco Terenzi, Republic of San Marino Foreword by Prof. Dr. James Omps, USA

INTRODUCTION About this book Considerations, information and recommendations contained in this book aim at the enhancement of doing business of SMEs and Crafts by reforms of national institutions in 182 Countries as monitored by the World Bank and IFC, the identification of future business opportunities for Smaller Enterprises by inclusive sustainable production and trading capacity building and actions by upgrading SME development plans in less developed economies on initiatives of Governments, International Organization (United Nations, European Union), SMEs Supporting NGOs, Chambers of Commerce and other decision makers.

We chose a holistic and three dimensional approach bearing in mind the high complexity of SMEs and Crafts development in different stages of the economies and industries: 1. Factor Driven Economies, 2. Competitive Driven Economies, 3. Innovative Driven Economies and Economies in Transition.

We attempted to integrate and evaluate the findings and recommendations of SMEs- and Crafts- supporting Organizations, based on workshops, international SME conferences, fact finding missions to Countries in Africa, Asia, Europe, South America and USA as well as explanatory briefings with economists, UN and EU

officers in order to facilitate decision making of politicians, investors and entrepreneurs.

1st Dimension ENABLE: BUSINESS ENVIRONMENT: Policy support and regulatory and institutional framework, competiveness and analysis positioning studies, financial and non-financial incentives.

2nd Dimension BUILD: Activating SMEs and Crafts supporting Organizations to organize Training Courses, Workshops, Exhibitions (Igniting Innovation) etc.

3rd Dimension EMPOWER: Best marketing practices, human resources and financial management, access and support of SMEs and Crafts Doing Business with the United Nations (UN Procurement) and to take advantage of SME financing by EU Programs, e.g. COSME and HORIZON. Alternative funding instruments for Small- and Medium Enterprises and Crafts contain an innovative approach to raise funds for more than 500 million formal and informal micro-, small and medium sizes enterprises and sustainable inclusive revenues for SMEs and crafts supporting Organizations.

Being aware that this book aims to recommend International Organizations, Governments, Financial Institutions and Entrepreneurs a „New Architecture for Financing”, it also needs to propose a New Approach for a sustainable and inclusive annual income of SMEs- and Crafts- Supporting Associations, e.g. like in the Republic of Austria based on Social Partnership.

We intend to submit with this book a long term program for raising annual sustainable funds for SMEs and Crafts along with financing for the annual budgets of SMEs and Crafts supporting NGOs in the

forthcoming years, enabling them to effectively realize this Agenda.

That approach is based on two main pillars: 1. Re-distribution of a small part of the VAT and Employer Taxes (and/or comparable taxes), and of future Currency/Finance Transaction Taxes (“Tobin Tax).

Economists have strong arguments to convince decision makers of governments, that tax re-distributions to „Quasi NGOs”, managed by entrepreneurs will be a classic „Pareto Improvement”, as it can be proved that not one tax payer will have any disadvantages and that the positive effects on economic growth and employment will be prevailing and be more efficient than without that tax redistributions 2. Formation of „National SME Foundations for Crises Prevention and Development – SMEDFOUNDS” as Quasi NGOs on a statutory basis in as many Countries as possible.

PART ONE

DEVELOPMENT OF SMALLER ENTERPRISES AN OUTLOOK

Chapter 1

Key Messages of the World Bank These are:

1)

• 600 million jobs are needed in the next 15 years to absorb a growing global workforce.

• Most formal jobs in emerging markets are with small and medium enterprises (SMEs), which also create 4 out of 5 new positions.

• Yet more than 50% of SMEs lack access to finance, which hinders their growth. A key area of work of Financial Institutions will be the improving SMEs’ access to finance and finding innovative solutions to unlock sources of capital.

A World Bank Group study suggests there are between 365-445 million micro, small and medium enterprises (MSMEs) in emerging markets: 25-30 million are formal SMEs; 55-70 million are formal micro enterprises; and 285-345 million are informal enterprises.

There are an estimated 450 million smallholder farming households (representing 2 billion people) relying to various degrees on agricultural production for their livelihoods. They represent the largest client segment by livelihood of those living on less than $2 a day.

Smallholder families2) are not just agricultural producers, they are also consumers who have diverse financial needs, typically earning income from a variety of non-agricultural sources, including labor and off-farm enterprises. Relatively little is known about the financial services needs of smallholder families, and the first step in reaching these clients successfully is to better understand their needs, preferences, aspirations and behaviors.

Overall, approximately 70 percent of all MSMEs in emerging markets lack access to credit. While the gap varies considerably between regions, it’s particularly wide in Africa and Asia. The current credit gap for formal SMEs is estimated to be US$1.2 trillion; the total credit gap for both formal and informal SMEs is as high as US$2.6 trillion.

GOOD NEWS Many governments and international institutions recognized that SMEs and Crafts decisively contribute to GDP-growth and employment. With the programs HORIZON and COSME 2014 to 2020 the European Union3) launched a more than 100 billion EURO budget for Industrial Upgrading, Technical Innovations and strengthening competitiveness of SMEs and Crafts in EU countries and associated non EU economies. Similar programs have been introduced in the BRICS4) countries (Brazil, Russia, India, China, South Africa).

According to a survey conducted by CGAP5) (Consultative Group to Assist the Poor, housed in the WORLD BANK) and The MIX (The Microfinance Information Exchange), international funders committed $31 billion towards financial inclusion projects in 2014, despite competing challenges facing the international development community - including climate change, mass migration, and fragile states.

The 2,235 global projects reported in the survey supported the growth of financial service providers, built capacity at financial institutions, expanded market infrastructure, addressed policy issues, and improved the financial capabilities of low-income people.

Conducted annually since 2008, The CGAP Funders Survey, in partnership with The MIX (Microfinance Information Exchange), is the most comprehensive source of analysis on international funding for microfinance and financial inclusion. The survey tracks

the quantity, purpose, and destination of international commitments to financial inclusion annually and explains how funders are working to bring more of the world’s 2 billion ‘unbanked’ into the formal financial system.

SURVEY FINDINGS

72% of financial inclusion funding came from public sources (development agencies, bilateral institutions and multilateral institutions), while 28% came from private sources (foundations, institutional investors and other donors).

Eastern Europe and Central Asia ($6.28 billion) and South Asia ($2.98 billion) received the most funding.

The Middle East and North Africa was the only region to see an increase in international funding in 2014. Funding increased by 12% in this region.

The largest number of projects (553) were executed in SubSaharan Africa. Digital finance is a central theme for these projects, and grants make up one-third of the $2.87 billion committed to this region.

The majority of international funding commitments take the form of debt ($11.84 billion) and are most commonly used to finance the portfolios of financial service providers ($9 billion).

97 of the 2,235 projects in 2014 aimed to expand digital financial services. Fifty-one of these projects target Sub-Saharan Africa.

These digital finance projects focus on improving operations, strengthening regulation and supervision, and supporting information and transparency.

REFUGEE CRISIS - ECONOMIC IMPACT The recent influx of refugees into Europe is likely to raise economic growth slightly in the short term – mainly in Austria, Germany and Sweden – and could deliver a bigger long-term economic boost to the EU if refugees are well integrated into the job market, according to the International Monetary Fund.6)

The Washington-based organization described the surge in refugees from Syria and other conflict zones as a “humanitarian catastrophe” with important ramifications across the Middle East, Europe and beyond. The number of asylum seekers arriving at EU borders is unparalleled in recent times – in the first 10 months of l year 2015, 995,000 first-time asylum applications were submitted to EU countries, more than twice the number over the same period in 2014, the 50-page report said.

The fund said this is likely to result in a “modest increase in GDP growth” in the short term, due to higher state spending on housing and benefits for asylum seekers, as well as a boost to the job market from the newcomers. Austria, Germany and Sweden, which have been taking in most of the refugees and have low unemployment rates, will see the biggest economic impact.

GDP in the EU as a whole could be lifted by 0.05%, 0.09% and 0.13% in 2015, 2016 and 2017 respectively. The IMF estimates the largest impact in Austria, with GDP rising by 0.5% by 2017, followed by Sweden (0.4%) and Germany (0.3%).

Chapter 2

DENSITY OF SMEs AND GDP Table 1- Density of MSME

Khrystyna Kushnir, Melina Laura Mirmulstein, and Rita Ramalho7), analysts of WORLD BANK/IFC provided an overview of new data on MSME (micro-, small-, and medium enterprises), Country Indicators for 132 economies. Here are the main results: On average, there are 31 MSMEs per 1,000 people across the 132 economies covered. The five countries with the highest formal MSME density are as follows: Brunei, Darussalam (122), Indonesia (100), Paraguay (95), the Czech Republic (85), and Ecuador (84).

Overall, economies with higher income per capita tend to have more formal MSMEs per 1,000 people. This result is in line with data previously presented in the literature. Klapper et al. (2008) find that business density (which includes both MSMEs and large

firms) is positively correlated with income per capita. It is important to note that the analysis presented in this note refers only to correlations and that no causal inferences should therefore be made.

The regional distribution of MSME density is in line with the income level distribution. Consequently, Sub-Saharan Africa and highincome OECD economies are at opposite ends of the spectrum with regard to MSME density. Somewhat surprisingly, Latin America and the Caribbean have more MSMEs per 1,000 people than non-OECD high-income economies. However, once the countries that are heavily dependent on mineral resources (United Arab Emirates, Qatar, Oman, Kuwait, and Saudi Arabia) are excluded from the sample, the MSME density for non-OECD high-income economies is at a similar level to that for Latin America and the Caribbean.

When considering the MSME growth rate from the standpoint of income per capita, high- income economies grew three times slower than low-income economies and five times slower than lower-middle-income economies. This could be explained by the fact that high-income economies start from a higher base, which is why the growth rate appears slower. In fact, even when taking into account differences in income level, economies with lower bases grow at higher rates. Only low-income economies do not follow the pattern of “higher income – slower growth rate” when compared to middle-income economies, which could be because the informal sector absorbs more MSMEs in low-income economies than in upper- and lower-middle-income countries. In the high-income economies, MSMEs are not only denser in the business structure, but also employ a higher percentage of the workforce. In half of the high-income economies covered, formal MSMEs employed at least 45 percent of the workforce, compared to only 27 percent in low-income economies.

Chapter 2

Smaller Enterprises: An Innovative Staircase to Success THE APPROACH SMEs and Crafts supporting Associations shall offer assistance to Government Agencies, Chambers of Commerce and Financial Institutions for the developing a long-term strategic approach to reforms of institutions that constrain doing business and financing, that is, understanding how different instruments can serve their different financing needs at specific stages of the economy and of the life cycle to leverage for SMEs and Crafts the more diversified financial instruments. Recognizing the vital role of women entrepreneurs, experts took the need to work in the reinforcement of the skills of women in the various fields of business training and financing of SMEs. BETTER ACCESS TO FINANCE Economists emphasize the importance of better access to finance for SMEs, they all the same have doubts that standing alone even a wider range of financial instruments would not be enough to achieve in the long run economic growth and sufficient employment. We recommend to develop a “Staircase to Success”, starting with reforms of National Institutions and the reduction of constraints for doing business up to igniting innovations and taking advantage of additional and new business opportunities.

REFORMS OF NATIONAL INSTITUTIONS AND REMOVING OF DEVELOPMENT CONSTRAINTS Since more than 10 years Governments and entrepreneurs can find out and compare in which Countries it is easy to do business and where it is rather difficult. Over the 13 years since their inception,

the Doing Business Reports of the WORLD BANK GROUP8) have become one of the world’s most influential policy publications. They are annual reports on the state of health of economies based on detailed diagnostics not of the relatively more visible features (such as growth) and various macroeconomic parameters (such as the public debt) but of underlying and embedded characteristics—such as the regulatory system, the efficacy of the bureaucracy and the nature of business governance. Other sources of information are e.g. the annual GEM Global Entrepreneurship Monitor9) and the annual WEF -Global Competitiveness Report10): Interviews with thousands of business owners reveal which constraints for SMEs are prevailing.

The following National Institutions that are decisively responsible for doing business need to be monitored and reformed with utmost speed. These are: 1. Starting a Business, 2. Dealing with Construction Permits, 3.

Getting Electricity, 4. Registering Property, 5. Getting Credit, 6.

Protecting Minority Investors, 7. Paying Taxes, 8. Enforcing Contracts, 9. Trading across Boarder, 10. Resolving Insolvency.

The Enterprise Surveys (what businesses experience) of the World Bank Group investigate on a regular basis, which top business environment obstacles SMEs are facing- These are: 1. Electricity, 2. Access to Finance, 3. Political Instability, 4.

Practices of the Informal Sector, 5. Corruption, Crime and disorder, 6. Tax Administration and Tax Rates, 7. Access to Land, 8. Custom and Trade Regulations.

SMEs Supporting Associations shall in future carefully monitor the development of National Institutions and recommend measures to reduce constraints for SMEs doing business.

SMES DEVELOPMENT BY EDUCATION AND TRAINING The purpose of institutions offering education and training for entrepreneurs is to support the establishing of a framework to develop and deliver strategic resources for SMEs and CRAFTS. This will be accomplished by providing and/or fostering: Entrepreneurial Development, Business Growth and Corporate Governance, Knowledge Transfer to include best practices, Innovation through Training, Competitiveness, Providing the Methodologies and Tools to maximize growth and prosperity.

NEW BUSINESS OPPORTUNITIES AND PROMOTION OF INTERNATIONAL TRADING AND INDUSTRIAL CAPACITY BUILDING Humanity will change more in the next 20 years than it has in the previous 300 years. Exponential technologies such as artificial intelligence, combined with advanced robotics, virtual reality, synthetic biology and quantum computing keep accelerating the speed of societal transformation. New emerging markets for SMEs and Crafts are “Green Technologies” (e.g. Cleaning techniques, waste to energy, organic fertilizers, protection of the environment.)

Examples for new Business Opportunities are, to mention some: AUTOMOTIVE Auto Repair & Maintenance Services, BUSINESS SERVICES Advertising/Marketing Services, CHILDREN'S BUSINESSES Personalized Children's Products, FOOD Delivery Services, HEALTHCARE SERVICES, GIFTS & NOVELTIES, HOME IMPROVEMENT Home Staging, MAINTENANCE Blinds Cleaning, and PERSONAL CARE Fitness Businesses.

The Transatlantic Trade and Investment Partnership (TTIP) 11) should create new opportunities in both the United States and the EU. These opportunities will be especially valuable for SMEs, given that trade barriers tend to disproportionately burden smaller firms,

which have fewer resources to overcome them than larger firms.

US and EU negotiators are working to ensure that SMEs are in a position to take full advantage of the opportunities that an agreement would provide.

OUTLOOK We have reasons to be optimistic. Governments are making SMEs a priority, and technology is providing effective new tools that are bringing down the costs of reaching small customers. An AGENDA 2016 to 2021 shall be a “Staircase to Success” to lay the foundation for an environment where SMEs and Crafts can grow to their full potential for creating jobs, particularly for women and younger people in less developed economies, reducing poverty, protect the environment and improving living standards.

Chapter 3

From Entrepreneurship to Entreprenology NEW FINDINGS OF RESEARCHE12) THE ECONOMISTS The popular belief is that entrepreneurship originated from the science of economics alone. A careful reading of the first two authors usually identified as the pioneers of the field – Richard Cantillon (1755) and Jean- Baptiste Say (1803; 1815; 1816; 1839) - reveals that they were interested not only in the economy but also in the managerial aspects of enterprises, business development and business management.

However, it was Joseph Schumpeter who really launched the field of entrepreneurship, by associating it clearly with innovation and opportunities in the realm of business. It always has to do with bringing about a different use of national employ and subjected to new combinations."

(Schumpeter, 1928) If we were to summarize the main economic trends of thought on entrepreneurship, we would probably accept the standpoint of William Baumol (1993), who proposed two categories of entrepreneurs: the entrepreneur-business organizer and entrepreneur-innovator.

THE BEHAVIOURISTS One of the first authors from this group to show an interest in entrepreneurs was Max Weber (1930). He identified the value system as a fundamental element in explaining entrepreneurial behavior. He viewed entrepreneurs as innovators, independent people whose role as business leaders conveyed a source of formal

authority. However, the author who really launched the contribution of the behavioral sciences to entrepreneurship was undoubtedly David C. McClelland. He did not define entrepreneurs in the same way as the rest of the literature. His definition was as follows: An entrepreneur is someone who exercises control over production that is not just for his personal consumption. According to that definition, for example, an executive in a steel-producing unit in the former USSR was an entrepreneur." (McClelland, 1971; see also 1961: 65) According to recent findings of economic research it appears to be of paramount importance for international comparisons of economies and the evaluation and assessment of reforms of given or new institutions that are responsible for the development of SMEs. These are 

Economic Freedom and Ease of Doing (SMEs) Business



Competitiveness and effectiveness of an economy as the main prerequisite for increasing the GDP per capita (PPP) and to reduce poverty.



SME - relevant statistics and entrepreneurship research have breathtakingly improved in the last decade. The main sources of these data and findings are:



Doing Business Reports of the WORLD BANK and the IFC (The International Finance Corporation of the World Bank), investigating the regulations that enhance business activity and those that constrain it. Doing Business presents quantitative indicators on business regulations and the protection of property rights that can be compared across 183 economies from Afghanistan to Zimbabwe and over time.

Regulations affecting 10 stages of the life of a business are measured. The Global Competitiveness Reports, published by the World Economic Forum within the framework of the Global Competitiveness Network. Competitiveness is been defined as

the set of institutions, policies, and factors that determine the level of productivity of a country.

PART TWO

ALTERNATIVE FUNDING INSTRUMENTS

Chapter 4

Range of Finance Instruments ABSTRACT Approach: Applied Economic- and Fiscal Policy on a New Architecture for reducing development obstacles and constraints to SMEs and Crafts in less privileged economies under Pareto-efficient taxation.13) The object of this publication is to provide guidelines for National Governments, Banks and SMEs supporting Associations on how to implement alternative and innovative financial institutions without new burdens for their national budgets. The same time SMEs and Crafts shall be offered better access to finance at favorable conditions and more independence from government support and bankable guarantees for bank loans.

The OECD Report 2015 on SME15) and Entrepreneur Financing drew the following conclusions: 1. Bank lending is the most common source of external finance for many SMEs and entrepreneurs, which are often heavily reliant on traditional debt to fulfill their start-up, cash flow and investment needs. While it is commonly used by small businesses, however, traditional bank finance poses challenges to SMEs, in particular to newer, innovative and fast growing companies, with a higher riskreturn profile.

2. Capital gaps also exist for companies undertaking important transitions in their activities, such as ownership and control changes, as well as for SMEs seeking to de-leverage and improve their capital structures. The long-standing need to strengthen capital structures and to decrease dependence on borrowing has become more urgent, as many firms were obliged to increase

leverage in order to survive the recent economic and financial crisis. Indeed, the problem of SME over-leveraging may have been exacerbated by policy responses to the crisis, which tended to focus on mechanisms that enabled firms to increase their debt (e.g. direct lending, loan guarantees). At the same time, banks in many OECD countries have been contracting their balance sheets in order to meet more rigorous prudential rules.

3. While bank financing will continue to be crucial for the SME sector, there is a broad concern that credit constraints will simply become “the new normal” for SMEs and entrepreneurs. It is therefore necessary to broaden the range of financing instruments available to SMEs and entrepreneurs, in order to enable them to continue to play their role in investment, growth, innovation and employment.

Less developed economies which are still factor driven rather than by competitiveness and innovation, lack sufficient knowledge of business administration and are often constrained by poor technologies utilized and limited access to finance for the expansion of production and trading capacities, thus resulting in obstacles and barriers to SMEs to compete on domestic and international markets.

SMEs supporting organizations are requested to provide guidelines for National Governments, Banks and other financial institutions on how to implement alternative and innovative financial institutions without new burdens for national budgets. The same time SMES and Crafts shall be offered better access to finance at favourable conditions and more independence from government support and bankable guarantees for bank loans.

ASSET BASED FINANCE is a widespread form of finance for SMEs, to monetize the value of specific assets and access working capital under more flexible

terms than they could from conventional lending channels. As firms obtain funding based on the value of specific assets, including accounts receivables, inventory, and machinery.

FACTORING AND LEASING Their diffusion is favored by less stringent requirements, in terms of an efficient legal and judicial system, than traditional and asset-based lending. Factoring and leasing are also broadly diffused across emerging economies, and increasingly so in supply chain arrangements and cross-border activities.

CORPORATE BONDS, SECURITIZED DEBT, COVERED BONDS Banks can access lower-cost funding on capital markets and extend SME lending. In the aftermath of the global crisis, as other traditional financing sources dried up, the potential for a bond market for the larger segment of the SME sector is starting to be recognized by entrepreneurs and investors. At the same time, this remains an area in which lack of knowledge and awareness by entrepreneurs still represents a major barrier to development.

In the wake of the financial crisis, they have come under scrutiny and criticism, as one major driver of risk leveraging and financial instability. Over the last few years, however, it has attracted renewed attention by policy makers and financial authorities, as an important instrument to foster SME lending.

CROWDFUNDING Crowdfunding16) has grown rapidly since the mid of the 2000s, and at an increasing rate over the last few years, although it still represents a very minor share of business financing. While the pace of technological developments has enabled a rapid diffusion of crowdfunding, the regulatory environment has limited a broader adoption, especially for securities-based crowdfunding, which is still not legal in some countries. Hence, in recent years,

crowdfunding has been the object of important regulatory attention in some OECD countries, which have aimed to ease the development of this financing channel, while addressing concerns about transparency and protection of investors HYBRID INSTRUMENTS combine debt and equity features into a single financing vehicle.

These techniques represent an appealing form of finance for firms that are approaching a turning point in their life cycle, when the risks and opportunities of the business are increasing, a capital injection is needed, but they have limited or no access to debt financing or equity, or the owners do not want the dilution of control that would accompany equity finance

Chapter 5

European Union Programs for SMEs

The EU Commission in the past decades has launched various Programs for SME Financing, e.g. HORIZON and COSME17) with a budget of more than 150 Billion EURO from 2014 to 2020. These Programs are not only applicable in EU Countries, but also in many Non-EU Countries. However, sufficient information and practical support of SMEs on how to successfully take advantage of these Programs are in most economies still missing. Moreover, EU Funding needs to be integrated into the national fiscal and financial environment and become an integral part of local financial engineering tools, e.g. in cooperation with banks, national funds, venture capitalists and entrepreneur organizations. Also the European Investment Bank (EIB) offers financial instruments for SMEs, equity financing as well as “Global Loans” worldwide.

EQUITY FINANCE Comprises all financial resources that are provided to the firms in return for an ownership interest, including public instruments, whereby equity shares are traded in some form of stock exchange, and private equity tools, which concern unlisted companies. Equity investors do not receive any security from the investee company and their return is entirely determined by the success of the entrepreneurial venture, particularly in the case of private equity, investors’ direct engagement in the management.

Equity markets are key for companies that seek long-term corporate investment, to sustain innovation, value creation and growth. Equity financing is especially relevant for companies that

have a high risk-return profile, such as new, innovative and high growth firms.

Chapter 6

National and international Foundations for SMEs development and crises prevention SMEDFOUNDS

SMEDFOUNDS shall use small parts of tax revenues (VAT, Finance Transaction Tax, Currency Transaction Tax) for sustainable development of SMEs and Crafts and their financial inclusion. In order to achieve political acceptance it is conditional to prove that such tax revenues are been allocated in accordance with tax optimization criteria, e.g. Pareto optimality. SMEDFOUNDS shall be governed by SME Supporting National Organizations, e-gChambers of Commerce and other Entrepreneur- and International Associations like WUSME.18) FINTECH “FinTech”19),is a contraction of “finance” and “technology”, is defined as the use of technology and innovative business models in financial services. Small and medium sized enterprises (SMEs) are a major, yet often overlooked driver of the world economy.

They account for more than half of the world’s gross domestic product (GDP) and employ almost two-thirds of the global work force. Lending is a major subsector of FinTech Of the total investment in FinTech, 27% has gone into consumer lending and 16% into business lending. 26 Consumer lending companies include Zopa, Lending Club and SoFi, while companies such as OnDeck or MarketInvoice lend primarily to small

businesses. Five key products for funding small businesses can be mentioned: 1. Marketplace (peer-to-peer) lending 2. Merchant and e-commerce finance 3. Invoice finance 4. Supply chain finance 5. Trade finance.

BITCOINS Is a new currency that was created in 2009 by an unknown person using the alias Satoshi Nakamoto20). Transactions are made with no middle men – meaning, no banks! There are no transaction fees and no need to give your real name. More merchants are beginning to accept them: You can buy webhosting services, pizza or even manicures.

Bitcoins can be used to buy merchandise anonymously. In addition, international payments are easy and cheap because bitcoins are not tied to any country or subject to regulation. Small businesses may like them because there are no credit card fees. Some people just buy bitcoins as an investment, hoping that they’ll go up in value.

PART 3

SMALL AND MEDIUM ENTERPRISES (SMEs)– DEFINITION DEVELOPMENT STAGES – BUSINESS CYCLE

Chapter 7

Definitions of SMEs

DEFINITIONS AROUND THE WORLD Small and medium-sized enterprises (SMEs) are non-subsidiary, independent firms which employ fewer than a given number of employees. This number varies across countries. The most frequent upper limit designating an SME is 250 employees, as in the European Union. However, some countries set the limit at 200 employees, while the United States considers SMEs to include firms with fewer than 500 employees.

Small firms are generally those with fewer than 50 employees, while micro-enterprises have at most 10, or in some cases 5, workers.

Financial assets are also used to define SMEs. In the European Union, a new definition came into force on 1 January 2005 applying to all Community acts and funding programmes as well as in the field of State aid where SMEs can be granted higher intensity of national and regional aid than large companies. The new definition provides for an increase in the financial ceilings: the turnover of medium-sized enterprises (50-249 employees) should not exceed EUR 50 million; that of small enterprises (10-49 employees) should not exceed EUR 10 million while that of micro firms (less than 10 employees) should not exceed EUR 2 million. Alternatively, balance sheets for medium, small and micro enterprises should not exceed EUR 43 million, EUR 10 million and EUR 2 million, respectively.

Source Publication: OECD, 2005, OECD SME and Entrepreneurship Outlook: 2005, OECD Paris, page 17.

Small and medium-sized enterprises (SMEs, also small and medium enterprises) or small and medium-sized businesses (SMBs) are businesses whose personnel numbers fall below certain limits. The abbreviation "SME" is used in the European Union and by international organizations such as the World Bank, the United Nations and the World Trade Organization (WTO). Small enterprises outnumber large companies by a wide margin and also employ many more people. SMEs are also said to be responsible for driving innovation and competition in many economic sectors.

China With the SME Promotion Law of China effect in 2003, the new definition of SME came out as well. The new guidelines base on the number of employees, revenue and total assets of enterprises. The SME definition in China is quiet complex. Such as the specific criteria about the total assets of enterprises in industrial sector,

including mining, manufacturing, electric power, gas, water production and supply and construction. However, in the industries like transportation, wholesale and retail business, and hotels and restaurants, there is no assets requirement. Guidelines for the industrial sector requires SMEs to employ a maximum 2,000 people, and to have an annual revenue not exceeding RMB300 million. Their total assets should not exceed RMB 400 million.

Medium-sized enterprises should employ a minimum of 300 people. Their annual revenue and total assets should not exceeding RMB30 million and 40 million respectively. The rest are classified as small enterprises (Details see EXHIBIT 1-1). Consequently, an SME in China may be quite large relative to SMEs in other countries. Therefore, this paper mainly focuses on small enterprises (SEs), including the problems of SE, the survey of SEs, and the recommendations about human resource perspective for SEs. Source: UKESSAYS - https://www.ukessays.com/essays/management/definition-of-sme-inchina-management-essay.php

Egypt Most of Egypt's businesses are small-sized, with 97 percent employing less than 10 workers, according to census data released by state-run statistics body CAPMAS. Medium-sized enterprises with 10 to 50 employees account for around 2.7 percent of total businesses. However, big businesses with over 50 employees account for 0.4 percent of all enterprises nationwide.

The data is part of Egypt's 2012/13 economic census on establishments ranging from small stalls to big enterprises.

Economic activity outside the establishments – like street vendors and farmers, for example – were excluded from the census.

The results show that Egypt is greatly lacking in medium-sized businesses.

Seventy percent of the country's 2.4 million businesses have only one or two employees. But less than 0.1 percent – only 784 businesses – employ between 45 and 49 people.

Ethiopia In Ethiopia there are SME enterprises funded by the government which are becoming sources of work.≤ Kenya In Kenya, the term is MSME stands for "micro, small and medium enterprises". Maximum number of employees = 100.

Micro Enterprises = up to 10 employees Small = 10 to 50 Medium = 50 to 100 turnover= > KShs. 80M Nigeria The Central Bank of Nigeria defines small and medium enterprises in Nigeria according to asset base and number of staff employed.

The criteria are an asset base equal or less than N5 million, and a staff strength equal or less than 100 employees.[citation needed] Somalia In Somalia, the term is SME (for "small, medium and micro enterprises"); elsewhere in Africa, MSME stands for "micro, small and medium enterprises". Maximum number of employees and maximum revenue it generates. in Somalia they define that SME is a small business that has more than 30 employee until 500 employees.

South Africa

In the National Small Business Amendment Act 26 0f 2003,[2] micro-businsses in the different sectors, varying from the manufacturing to the retail sectors, are defined as businesses with five or fewer employees and a turnover of up to R100 000 ZAR. Very small businesses employ between 6 and 20 employees, small businesses employ between 21 and 50 employees. The upper limit for turnover in a small business varies from R1 million in the Agricultural sector to R13 million in the Catering, Accommodation and other Trade sector as well as in the Manufacturing sector, with a maximum of R32 million in the Wholesale Trade sector.

Medium-sized businesses usually employ up to 200 people (100 in the Agricultural sector), and the maximum turnover varies from R5 million in the Agricultural sector to R51 million in the Manufacturing sector and R64 million in the Wholesale Trade, Commercial Agents and Allied Services sector.

A comprehensive definition of an SME in South Africa is therefore any enterprise with one or more of the following characteristics: Fewer than 200 employees Annual turnover of less than R64 million Capital assets of less than R10 million Direct managerial involvement by owners[3] India Under section 7 of the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, the Indian government defined the size of micro, small, and medium enterprises as:[4] (a) in the case of the enterprises engaged in the manufacture of goods pertaining to any industry specified in the First Schedule to the Industries (Development and Regulation) Act, 1951, as—

(i) a micro enterprise, where the investment in plant and machinery does not exceed twenty-five lakh rupees; (ii) a small enterprise, where the investment in plant and machinery is more than twenty-five lakh rupees but does not exceed five crore rupees; or (iii) a medium enterprise, where the investment in plant and machinery is more than five crore rupees but does not exceed ten crore rupees; (b) in the case of the enterprises engaged in providing or rendering of services, as— (i) a micro enterprise, where the investment in equipment does not exceed ten lakh rupees; (ii) a small enterprise, where the investment in equipment is more than ten lakh rupees but does not exceed two crore rupees; or (iii) a medium enterprise, where the investment in equipment is more than two crore rupees but does not exceed five crore rupees.

Businesses that are declared as MSMEs and within specific sectors and criteria can then apply for "priority sector" lending to help with business expenses; banks have annual targets set by the Prime Minister’s Task Force on MSMEs for year-on-year increases of lending to various categories of MSMEs. European Union Small and medium-sized enterprises (SMEs) represent 99% of all businesses in the EU. The definition of an SME is important for access to finance and EU support programmes targeted specifically at these enterprises.

What is an SME? Small and medium-sized enterprises (SMEs) are defined in the EU recommendation 2003/361.

The main factors determining whether an enterprise is an SME are: 1. staff headcount and 2. either turnover or balance sheet total.

Table 2 – EU definition of SMEs or

Company category

Staff headcount

Turnover

Balance sheet total

Medium-sized

< 250

≤ € 50 m

≤ € 43 m

Small

< 50

≤ € 10 m

≤ € 10 m

Micro

< 10

≤€2m

≤€2m

These ceilings apply to the figures for individual firms only. A firm that is part of larger group may need to include staff headcount/turnover/balance sheet data from that group too.

For more details: The revised User Guide to the SME definition (770 kB, available in all EU languages) Declaring your enterprise to be an SME (the form is available in all languages as an annex in the revised User Guide) Use the SME self-assessment questionnaire and determine whether your organization qualifies as a small and medium sized enterprise.

Source: European Commission - http://ec.europa.eu/growth/smes/business-friendlyenvironment/sme-definition_en

Poland The SME sector in Poland generates almost 50% of the GDP, and out of that, for instance, in 2011 micro companies generated 29.6%, small companies 7.7%, and medium companies 10.4% (big companies 24.0%; other entities 16.5%, and revenues from customs duties and taxes generated 11.9%). In 2011 out of the total of 1,784,603 entities operating in Poland, merely 3,189 were classified as "large", so 1,781,414 were micro, small or medium.

Companies of the SMEs sector employed 6.3 million people out of the total of 9.0 million of labour employed in the private sector. In Poland in 2011 was 36.2 SMEs per 1,000 of inhabitants.

United Kingdom In the UK a company is defined as being an SME if it meets two out of three criteria: it has a turnover of less than £25m, it has fewer than 250 employees, it has gross assets of less than £12.5m. Many small and medium-sized businesses form part of the UK's currently growing Mittelstand, as it is also often named.[12] These are businesses in Britain that are not only small or medium but also have a much broader set of values and more elastic definition.

The Department for Business Innovation and Skills estimated that at the start of 2014, 99.3% of UK private sector businesses were SMEs, with their £1.6 trillion annual turnover accounting for 47% of private sector turnover.[ In order to support SMEs, the UK government set a target in 2010 "that 25% of government’s spend, either directly or in supply chains, goes to SMEs by 2015"; it achieved this by 2013.

North America Canada Industry Canada defines a small business as one with fewer than 100 paid employees and a medium-sized business as one with at least 100 and fewer than 500 employees. As of December 2012, there were 1,107,540 employer businesses in Canada, of which 1,087,803 were small. Small businesses make up 98.2 percent of employer businesses, medium-sized businesses make up 1.6 percent of employer businesses and large businesses make up 0.1 percent of employer businesses. In 2012, over 7.7 million employees, or 69.7 percent of the total private labour force, worked for small businesses and 2.2 million employees, or 20.2 percent of the labour force, worked for medium-sized businesses.

In total, SMEs employed about 10 million individuals, or 89.9 percent of employees. Canadian high-growth firms are present in every economic sector and are not just concentrated in knowledgebased industries. In terms of employment, the highest concentrations of high-growth firms in Canada during the 2006– 2009 period were in construction (4.9 percent of all firms); business, building and other support services (4.6 percent); and professional, scientific and technical services (4.5 percent). In 2011, only 10.4 percent of SMEs exported. Nonetheless, they were responsible for $150 billion, or about 41.0 percent, of Canada's total value of exports.[16] Corporations in Canada are generally taxed at 29% federally.

Canadian Controlled private corporations receive a 17% reduction in the tax rate on taxable income from active businesses up to $500,000. This small business deduction is reduced for corporations whose taxable capital exceeding $10M, and is completely eliminated for corporations whose taxable capital exceeds $15M.It has been estimated that almost $2 trillion of Canadian SMEs will be coming up for sale over the next decade which is twice as large as the assets of the top 1,000 Canadian

pension plans and approximately the same size as Canadian annual GDP. United States In the U.S., the definition of an SME varies by industry, based on the North American Industry Classification System (NAICS). NAICS is a system developed by the U.S., Canada, and Mexico to standardize and facilitate the collection and analysis of business statistics.

The U.S. Small Business Administration (SBA) provides a list of small business size standards matched to the NAICS codes.

To be considered a small business and be eligible to apply for government contracts and targeted funding, a business must be within the defined limits in terms of a number of employees or revenue.

In manufacturing, for example, an SME is defined as having 500 employees or less, whereas in wholesale trades it is typically 100 employees or less.

Australia In Australia, a SME has 200 or fewer employees. Microbusinesses have 1–4 employees, small businesses 5–19, medium businesses 20–199, large businesses 200+.[20] Australian SMEs make up 97% of all Australian businesses, produced one third of total GDP, and employ 4.7 million people. SMEs represent 90 per cent of all goods exporters and over 60% of services exporters.[21]

New Zealand In New Zealand, 99% of businesses employ 50 or less staff, and the official definition of a small business is one with 19 or fewer employees.

Source: Wikipedia https://en.wikipedia.org/wiki/Small_and_mediumsized_enterprises

ASIAN COUNTRIES INDIA In accordance with the provision of Micro, Small & Medium Enterprises Development (MSMED) Act, 2006 the Micro, Small and Medium Enterprises (MSME) are classified in two Classes: Manufacturing Enterprises- The enterprises engaged in the manufacture or production of goods pertaining to any industry specified in the first schedule to the industries (Development and regulation) Act, 1951) or employing plant and machinery in the process of value addition to the final product having a distinct name or character or use. The Manufacturing Enterprise are defined in terms of investment in Plant & Machinery.

Service Enterprises: The enterprises engaged in providing or rendering of services and are defined in terms of investment in equipment. The limit for investment in plant and machinery / equipment for manufacturing / service enterprises, as notified, are as under: Manufacturing Sector Micro Enterprises: Does not exceed twenty five lakh rupees

Small Enterprises: More than twenty five lakh rupees but does not exceed five crore rupees Medium Enterprises: More than five crore rupees but does not exceed ten crore rupees CHINA Agency: NDRC (National Development and Reform Commission).

Legal Definition: “Interim Categorizing Criteria on Small and Medium-sized Enterprises (SMEs), published in 2003 and based on the SME Promotion Law of China, sets the guidelines for classifying SMEs. Source 2: LIU Xiangfeng, “SME Development in China: a Policy Perspective on SME Industrial Clustering,” Economic Research Institute for ASEAN and East Asia, Chapter 2, pp. 38-40, http://www.eria.org/research/images/pdf/PDF No.5... (accessed on May 12, 2010).

AFRICAN COUNTRIES KENYA Agency: National Legislature.

Legal Definition: MSME bill 2009.

Interpretation: “In Kenya, the MSME bill 2009 has used 2 criteria to define SMEs in general: Number of people/employees and the company’s annual turnover. For enterprises in the manufacturing sector, the definition takes into account the investment in plant and machinery as well as the registered capital.

Chapter 8

Development Stages of Economies Table 3 – Development stages of economies

Source: The Global Competitiveness Report 2013–2014

While all of the pillars described above will matter to a certain extent for all economies, it is clear that they will affect them in different ways: The best way for Vietnam to improve its

competitiveness is not the same as the best way for Canada to do so. This is because Vietnam and Canada are in different stages of development: as countries move along the development path, wages tend to increase and, in order to sustain this higher income, labor productivity must increase. In line with the economic theory of stages of development, the GCI assumes that, in the first stage, the economy is factor-driven and countries compete based on their factor endowments—primarily unskilled labor and natural resources.

Companies compete on the basis of price and sell basic products or commodities, with their low productivity reflected in low wages.

Maintaining competitiveness at this stage of development hinges primarily on well-functioning public and private institutions (pillar 1), a well-developed infrastructure (pillar 2), a stable macroeconomic environment (pillar 3), and pillars matter to a certain extent for all countries, the relative importance of each one depends on a country’s particular stage of development.

To implement this concept, the pillars are organized into three subindexes, each critical to a particular stage of development. The basic requirements sub- index groups those pillars most critical for countries in the factor-driven stage. The efficiency enhancer’s subindex includes those pillars critical for countries in the efficiencydriven stage. And the innovation and sophistication factors subindex includes the pillars critical to countries in the innovationdriven stage.

The Rostow Model of Development The Rostow Model of Development was created in 1960 by an American, W.W.Rostow. He based the Model, which represents economic development, on 15 countries - most of which were European - and suggested that it was possible for all countries to

break the vicious cycle of poverty and develop through the 5 linear stages that construct his model.

Stage 1: TRADITIONAL SOCIETY - A subsistence economy based on basic agriculture. The outputs are consumed by the producers instead of being exchanged and the only trade that exists is the barter/exchange of items required for living (not done for profit). Agriculture is crucial to daily life and the only industry that exists. The work is very labour intensive as there is very limited technology. Other than the land for food production there is very limited exploitation of raw materials and so the development of other industries and services is also restricted.

Stage 2: PRE-CONDITIONS FOR TAKE-OFF Agriculture starts to become more commercialized as mechanization occurs. Other industries start to emerge, although one will take dominance (this is usually textiles), and resources start to be exploited. TNC's start to invest and this further provokes the development of industries. This investment is known as FDI = Foreign Direct Investment.

Stage 3: TAKE-OFF This stage is characterized by the dominating presence of the multiplier effect - also known as the Model of Cumulative Causation. Industrialisation increases and workers switch from working the land to working in factories thereby kick-starting the process ofurbanisation. Political and social reforms and improvements occur in conjunction with the industrialization.

Infrastructure continues to be developed but growth often remains only in a few regions in the country = growth poles.

Stage 4: DRIVE TO MATURITY Growth becomes self-sustaining as it is now supported by technological innovation. The population continues to grow and rapid urbanization starts to occur. Earlier industries start to decline as manufacturing takes dominance and a wider range of industries develop. Economic growth becomes more evenly distributed throughout the country due to a process of filter through - this occurs via Cumulative Causation.

Stage 5: AGE OF HIGH MASS CONSUMPTION - The initially exploitative industries move elsewhere and any remaining industries shift production to durable consumer goods.

A rapid expansion of tertiary industry occurs.

One of the main shifts that occur as a country moves through the 5 stages of the Rostow Model of Development is within the employment sector and the changes that occur here reflect those that happen within industry.

Criticisms: The model is quite old (created in 1960) and, perhaps, oversimplified. Its age prevents it from taking into account new technologic and scientific advances that have accelerated development.

- It is very Eurocentric and so perhaps reflects Westernization more than it does development as all countries development differently and at different rates.

- The model makes the presumption that all countries start with the same foundations i.e. have the same climate, amount of natural resources and same population size/structure and this is not in fact that case.

- Money is clearly needed for a country to move beyond stage 1 and often, nowadys, this money is provided via international aid.

However, debt repayments often restrict further advancements something which is not taken into account in the model.

- This model is based on the development of countries like the UK. Our development was, arguably, at the expense of others, through colonialism.

- This model underestimates the importance of colonialism in the early development of many of the nations it is based on.

Strengths: - It provides a general path and framework for development and splits this path into 5 stages.

This enables countries to use it as a rough guide to development.

- To some extent all countries can be compared to it.

- It is easy to understand.

- In conjunction with the Demographic Transition Model, it can be used to generate population policies.

Chapter 9

SME Density across the World

Khrystyna Kushnir, Melina Laura Mirmulstein, and Rita Ramalho22), analysts of WORLD BANK/IFC provided an overview of new data on MSME (micro, small, and medium enterprise) Country Indicators for 132 economies. Here are the main results: On average, there are 31 MSMEs per 1,000 people across the 132 economies covered. The five countries with the highest formal MSME density are as follows: Brunei,Darussalam (122), Indonesia (100), Paraguay (95), the Czech Republic (85), and Ecuador (84).

Overall, economies with higher income per capita tend to have more formal MSMEs per 1,000 people. This result is in line with data previously presented in the literature. Klapper et al. (2008) find that business density (which includes both MSMEs and large firms) is positively correlated with income per capita. It is important to note that the analysis presented in this note refers only to correlations and that no causal inferences should therefore be made.

The regional distribution of MSME density is in line with the income level distribution. Consequently, Sub-Saharan Africa and highincome OECD economies are at opposite ends of the spectrum with regard to MSME density. Somewhat surprisingly, Latin America and the Caribbean have more MSMEs per 1,000 people than non-OECD high-income economies. However, once the countries that are heavily dependent on mineral resources (United Arab Emirates, Qatar, Oman, Kuwait, and Saudi Arabia) are excluded from the sample, the MSME density for non-OECD high-income economies is at a similar level to that for Latin America and the Caribbean.

When considering the MSME growth rate from the standpoint of income per capita high- income economies grew three times slower than low-income economies and five times slower than lowermiddle-income economies. This could be explained by the fact that high-income economies start from a higher base, which is why the growth rate appears slower. In fact, even when taking into account differences in income level, economies with lower bases grow at higher rates. Only low-income economies do not follow the pattern of “higher income – slower growth rate” when compared to middleincome economies, which could be because the informal sector absorbs more MSMEs in low-income economies than in upper- and lower-middle-income countries. In the high-income economies, MSMEs are not only denser in the business structure, but also employ a higher percentage of the workforce. In half of the highincome economies covered, formal MSMEs employed at least 45

percent of the workforce, compared to only 27 percent in lowincome economies.

Chapter 10

Entrepreneurship and Business (GDP) Cycles

The Koellinger- Thurik Study23) shows that the business ownership rate positively influences the GDP cycle.

These are the conclusions:

The data reject the null hypothesis that the share of entrepreneurs in the population is independent of the cycle.

The results on the link between the entrepreneurship and the business cycle correspond to the two faces of entrepreneurship: Entrepreneurs are agents of change and economic development, in a Schumpeterian sense: Many business owners perform only marginal activities The prevalence of the former effect at the level of the world economy suggests an important and much overlooked function of entrepreneurship in the recovery from recessions.24)

Chapter 11

Limitations of VAT and other Taxes

SMEFOUNDS shall use small parts of tax revenues (VAT, Finance Transaction Tax, Currency Transaction Tax) for sustainable development of SMEs and Crafts and their financial inclusion. In order to achieve political acceptance it is conditional to prove that such tax revenues are been allocated in accordance with tax optimization criteria, e.g. Pareto optimality.

Pareto efficiency is a state of allocation of resources in which it is impossible to make any one individual better off without making at least one individual worse off. The term is named after Vilfredo Pareto (1848–1923)25), an Italian economist who used the concept in his studies of economic efficiency and income distribution. The concept has applications in academic fields such as economics, engineering, and the life sciences.

Given an initial allocation of goods among a set of individuals, a change to a different allocation that makes at least one individual better off without making any other individual worse off is called a Pareto improvement. An allocation is defined as "Pareto efficient" or "Pareto optimal" when no further Pareto improvements can be made.

Pareto efficiency is a minimal notion of efficiency and does not necessarily result in a socially desirable distribution of resources: it makes no statement about equality, or the overall well-being of a society.The notion of Pareto efficiency can also be applied to the selection of alternatives in engineering and similar fields. Each option is first assessed under multiple criteria and then a subset of options is identified with the property that no other option can categorically outperform any of its members.26) A VAT, like most taxes, distorts what would have happened without it. Because the price for someone rises, the quantity of goods

traded decreases. Correspondingly, some people are worse off by more than the government is made better off by tax income. That is, more is lost due to supply and demand shifts than is gained in tax. If the "deadweight loss" income lost by the economy is greater than the government's income; the tax is inefficient. It must be noted that a VAT and a Non-VAT has the same implications on the micro-economic model.

The entire amount of the government's income (the tax revenue) may not be a dead-weight drag, if the tax revenue is used for productive spending or has positive externalities – in other words, governments may do more than simply consume the tax income.

While distortions occur, consumption taxes like VAT are often considered superior because they distort incentives to invest, save and work less than most other types of taxation – in other words, a VAT discourages consumption rather than production.

Deadweight loss: the area of the triangle formed by the tax income box, the original supply curve, and the demand curve · Governments tax income: the grey rectangle that says "tax revenue" · Total consumer surplus after the shift: the green area · Total producer surplus after the shift: the yellow area

GRAPH: VAT LIMITATION

Chapter 12

Obstacles to SMEs Development

This is an example for obstacles of SME development in Ethiopia compared to Sub-Saharan Africa. You can make your own survey with all Countries of the world, except "Innovative Driven Countries", e.g. West-European Countries, USA, Japan.

WORLD BANK GROUP – ENTERPRISE SURVEYS METHODOLOGY An Enterprise Survey27) is a firm-level survey of a representative sample of an economy's private sector. The surveys cover a broad range of business environment topics including access to finance, corruption, infrastructure, crime, competition, and performance measures.

Firm-level surveys have been conducted since the 1990's by different units within the World Bank. Since 2005-06, most data

collection efforts have been centralized within the Enterprise Analysis Unit. Earlier data from differing survey instruments have been matched to an older standard instrument for dissemination on the website. The raw individual country datasets, aggregated datasets (across countries and years), panel datasets, and all relevant survey documentation are publicly available. All surveys have country-specific questions; therefore the aggregated dataset across countries does not include these country-specific questions.

WHO IS SURVEYED The Enterprise Survey is answered by business owners and top managers. Sometimes the survey respondent calls company accountants and human resource managers into the interview to answer questions in the sales and labor sections of the survey.

Typically 1200-1800 interviews are conducted in larger economies, 360 interviews are conducted in medium-sized economies, and for smaller economies, 150 interviews take place. The Sampling Note provides the rationale for these sample sizes.

The manufacturing and services sectors are the primary business sectors of interest. This corresponds to firms classified with ISIC codes 15-37, 45, 50-52, 55, 60-64, and 72 (ISIC Rev.3.1). Formal (registered) companies with 5 or more employees are targeted for interview. Services firms include construction, retail, wholesale, hotels, restaurants, transport, storage, communications, and IT. Firms with 100% government/state ownership are not eligible to participate in an Enterprise Survey. Occasionally, for a few surveyed countries, other sectors are included in the companies surveyed such as education or health-related businesses. In each country, businesses in the cities/regions of major economic activity are interviewed.

In this chapter we shall focus on SMEs development concerns which the proposed SMEDFOUNDS will be able to alleviate. Though it is

useful to be aware of all main constraints to SMEs development, we shall concentrate on the details of the following concerns of SMEs in the selected stages of economies: 

Main constraints



Access to finance



CorruptionPractices of the Informal Sector

ADDITIONAL NOTES Most surveys were administered using the Enterprise Surveys Global Methodology as outlined in the Methodology page, while some others did not strictly adhere to the Enterprise Surveys Global Methodology. For example, for surveys which do not follow the Global Methodology, the Universe under consideration may have consisted of only manufacturing firms or the questionnaire used may have been different from the standard global questionnaire. Data users should exercise caution when comparing raw data and point estimates between surveys that did and did not adhere to the Enterprise Surveys Global Methodology. For surveys which did not adhere to the Global Methodology plus Afghanistan 2008, any inference from one of these surveys is representative only for the data sample itself.

Regional and "all countries" averages of indicators are computed by taking a simple average of country-level point estimates. For each economy, only the latest available year of survey data is used in this computation. Only surveys, posted during the years 20092015, and adhering to the Enterprise Surveys Global Methodology are used to compute these regional and "all countries" averages.

Descriptions of firm subgroup levels, e.g. how the ex post groupings are constructed, are provided in the Indicator Descriptions (PDF, 710KB) document.

Statistics derived from less than or equal to five firms are displayed with an "n.a." to maintain confidentiality and should be distinguished from ".." which indicates missing values.

Chapter 13

GOVERNMENT SPENDING FISCAL ECONOMIC GROWTH SPENDING Government spending in most countries in the world fails to contribute to economic growth in a „Pareto-optimum fashion”. We can conclude that tax yields from VAT and FTT, transferred to SMEDFOUNDS independent from Governments and invested by economic experts for SME development and crises prevention would significantly enhance GDP growth and improve social developments.

The Heritage Foundation28) in various studies concluded as follows: A growing government is contrary to a Country’s economic interests because the various methods of financing government— taxes, borrowing, and printing money—have harmful effects. This is also true because government spending by its very nature is often economically destructive, regardless of how it is financed. We have summarized arguments why part of tax yields, e.g. from the VAT should from economic reasons should be transferred to private sector institutions: • The extraction cost. Government spending requires costly financing choices. The federal government cannot spend money without first taking that money from someone. All of the options used to finance government spending have adverse consequences.

• The displacement cost. Government spending displaces privatesector activity. Every currency unit (cu) that the government spends means one less cu in the productive sector of the economy.

This dampens growth since economic forces guide the allocation of resources in the private sector.

• The negative multiplier cost. Government spending finances harmful intervention. Portions of the national budget are used to finance activities that generate a distinctly negative effect on economic activity. For instance, many regulatory agencies have comparatively small budgets, but they impose large costs on the economy’s productive sector.

• The behavioral subsidy cost. Government spending encourages destructive choices. Many government programs subsidize economically undesirable decisions. Welfare encourages people to choose leisure. Unemployment insurance programs provide an incentive to remain unemployed.

• The behavioral penalty cost. Government spending discourages productive choices. Government programs often discourage economically desirable decisions. Saving is important to help provide capital for new investment, yet the incentive to save has been undermined by government programs that subsidize retirement, housing, and education.

• The market distortion cost. Government spending hinders resource allocation. Competitive markets determine prices in a process that ensures the most efficient allocation of resources.

However, in both health care and education, government subsidies to reduce out-of-pocket expenses have created a “third-party payer” problem.

• The inefficiency cost. Government spending is a less effective way to deliver services. Government directly provides many services and activities such as education, airports, and postal operations.

However, there is considerable evidence that the private sector could provide these important services at higher quality and lower costs.

• The stagnation cost. Government spending inhibits innovation.

Because of competition and the desire to increase income and wealth, individuals and entities in the private sector constantly

search for new options and opportunities. Government programs, however, are inherently inflexible.

PART THREE

SME FOUNDATIONS FOR CRISES PREVENTION AND DEVELOPMENT SMEDFOUNDS

Chapter 14

Foundations A foundation29) (also a charitable foundation) is a legal categorization of non-profit organizations that will typically either donate funds and support to other organizations, or provide the source of funding for its own charitable purposes.

We recommend that WUSME World Union of Small and Medium Enterprises (in Special Consultative Status at United Nations Economic and Social Council - ECOSOC)30) shall start with the registration of an INTERNATIONAL FOUNDATION DEVELOPMENT – IFSMED.

FOR

SMEs

AND

CRAFTs

IFSMEF shall be registered in the Republic of San Marino as a WUSME AGENCY in accordance with WUSME’s Articles of Association. Beneficiaries shall be Employer Organizations, e.g.

Chamber of Commerce in San Marino, Employee Organizations and National Foundations (SMEDFOUNDS).

IFSMED shall have three main DESKS: I. FINANCE SUPPORT DESK II. BUSINESS SERVICE DESK III. INTERNATIONAL LIAISON DESK More DESKS could be created if seen fit.

The FINANCE SUPPORT DESK shall function as a “Bridge” between Beneficiaries and particularly (but not only) the following alternative Financial Instruments: 1. MICRO FINANCING FOR SMALLHOLDERS 2. FINTECH  Marketplace (peer-to-peer) lending  Merchant and e-commerce finance  Invoice finance  Supply chain finance Trade finance.

3. CROWDFUNDING 4. HYBRID INSTRUMENTS 5. EUROPEAN UNION, ASIAN, AFRICAN, LATIN PROGRAMS FOR SMEs AND CRAFTS FUNDING

AMERICAN

6. BITCOIN Transactions without banking fees.

Note: For details see the ‘Position Paper” on “A New Architecture for SME and Entrepreneurship Financing” - Completing the Range of Instruments.

The BUSINESS SERVICE DESK shall offer particularly (but not only) the following services: 1. Business Plan Assistance 2. EU Tender Assistance 3. Business Administration: Courses and Webinars

In cooperation with the WUSME CSMED Committee and The IUE International University of Entreprenology The INTERNATIONAL LIAISON DESK Permanent liaison with the IFSMED and other SMEDFOUNDS. FEE ORDER IFSMED and SMEDFOUNDS as Non-For-Profit Organizations shall calculate their service fees on cost basis only. Beneficiaries shall receive cost contributions. Approx. 10% of the annual budget of SMEDFOUNDS shall be transferred to the Foundation Headquarters IFSMED.

Chapter 15

FINANCING OF THE FOUNDATIONS

Source: Norbert W. Knoll von Dornhoff - Statement of the WUSME General Secretary at the 4th General Assembly, April 201631)

BASIC SUSTAINABLE FINANCING OF IFSMED and SMEDFOUNDS need a sustainable annual income for providing efficient services for the beneficiaries. Sources of funding shall be: 1. 0,5% to 1% of the VAT and Employer Tax revenues of a Member Country, 2. Alternatively and/or in addition 0,05% of a Currency Transaction Levy (CTL), 3. Donations of other Entrepreneur Organizations and Charity Foundations.

Note: SMEFOUNDS shall use small parts of tax revenues32) (VAT, Employer Tax, Finance Transaction Tax, Currency Transaction Tax)

for sustainable development of SMEs and Crafts and their financial inclusion. In order to achieve political acceptance it is conditional to prove that such tax revenues are been allocated in accordance

with tax optimization criteria, e.g. Pareto optimality. A VAT, like most taxes, distorts what would have happened without it. Because the price for someone rises, the quantity of goods traded decreases. Correspondingly, some people are worse off by more than the government is made better off by tax income. That is, more is lost due to supply and demand shifts than is gained in tax.

This is known as a dead-weight loss. If the income lost by the economy is greater than the government's income; the tax is inefficient. It must be noted that a VAT and a Non-VAT has the same implications on the micro-economic model.

PART FOUR

NEW BUSINESS OPPORTUNITIES FOR SMEs AND CRAFTS

Chapter 16

SMEs AND VALUE CHAINS BIG COMPANIES: PARTNERS OR COMPETITORS OF SMEs AND CRAFTS?

Little doubt: Big companies have easier access to finance than SMEs. Given trade barriers tend to disproportionately burden smaller firms, which have fewer resources to overcome than large firms. Many small business owners see large businesses exclusively in competitive terms. A small plastics manufacturer will view larger firms engaged in the same industry sector as competition, and many large firms continue to prefer to simply swallow up smaller enterprises via acquisition.

With the emerging big supermarkets thousands of small shops in Europe closed down as they were no more competitive. Meanwhile many of them have established “Shops in the Shop” or are permanent suppliers of value chains. We deem is worth to find out if powerful competitors could become better partners – foes or friends -for SMEs and Crafts in the mutual interest. Do Value Chains33) open in future new business opportunities for smaller companies, and what is needed to reach this aim?

DO LARGER BUSINESSESS BENEFIT FROM SMEs? Susan Bowen, Chief of Staff, Hewlett34) stated in her recent article “SMEs and big companies – friends or foes?”: Larger businesses understand the benefits of having SMEs as their suppliers. Within the IT and technology sector, SMEs often provide niche solutions which help in the design of complex infrastructure and application solutions. SMEs also often bring expertise and experience in new

methods and solutions and can provide a local solution which complements a global provider.

SMEs can also benefit from cooperating with bigger companies.

Being involved in bigger contracts which they may not be able to bid for in their own right is an obvious and immediate benefit.

Bigger companies provide a broader range of resources and experience. Susan Bowen believes “that larger companies need to be more structured in their interactions with SME partners rather than just managing each as a single transaction. But it doesn’t just happen by chance!”. This is why HP established a Small Business Office (SBO) to build SME relationships, simplify terms and conditions, and provide more information to SMEs with a view to, ultimately, driving up the amount of work and innovation from our SME suppliers. HP has a number of complementary programs which make it easier to do business with HP and reward partners for growing with HP, and a program to support the startup entrepreneurial community.

Successful large companies are well advised to secure the partnership with SMEs. This has little to do with social responsibility, but with good business. Smaller businesses are simply more flexible in the development of innovative products and services. The local market knowledge of SMEs are of course extremely valuable for large companies that want to establish themselves on new markets.

Chapter 17

Big + Small = Tall – Keys to Successful Partnerships with Larger Companies Following are several tips (by Inc. 2016 Mansueto Ventures LLC) 35) that entrepreneurs should consider when negotiating and maintaining a partnership with a larger company: RESEARCH Entrepreneurs should make sure that they undertake diligent research so that they can best assure themselves of finding the right partner, for not every partnership yields happy results; illconceived partnerships can leave a company in worse shape than before. Typically, however, warning signs will be there for the small business owner who takes the time to look.

Fundamentally sound business practices Entrepreneurs hoping to secure a partner to bankroll their R&D efforts or market their products are wasting their time if they do not have a viable business already in place. If the small company's business practices are shoddy, disorganized, or incomplete, large companies will be sure to notice.

Recognition of own responsibilities Entrepreneurial companies can reap many benefits from partnering with large firms, but they need to recognize that those big companies are for-profit enterprises; they expect something in return for their financial, marketing, and/or management help.

Monitor requirements of successful partnership Many partnerships with larger companies require entrepreneurs to make a greater commitment to their business in order to meet the

obligations and conditions explicated in the partnership agreement.

If the entrepreneur in question launched his or her business for the express purpose of realizing greater personal wealth or establishing a significant presence in a given industry, finding the desire to meet those partnership obligations should not be a problem. If, however, the entrepreneur launched his or her venture in order to stake out a lifestyle of independence and travel, that person may want to weigh the sort of impact that the partnership could have on those aspects of his or her life.

Do not be intimidated The trappings of the corporate world (high-rise buildings, cavernous conference rooms, legions of blue suits, etc.) can be intimidating, but small business owners have to remember that they run viable businesses of value themselves, and they should negotiate accordingly.

Maintain independence Autonomy is assured if you maintain ownership, so be leery of turning over too much equity in the business in exchange for financial help.

Establish clear and open lines of communication Good communication practices are essential to all business relationships, both internal and external, and alliances with large companies are no exception.

Chapter 18

HEALTH CARE: CHALLANGES FOR SMEs

Among the various economic policy options here, those geared to attaining higher levels of efficiency in the provision of health services are particularly appropriate, and less politically controversial. This is because, by definition, they would contribute to containing public spending (using fewer resources) while maintaining the same output and quality of the services. The alternatives that may give rise to improved efficiency in the provision of healthc The alternatives that may give rise to improved efficiency in the provision of healthcare services are potentially very diverse.

Among them, the existing literature emphasizes the role played by health policies and institutions, including aspects such as the degree of public coverage, its financing, the public or private nature of the provision of healthcare services or the administrative or territorial organization of the system.

While we discovered in recent publications a plethora of recommendations for improving the efficiency of public spending, the important role of the private sector, particularly of the millions

of Small and Medium Enterprises (SMEs) that are worldwide engaged in various forms of heath care, has up to date been barely analyzed and is still waiting for thorough considerations and practical actions.

This article attempts to inform in brevity SME Supporting Associations about the dimension and scope of heath care expenditures and possible actions to improve efficiency of

allocation by stronger and coordinated integration of SMEs in national and international health care systems.

THE DIMENSION OF HEALTH CARE EXPENDITURES Total health expenditure is the sum of public and private health expenditures as a ratio of total population. It covers the provision of health services (preventive and curative), family planning activities, nutrition activities, and emergency aid designated for health but does not include provision of water and sanitation. Data are in current U.S. dollars.

World Health Organization Global Health Expenditure database 35) Total global expenditure for health US$ 6.5 trillion Total global expenditure for health per person per year US$ 948 Country with highest total spending per person per year on health United States (US$ 8362) Country with lowest total spending per person per year on health Eritrea (US$ 12) Country with highest government spending per person per year on health Luxembourg (US$ 6906) Country with lowest government spending per person per year on health Myanmar (US$ 2) Country with highest annual out-of-pocket household spending on health Switzerland (US$ 2412)

Country with lowest annual out-of-pocket household spending on health Kiribati (US$ 0.2) Average amount spent per person per year on health in countries belonging to the Organization for Economic Co-operation and Development (OECD) US$ 4380 Percentage of the world's population living in OECD countries 18% Percentage of the world's total financial resources devoted to health currently spent in OECD countries 84% WHO estimate of minimum spending per person per year needed to provide basic, life-saving services US$ 44 Number of WHO Member States where health spending – including spending by government, households and the private sector and funds provided by external donors – is lower than US$ 50 per person per year 34 Number of WHO Member States where health spending is lower than US$ 20 per person per year 7 Percentage of funds spent on health in WHO's Africa Region that has been provided by donors 11% WHAT WHO IS DOING IN THE AREA OF HEALTH SYSTEMS FINANCING WHO works with countries to devise ways of raising more funds for health equitably, to use the available funds efficiently, and to monitor the use of funds. It works with the international community to try to raise more, and more predictable funds for health. Many countries need to use available funds more efficiently and raise more funds from domestic sources, but these measures would be insufficient to fill the current gap in the poorest countries.

Only an increased and predictable flow of donor funding will allow them to meet basic health needs in the short to medium term.

As a consequence of the trend of increasing demand of health care services and supply factors related with the impact of technological change (IMF 2010), health care expenditure in recent decades has grown very significantly in most countries from 6% of GDP in 1970 to around 14% of GDP in 2010. This trend might continue in the future and even become more significant due among other reasons to the population ageing. Apart from Luxembourg, health spending grew more quickly than GDP since 2000 resulting in a higher share of GDP allocated to health. In 2009, OECD countries devoted 9.6% of their GDP to health spending, a sharp increase from 8.8% in 2008, following the recession that started in many countries in 2008 and became widespread in 2009. The rise in the health spending share of GDP was particularly marked in Ireland, where the percentage of GDP devoted to health increased from 7.7% in 2007 to 9.5% in 2009, and in the United Kingdom, where it rose from 8.4% in 2007 to 9.8% in 2009.

The fast-growing economies of China and India spent on health 4.6% and 4.2% of their GDP respectively in 2009, while South Africa and Brazil allocated 8.5% and 9.0% of GDP to health. The share of public expenditure on health to GDP also varies among OECD countries from a high of 9.8% in Denmark to a low of 3.1% in Mexico.

Since 2000, after an initial period of growth in the health spending to GDP ratio, there was a period of relative stability until 2009. The subsequent reduction in GDP, due to the economic downturn, has led to rises in the health spending to GDP ratios. Previous recessions show that, in many countries, the health spending share of GDP has tended to go up strongly during periods of economic downturn, and then stabilize or go down only slightly during periods of economic growth.

HEALTH CARE AND SMEs: BIG CHALLENGES IN THE FUTURE “The contribution of health to economic development is considered to be high. Studies that have been made in the UK show that 30% of economic growth can be related to improved health and some scientists believe that the improved health of the population has a greater impact on the economic growth than education. It is estimated that today about 30-40% of the value making is due to improved health. Comparisons between countries has shown that if age increases by one year it is equivalent to 4% growth in GDP and in countries where incomes are high 10% fewer deaths from cardiovascular disease led to a 1% increase in GDP.”, wrote Örn Thorvardarson36), one of the leading health economists of Iceland, Reykjavik, in his article “HEALTH AND ECONOMY” of 2011.

According to Espicom’s June 2010 report 1 „The global market for medical equipment and supplies is valued at US$245.6 billion in 2010, equal to just over US$44 per capita. The CAGR (Compound Annual Growth Rate) for the 2006-2010 periods is 5.3%, although this masks the major reduction in growth which has occurred in 2009 and 2010.”

The Georgia State University in a study of 2009 estimated that since the end of World War II more than 50% of all innovations and even 95% of all „radical” innovations , e.g. in electronics, medicine techniques and genetic engineering originated from single inventors and SMEs. Recent publications, more specifically focusing on the medical device industry, confirmed that most novel technologies are a central part of the solutions offered by SMEs rather that by multinationals. A survey of 12 National Industry Associations (including all the major medical technology exporters) across Europe has identified almost 7,000 SMEs that design and manufacture medical devices and diagnostic products. Of these: 3702 companies employ fewer than 10 employees (micro), 1940 companies employ 10–50 employees (small), 1187 companies employ 50–250 employees (medium).

Regarding new products in the biotech, SMEs traditionally play a crucial role. Because of their quick adaptability, ability to identify market niches and considerable innovative potential, these firms form an important component of the healthcare industry worldwide. Accounting for more than 50% of all pipeline products, they have a significant role in the future of the healthcare industry.

Analysis of more than 4,000 products in the pipeline reveals that 56% are being developed by small businesses.

CONCLUSIONS AND RECOMMENDATIONS FOR

37)

• At national level, Member States need to improve the business environment, especially for innovative SMEs. This includes public sector procurement initiatives to promote innovation incentives, enhancing the conditions for greater enforcement intellectual property rights, and reducing the administrative burden on companies.

• If purchasing procedures are more predictable, SMEs can make better informed assessments of the risks they face in doing business. The ability to correctly interpret this environment is what allows a business to assess its competitiveness and provides the premise on which it will operate successfully.

• SME-relevant research: Promoting innovation by strengthening the links between Academia and industry is the driving force of this work programme. Broad, SME-targeted topics (almost 50 % of all topics) are set out in areas of great interest to SMEs, such as medical technologies, and where, for each project, a minimum of 15%, 30% or 50% of national and international (WHO, EU, IFC – World Bank etc) funding must go to SMEs. SMEs are encouraged via specific conditions for several topics to take a leading role in projects to foster innovation in health research.

• SMEs – Supporting Member Associations shall be encouraged to take stock of the number and scope of SMEs involved in health care

services in their region and elaborate projects ready for funding by the International Organizations.

Regional SMEs – supporting Associations shall urge Governments in their region to introduce the „Currency Transaction Levy” („Tobin Tax”38)). Part of the proceeds whereof shall be used for crises prevention, improvement of the business environment of SMEs and for the enhancement of the competitiveness of health-related industries and businesses, as well as for the funding of global health issues in accordance with the UN Millennium Goals.

Note: France’s co-operative bank, Crédit Coopératif, has become the world’s first to voluntarily start paying a Tobin Tax on currency transactions. The Bank says tax will raise €100,000 per annum for Millennium Development Goals by Hugh Wheelan | May 4th, 2011 At a conference in Paris on May 3, the bank announced that it was earmarking 0.01% from all interbank currency transactions (spot and outright on foreign exchange market) – which it said would generate €100,000 in a year – that it will hand over to development agencies working to advance the Millennium Development Goals.

The move could put pressure on other banks, notably in France, to follow suit. The Tobin Tax was originally put forward in the 1970s

by Nobel Laureate economist James Tobin as a tax on all spot conversions of one currency into another. It intended to penalize short-term financial round-trip excursions into another currency.

Recently, it has received notable support recently from the French President, Nicholas Sarkozy, and been picked up in a form by activists in the UK as the Robin Hood Tax on short-term trading.

The French bank said it had started collecting the Tobin Tax contributions on March 1st. It said the bank would meet the full costs of the tax with no increase of banking charges for clients; a response to critics of the tax who say that banks will merely pass on the cost to the public. Crédit Coopératif was created in 1893

and specializes in financing of microfinance and the environment.

areas

of

social

economy,

CHAPTER 19

MIGRATION ENTERPRISES

THE

ROLE

OF

SMALLER

LABOUR MIGRATION – DEVELOPENT OF SMALL BUSINESS AND CRAFTS BOOST ECONOMIC GROWTH What is migration?39) Human movement before the establishment of political boundaries or within one state, is termed migration. There are many reasons why people might choose to emigrate. Emigration is the act of leaving one's native country or region to settle in another. It is the same as immigration but from the perspective of the country of origin. According to the International Organization for Migration there are more than 200 million migrants around the world today.

Europe hosted the largest number of immigrants, with 70.6 million

people in 2005, the latest year for which figures are available.

North America, with over 45.1 million immigrants, is second, followed by Asia, which hosts nearly 25.3 million.

PUSH AND PULL FACTORS The United Nations estimates that there are 214 million migrants across the globe, an increase of about 37% in two decades. One theory of immigration distinguishes between Push and Pull. Push factors refer primarily to the motive for emigration from the country of origin. In the case of economic migration (usually labour migration), differentials in wage rates are prominent. If the value of wages in the new country surpasses the value of wages in one’s native country, he or she may choose to migrate as long as the costs are not too high. Escape from poverty (personal or for relatives staying behind) is a traditional push factor, the availability of jobs is the related pull factor. Natural disasters can amplify poverty-driven migration flows. This kind of migration may be illegal immigration in the destination country (emigration is also illegal in some countries, such as North Korea, Myanmar, and Somalia). Economic net effects of migration Persons who have emigrated from one region to another region for purposes of seeking employment or improved financial conditions are economic migrants and are distinct from someone who is a refugee fleeing persecution.

NET EFFECTS OF MIGRATION PREVAIL Sending Countries may expect gains or losses. For receiving countries temporary programs help to address skills shortages but may decrease domestic wages and add to public welfare burden. Net effects of migration are generally been considered to be positive. The positive effects would be significantly greater than removal of any trade barriers. For sending countries, the short-term economic benefit of emigration is found in remittances. Remittances from workers abroad have continued

increasing and for many developing countries have become a critical source of foreign-exchange earnings. Income from worker remittances as recorded in balance-of-payments statistics totaled $406 billion in 2012, representing a year-on-year increase of about 6.5 per cent.

LESS PRIVILEGED ECONOMIES CAN SUFFER FROM “BRAIN DRAIN” The loss of trained and educated individuals to emigration, an example of the possible negative effects of emigration for these Countries. E.g. are currently more African scientists and engineers working in the United States than there are in Africa. In India, 100,000 skilled technology workers are expected to leave in the next three years. Since it costs India about $20,000 per student to educate these individuals, India essentially will subsidize the rest of the world for $2 billion worth of technology education.

MIGRATION AND TRANS- NATIONALISM: SMEs AFFILIATE WITH PARTNERS WORLDWIDE “Transnationalism” is a concept that is increasingly used to capture the nature of today’s cross-border movements and their outcomes. A growing trend in transnational social movements is the joint efforts of migrants to maintain and foster links with their places of origin through the creation and organization of ‘hometown associations’ (HTAs40)). HTAs are established not only in response to the social and cultural challenges faced by new immigrants in adjusting to life in a foreign country, but also to fund small-scale development projects in home communities through collective remittances.

SMEs ARE “SOCIAL ACTORS” Immigrant entrepreneurs (most of them Micro-enterprises and SMEs are also ‘social actors’, who participate actively

in transnational activities. For example, in the Dominican Republic, there are hundreds of small- to medium sized transnational enterprises (SMEs), including small factories, commercial/retail establishments and financial agencies. Such ventures are created and run by former migrants, who have returned to the Dominican Republic after acquiring capital and establishing ties with migrant communities in the United States, thus acquiring clients and investors abroad. The author observed in the Republic of Hungary a similar trend after the change of the political systems in Eastern Europe. In Tajikistan, remittances from its cheap unskilled labor force abroad in countries like Russia, Kazakhstan, and Uzbekistan has helped the country rebound from the failures of a planned economy and government instability, contributing around 50 percent of Tajikistan’s GDP in recent years. For example, Somaliland, a breakaway region of conflict-devastated Somalia, receives an estimated $500 million a year in money sent home from abroad, four times more than the income from the main export, livestock, according to a study by the researcher Ismail Ahmed reported in the Financial Times. In the case of Mexico, remittances have become the country's second most important source of foreign exchange, after oil. The income is so large that Mexicans working outside of the country were able to gain the right to vote after threatening to withhold remittances.

MEXICO: REMITTANCES SECOND AFTER OIL In Tajikistan, remittances from its cheap unskilled labor force abroad in countries like Russia, Kazakhstan, and Uzbekistan has helped the country rebound from the failures of a planned economy and government instability, contributing around 50 percent of Tajikistan’s GDP in recent years. For example, Somaliland, a breakaway region of conflict-devastated Somalia, receives an estimated $500 million a year in money sent home from abroad, four times more than the income from the main export, livestock, according to a study by the researcher Ismail Ahmed reported in

the Financial Times. In the case of Mexico, remittances have become the country's second most important source of foreign exchange, after oil. The income is so large that Mexicans working outside of the country were able to gain the right to vote after threatening to withhold remittances.

MIGRATION AND REMITTANCES Migrants make significant sacrifices to send an average of US$200 eight or more times per year to their home country. Several studies indicate that permanent migrants send about 15 per cent of their salary home, whereas temporary migrants may remit up to 50 per cent of their income. Cost of remittance transfers: Globally, the average cost of sending remittances was about 12 per cent of their value in 2004 (World Bank 2006, 137). However, costs may range from a low of 0.2 per cent to about 20 per cent, depending on the remitted amount, type of service used, destination and transfer location. Costs tend to be highest for small transactions, since most transfer services charge a minimum fee. A comparative study of the transfer costs to 11 low-income countries in Africa, Asia and Europe demonstrated that banks have become considerably cheaper than international money transfer companies over the last several years. The value of remitting through banks was 7 per cent, compared with 12 per cent for companies such as Western Union (Orozco 2003c, 9). A recent study of the corridors between France and the Comoros, Mali, Morocco and Senegal shows that money transfer costs are still quite high. The cost of transferring € 300 varied from €10 to € 29. Bank transfer was the cheapest, while transfer through Western Union was the most costly.

G8: FACILITATE REMITTANCE One item of the action plan to achieve the MDGs (Millennium Development Goals41)), agreed upon at the Group of Eight (G8) Summit, is to facilitate remittance support to families and SMEs. The First Global Forum on International Migration was organized, with the participation of 155 countries. The forum is a global

process designed to enhance the positive impact of migration on development (and vice versa) by adopting a more consistent policy approach, identifying new instruments and best practices, exchanging know-how and experience and establishing cooperative links among the various actors involved. Participating governments agreed that migration should not become an alternative to national development strategies in developing countries. It is important that migrants and recipient communities gain a better understanding of the various options for remitting and receiving. In particular, migrants and recipient communities need access to local financial institutions, not only because of the lower remittance costs, but also because of the greater opportunities to initiate or increase their savings and their access to other financial services such as housing loans. New technologies may also help lower the cost of remittance transfers and allow migrants and their families at home to send and receive remittances with greater ease. One of the popular techniques in the Americas is the use of automatic teller machine (ATM)/debit card transfer services, which are being offered by a growing number of private banks. When migrant workers enroll in such programs, they are issued a debit card to be used by a designated person in the home country. The cost of this type of transfer can be less than half the cost of a traditional transfer REFERENCES WORLD MIGRATION REPORT 2010 (IOM)42) – The Future of Migration Building Capacity for Change WORLD BANK, Sept. 2010 – Migration and Remittances INTERNATIONAL ORGANIZATION FOR MIGRATION (IOM) – Remittances and the Movement of Workers ILO –GTFA Conference, Geneva, 21 June 2010 IFAD – FAO - International migration, remittances and rural development, 2008 by the International Fund for Agricultural Development (IFAD) THE FINBANCIAL EXPRESS, 14 Jul 2010

THE AUTHOR PROPOSES TO PROVIDE SPECIAL DEBIT CARDS FOR SMEs TO REDUCE REMITTANCE Remittances from workers abroad have continued increasing and for many developing countries have become a critical source of foreign-exchange earnings. Income from worker remittances as recorded in balance-of-payments statistics totaled $406 billion in 2012, representing a year-on-year increase of about 6.5 per cent.

For some countries, it is a main source of income. For instance, remittances were as high as 47 per cent of GDP in Tajikistan, 27 per cent in Lesotho, and around 20 per cent of gross domestic product (GDP) in the Republic of Moldova, Samoa and Kosovo.

The total volume of remittance flows to developing countries moderated somewhat during the initial years of the global economic and financial crisis, but the decline was not as sharp as in the case of private capital inflows. In general, remittance flows tend to be less volatile than most forms of cross-border financial flows. Yet, the economic slowdown and rise in unemployment in Europe disproportionately affects migrant workers, especially in Italy and Spain. This in turn has had a strongly adverse impact on remittance flows to Eastern European countries, such as Bosnia and Herzegovina, Poland and Romania, as well as countries in the Middle East and North Africa and in Latin America, like Ecuador and, to a lesser extent, Colombia.

Chapter 20

REFUGEE IMPACT

CRISIS

EUROPE

-

ECONOMIC

HOW WILL THE REFUGEE SURGE AFFECT THE EUROPEAN ECONOMY? A statement of the OECD43) concluded: The past gives us only a few clues as to the economic and fiscal impacts on host-nations of a sharp rise in refugees and most existing research focuses on the impact of total immigration (within which the share of refugees is usually quite small). Furthermore, many factors make the appraisal of the economic impact of the refugee crisis particularly challenging, notably: estimating the number of asylum seekers is far from easy as they are highly mobile and may be registered several times in different countries; the expected duration of stay is uncertain and will depend on how many are recognised as refugees and the enforcement of return for those who are denied international protection; and the time required to process the asylum claims varies a lot across receiving countries, as does the time required to enter the labour market. In the longer run, the effect of the inflow of refugees on other categories of entries (e.g. intra EU movements, family reunification) remains uncertain.

With all these caveats in mind this brief highlights the available evidence and simulations regarding the likely impact of the refugee crisis. Impact on public finances.

OECD countries have responded to the emergency situation by scaling up public spending to process asylum applications and welcome refugees. Additional funding has also been made available at EU and national levels to support countries of origin and transit.

As the crisis has unfolded, Germany has projected an additional 0.5 per cent of GDP per annum of public spending in 2016 and 2017 to meet initial needs of the newly arrived immigrants and to integrate them in the labour market; Austria 0.3% of GDP in 2016 and Sweden 0.9% of GDP in 2016. The Turkish government has provided aid to Syrians under temporary protection in Turkey since 2011, equivalent to 0.8% of GDP in 2014.

In the short run the additional public spending may act as a demand stimulus. The latest edition of the OECD Economic Outlook (OECD, 2015a) estimates that in 2016 and 2017, the additional spending to provide support on refugees could boost aggregate demand in the European economy by about 0.1-0.2% of GDP. Impact on the labour markets Conditions for accessing the labour market during the processing of an asylum claim vary significantly across countries. In some, labour market access can be granted, under specific conditions, almost immediately, whereas in others the waiting period can be as long as a year.

Higher bound estimates for the European Economic Area (EEA)44) and Switzerland as a whole indicate that the cumulative impact of the asylum seekers inflow by the end 2016 will correspond to less than 1 million entries in the labour market, or 0.4% of EEA labour force. The figure for Germany alone would be less than 400 000, or 1% of the total labour force. · In general, the effects on host country labour markets should build up only very progressively over time as refugees become better integrated and as they reunite with their family. For refugees to realise their full potential it will be however important to enable them to locate where their skills are the most needed.

EUROPEAN COMMISSION Three million refugees and migrants could arrive in Europe by the end of 2017, the European Commission (EC) says in its economic forecast for the fall of 2015.

The Report of the EC says the newcomers will have a “relatively small” economic impact in the medium term, with GDP rising between 0.2 percent and 0.3 percent above the baseline by 2020.

But, the EC notes, that could vary by country—with destination countries—such as Germany—seeing a more significant impact than transit countries. Here’s more: The impact from higher public spending and a larger labour force with a skillset similar to the existing one in the EU is expected to: − contribute to a small increase in the level of GDP this year and next, compared to a baseline scenario, rising to about ¼% by 2017. This however is less than the rise in the underlying population, implying a small, negative impact on GDP per capita throughout the period; and − strengthening the outlook for employment (which is expected to improve gradually to about 0.3% more employed persons by 2017), in part from a wage response.

The EC reports points out that, typically, non-EU migrants typically receive less in individual benefits than they contribute in taxes and social contributions. And their employment is the most important factor of net fiscal contribution.

The influx—excluding failed asylum applications—will increase the EU’s population by 0.4 percent, the forecast says.

The report further says: For Member States with an ageing population and shrinking workforce, migration can alter the age distribution in a way that may strengthen fiscal sustainability—yet, if the human potential is not used well, the inflow can also weaken fiscal sustainability. Moreover, while migration flows can partly offset unfavourable demographic developments, earlier studies

have shown that immigration could not on its own solve the problems linked to ageing in the EU. Economic models examining the integration of 3 million extra people over the next two years notwithstanding, Europe is deeply divided over how to handle the most severe refugee crisis since World War II. More than 760,000 refugees and migrants have entered the EU in the first nine months of this year, but the bloc has only agreed on relocating 160,000 of them. Of these, as we reported Wednesday, 116 have been sent to their new homes.

About 1.2 million people have sought asylum in the EU since the start of 2014. Many of them are people fleeing the Syrian civil war, and unrest in Afghanistan, Iraq, Eritrea, and elsewhere. Others, however, are economic migrants, and will likely be turned away by Europe.

Chapter 21

Smaller Enterprises in African Countries We will focus on the economic development in the „Danger Zones” of the African Continent45) regarding the main issues of this Summit: Water, Food and Energy. We are all aware that these regions remain a challenge and urgently need to be addressed.

These are the African Savanna and Sahel: Niger, Sierra Leone, Mali, Burkina Faso, Guinea-Bissau, Central African Republic, Chad, northern Uganda, Ethiopia and Somalia.

Economic research has found that the variability of water and of water availability is strongly and negatively related to per capita income. These findings highlight the need for better water management in order to achieve greater economic prosperity. The Millennium Development Goals aim at cutting half the number of people without access to safe drinking water and sanitation. The basic problem is engineering and finance rather than the natural availability of water.

Countries with water shortages have significantly lower GDP per capita than countries with no water connections delay.

Let us now have a look at the present stage of development so that we may be able to drawing some conclusions regarding reforms and actions needed for helping the „Danger Countries” to faster climbing up the development ladder.

WATER – FOOD – ENERGY: STATUS OF DEVELOPMENT The number of people who are undernourished has continued to grow, while slow progress in reducing the prevalence of hunger stalled—or even

reversed itself—in some regions between 2000-2002 and 20052007. About one in four children under the age of five are underweight, mainly due to lack of food and quality food, inadequate water, sanitation and healt services, and poor care and feeding practices.

Under nutrition among children under five continues to be widely prevalent, due to both a lack of food and lack of quality food, inadequate water, sanitation and health services as well as less than optimal caring and feeding practices. The proportion in SubSaharan Africa decreased from 31% in 1990 to 30% in 2015.46) The most progress was made in Eastern Asia, where access to drinking water improved by almost 30 per cent over the period 1990-2008. Although coverage also expanded in sub-Saharan Africa—by 22per cent over the same period—it remains very low, with only 60 percent of the population served. The Proportion of population using an improved water source, 1990 and 2008 (Percentage) has improved in Sub-Saharan Africa from 49% (1990) to 60% (2008). The world is on track to meet the drinking water target, though much remains to be done in some regions.

Accelerated and targeted efforts are needed to bring drinking water to all rural households. Despite overall progress in drinking water coverage and narrowing of the urban-rural gap, rural areas remain ata disadvantage in all developing regions. The largest disparities are in Oceania and sub-Saharan Africa, but significant differences between urban and rural areas are found even in regions that have achieved relatively high coverage, such as Western Asia and Latin America and the Caribbean.

ACCESS TO FINANCE FOR SMEs Reforms of Institutions shall enhance a new generation of SMEs and Crafts, which make use of the technology, know-how and professional training made available by the industrialized areas by means of economic cooperation agreements, micro financing,

international universities.

education

programs

and

partenariats

between

In general terms, regulatory and policy environments vary across Africa. In countries such as Cameroon, Ethiopia, Gabon, Nigeria, Senegal and Uganda, evidence from mission reports shows that the environment in which SMEs operate proves to be a major handicap for their expansion and growth. Firms in most Sub Saharan Countries consider electricity and transport to be among the biggest constraints to their business. To counter weak electricity supply, many firms have to rely on self- supply through a generator.

The cost of self-supply is often prohibitively high, especially for small firms, underlining the importance of utilities’ providing reliable and affordable electricity to businesses. In Sub Saharan Countries the roads as well as railway transport that link production centres and markets are in bad condition. Such poor conditions in basic infrastructure facilities hamper industrial development in general and SME competitiveness in particular.

Access to finance remains a major problem in the majority of African Countries. While loans from commercial banks are at least possible in principle, later examples show that the terms of such access are often punitive for SMEs. Overall it seems that the problems remain severe in Cote d.Ivoire, Cameroon, Ethiopia, Gabon, Kenya, Namibia, Nigeria, Senegal and Uganda. In some other countries, namely Mauritius and South Africa, SMEs appear to have better access to finance, but in general terms, none of the African countries seem to have an efficient structure of financial institutions providing short- and long term capital to SMEs. In Gabon and Cameroon, real interest rates on loans can go up to 25 per cent, and although development banks exist, they operate like commercial banks with the same loan conditions. However it is worth to note that the Governments of Sub Sahara Africa since 2005 implemented most active start-up reform all Counties in the

world monitored by the World Bank Group “Ease of Doing Business”. These reforms should be awarded by increasing FDIs as an important condition for economic growth.

MILLENNIUM REGIONS OF ECONOMIC, ENVIRONMENTAL EXCELLENCE – WMR

SOCIAL

AND

Normally, an economy being factor-driven needs many decades to embark onthe next stage of development becoming „efficiencydriven”, based on 

Higher education and training



Goods market efficiency



Labor market efficiency



Financial market development



Technological readiness



Market size

The Millennium Village Project47) could prove that it is possible to enhance and to speed up the process of development in the poorest African Countries within a very short time period and with astoundingly positive results at relatively low cost. WUSME’s approach taking up the success of the MVP goes on step farther by integrating Millennium Villages into MILLENNIUM REGIONSAS SUPPLEMENTARY SERIES BY REGIONS OF ECONOMIC, SOCIAL AND ENVIRONMENTAL EXCELLENCE. The proposed WMR in Sub Saharan Countries shall be a territory which the Government and the local Authorities declare as an area of infrastructural development to be set up in pleasant sites served by international transport and communication infrastructure; nearby Research/Training centers and Universities.

The WMR shall comprise all key activities and facilities of UN Millennium Villages and additional elements favorable for new Micro- Small- and Medium Enterprises (MSMEs), technology transfer and technological research and training. The WMR shall be in Sub Saharan Countries the Central Unit in for economic growth and reduction of poverty.

Production- and Services Capacity Building and enhancing economic growth MSME - Technology Park, Center of Competence The Park’s main role shall be to stimulate and manage flow of knowledge and technology amongst universities, R&D institutions, companies and markets, to facilitate creation and growth of innovation-based MSME companies to provide services & high quality space and facilities and to attract Foreign Direct Investment (FDI) and Technology Champions to the Sub Saharan Countries.

ENERY SUPPLY The WMR shall use the following renewable sources for generating energy, particularly electricity: 

Hydro Water Power Plants



Biomass Power Plants



Solar energy, e.g. Photovoltaic



Wind Parks



Energy from organic waste

RECOMMENDATIONS FOR ACTIONS Governments, Banks, regional Development Organizations and Universitiesin Sub Saharan Countries shall seek advice of and closely cooperate with UNDP, the EARTH INSTITUTE and its Director Prof. Jeffrey Sachs48), and WUSME World Union of Small

and Medium Enterprises regarding the Millennium Village Projects and a framework for actions for SMEs and Crafts development and securing the water and electricity needs in the “Danger Zones” of Africa.

Prof. Jeffrey Sachs advised that plans should address the following five areas: 1. Safe drinking water and sanitation for all 2. Increased water efficiency in agriculture, including the development of drought-resistant seed varieties and new irrigation strategies 3. Increased attention to droughts through improved water storage 4. Reduced economic risk through rainfall insurance 5. Economic diversification and international trade to reduce the dependency of livelihoods on rainfall.

6. Imposing a FTT – Financial Transaction Tax („Tobin Tax”) on currency and other transaction of 0,1%. Proceeds of the tax shall be lodged in a Development Fund for „Danger Zones in Africa” under the governance of independent experts of economic and technical development.

7. Promotion of Foreign direct Investments (FTI) and cooperation with development Foundations, e.g. Melinda and William Gates Foundation, Warren Buffet, William Clinton Foundation and the BRIC – Countries.

8. Enterprise to enterprise cooperation.

9. Training to African Entrepreneurs for setting up SMEs in cooperation with IUE International University of Entreprenology, USA.

Chapter 22

Expanding sustainable energy and agribusiness AGRIBUSINESS: KEY DETERMINANT OF ECONOMIC GROWTH AND POVERTY A renewed focus on agribusiness is an important complementary strategy to the existing approaches being followed for the structural transformation, technological upgrading and economic diversification of African economies. Agribusiness is the key determinant of overall economic growth and poverty reduction in most countries of Sub-Saharan Africa, as it harnesses the critical linkages between agriculture, industry and services. The accelerated development of agribusiness will benefit a large majority of the African population - it will be "people-oriented" because it will enhance the well-being of both producers and consumers, and generate employment, income and food security.

African states, through the African Union, have pledged to invest a minimum of 10 percent of budgetary resources in the agricultural sector, and the G-8, meeting in L'Aquila, Italy in 2009 renewed the commitment of the donor community to the Comprehensive Africa Agricultural Development Program. This program has set an annual agricultural growth target of 6 per cent to achieve the Millennium Development Goal of halving poverty by 2015.

PRINCIPAL AREAS OF DEVELOPMENT INTERVENTIONS This high rate of agricultural growth would provide a strong platform for developing agribusiness value chains, and raising productivity in all of the individual links in these chains. Following Kandeh K. Yumkella, former General Director of UNIDO, stated in his deliberations: This is a formidable challenge and will involve development interventions in three principal areas:

First, improving agricultural productivity through improved industrial inputs. This is the first element of agribusiness.

Second, increasing the industrial processing of agricultural raw materials and food products.

Third, strengthening industrial production of processing machinery, equipment, tools and packaging materials, and improving the storage and transport infrastructure.

Such a strategy focusing on accelerating agribusiness development requires a strong emphasis on eight critical pillars of growth consistent with the Action Plan for the Accelerated Industrial Development of Africa. These are: 1. Enhancing agricultural growth for agribusiness; 2. Upgrading value chains in agribusiness; 3. Targeting commodities and producers for value addition and social inclusion; 4. Strengthening technological effort, innovation capacity and capacity building; 5. Stimulating private enterprise development and investment; 6. Facilitating innovative financing for agribusinesses; 7. Improving agro-industrial sustainable energy; and

infrastructure

and

access

to

8. Exploiting local, regional and international demand.

A strengthening of the eight key pillars in the agro food system will help to unlock the enormous potential of agro-industries to contribute to the continent's long-term prosperity.

• Fish in Uganda; • Organic coffee and cocoa in Uganda; • Fruit and vegetables in Kenya; • Pineapple in Ghana; • Dairy and cassava products in Kenya, Uganda and Zambia; • Furniture in South Africa; • Wine in South Africa; • Cotton garments in Mauritius and Madagascar; and • Biofuels in a number of countries • Waste to Energy Technologies, e.g. Gas Plasma Plants, Low Temperature Conversion of organic waste from farms in nearly all African Countries.

NON – FOSSIL ALTERNATIVES AT REMARKABLY LOW COST We have good reasons to assume that in the longer term non-fossil alternatives will be a fast growing fraction of the world's energy supply. African Countries will play a deciding role in implementing and operating solar energy plants. Africa will also come to preeminence in generating biofuels, such as ethanol, derived not from cane and food crops, but from inedible grasses, such as switch grass and woody plants on lands that are not suitable for food crops. Technologies for the conversion of cellosic ethanol are since more than 30 years available and will be used on a commercial basis.

Climate change, escape from poverty, development of economy, particularly of Micro- and Small enterprises in rural areas are closely interlinked. We believe that these burdens are surmountble

at remarkably low cost and that sufficient funds can be made available within a relatively short time period. Food production can be increased, technologies for generating energy from renewable sources, such as sun, wind, water, energy from all kinds of waste (e.g.Gas Plasma Plants, LTC - Low Temperature Conversion of organic waste) can be used and it can happen rapidly if the projects can be financed and implemented. Low cost carbon management will also be in African Countries an important contribution to avoid the doubling of CO2. Examples are the hybrid automobiles to be promoted with financial incentives in African Cities and carbon capture and sequestration. Experts attending the Summit will understand was is meant.

In most cases the lack of finance is the limiting factor. “The poor know what to do, but they are to poor to do it”, said Prof. Jeffrey Sachs, the adviser of the UN General Secretary for the Millennium Promise.

TRANSITION TO SUSTAINABE ENERGY: 1% OF THE RICH COUNTRIE’s INCOME In order to resolve the limiting factor of FINANCE, we should focus on the following actions: Prof Jeffrey Sachs, Director of the Earth Institute, proposed a new financial architecture for the Millennium Development Goals, only to find, that the promised international support is not available.

Taking the experience from the UN administrated Global Fund, we should plan to simplify the global aid architecture for Africa and make it more transparent, science based, and responsive to the level of actual needs. This can be accomplished by establishing a few high-level funds aiming at critical dimensions of the Millennium Promises, and concentrating our aid efforts through those funds rather than a plethora of bilateral programs. Some funds are already existing and need to be expanded, others need to be started.

The financial needs worldwide for meeting our Millennium Promises have been calculated by the Earth institute of Prof Jeffrey Sachs.

The transition to sustainable energy will likely require no more than 1 percent of rich-world income and less than that in low-income Countries.

The goal of IFC's work is to support the growth of the private sector, giving men and women across Africa the opportunity to escape poverty and improve their lives. IFC's products and services are especially important during rocky times for the global economy, when Africa cannot rely on increasing amounts of foreign aid or investment. IFC'S own investments in Africa are strong, however, reaching $1.38 billion for 55 projects in 25 countries in FY08. IFC's advisory services programs are active in 30 countries in subSaharan Africa. These programs support the creation of better business environments, promote environmental and social sustainability, help facilitate large infrastructure projects, and work to expand access to finance for smaller businesses.

Chapter 23

Crises Prevention and Development of SMEs The global jobs crisis continues. Global unemployment remains very high, particularly among developed economies, with the situation in Europe being the most challenging. The unemployment rate continued to climb, reaching a record high of nearly 12 per cent in the euro area during 2013, an increase of more than one percentage point from one year ago.

POVERTY REDUCTION AND PROGRESS TOWARDS OTHER MDGs MAY SLOW Global trends in greenhouse gas emissions remain alarming.

Inflation rates remain subdued in most developed economies.

Continuing large output gaps and downward pressure on wages in many countries are keeping inflationary expectation slow.

In the baseline outlook, world trade growth will pick up moderately in2013 and return to near its long-term average growth rate of 5 per cent in 2014. However, developing countries were more resilient to the renewed slowdown and their importance in world trade continues to increase, along with their integration in global value chains. Commodity prices remain high and volatile.

INTERNATIONAL FINANCING FOR DEVELOPMENT AND PRIVATE CAPITAL REMAIN VOLATILE Since the crisis, international private capital flows to emerging and developing countries have remained extremely volatile, owing in part to growing fears among portfolio investors about the sustainability of public finances in Europe that prompted a “flight to safety”. Uncertainties and risks. A worsening of the euro area

crisis, the “fiscal cliff” in the United States and a hard landing in China could combine to cause a new global recession. The baseline outlook is subject to major uncertainties and risks, mostly on the downside. First, the economic crisis in the euro area could continue to worsen and become more disruptive. The ongoing perilous dynamics between sovereign debt distress and banking sector fragility are deteriorating the balance sheets of both Governments and commercial banks. The fiscal austerity responses are exacerbating the economic downturn, inspiring self-defeating efforts at fiscal consolidation and pushing up debt ratios, thereby triggering further budget cuts. The situation could worsen significantly with delayed implementation of the Outright Monetary Transactions programme and other supports for those members in need. Such delays could come as a result of political difficulties in reaching agreement between the countries in need of assistance and the troika of EU, ECB and IMF, and/or much larger detrimental effects of the fiscal austerity programs and more difficulties in structural adjustments than anticipated. In such a scenario, as simulated through the United Nations World Economic Forecasting Model, the euro area could suffer an additional cumulative output loss of more than 3 per cent during 2013-2015 and the world as a whole of more than 1 per cent.

EFFECTS ON SMEs ACCESS TO FINANCE There is evidence that deleveraging in the European banking sector has especially affected trade financing, which in many countries comprises a large share of short-term borrowing. Trade-oriented small- and medium-sized enterprises (SMEs) from lower-income countries, in particular by raising the cost of riskier lending, capital adequacy rules might have the effect of limiting access to finance, since smaller entities, such as micro-enterprises and SMEs, have higher capital costs. The role of regulatory regimes in macroeconomic stability and long-term sustainable growth has not been sufficiently addressed. Basel III includes a countercyclical buffer, although it is limited. Basel rules could result in less lending

to SMEs and reduce availability of long term financing, particularly in developing countries.

POLICY CHALLENGES Most developed countries have adopted a combination of fiscal austerity and expansionary monetary policies aimed at reducing public debt and lower debt refinancing costs in order to break away from the vicious dynamics between sovereign debt and banking sector fragility. Hopes are that this will calm financial markets and restore consumer and investor confidence. Together with structural reforms to entitlement programs, labor markets and business regulation, such an improved environment should help restore economic growth and reduce unemployment. However, controlling debt stocks is proving to be much more challenging than policymakers expected.

More forceful and concerted actions are needed to generate growth and create jobs. The sobering outlook for the world economy and the enhanced downside risks call for much more forceful action.

Those efforts will be challenging. At the same time, however, they will provide opportunities to better align policy actions addressing the immediate challenges with long-term sustainable development objectives.

ADDRESSING POLICY UNCERTAINTIES A first challenge will be to reduce the high degree of policy uncertainty associated with the three key risks discussed in the downward scenario. These risks must be addressed immediately through shifts in policy approach and greater consideration of international spill - over effects of national policies. Sufficient resources need to be made available to developing countries.

Sufficient resources must be made available to developing countries, especially those possessing limited fiscal space and facing large development needs.

A scenario of concerted policies for more sustainable growth and jobs recovery is feasible. A jobs creation and green growthoriented agenda as outlined above is compatible with medium-term reduction of public debt ratios and benign global rebalancing, according to a policy scenario analysis using the United Nations Global Policy Model. With continued existing policies, but assuming no major deepening of the euro crisis, growth of WGP would average, at best, about 3 per cent per year, far from sufficient to deal with the jobs crisis or bring down public debt ratios. The alternative scenario, based on the agenda outlined above, would support an acceleration of world economic growth to 4.5 per cent per year between 2013 and 2017, while public debt-to-GDP ratios would stabilize and start falling in 2016 or earlier. Employment levels in major developed countries would gradually increase and return to pre-crisis levels in absolute terms by 2014, and by 2017 after accounting for labor force growth. The employment recovery would thus come much sooner than in the baseline, although remaining protracted even with the suggested internationally concerted strategy for growth and jobs. An additional 33 million jobs per year on average would be created in developing and transition economies between 2013 and 2017.

REMITTANCES Remittances from workers abroad have continued increasing and for many developing countries have become a critical source of foreign-exchange earnings. Income from worker remittances as recorded in balance-of-payments statistics totalled $406 billion in 2012, representing a year-on-year increase of about 6.5 per cent.

For some countries, it is a main source of income. For instance, remittances were as high as 47 per cent of GDP in Tajikistan, 27 per cent in Lesotho, and around 20 per cent of gross domestic product (GDP) in the Republic of Moldova, Samoa and Kosovo.

The total volume of remittance flows to developing countries moderated somewhat during the initial years of the global economic and financial crisis, but the decline was not as sharp as in the case of private capital inflows. In general, remittance flows

tend to be less volatile than most forms of cross-border financial flows. Yet, the economic slowdown and rise in unemployment in Europe disproportionately affects migrant workers, especially in Italy and Spain. This in turn has had a strongly adverse impact on remittance flows to Eastern European countries, such as Bosnia and Herzegovina, Poland and Romania, as well as countries in the Middle East and North Africa, and some in Latin America, like Ecuador and, to a lesser extent, Colombia.

According to publications of the World Bank, remittances to developing countries will surpass $400 billion in 2012. Source: Migration and Development Brief, No. 19 (20 November 2012).

GROWTH IN SEVERAL MAJOR DEVELOPING COUNTRIES e.g. Brazil, India, and to a lesser extent Russia, South Africa and Turkey is also slowing, but in most cases due to a tightening of domestic policy introduced in late 2010 or early 2011 to combat domestic inflationary pressures. So far, smaller economies continue to expand, but weak business sector surveys and a sharp reduction in global trade suggest weaker growth ahead.

PROVISION OF ARTISAN SUPPORT SERVICES It will be crucial to continue to support artisans to increase their production capacities and improve quality of their products. Efforts will be concentrated to develop and strengthen capacities of blacksmiths, tinsmiths, carpenters, handicraftsmen and weavers.

The intervention will be in the form of skills upgrading aimed at quality improvement, provision of working tools/machines and working spaces.

Target 1: Involve 1500 artisans groups in skills upgrading training by the end of June 2014.

Target 2: Support 1200 artisans groups with working tools and BDS services by the end of June 2014.

Target 3: Introduce 15 new artisan products IMPLICATIONS AND RECOMMENDATIONS 1. Policies promoting societal attitude changes about women, and that train, support and encourage women entrepreneurs will promote inclusiveness and fuel economic growth. Additionally, societies can benefit from entrepreneurs ofall ages, with unique orientations and resources that may include the fresh ideas, risk tolerance and technology savvy of the young, and the experience, networks and credibility that comes with maturity. Entrepreneurs of different ages, however, will likely require particular support mechanisms and programs.

2. Businesses can be recognized and leveraged as former entrepreneurs re-engage in entrepreneurial activity, perhaps even in established organizations, or support other entrepreneurs in a variety of stakeholder roles. Attention could therefore turn toward re-engaging former entrepreneurs, whether they have discontinued for positive or negative reasons.

3. A high-growth oriented approach to entrepreneurship will create jobs and, in tandem, grow economies. Broad-based efforts to improve the labour market, increase the internal market, and provide access to international markets can be more specifically addressed toward meeting the specific needs of entrepreneurs.

4. With unemployment and a growing youth population as a key issue in regions such as Sub-Saharan Africa, identifying and successfully implementing policies that both encourage youth to start businesses and support businesses with high employee growth expectations will be critical to creating jobs and ensuring economic growth and societal stability .The persistent poor ratings on entrepreneurship education in primary and secondary schools in the national expert survey indicates a need for both national and global efforts to encourage this factor. With regard to other entrepreneurial framework conditions, each region has particular strengths but also areas to improve. While policies that work in one

economy are not guaranteed success in others, there may be merit in studying and discussing what works (and doesn’t) within and across regions.

5. Research using GEM data emphasizes that if an economy’s government fails to enforce a strong rule of law, the quality of entrepreneurial entries will suffer – and consequently, the economic impact of entrepreneurship will diminish. Another study suggests that intellectual property protection encourages specialisation among potential entrepreneurs and supports conditions where individuals can choose the course of action that best fits their innate strengths. These findings highlight the importance of the legal framework in developing a context in which entrepreneurship can thrive.49)

Chapter 24

SME Development for Asia and Pacific SME (ESCAP)

GLOBALIZATION AND OPENING OF ECONOMIES have enhanced opportunities and also competition. The survival of SMEs at any point of time depends on their competitiveness. The Future perspective depends on the ability to address this issue in the light of the constraints faced by them. The emerging issues require careful considered remedial and reformative measures for sustained development of the SME sector which have been discussed here. They not only raise concerns for such countries which are embarking on massive development plans but also give enough signals to the respective Governments for attending to the resultant implications through policy reforms. Major issues are: 1.

SMEs are structurally strong and a major economic segment of contribution to total development including employment, industrial output, exports and the GDP. Many countries have no comprehensive policy structure to provide enabling environment and proper support to the sector especially in the area of credit, target market identification and marketing support.

2.

There is a steady shift from agriculture to manufacturing.

This trend is not healthy as most of the countries in Asia are having agrarian economy. Opportunities may have to be provided for value addition activities to agriculture and agro-based economies through proper guidance to generate employment opportunities in the rural areas by setting up SMEs and prevent urban ward migration.

3.

In few countries, Governments have not yet worked out clear cut policies for entrepreneurship and SMEs development and employment generation by this sector.

4.

There is a wide disparity in the status of SMEs in countries of Asia-Pacific region. SMEs in the LDCs do not appear to have reaped the benefits of globalization and technological developments happening around them. SMEs need to be exposed to the advancements and global markets to reduce gap and harness their growth potential.

MORE SMEs = MORE JOBS Taking into consideration the emerging issues requiring urgent policy interventions, following areas seem relevant for consideration by countries which are embarking on massive SME development plans and creating more jobs.

Close look into challenges and prospects both by, Government, NGOs, and others involved.

Creating Enabling Environment: Policy and Legal framework.

Greater focus on Finance and Innovative Finance adequacy, timeliness and cost.

Technology, Creativity and Innovation and creating required framework.

Infrastructure Development (Power, Roads, Communication, IT, etc).

Marketing and Strategic Alliances. Treating globe as one market.

Enterprises Development and Capacity Building through skill development.

Institutional Network and BDS (Business Development Services).

Adopting cluster approach as the strategy of SME development.

Strengthening of NGOs and Civil Society organizations and encourage them for PPP mode.

Creating required awareness on World Trade Organisation (W.T.O) obligations and other intermediate commitments such as Intellectual Property Rights (IPRs).

Chapter 25

The Islamic SMEs Financing Approach in Asian Countries FACILITATING EASIER ACCESS OF FINANCE TO SMALL AND MICRO ENTERPRISES : SOME RECENT LESSONS FROM MALAYSIA50) One of the strategic objectives of the Asian Economic Community (AEC) is to accelerate the development of SMEs within the ASEAN countries. SME are the backbone of the ASEAN economies. AEC aims to create world-class SMEs at regional and national level through achieving a set of goals including the enhancement of SMEs marketing capabilities and increasing the internationalization brand of SMEs, improving SMEs access to finance, strengthening SME human capital development, setting-up service centre and regional development fund.

SMEs account for 96% of the total operating enterprises in ASEAN. Among the ten countries, SMEs employ from 52% (Vietnam) to 97% (Indonesia) of the total workforce. The SME sector is the largest source of domestic growth which contributes significantly to GDP of ASEAN member countries (depending on the GDP cycles 30% - 53% of ASEAN total GDP). The SME sector still faces a wide range of structural, financial and other challenges that need to be overcome in order to achieve the AEC goals. The SME sector in Malaysia accounts for a significant proposition, 97.3% of all businesses operating in the country and employs approximately 60% of the working population.

MALAYSIA’s SME STRENGTHS Malaysia sees the development of SMEs as a driver that will help narrow the development gaps between the ASEAN economies and

Subsequently achieve a high level of integration and competitiveness. The country has three decades of experience building a comprehensive education, business, financial and crossborder promotion and trading framework to support and develop SMEs. Crucially, the Islamic finance option is offered alongside conventional finance. As with the financial sector, and capital market masterplans, there is also the SME Masterplan which is on its 2012-2020 cycle.

DEVELOPMENT GAPS An Index for the ASEAN SME policy has been created; the ASEAN SME Policy Index based on 8 policy dimensions that are mentioned in the ASEAN SME blueprint. The Index reveals development gaps between ASEAN countries in terms of SME policy. The founding members – Indonesia, Malaysia, Singapore, Thailand and the Philippines – scored well and exceeded the ASEAN average of 3.7, while the other countries scored below the average. Malaysia ranked second after Singapore in the ASEAN SME Policy Index.

POLICY DIMENSIONS FOR THE ASEAN SME POLICY INDEX 1. Institutional framework 2. Access to support services 3. Cheaper and faster start-up and better legislation and regulation for SMEs 4. Access to finance 5. Technology and technology transfer 6. International market expansion 7. Promotion of entrepreneurial education 8. More effective representation of SMEs’ interests

CONSTRAINTS FACING THE SME SECTOR IN ASEAN COUNTRIES 1. Access to finance 2. Lack of Skilled human resources (technical and managerial capabilities) 3. Lack of access to information 4. Access to greater market 5. Limited access to technologies 6. Absence of a more conducive business and policy environment HOW CAN MALAYSIA CONTRIBUTE TO THE GROWTH OF SMEs IN ASEAN? Malaysia can make an important contribution to the development of SMEs in ASEAN if it leverages on its experience in SME development, its strengths in Islamic finance, and providing access to finance/credit.

SME financing should be a priority area for Islamic financial institutions as the sector embodies the real economy, creates employment opportunities, and moves resources that collectively work towards alleviating poverty. How can it further develop SMEs? MALAYSIAS STRENGTHS AND EXAMPLES FOR SMEs IN OTHER COUNTRIES 1. It has built a comprehensive SME development and financing framework.

2. Capitalize on its Islamic financial institutions through easing access to capital and expanding its network in neighboring ASEAN countries where SME financing is limited. Malaysia’s Credit

Guarantee Corporation (CGC) has been key to providing guarantees to SME loans/financing where collateral is lacking.

3. Malaysia has a microcredit/microfinance scheme for SMEs that has helped increase levels of access to credit/financing.

Outstanding loans/financing jumped from RM84 million in 2006 to RM857 million in 2013*.

4. Malaysia’s SMEs outstanding loans increased from RM81.995 billion in 2003 to RM212.9 billion in 2013*. Impaired loans/financing plunged from 14.5% (of loan/financing ratio) in 2003 to 3.8% in 2013*.

5. All data from Bank Negara Malaysia (Central Bank of Malaysia) 6. Existence of infrastructure institutions to support the development of the SME sector, such as SME Corp, which is a onestop shop for all SME matters. It also facilitates SMEs advisory services including redress mechanisms.

7. MATRADE, the national trade promotion agency, has been at the forefront of supporting and marketing Malaysian SMEs to the world.

Chapter 26

Promotion of SMEs in the Golf Countries (GCC)- Sultanate of Oman SOME HIGHLIGHTS The Oman Central Bank of Oman considered in a study of 2014 as follows: Available data suggests that the SME sector in Oman is indeed at its infancy and its potential for growth is impeded by many factors among which are bureaucracy, scarce financing and other critical supports that otherwise have allowed this sector to prosper in other countries.

With regard to opportunities, while SMEs have traditionally catered on domestic markets, prospects also exist in the global or regional markets for those firms that are willing, capable and competitive in the export market. Opportunities for the SME sector range from service sector to manufacturing, and all other sectors that can be exploited either domestically, regionally, or globally. In cases where SMEs enjoy technological capabilities, they can leverage advances in areas such as renewable energy, biotechnology, and an array of high-growth global industries The SME sector can also find opportunities in innovation, in particular given its inherent flexibility born out of smaller size when compared to large firms.

Public Authority for Development of SMEs in Oman further indicated the growing importance attached to SMEs. The ultimate success of the Public Authority for Development of SMEs would be in its effectiveness to gradually help the sector becoming a major contribution to the national economy. Failure to meet the objectives of the SME sector laid down in an approved strategy would render this institution into another layer of bureaucracy, further burdening public finances.

GROWTH OPPORTUNITIES FOR SMEs SECTOR IN OMAN Among the sectors identified were transport and logistics, manufacturing, healthcare, and tourism. Given the magnitude and variety of investments that are expected to take place to further develop these sectors, a strategy and a road map to identify synergies between these projects with the SME sector in Oman, both startups and existing firms are required. The strategy and road map should include pre and post implementation opportunities that can be seized by the SME sector. The opportunity for SMEs growth can also be generated through clusters or business incubators in Oman in order to promote entrepreneurship, knowledge and costs sharing, as well as benefits realized through the economies of scale which tends to be an advantage enjoyed by large companies.

OMAN SME DEVELOPMENT FUND Vision: ‘To create a platform for contributing towards the creation of an Oman where Entrepreneurship and Small and Medium Enterprises (SMEs) flourish, fulfilling the aspirations of the common citizens for employment and economic opportunity.’

Mission: ‘To work with the government, academia, private stakeholders and the youth of Oman, to encourage the development and spread of entrepreneurship and the growth of SMEs, to deliver value to the investors and benefits to all stakeholders.’

What does SME Development Fund offer?

SMEF provides entrepreneurship training in university campuses.

It also has programs for more experienced personnel who are interested in entrepreneurship. In addition, the fund finances Small & Medium Enterprise, supports them with professional accounting software, monitoring & mentoring. The Fund’s “Legitimizing”

service seeks to create a conducive environment and access to market opportunities for Small & Medium Enterprises. Details are available in “The Four Point Plan” page.

What type of Finance facility SME Development fund provides?

Provision of Asset Financing in the form of leasing and hire purchase; Bills Discounting; Factoring; Working Capital and Project Finance What is the eligibility criteria for a Finance facility?

Any Organization registered under the Commercial Laws of Sultanate of Oman will be considered for the financial assistance.

However, the Fund offers a special package for qualifying SMEs. Sultan Qaboos created a fund for Oman SMEs In Feb 11, 2013 - Oman's ruler has set up a Dh667.6m fund to help young men and women set up businesses.

"This fund will help young men and women with their projects. The initial capital of the fund has been set at 70 million rials (Dh667.6m), which will be increased by 7 million rials each year," Sultan Qaboos said.

But an unemployment rate estimated to be 20 per cent by the IMF and dwindling oil reserves has forced the government to change its approach.

The solution, officials say, is to develop an entrepreneurial economy - which would be a major change for Omanis, who have grown accustomed to relying on oil wealth and comfortable jobs in the government.

BANK MUSCAT has initiated a series of innovative programmes benefiting SMEs. The bank’s Al Wathbah SME department offers a comprehensive suite of tailor-made finance solutions and non-financial services

targeted at small and medium enterprises. Credit facilities, both short-term and long-term in nature, are available to all sectors.

Further support is extended through non-financial services in areas of education, coaching, networking opportunities and workshops.

One such example is the bank’s Al Wathbah Academy. The objective of this ongoing educational initiative is to impart the required skills and guidance for entrepreneurs drawn from diverse fields to embark on successful SME business ventures.

AL WATHBAH WOMEN BUSINESS FORUM is a first-of-its-kind networking initiative to provide guidance and help for women entrepreneurs to develop the requisite attitude, skills and abilities for leadership in business. The main objective of the forum is to play an important role in filling the gaps and empowering Omani businesswomen.

Chapter 26

Igniting Innovation – The Role of SMEs

EMPIRICAL RESEARCH Research Institutes are using either input measures such as a) Research and Development (R&D) expenditures or b) Innovation outcomes such as p a t e n t s In contrast to input measures, productivity growth results from intentional innovation supported by modern business administration focusing on the importance of knowledge, knowledge – spillovers and technological substitution in the process of economic growth.

(See the “Las Vegas Program for Applied SMEs and Crafts Development”).

The new class of endogenous growth recognizes aspects of entrepreneurship by modelling the process of invention and deriving the motives for invention from the microeconomic level, particularly from Small and Medium Enterprises.

INTERNATIONAL TRENDS As a result of fast progressing globalization, not only of international big companies but also of SMEs, innovation and technology transfer into profitable products and services are increasingly becoming a challenging task for entrepreneurs to stay competitive on their markets.

According to an analysis performed by Battelle and R&D Magazine global R&D spending is expected to grow by about 5.2% to more than $1.7 trillion in 2015. “This advance is slightly less than the 6.5% growth seen in 2011 following the end of the global recession and accompanying R&D stimulus incentives. Most of the

global funding growth is being driven by Asian economies, which are expected to increase nearly 11% in 2016, while European R&D will grow by about 3.5% and North American R&D by 2.8%.

U.S. R&D is forecast to grow 2.1% in 2016 to $436 billion.

China, which became the world's second largest R&D investor in 2011, remains noteworthy as well. Driven by GDP growth, its rate of spending will remain strong in 2016. Three new emerging economies joined this Forecast in 2016: Malaysia, Indonesia, and Saudi Arabia. Starting from relatively small commitments (R&D expenditures at less than 1.0% of gross domestic product), each intends to increase its funding over the next several years to reflect the R&D ratios of more innovation-oriented economies.

This report reflects the global researcher viewpoint of R&D. The multinational respondents to this survey confirm trends reported elsewhere, including expectations of future funding constraints across all R&D sectors—government, industry, and academia—as the most critical concern for researchers. It also reveals that the U.S. and Europe continue to be the recognized leaders in a broad range of technologies such as aerospace, agriculture, materials, and life science.”

HOW TO IGNITE INNOVATIONS BY SMEs WUSME World Union of Small and Medium Enterprises at International Conferences and on occasion of recent missions to African Countries, e.g. in Angola, Gabon and Uganda has successfully enhanced awareness on governmental and private level that SMEs and Crafts create jobs, deliver innovation and raise productivity.

We observe still lack of evidence about the best means to energize growth and to remove the biggest barriers to faster development of SMEs in less privileged economies. WUSME, therefore, focuses on building the evidence that a new architecture is needed for the implementation of programs and actions that enhance and promote entrepreneurial growth.

On this line, WUSME World Union of SMEs recommended to establish Technology Transfer Centers in developing Countries,

particularly in cooperation with European and US Institutions and industrial partnerships and to create SME Funds for Crises Prevention and Development, funded with a CTL Currency Transaction Levy and a small percentage of the Value added Tax (VAT) as successfully practiced in Austria since many years.

WUSME’s aims and targets to promote innovation and technology transfer in the forthcoming years will be, among others: 

Once consultative status has been obtained, e.g. at United Nations ECOSOC, UNIDO, OECD, UNESCO, WUSME will request these Organizations to build more knowledge and awareness by funding, conducting and enabling comprehensive studies and pilot projects, e.g. in the African UN Millennium Villages and other developing regions of the world.



WUSME can certainly contribute to build a network of specialists, practitioners and policy makers focused on SMEs and Crafts development and offer this network to stakeholders and member organizations.



Via the WUSME Internet Portal „Partnership Exchange” collaboration between Government Agencies, Universities and innovation Centers and entrepreneurs WUSME will connect people tackling similar problems so that they may share and exchange ideas t their mutual benefit.

It is important to note that Innovation is critical not just for developed countries to sustain growth, but for emerging economies and developing countries to catch up with developed countries.

WUSME considers innovation not only in the context of path-

breaking inventions, but also in terms of administrative and organizational changes that support technological diffusion.

Chapter 27

Waste to Energy – A Challenge for SMEs and Crafts ECONOMICS OF WASTE For securing economic stability and continuing development in less advanced regions, all kinds of raw materials must be used efficiently, today and for the next generations. However, in most economies, particularly in the new emerging markets (e.g. the BRICS Countries), these resources are over-consumed. Free market mechanisms alone would inevitable result in an overproduction of waste. Such environmental externalities constitute market failures as decisions to produce and consume do not include the cost of negative environmental consequences connected with excess waste being produced. In the context of waste, economic efficiency is achieved when the amount of waste generated and treated is optimal, i.e. the costs of reducing waste by one unit is equal to the economic and environmental benefits of having one less unit of waste.

Externalities are several environmental impacts associated with waste management – greenhouse gases, air quality, water pollution, noise and land use change. While there may be specific impact categories associated with particular waste types – for example, hazardous wastes – the preponderance of waste-related environmental impacts relate to greenhouse gas (GHG) emissions.

WASTE VOLUMES WORLD51) Every year the world produces more than 4 billion metric tons of municipal and industrial waste:

 

Municipal waste 1.7 to 1.9 billion Industrial waste 1.2 to 1.7 billion



Hazardous industrial waste 0.5 billion

Other wastes include construction, mining, agricultural and forestry wastes.

If we include the many other categories of waste, the total is no doubt much higher: Total 3.4 to 4 billion (metric tons) The richer an economy is, the more waste is been produced:   

High revenue developed countries: 1 billion people 1.4 kg / capita / day Average revenue developing countries: 3 billion people 0.8 kg / capita / day “Third World” 2.5 billion people 0.6 kg / capita / day Forecasts of the World Bank predict a dramatic increase of urban waste, particularly of plastic waste for the 2025:52) “As the world hurtles toward its urban future, the amount of municipal solid waste (MSW), one of the most important byproducts of an urban lifestyle, is growing even faster than the rate of urbanization. Ten years ago there were 2.9 billion urban residents who generated about 0.64 kg of MSW per person per day (0.68 billion tons per year). This report estimates that today these amounts have increased to about 3 billion residents generating 1.2 kg per person per day (1.3 billion tons per year). By 2025 this will likely increase to 4.3 billion urban residents generating about 1.42 kg/capita/day of municipal solid waste (2.2 billion tons per year).”

WASTE – TO – ENERGY TECHNOLOGIES The technologies mentioned hereunder all produce energy. We don’t refer to pure incineration or other means of reducing municipal solid waste that does not produce energy. Also not

included are Non-Thermal Technologies (Anaerobic Digestion, Landfill Gas, or Hydrolysis and Mechanical Biological Treatment).

The technologies we reviewed are as follows:     

Thermal Technologies Direct Combustion (Mass Burn and RDF) LTCC - Low Temperature Conversion Conventional Gasification Plasma Arc Gasification

THERMAL TECHNOLOGIES Mass Burn facilities have been in existence for decades and as the technology reflects it literally burns/combusts everything, leaving only noncombustible material. There are over 100 of these facilities operating in the U.S. and considerably more in Europe and Asia.

LOW TEMPERATURE CATALYTIC CONVERSION (LTCC) LTCC is the thermo-chemical decomposition of organic material, at elevated temperatures without the participation of oxygen. The process involves the simultaneous change of chemical composition and physical phase that is irreversible. LTCC occurs at temperatures >750°F (400°C) in a complete lack of oxygen atmosphere. The syn-gas that is produced during their action is generally converted to liquid hydrocarbons, such as biodiesel.

Byproducts from the process are generally unconverted carbon and/or charcoal and ash.

CONVENTIONAL GASIFICATION Conventional gasification is defined as the thermal conversion of

organic materials at temperature of 1,000 °F - 2,800 °F (540 °C – 1,540 °C), with a limited supply of air or oxygen (substoichiometric atmosphere). This is not combustion and therefore there is no burning. Gasification uses a fraction of the air/oxygen that is generally needed to combust a given material and thus creates a low to medium Btu syn - gas. Although more mature than other processes, it does require complex systems, such as gas clean up equipment.

PLASMA ARCH GASIFICATION Plasma Arc gasification is the process of that utilizes a plasma torch or plasma arc using carbon electrodes, copper, tungsten, hafnium, or zirconium to initiate the temperature resulting in the gasification reaction. Plasma temperature temperatures range from 4,000 °F – 20,000 °F (2,200 °C – 11,000 °C), creating not only a high value syn-gas but also high value sensible heat. The technology has been used for decades to destroy wastes that may be hazardous. The resulting ash is similar to glass that encapsulates the hazardous compounds ESTIMATED COST53) Ranges for Capital Costs for each of the Thermal Technologies assumes a 15 MW output for a:    

Direct Combustion (Mass Burn and RDF) ranges from $7,000 to $10,000 per kW. Pyrolysis ranges from $8,000 to $11,500 per kW. Conventional Gasification ranges from $7,500 to $11,000 per kW. Plasma Arc Gasification ranges from $8,000 to $11,500 per kW

Costs vary from technology to technology due to each having unique design characteristics, variations in equipment costs, site

specific waste characteristics and site space requirements. There are significant other factors that can negatively affect the costs of construction.

WASTE –TO- ENERGY-POLICY (SUMMARY) Policy remains central to renewable energy business case in much of Europe, USA and Asian Countries and new rules designed to shift that support to a market-based mechanism have raised some uncertainties. Nonetheless, new sources of investment suggest Waste-To-Energy-Projects can still be financed.

A “green” economy is characterized where economic benefits and growth is maximized, and all natural resources are been sustainably managed. The waste economy is one of many environmental sectors with policy actions contributing to the overall macro - economy, and to a transition to a green economy.

The main tools of Waste Management Policies are: 1. Direct regulation (command and control) where a standard, procedure or process is specified, such as Hazardous Waste Regulations; 2. Market-based instruments (MBIs) such as taxes/subsidies and trading schemes which help reflect the value of environmental resources, e.g. the landfill tax; We see waste management as an important sector that needs to be promoted. Business potentials in recycling industry need to be explored by the entrepreneurs. Governments should come forward to provide all kinds of incentives & supports to promote this sector. Tax incentives, interest subsidies or interest free loans, technical consultancy services and marketing support for waste recycling enterprises may be some of the measures that the government may consider, so that many more entrepreneurs

would come forward as well as SMEs and Crafts would diversify into waste-management/recycling sector.

3. Technology/spending programs such as investment grants and subsidies, to encourage innovation and investment in infrastructure, e.g. PFI funding to local authorities. This helps to overcome market failures and other barriers to the efficient level of investment.

4. Information provision and public engagement programs which, respectively, increase awareness and are used to overcome informational failures, and attempt to encourage more pro-environmental attitudes, e.g. WRAP’s ‘Love Food, Hate Waste’ campaign.

5. Negotiated agreements between the government and one or more private parties to reduce the level of environmental damage beyond the level in existing operations.

PART FOUR

SMALLER ENTERPRISES COOPERATION WITH THE UNITED NATIONS AND THE EUROPEAN UNION

Chapter 28

Consultative Status of SMEs supporting NGOs

Consultative status for an organization enables it to actively engage with ECOSOC and its subsidiary bodies, as well as with the United Nations Secretariat, programs, funds and agencies in a number of ways. In order to better understand this relationship, we take this opportunity to provide some critical information about the privileges that consultative status with ECOSOC confers on your organization, as well as the obligations that your organization will be required to meet under this relationship.

PRIVILEGES AND BENEFITS OF CONSULTATIVE STATUS  Consultative status allows a NGO to be informed about the provisional agenda of the Economic and Social Council;  Attendance at meetings and access to the United Nations  The status now entitles NGOs to designate official representatives to the United Nations Headquarters in New York and the United Nations offices in Geneva and Vienna.

NGO’s representatives will be able to register for and participate in vents, conferences and activities of the United Nations, and organizations in general and special consultative status may designate authorized representatives to sit as observers at public meetings of ECOSOC and its subsidiary bodies, General Assembly, Human Rights Council and other United Nations intergovernmental decision-making bodies.  Written statements at ECOSOC: Organizations in general and special consultative status are able to submit written statements relevant to the work of the Council on subjects in which these organizations have a special competence. These statements may be circulated by the Secretary-General of the United Nations to the members of the Council.  Oral presentations at ECOSOC

Requirements for oral statements include, but are not limited to, the following:

(a) The ECOSOC Committee on Non-Governmental Organizations makes recommendations to the Council about which organizations in general and special consultative status should make an oral presentation to the Council, as well as the items on which they should be heard. Such organizations are entitled to make one statement to the Council, subject to the approval of the Council; (b) Whenever the Council discusses the substance of an item proposed by an NGO in general consultative status and included in the agenda of the Council, such an organization shall be entitled to present orally to the Council, as appropriate.  Consultations with ECOSOC and its subsidiary bodies  A commission of ECOSOC may recommend that an NGO with special competence in a particular field undertake studies or investigations, or prepare papers for the commission. NGOs shall be able to consult officers of the appropriate offices of the Secretariat on matters of mutual interest or concern. Such consultation shall beat the request of the NGO or the Secretary-General. The Secretary-General may request organizations in general, special and roster status to carry out studies or prepare papers.  Use of United Nations facilities. The Secretary-General is authorized to offer United Nations facilities to NGOs in consultative status, including: accommodation for conferences or smaller meetings related to the work of ECOSOC.  Arrangement of informal discussions on matters of special interest to groups or organizations;  Access to United Nations press documentation services; prompt and efficient distribution of documents related to ECOSOC and its subsidiary bodies as the Secretary-General deems appropriate.  Use of United Nations libraries.

Chapter 29

Business with the United Nations54) THE OVERALL PROCUREMENT VOLUME (GOODS AND SERVICES COMBINED) The United Nations Global Marketplace - UNGM - is the common procurement portal of the United Nations system of organizations.

It brings together UN procurement staff and the vendor community. The United Nations represents a global market of over USD 17 billion annually for all types of products and services.

The UNGM acts as a single window, through which potential suppliers may register with the UN organizations using the UNGM as their vendor database. These organizations account for over 99% of the total UN procurement spent. The UNGM therefore provides an excellent springboard to introduce your products and services to many UN organizations, countries and regions by only completing one registration form.

The UNGM also enables vendors to keep abreast of upcoming tender notices. By subscribing to the Tender Alert Service, vendors can receive relevant business opportunities emailed directly. The UNGM facilitates the interchange of vendor information within the UN system as information is made available to all UN organizations.

The UNGM also acts as an important procurement tool to shortlist suppliers for competitive bidding. Initially developed in the 90’s under the auspices of the Inter-Agency Procurement Working Group (now the High Level Committee on Management's Procurement Network) UNGM has a United Nations General Assembly mandate to:

Enhance transparency procurement practices.

and

increase

harmonization

of

UN

Simplify and streamline the registration process for vendors.

Increase procurement opportunities for vendors from developing countries.

The increase in the overall procurement volume is mainly attributable to a rise in volume from three organizations: the United Nations Children’s Fund (UNICEF), the United Nations Procurement Division (UN/PD), and the United Nations World Food Program (WFP). The increase within these three organizations was due in part to a rise in the procurement of food products, transportation services, fuel and pharmaceuticals.

FUNDAMENTAL REGISTRATION REQUIREMENTS 1. General Information (Company name, license number, address, phone, contact details, etc. Name).

2. The vendor company must be minimum three years old and has to show three independent references.

3. Information on countries in which the provider is active.

4. Classification of products and services.

Providers are advised to consult authorized Procurement consultants, e.g. Organizations in consultative status at UN ECOSOC. CONLUSIONS The United Nations and all its organizations and agencies with more than 17 billion USD per year, are one of the most powerful buyer of goods and services from private companies in the world.

Those countries which make optimal use of nearness to the "Procurement Divisions" in the UN Headquarters, were in the past far more successful than countries which exploited these business opportunity not or not sufficiently.

The most successful countries in Europe included Denmark, Switzerland, - and by a wide margin - even Austria, which measured in 2014 to the goods and services per head of the population and ranked 4th of the most successful countries in the world, but only reached 19% of the value of Switzerland.

Disproportional weak are the supply balance sheets of the countries of Central and Eastern Europe, including Hungary, Poland, Czech Republic, Slovakia and Slovenia.

Chapter 30

United Nations Funds, Programs, Specialized Agencies and Others The UN system, also known unofficially as the "UN family", is made up of the UN itself and many affiliated programmes, funds, and specialized agencies, all with their own membership, leadership, and budget. The programmes and funds are financed through voluntary rather than assessed contributions. The Specialized Agencies are independent international organizations funded by both voluntary and assessed contributions.

UN BUDGET 2015 billion US$ 10840

10230510

350713

180061

3382136 3207163

708671 UNOV

UNIDO

FAO

IAEA

669035 UNPD

UNOPS

WHO

UNICEF

Programmes and Funds UNDP The United Nations Development Programme works in nearly 170 countries and territories, helping to eradicate poverty, reduce inequalities and build resilience so countries can sustain progress.

As the UN’s development agency, UNDP plays a critical role in helping countries achieve the Sustainable Development Goals.

UNICEF The United Nations Children's Fund provides long-term humanitarian and development assistance to children and mothers.

UNHCR The United Nations High Commissioner for Refugees – UNHCR protects refugees worldwide and facilitates their return home or resettlement.

WFP The World Food Programme aims to eradicate hunger and malnutrition. It is the world’s largest humanitarian agency. Every year, the programme feeds almost 80 million people in around 75 countries.

UNODC The United Nations Office on Drugs and Crime – UNODC helps Member States fight drugs, crime, and terrorism.

UNFPA The United Nations Population Fund – UNFPA is the lead UN agency for delivering a world where every pregnancy is wanted, every birth is safe, and every young person's potential is fulfilled.

UNCTAD The United Nations Conference on Trade and Development is the United Nations body responsible for dealing with development issues, particularly international trade – the main driver of development.

UNEP

The United Nations Environment Programme established in 1972, is the voice for the environment within the United Nations system. UNEP acts as a catalyst, advocate, educator and facilitator to promote the wise use and sustainable development of the global environment.

UNRWA The United Nations Relief and Works Agency for Palestine Refugees has contributed to the welfare and human development of four generations of Palestine refugees. It’s services encompass education, health care, relief and social services, camp infrastructure and improvement, microfinance and emergency assistance, including in times of armed conflict. It reports only to the UN General Assembly.

UN Women UN Women merges and builds on the important work of four previously distinct parts of the UN system, which focus exclusively on gender equality and women’s empowerment.

UN-Habitat The mission of the United Nations Human Settlements Programme is to promote socially and environmentally sustainable human settlements development and the achievement of adequate shelter for all.

UN Specialized Agencies The UN specialized agencies are autonomous organizations working with the United Nations. All were brought into relationship with the UN through negotiated agreements. Some existed before the First World War. Some were associated with the League of Nations. Others were created almost simultaneously with the UN. Others were created by the UN to meet emerging needs.

World Bank The World Bank focuses on poverty reduction and the improvement of living standards worldwide by providing lowinterest loans, interest-free credit, and grants to developing countries for education, health, infrastructure, and communications, among other things. The World Bank works in over 100 countries.      

World Bank Group International Bank for Reconstruction and Development (IBRD) International Centre for Settlement of Investment Disputes (ICSID) International Development Association (IDA) International Finance Corporation (IFC) Multilateral Investment Guarantee Agency (MIGA)

IMF The International Monetary Fund fosters economic growth and employment by providing temporary financial assistance to countries to help ease balance of payments adjustment and technical assistance. The IMF currently has $28 billion in outstanding loans to 74 nations.

WHO The World Health Organization is the directing and coordinating authority on international health within the United Nations system. The objective of WHO is the attainment by all peoples of the highest possible level of health. Health, as defined in the WHO Constitution, is a state of complete physical, mental and social well-being and not merely the absence of disease or infirmity.

UNESCO

The United Nations Educational, Scientific and Cultural Organization focuses on everything from teacher training to helping improve education worldwide to protecting important historical and cultural sites around the world. UNESCO added 28 new World Heritage Sites this year to the list of irreplaceable treasures that will be protected for today's travelers and future generations.

ILO The International Labor Organization promotes international labor rights by formulating international standards on the freedom to associate, collective bargaining, the abolition of forced labor, and equality of opportunity and treatment.

FAO The Food and Agriculture Organization leads international efforts to fight hunger. It is both a forum for negotiating agreements between developing and developed countries and a source of technical knowledge and information to aid development.

IFAD The International Fund for Agricultural Development, since it was created in 1977, has focused exclusively on rural poverty reduction, working with poor rural populations in developing countries to eliminate poverty, hunger and malnutrition; raise their productivity and incomes; and improve the quality of their lives.

IMO The International Maritime Organization has created a comprehensive shipping regulatory framework, addressing safety and environmental concerns, legal matters, technical cooperation, security, and efficiency.

WMO

The World Meteorological Organization facilitates the free international exchange of meteorological data and information and the furtherance of its use in aviation, shipping, security, and agriculture, among other things.

WIPO The World Intellectual Property Organization protects intellectual property throughout the world through 23 international treaties.

ICAO The International Civilian Aviation Organization sets international rules on air navigation, the investigation of air accidents, and aerial border-crossing procedures ITU The International Telecommunication Union is the United Nations specialized agency for information and communication technologies. It is committed to connecting all the world's people – wherever they live and whatever their means. Through our work, we protect and support everyone's fundamental right to communicate UNIDO The United Nations Industrial Development Organization is the specialized agency of the United Nations that promotes industrial development for poverty reduction, inclusive globalization and environmental sustainability.

UPU The Universal Postal Union is the primary forum for cooperation between postal sector players. It helps to ensure a truly universal network of up-to-date products and services.

UNWTO

The World Tourism Organization is the United Nations agency responsible for the promotion of responsible, sustainable and universally accessible tourism.

Other Entities UNAIDS The Joint United Nations Programme on HIV/AIDS is cosponsored by 10 UN system agencies: UNHCR, UNICEF, WFP, UNDP, UNFPA, UNODC, the ILO, UNESCO, WHO and the World Bank and has ten goals related to stopping and reversing the spread of HIV/AIDS. UNISDR The United Nations Office for Disaster Reduction serves as the focal point in the United Nations system for the coordination of disaster reduction.

UNOPS The United Nations Office for Project Services is an operational arm of the United Nations, supporting the successful implementation of its partners' peacebuilding, humanitarian and development projects around the world.

Related Organizations IAEA The International Atomic Energy Agency, is the world's centre for cooperation in the nuclear field. The Agency works with its Member States and multiple partners worldwide to promote the safe, secure and peaceful use of nuclear technologies.

WTO The World Trade Organization is a forum for governments to negotiate trade agreements, and a place where member

governments try to sort out the trade problems they face with each other.

CTBTO The Preparatory Commission for the Comprehensive NuclearTest-Ban Treaty Organization promotes the Comprehensive Nuclear-Test-Ban Treaty (which is not yet in force) and the buildup of the verification regime so that it is operational when the Treaty enters into force.

OPCW The Organisation for the Prohibition of Chemical Weapons is the implementing body of the Chemical Weapons Convention (CWC), which entered into force in 1997. OPCW Member States work together to achieve a world free of chemical weapons.

IOM The International Organization for Migration works to help ensure the orderly and humane management of migration, to promote international cooperation on migration issues, to assist in the search for practical solutions to migration problems and to provide humanitarian assistance to migrants in need, including refugees and internally displaced people.

Source: United Nations Foundation 2017

Chapter 31

European Union SMEs Funding55) EUROPEAN INVESTMENT FUND About the European Investment Fund The European Investment Fund's (EIF) is part of the European Investment Bank group. Its central mission is to support Europe's micro, small and medium-sized businesses by helping them to access finance. EIF designs and develops both venture and growth capital, guarantees and microfinance instruments which specifically target this market segment. In this role, EIF fosters EU objectives

in support of innovation, research entrepreneurship, growth and employment.

and

development,

COSME EQUITY FACILITY FOR GROWTH (EFG) The Equity Facility for Growth (EFG) is dedicated to investments in risk-capital funds that provide venture capital and mezzanine finance to expansion and growth-stage SMEs, in particular those operating across borders. It is expected that some 500 firms will receive equity financing through the program, with overall investment reaching up to EUR 4 billion. The EFG is part of COSME, the EU program for the Competitiveness of Enterprises and Small and Medium-sized Enterprises (SMEs) running from 2014 to 2020.

It has a total budget of EUR 2.3 billion and at least 60% of the program will be devoted to ease access to finance for SMEs in Europe.

INNOFIN SME VENTURE CAPITAL is an early stage equity product offered in cooperation with the European Investment Fund which aims at improving access to risk finance for early-stage RDI-driven SMEs and small midcaps through supporting early-stage risk capital funds that invest, on a predominantly cross-border basis, in individual enterprises. Eligible final beneficiaries are SMEs (and small midcaps) located in Member States or in Horizon 2020 Associated Countries. The aggregate investments to venture capital funds made out of InnovFin SME Venture Capital are expected to support between EUR 1.6 to EUR 2 billion of equity financing to final beneficiaries.

InnovFin SME Venture Capital is part of InnovFin – EU Finance for Innovators, the new generation of EU financial instruments and advisory services developed under Horizon 2020 to help innovative firms access finance more easily. "InnovFin – EU Finance for

Innovators" will help to inject up to EUR 48 billion in investments in Research and Innovation across Europe.

FUNDING OF GREEN ENERGY PROJECTS BY THE EUROPEAN UNION 1.

Small and medium sized enterprises (SMEs) were the economic backbone of the European Union. More than 99% of all European businesses are SMEs. 2.

SMEs provided two out of three of the private sector jobs and contribute to more than half of the total value-added created by businesses in the EU. 3.

SMEs being primarily responsible for wealth and economic growth, next to their key role in innovation and R&D. 4. Climate change, scarcity of energy supplies and sustainable development are key challenges for SMEs, which have to adopt more sustainable production and business models. The demand for

environmentally friendly products and services also opens the way for new business opportunities.

The Europe 2020 Strategy outlines the EU‟s priority to become a sustainable economy and set ambitious objectives for climate action and energy efficiency.

EU POLICY ACTIONS Communication for a European Industrial Renaissance On 22 January 2014, the Commission adopted a new Communication on Industrial Policy “For a European Industrial Renaissance” COM (2014)14. The Communication sets out the Commissions key priorities for industrial policy, it provides an overview of actions already undertaken and puts forward a limited number of new actions to speed up the attainment of these objectives.

A resource-efficient Europe – Flagship initiative of the Europe 2020 Strategy The flagship initiative for a resource-efficient Europe under the Europe 2020 strategy supports the shift towards a resourceefficient, low-carbon economy to achieve sustainable growth.

Natural resources underpin our economy and our quality of life.

The Small Business Act (SBA) The Small Business Act for Europe (COM(2008) 394) adopted in June 2008, reflects the Commission's political will to recognize the central role of SMEs in the EU economy and for the first time puts into place a comprehensive SME policy framework for the EU and its Member States. It aims to improve the overall approach to entrepreneurship, permanently anchor the 'Think Small First' principle in policy making from regulation to public service, and to promote SMEs' growth by helping them tackle the remaining

problems which hamper their development. The European Commission promotes the growth of SMEs through the Small Business Act This framework includes an initiative to raise SMEs‟ awareness of environmental and energy-related issues and to assist them in implementing legislation, assessing their environmental and energy performance and upgrading their skills and qualifications.

Green Action Plan for small and medium sized enterprises (SMEs) The Green Action Plan (GAP) adopted in July 2014, gives a clear direction and framework for how the EU, in partnership with Member States and regions, intends to help SMEs exploit the business opportunities that the transition to a green economy offers. It is a significant milestone for involving the SMEs in not only in waste minimization and management but also encouraging enterprise and opportunities in green business.

The GAP proposes to exploit green opportunities, by improving productivity and driving down costs in European SMEs through resource-efficiency, by supporting green entrepreneurship and by exploiting and developing Europe's leadership in green processes and technologies.

The Green Action Plan focuses on European level actions which are designed to fit in with, and reinforce existing 'green' initiatives to support SMEs at national and regional levels. It was drafted through consultation with, and will be implemented in cooperation with actors in the Member States that are active in this area.

The Green Action Plan sets out a series of objectives and lists actions that will be implemented at European level within the framework of the Multiannual Financial Framework 2014-2020. All the actions are either new or revised versions of previous actions that now take into account the potential for business of resource efficiency and access to green markets.

OTHER PROGRAMS OF THE EUROPEAN UNION 1. Horizon 2020 Program Horizon 2020 is the biggest EU Research and Innovation program ever with nearly €80 billion of funding available over 7 years (2014 to 2020). This program is divided into several pillars and implements the Innovation Union, a Europe 2020 flagship initiative, aimed at securing Europe's global competitiveness.

Through a dedicated SME instrument, which offers seamless business innovation support under the section Societal Challenges and the specific part Leadership in Enabling and Industrial Technologies (LEITs, Horizon funds High-potential innovation and stimulates SME participation across the whole programme, targeting all those SMEs which are showing a strong ambition to develop, grow and internationalize, regardless of whether they are high-tech and research-driven or non-research conducting, social or service companies.

Provided with about € 3 billion in funding over the period 20142020, the SME Instrument helps high-potential SMEs to develop ground-breaking innovative ideas for products, services or processes that are ready to face global market competition. The SME Instrument consists of three separate phases and a coaching and mentoring service for beneficiaries. Participants can apply to phase 1 with a view to applying to phase 2 at a later date, or directly to phase 2.

In phase 1, a feasibility study shall be developed verifying the technological/practical as well as economic viability of an innovation idea/concept with considerable novelty to the industry sector in which it is presented (new products, processes, services and technologies or new market applications of existing technologies).

Bottlenecks in the ability to increase profitability of the enterprise through innovation shall be detected and analyzed during phase 1 and addressed during phase 2 to increase the return in investment in innovation activities. The proposal should contain an initial business plan based on the proposed idea/concept. Funding will be provided in the form of a lump sum of EUR 50,000. The Proposals should last around 6 months.

In phase 2, innovation projects will be supported that address the specific challenges identified and that demonstrate high potential in terms of company competitiveness and growth underpinned by a strategic business plan. Activities should focus on innovation activities such as demonstration, testing, prototyping, piloting, scaling- up, miniaturization, design, market replication and the like aiming to bring an innovation idea (product, process, service, etc.) to industrial readiness and maturity for market introduction close to deployment and market introduction, but may also include some research.

Proposals shall be based on an elaborated business plan either developed through phase 1 or another means. Particular attention must be paid to IP protection and ownership. The Commission

considers that proposals requesting a contribution from the EU of between EUR 0.5 and 2.5 million would allow phase 2 to be addressed appropriately.

Nonetheless, this does not preclude submission and selection of proposals requesting other amounts. Proposals should last between 12 and 24 months. In addition, in phase 3, SMEs can benefit from indirect support measures and services as well as access to the financial facilities supported under Access to Risk Finance of this work program.

Successful beneficiaries will be offered coaching and mentoring support during phase 1 and phase 2. This service will be accessible via the Enterprise Europe Network and delivered by a dedicated coach through consultation and signposting to the beneficiaries.

The single SME instrument call includes topics particularly relevant to innovation driven SMEs seeking to commercialize eco-innovative products, services or processes, including under Horizon 2020 Societal Challenges 2, 3, 4 and 5. Moreover Horizon 2020 funds collaborative R&D actions that are of particular relevance to ecoinnovation driven SMEs, not least under its Societal Challenge "Climate Action, Environment, Resource Efficiency and Raw Materials", in terms of increasing resource efficiency through a systemic approach towards eco-innovation and in the setting up of a circular economy.

The Horizon 2020 action „Cluster facilitated projects for new industrial value chains‟ to be implemented as of 2015, is aimed at better unlocking the innovation potential of SMEs, including the eco-innovative and resource- efficient solutions they offer. The action will support cross-sectoral and cross-regional collaboration and innovation projects driven by SMEs by better integrating them into clusters and different value chains.

2. Erasmus Plus

The Erasmus Plus Program aims to boost skills and employability, as well as modernizing Education, Training, and Youth work. The seven year program will have a budget of €14.7 billion.

In order to foster higher education and enterprise cooperation to trigger innovative solutions and entrepreneurship, and to support Vocational Education and Training to tackle sector specific skills gaps on environmental technologies and eco- innovation, key action ‘Cooperation for innovation and good practices' supports: supports the establishment of: 

Knowledge Alliances, and



The establishment of Sector Skills Alliances.

Knowledge Alliances are transnational, structured and resultdriven projects between higher education institutions and public or private, small, medium or large enterprises for: • Jointly designed and delivered innovative learning and teaching methods • Introducing entrepreneurship knowledge, skills and motivation in order to trigger students, enterprise and academic staff to engage in entrepreneurial activities in their environment • Cross-sectoral and reciprocal mobility for continuing educational programs, supervision, teaching and activities with and within companies.

The program is open to any discipline, including the field of the green economy. Selected Knowledge Alliances are funded with EUR 700,000 (for a 2-year project) or up to EUR 1,000,000 (for a 3year project) following yearly calls for proposals. Some 150 Knowledge Alliances between 1500 higher education institutions and enterprises are expected to be built by 2020.

Sector Skills Alliances are transnational projects drawing on evidence of trends in a specific economic sector and the skills needed in order to perform in one or more professional field.

They support the design and delivery of joint vocational training curricula. Selected Sector Skills Alliances are funded with a grant ranging from EUR 700,000 (for a 2-year project) or up to EUR 1,000,000 (for a 3-year project) following yearly calls for proposals. One of the sectors which are eligible under this action is "environmental technologies" (eco-innovation). Public or private, small, medium or large enterprises (including social enterprises) are eligible participating organizations for the Sector Skills Alliances. Up to 150 Sector Skills Alliances are expected to be set up by 2020.

3. COSME COSME is the EU program for the Competitiveness of Enterprises and Small and Medium-sized Enterprises (SMEs) running from 2014 to 2020. With a planned budget of €2.3bn, the financial instruments under COSME will specifically support SMEs to internationalize, by promoting their cross border development.

4. LIFE LIFE is the EU's financial instrument supporting environmental, nature conservation and climate action projects throughout the EU. With an overall budget for the next funding period, 2014–2020, of €3.4 billion the Life program also supports initiatives to facilitate business partnering, and skills and knowledge for green entrepreneurship.

It prioritizes projects implementing:

a) New business models for resource efficiency and energy efficiency, including establishing resource efficiency practices in SMEs, focusing on the environmental impact, durability, reuse, repair and recycling of their products and processes – including sharing or leasing of products rather than selling them. This should involve one of the industrial sectors considered as a priority in the Roadmap for a Resource Efficient Europe, and the new business model should result in a reduction in material use and/or energy and water use. b) The circular economy concept though actions spanning the value chain or ensuring the use of secondary resources/scrap material/waste in other industries or value chains, including ecodesign, cascading use of materials, repair, remanufacture, reuse, recycling, new circular business concepts, innovative take-back and collection systems, and industrial symbiosis-related projects.

Chapter 31

Micro Finance Sources While the gap varies considerably between regions, it’s particularly wide in Africa and Asia. The current credit gap for formal SMEs is estimated to be US$1.2 trillion; the total credit gap for both formal and informal SMEs is as high as US$2.6 trillion.

Micro Enterprises have in fact no access to bank loans at all,

being one of the main concerns for their survival and development.

They would need micro loans with no bankable guarantees.

THE ROOTS OF MICRO FINANCING The modern use of the expression "micro financing" has roots in the 1970s when organizations, such as Grameen Bank of Bangladesh with the microfinance pioneer and Nobel - Prize laureate Muhammad Yunus, were starting and shaping the modern industry of micro financing. While the success of the Grameen Bank (which now serves over 7 million poor Bangladeshi women) has inspired the world, it has proved difficult to replicate this success.

Hans Dieter Seibel, board member of the European Microfinance Platform, is in favor of the group model. This particular model (used by many Microfinance institutions) makes financial sense, he says, because it reduces transaction costs. Microfinance programs also need to be based on local funds. We proposed “National SME Foundations for Crises Prevention and Economic Development (SMEDFOUNDS)”, financed by a small part, of the VAT (e.g. 1% ) and 0,05% of a Currency Transaction Levy.

The new financial systems approach pragmatically acknowledges the richness of centuries of microfinance history and the immense diversity of institutions serving poor people in developing world today. It is also rooted in an increasing awareness of diversity of the financial service needs of the world’s poorest people, and the diverse settings in which they live and work.

INCLUSIVE FINANCIAL SYSTEMS The micro - credit era that began in the 1970s has lost its momentum, to be replaced by a 'financial systems' approach. While

micro - credit achieved a great deal, especially in urban and nearurban areas and with entrepreneurial families, its progress in delivering financial services in less densely populated rural areas has been slow.

Informal financial service providers include moneylenders, pawnbrokers, savings collectors, money-guards, ROSCAs, ASCAs and input supply shops. Because they know each other well and live in the same community, they understand each other’s financial circumstances and can offer very flexible, convenient and fast services. These services can also be costly and the choice of financial products limited and very short-term. Informal services that involve savings are also risky; many people lose their money.

MEMBER-OWNED ORGANIZATIONS These include self-help groups, credit unions, and a variety of hybrid organizations like 'financial service associations' and CVECAs. Like their informal cousins, they are generally small and local, which means they have access to good knowledge about each other's financial circumstances and can offer convenience and flexibility.

THE ROLE OF NGOs The Microcredit Summit Campaign counted 3,316 of these MFIs and NGOs lending to about 133 million clients by the end of 2006.[45] Led by Grameen Bank and BRAC in Bangladesh, Prodem in Bolivia, Opportunity International, and FINCA International, headquartered in Washington, DC, these NGOs have spread around the developing world in the past three decades; others, like the Gamelan Council, address larger regions. They have proven very innovative, pioneering banking techniques like solidarity lending, village banking and mobile banking that have overcome barriers to serving poor populations.

FORMAL FINANCIAL INSTITUTION In addition to commercial banks, these include state banks, agricultural development banks, savings banks, rural banks and non-bank financial institutions. They are regulated and supervised, offer a wider range of financial services, and control a branch network that can extend across the country and internationally.

However, they have proved reluctant to adopt social missions, and due to their high costs of operation, often can't deliver services to poor or remote populations.

The increasing use of alternative data in credit scoring, such as trade credit is increasing commercial banks' interest in microfinance. With appropriate regulation and supervision, each of these institutional types can bring leverage to solving the microfinance problem. For example, efforts are being made to link self-help groups to commercial banks, to network member-owned organizations together to achieve economies of scale and scope, and to support efforts by commercial banks to 'down-scale' by integrating mobile banking and e-payment technologies into their extensive branch networks.

MICROCREDIT AND THE WEB Due to the unbalanced emphasis on credit at the expense of microsavings, as well as a desire to link Western investors to the sector, peer-to-peer platforms have developed to expand the availability of microcredit through individual lenders in the developed world.

New platforms that connect lenders to micro-entrepreneurs are emerging on the Web, for example MYC4, Kiva, Zidisha, myELEN, Opportunity International and the Microloan Foundation. Another Web-based micro - lender United Prosperity uses a variation on the usual micro - lending model; with United Prosperity the microlender provides a guarantee to a local bank which then lends back double that amount to the micro-entrepreneur.

CHAPTER 32

SME Financing Investment Bank

by

the

EIB

European

Preliminary remarks In the last few years, the author has interviewed the owners of smaller companies in the countries in which the EIB finances smallscale projects, whether they are aware of these financing possibilities and make use of them. We had to realize that neither these entrepreneurs nor the regional economic chambers were concerned with EIB financing in detail. The majority of the surveyed entrepreneurs felt that the EIB only finances large companies, and that financial consultants should be entrusted if, for example, to apply for EIB financing. Small business owners, however, cannot afford such consultants. This result of surveys shows once again that the "SME Foundations for Development" proposed by us could effectively help the smaller companies to gain access to the EIB's financing programs.

We have drawn up a summary of the EIB Financing for SMEs, based on EIB publications and personal discussions with EIB Managers.

The EIB The EIB is the European Union's bank and is the only bank owned by and representing the interests of the European Union Member States. EIB works closely with other EU institutions to implement EU policy.

EIB is presently the world’s largest multilateral borrower and lender and provides finance and expertise for sustainable investment projects that contribute to EU policy objectives. More than 90% of our activity is in Europe. But we also are a big investor around the world.

Lending: The vast majority of EIB’s financing is through loans, but we also offer guarantees, microfinance, equity investment, etc.

Blending: EIB’s support unlocks financing from other sources, particularly from the EU budget. This is blended with loans to form a full financing package.

Advising: Lack of finance is often only one barrier to investment.

EIB helps with administrative and project management capacity to facilitate investment.

SMEs and Midcaps Small and medium sized enterprises (SMEs) are important drivers of growth, employment and innovation in Europe. SMEs represent well over 90% of businesses in the EU and employ two thirds of the active working population. Supporting access to finance for SMEs and midcaps is a top priority for the EIB Group.

In 2016 alone, the EIB Group financed SMEs and midcaps across the globe to the tune of a record EUR 33.6 billion (EIB Group). We supported 300 000 smaller companies, which employ 4.4 million people.

Approach The EIB Group continuously works to strengthening its support for SMEs and midcaps. EIB heightened cooperation with the EU Member States and public promotional institutions to establish tailor-made innovative financing facilities for SMEs and midcaps to help maximize resources.

EIB’s financial support focuses on developing innovative products and partnerships that facilitate access to finance and improve financing conditions for SMEs and midcaps at all stages of their development.

Together, the EIB and EIF mobilise financial and technical expertise to act as a catalyst for investment in this essential economic sector to achieve smart, sustainable and inclusive growth.

How to receive EIB support Within the EU SMEs (with fewer than 250 employees) and Mid-Caps (with 250-3 000 employees) receive intermediated loans towards investment projects costing up to EUR 25m (and occasionally EUR 50m).

Local authorities also receive intermediated investment projects costing up to EUR 25m.

loans

towards

Local authorities can also access urban development technical assistance through the JESSICA programme and can maximise investment for sustainable energy via the ELENA scheme. New EU Member States can receive infrastructure project advice under the JASPERS programme.

Major project finance EIB lends directly to major projects towards investment projects costing in excess of EUR 25m. To receive our backing, these projects must further EU policy goals as well as being financially, environmentally and technically viable.

Outside the EU Many of the services offered within the EU are also available in the rest of the world.

What is growth finance?

Loans (including quasi-equity) to medium-sized companies (Midcaps) or in some cases small and medium sized enterprises (SMEs) in need of capital to expand their operations, located in the EU or in select neighbouring countries. Depending on risk and other features, this product may be supported by the European Fund for

Strategic Investments managed by the EIB.

(EFSI),

InnovFin

or

other

mandates

Who is eligible?

Companies with up to 3 000 full-time employees at the time of application, Companies who have raised already one or more rounds of financing with financial or strategic investors Companies able to demonstrate sound corporate governance, viable business plans, and sustainable capital structures Key benefits of EIB growth finance Long tenors, flexible structures, ability to absorb equity risk without dilution, Quality stamp and positive signalling effect, catalysing additional financing from other sources Long-term perspective, with a view to supporting EU public policy objectives Improved return on equity for existing investors Partners for SMEs and Midcaps Here is the list EIB’S active intermediaries for investment in smaller projects.

European Union • Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, United Kingdom.

European Free Trade Association countries •

Iceland, Liechtenstein, Norway, Switzerland

Candidate countries • Turkey, Former Yugoslav Republic of Macedonia (FYROM), Montenegro, Serbia.

Western Balkans •

Albania, Bosnia and Herzegovina, Kosovo*.

EU Eastern Neighbours •

Russia, Ukraine, Moldova, Armenia, Azerbaijan, Georgia.

Mediterranean partner countries - FEMIP • Algeria, Egypt, Gaza/West Bank, Israel, Jordan, Lebanon, Morocco, Syria, Tunisia.

Africa, Caribbean, Pacific and Overseas countries and territories (ACP+OCT) • Africa, territories •

Caribbean,

Pacific

and

Overseas

countries

and

South Africa

Asia and Latin America •

Asia and Latin America (ALA)

•

Central Asia

* This designation is without prejudice to the positions expressed by the EU Member States on Kosovo’s status and is in line with United Nations Security Council Resolution No. 1244/1999 and the International Court of Justice Opinion of 22 July 2010 on Kosovo’s declaration of independence.

CHAPTER 33

SME Financing by the EBRD – European Bank for Reconstruction and Development EBRD The European Bank for Reconstruction and Development (EBRD) was established to help build a new, post-Cold War era in Central and Eastern Europe. It has since played a historic role and gained unique expertise in fostering change in the region - and beyond.

Commitment to entrepreneurship The EBRD is committed to furthering progress towards ‘marketoriented economies and the promotion of private and entrepreneurial initiative’. This has been its guiding principle since its creation at the beginning of the 1990s and, new challenges and the welcoming of new countries to the EBRD world notwithstanding, will continue to be its mission in years to come.

Chapter 34

IFC – International Finance Corporation – World Bank Group: Support of micro – finance IFC56) stated: “Microfinance has built a solid track record as a critical tool in the fight against poverty and has entered the financial mainstream. The rapid growth of the industry over the past 15 years has reached approximately 130 million clients according to recent estimates. Yet microfinance still reaches less than 20 percent of its potential market among the world’s three billion or more poor. IFC is one of the leading global investors in terms of volume. In fiscal year 2014, IFC committed $519 million in 47 projects with MFIs. IFC cumulative investment portfolio in microfinance exceeded $3.5 billion, with outstanding commitments of $1.68 billion.

In fiscal year 2014, IFC's advisory services comprised $66.2 million, representing technical assistance for 73 projects. IFC's investment and advisory reach through MFIs and SME-focused financial institutions is 29.1 million micro loans for a total of $28 billion outstanding portfolio (as of December 2013). IFC also takes an active role in advising microfinance institutions and developing credit bureaus, which are critical to avoid over-indebtedness and support responsible lending practices. Through its Global Credit Bureau Program, IFC has created or significantly improved credit bureaus in more than 30 countries and advocated for relevant laws in 33 Countries”.

A POSITIVE EXAMPLE: MICRO FINANCE PROGRAM IN GUATEMALA FOR MAYA FAMILIESA

Generally, microloans process follows the below model: Leaders organize themselves into groups of about 25-30 members Women’s groups are established and they recruit other women interested in receiving a microloan. Each woman initially receives $125USD (limit increases after successful repayment). Women use this money to start a small business or enhance an existing one.

We provide ongoing training throughout the process to help improve success rates and to teach them business and banking skills, how to start their own savings account and develop financial planning skills.

PART FIVE

INTERNATIONAL SOURCES OF SMEs INFORMATION

In the following chapters we introduce our readers to the leading sources of information about the development of SMEs worldwide.

These are:

Chapter 35

International SMEs Supporting Organizations (no ranking) WUSME World Union of Small and Medium Enterprises with headquarters in the Republic of San Marino (web: http://www.wusme.org), presently the only International Organization in Special Consultative Status at United Nations Economic and Social Council - ECOSOC exclusively safeguarding the interests, rights and competitiveness of SMEs and Crafts.

WUSME is represented in 70 Countries and offers a wide range of benefits for Members.

The UN-Business Action Hub https://business.un.org/?locale=en is a platform where the UN and business can engage in dialogue, share information and take action to advance UN objectives and the Sustainable Development Goals.

BiD Network http://www.bidnetwork.org/, Netherlands BiD suppors entrepreneurs in emerging markets in starting and growing their businesses. They provide access to finance programs and offer training, coaching and investor matchmaking services.

Central European Initiative – CEI http://www.ceinet.org Italy

SMEs and Business Development: CEI actions in the area of SMEs and Business Development are closely in line with the Europe 2020 Strategy. Through its activities, the CEI endeavours to invest in and contribute to developing a sustainable economy placing this field of action on top of its agenda. The CEI focuses in particular on transferring experience and best practices, enhancing cooperation relations among its Member States as well as fostering policies and activities promoting entrepreneurship.

China IPR SME Helpdesk http://www.china-iprhelpdesk.eu/, Valuable for SMEs doing business in China, Latin America and South East Asia. Free business tools for SMEs to manage your Intellectual Property Rights.

Enterprise Ireland http://www.enterprise-ireland.ie SMEs supporting Organizations can learn how this Association works in partnership with Irish enterprises to help them start, grow, innovate and win export sales in global markets. In this way, we support sustainable economic growth, regional development and secure employment.

European Commission Programme for the Promotion of Innovation and Encouragement of SME Participation http://www.cordis.lu/innovation-smes/home.html A valuable source of information for innovative SMEs Innovation is vital to European competitiveness in the global economy. The EU is implementing policies and programmes that support the development of innovation to increase investment in research and development, and to better convert research into improved goods, services, or processes for the market.

European Small Business europe.org/, Belgium

Alliance

(ESBA)

http://www.esba-

The European Small Business Alliance (ESBA) is a non-party political group, which cares for small business entrepreneurs and the self-employed and represents them through targeted EU advocacy and profiling activities.

European Commission http://ec.europa.eu/growth/smes/ What the EU does for SMEs.: Creates a business friendly environment, Promotes entrepreneurship, Improves access to new markets and internationalization, Facilitates access to finance, Supports SME Competitiveness and Innovation, Provides key support networks and information for SMEs.

International Council for Small Business http://www.icsb.org/ Founded in 1955, the International Council for Small Business (ICSB) was the first international membership organization to promote the growth and development of small businesses worldwide. The organization brings together educators, researchers, policy-makers and practitioners from around the world to share knowledge and expertise in their respective fields.

International Network for SMEs (INSME) http://www.insme.org/ Rome, Italy The International Network for Small and Medium Sized EnterprisesINSME is a legally recognized not-for-profit Association open to international membership. Its mission is to stimulate transnational cooperation and public and private partnership in the field of innovation and technology transfer to SMEs. The SME Portal https://www.smeportal.sg/content/smeportal/en/home.html It is the first stop for Singapore SME owners and aspiring entrepreneurs looking for information, tools and services that can help them build sustainable and competitive businesses.

SME – USA and Canada http://www.sme.org/smehome.aspx The intersection of manufacturing technology and workforce development. Connecting people who are passionate about manufacturing and inspiring future generations.

China Association of Small and Medium Enterprises (CASME) http://english.ca-sme.org/Main.aspx For SMEs doing or planning to do business in China The Global Alliance of SMEs (GASME) http://www.globalsmes.org/ is a non-profit multinational NGO approved by the US government, and was founded by the US-China Exchange Association (USCEA) together with more than one hundred prominent trade organizations from the G20 countries in 2009.

ESA – European Space Agency http://www.esa.int/About_Us/Business_with_ESA/SME_Small_an d_Medium_Sized_Enterprises Interesting business opportunities offered for SMEs. SME Toolkit IFC – World Bank http://www.smetoolkit.org/smetoolkit/en/webpage/141742/en SME Toolkit is an online platform that helps entrepreneurs and small and medium enterprises (SMEs) all over the world to learn and implement sustainable business management practices and increase their productivity, efficiency, and capacity, as well as improve their access to finance and new markets. SME Toolkit provides SMEs with free online key business management information, interactive tools, and training resources. This includes over 5,000 free business forms, tools, and how-to-articles, as well as a global business directory, multilingual community forums, and a host of other interactive features.

U.S. Small Business Administration https://www.sba.gov/ SME supporting Organizations worldwide should visit the SBA website now and again.

The U.S. Small Business Administration (SBA) was created in 1953 as an independent agency of the federal government to aid, counsel, assist and protect the interests of small business concerns, to preserve free competitive enterprise and to maintain and strengthen the overall economy of our nation.

THE WORLD BANK – SME FINANCE http://www.worldbank.org/en/topic/financialsector/brief/smesfinance

A key area of the World Bank Group’s work is to improve SMEs’ access to finance and find innovative solutions to unlock sources of capital.

WORLD SME FORUM - WSF http://worldsmeforum.org/ The mission of WSF is to improve the overall growth and impact of small and medium enterprises (SMEs) globally. WSF aims to provide SMEs with effective representation, ensuring that they can compete fairly. Partnering with international financial institutions, development agencies, SME-related associations, and chambers, WSF will promote the vital role of SMEs in the global economy; represent them in international bodies and to standard setters that either directly or indirectly affect SME performance and development; and help SMEs achieve sustainable efficiency and competitiveness to reinforce their contribution to economic growth, employment and development.

GEM- GLOBAL ENTRPRENEURSHIP MONITOR ANNUAL REPORTS The Global Entrepreneurship Monitor is the world's foremost study of entrepreneurship.

Through a vast, centrally coordinated, internationally executed data collection effort, GEM is able to provide high quality information, comprehensive reports and interesting stories, which greatly enhance the understanding of the entrepreneurial phenomenon - but it is more than that. It is also an ever-growing community of believers in the transformative benefits of entrepreneurship.

In numbers, GEM is: 17 years of data, 200,000+ interviews a year, 100+ countries, 500+ specialists in entrepreneurship research, 300+ academic and research institutions, 200+ funding institutions.

In each economy, GEM looks at two elements: The entrepreneurial behavior and attitudes of individuals, the national context and how that impacts entrepreneurship, the information gained, carefully analyzed by local GEM researchers, allows a deep understanding of the environment for entrepreneurship and provides valuable insights.

GEM began in 1999 as a joint project between Babson College (USA) and London Business School (UK). The aim was to consider why some countries are more 'entrepreneurial' than others. 17 years on, GEM is the richest resource of information on the subject, publishing a range of global, national and 'special topic' reports on an annual basis.

THE GEM CONCEPT This Global Entrepreneurship Monitor (GEM) report provides the results of its sixteenth survey on entrepreneurship held every year across the world. The rising number of participating countries and consistent conceptual framework, surveying tools and applied methodology contribute to build the biggest database on entrepreneurship in the world. The GEM survey generates a variety of relevant primary information on different aspects of entrepreneurship and provides harmonized measures about

individuals’ attributes and their activities in different phases of venturing (from nascent to start-up, established business and discontinuation).

GEM also tracks highly ambitious entrepreneurship (by identifying aspirations to grow among ownermanaged businessesand the presence of entrepreneurial employee activity).

All harmonized measures can be enriched with information on inclusiveness, using as lenses age, gender and income.

GLOBAL COMPETITIVENESS REPORTS57) The WEF - World Economic Forum The World Economic Forum, committed to improving the state of the world, is the International Organization for Public-Private Cooperation.

The Forum engages the foremost political, business and other leaders of society to shape global, regional and industry agendas.

It was established in 1971 as a not-for-profit foundation and is headquartered in Geneva, Switzerland. It is independent, impartial and not tied to any special interests. The Forum strives in all its efforts to demonstrate entrepreneurship in the global public interest while upholding the highest standards of governance.

Moral and intellectual integrity is at the heart of everything it does.

The Forum’s activities are shaped by a unique institutional culture founded on the stakeholder theory, which asserts that an organization is accountable to all parts of society. The institution carefully blends and balances the best of many kinds of organizations, from both the public and private sectors, international organizations and academic institutions.

The Global Competitiveness Report 2014-2015 assesses the competitiveness landscape of 144 economies, providing insight into the drivers of their productivity and prosperity. The Report

series remains the most comprehensive assessment of national competitiveness worldwide.

Why are these WEF REPORTS so valuable? The level of productivity, in turn, sets the sustainable level of prosperity that can be earned by an economy. In other words, more-competitive economies tend to be able to produce higher levels of income for their citizens. The productivity level also determines the rates of return obtained by investments in an economy. Because the rates of return are the fundamental drivers of the growth rates of the

economy, a more-competitive economy is one that is likely to grow faster in the medium to long run. SMEs, as recent studies show that entrepreneurial activity is related to growth in GDP and more specifically, it suggests that entrepreneurs play an important part in recovering from economic recessions.

PART SIX

CONTRIBUTIONS OF GUEST AUTHORS

Dr. Arun Agrawal, India FACILITATING EASIER ACCESS OF FINANCE TO SMALL AND MICRO ENTERPRISES : SOME RECENT LESSONS FROM INDIA Indian experience Now numbering close to 50 million, Indian SMEs have grown at a stable pace of 4.5% in the last 5 years. However, they continue to face difficulties in raising money, among other challenges, number and complexity of regulations being among others.

Many of such enterprises resort to raising funds from relatives and friends and from a rather expensive informal credit system to meet their financial requirements . A recent study suggests that nearly 25% of all micro and small enterprises operating in the country do not have access to institutional credit .

So is the Indian financial system so short of cash that it is unable to cater to the needs of micro and small enterprises ? This is certainly not so . I believe that the problem is with the mindsets of the bankers who look for securities and collaterals when dealing with loans worth a few thousands euros and reject most applications on small technical or uncertain project viability related grounds , but throw caution to the winds while financing large corporates . Let us consider some examples :

A case making headlines in the country presently is that of default in payment of bank loans by the now sunk Kingfisher Airlines to the extent of Rs. 90, 000 million [ Euros ] Stocks and brand names were overvalued and pledged as collateral securities .They are worth nothing now, and sale of properties incl: non-leased aircraft/s owned by the Airline/its Directors and pledged to the Banks would hardly fetch them Rs.9000 million [ Euros ] crores, that too with a reat deal of effort . Which means that close to 90% of the loans can easily be considered as bad , to be written off in due course of time . And in fact, while the loans given to the Airline by a consortium of 16 Banks before had already

turned sour , another Bank stepped in to support with a generous unsecured loan of Rs. 8000 million [ Euros ] . On the other hand, we read horror stories of small borrowers resorting to suicides because of coercive actions initiated by Banks to recover small loans given to them , less than 10,000 Euros . Therein lies the dichotomy and the discrimination.

Going further . 11 corporates in India owe Rs .732,7810 millions.

If the same amounts had been lent to micro and small enterprises sector in the country, that would have given birth to micro and small businesses resulting in creation of at least additional new jobs, and bringing prosperity to millions of people instead of enriching the coffers of a select band of 400-500 corporate managers and their families in major cities.

Recent Initiatives It cannot be said that the Government of India is not aware of the difficulties that the small and micro enterprises face in accessing the blood line for running their business - finance . That is why , considering the importance of this sector in promoting entrepreneurship, generating new jobs and distribution of income across wider sections of the society, the present Government since

it came into power in May 2014, has taken several new initiatives .

MUDRA BANK [ Micro Un its Development and Refinance Agency Bank ] Set up on 8 April, 2015 , the Bank aims to provide loans at low rates of interest to micro-finance institutions and non-banking financial institutions which would then provide onward credit to micro and small businesses , including self employed professionals , craftsmen and services providers . Three products available under Mudra Bank’s Scheme are Shishu [ Tiny] , Kishore [ Youngster ] and Tarun [ Adult ] , signifying different stages of growth and funding needs of the beneficiary micro unit or entrepreneur .

Shishu covers loans of upto Rs.50,000 , while Kishore covers those above Rs 50,000 and upto Rs.0.5 million . Tarun category provides loans between Rs. 0.5 million to Rs.1 million.

As on 15 March this year, loans worth Rs 1.09 lakh crores [ EUR ] have been provided by the Bank to over 2.96 crore beneficiaries since it was set up , less than 12 months before .

START UP INDIA This was launched on 16 January, 2016 and is applicable to those businesses which were launched in India in the last 5 years, but have either not received adequate funding or none at all. Some of its innovative features are as follows: 1.Compliance regime based on Self Certification The objective of compliance regime based on self - certification is to reduce the regulatory burden on Startups. This self-certification will apply to various laws like payment of gratuity, contract labor, employees provident fund, water and air pollution acts, among others .

2.Startup India hub and simplifying the Startup process A Startup India hub will be created as a single point of contact for the entire Startup ecosystem to enable efficient exchange of knowledge and faster access to funding. It will be possible to set up such a Start-Up by just filling a short form through a mobile app and on line portal launched recently by the Department of Industrial and Investment Promotion [ DIPP ] in the Ministry of Commerce and Industry .

3. Patents protection and exploitation of IPRs The Government is also working on legal support for fast tracking patent exanination at lower costs . It will promote awareness and adoption of Intellectual Property Rights [ IPRs ] by Startups and help them protect and commercialize IPRs .

4. Easier access to public agencies/departments.

procurement

by

Government

Procedures will be established for facilitating access to public procurement program for goods and services supplied by such StartUps .

5. Tax exemptions for Start - Ups Startups will be exempted from payment of taxes on their earnings for a period of 3 years from the day of starting their commercial operations. Procedures will be established to facilitate faster exit in case of genuine business failures.

STAND UP INDIA Under the Scheme launched by the Indian Prime Minister just 2 weeks ago, 125,000 branches of commercial banks will loan money to 125,000 young people from marginalized communities , the intention being to turn job seekers into job creators.

The "Stand up India Scheme" will help members of Scheduled Castes and Tribes class and Women to get loans - between Rs. I million and Rs. 10 million - for their non-farm businesses. The Scheme proposes to leverage the institutional credit structure to reach out to these under-served sectors of the population by facilitating bank loans to them on easy terms .

INITIAL PUBLIC OFFERING A recent phenomenon has been setting up of a smaller, exclusive stock exchange for SMEs enabling them to raise finances from retail as well as institutional investors , thus becoming publicly trading enterprises through such IPOs .

Until now, that is during last 3 years , 129 SMEs have been listed on the SME Exchange set up by the Bombay Stock Exchange . 34 SMEs raised Rs 2870 million [ EUR ] by way of IPO during April, 2015 - January 2016 . 23 SMEs have filed IPO papers in January – March 2016 quarter to mop up Rs 2000 million [ ……..EUR ] .

Dr. Joginder Singh JUNEJA, Vice President of WUSME – World Union of Small and Medium Enterprises MORE SMEs = MORE JOBS & MORE JOBS = BETTER QUALITY LIFE INTRODUCTION SMEs continue to make significant contribution to the overall economies of various countries world over. Adaptability, resilience and ability to manufacture and to provide services with a high degree of flexibility and cost effectiveness have made SMEs a force to recon with amongst all industrial economies of the globe.

Innovations have been the unique and biggest strength of SMEs. A number of modern products especially electronics and IT owe their origin to the SME sector. In fact, SMEs have proved to be a ‘nursery’ for nurturing the entrepreneurial talent coupled with high level of employment and industrial development.

In terms of industrial out-put, exports, creation of job opportunities at relatively lower capital costs, effective utilization of local

resources and talent, economic growth and poverty alleviation, SMEs world over have been playing a highly successful role in enhancing economic condition of various countries.

It would be pertinent to emphasis that the economic transformation of any country is mainly due to development and promotion of entrepreneurship and creation of SMEs as they are the main driving force for a country’s economic development through creation of ample and optimum job opportunities. Over the years, it has also been observed that, SME sector has played a key role in addressing socio - economic development by contributing to massive employment opportunities. The sector provides income generating avenues to large number of people next only to agriculture. SMEs have proved to be the backbone and engine of growth for the economies. A recent World Bank report stated “there is wide spread recognition that vibrant SMEs are potentially a key of economic growth, job creation and economic prosperity.

2.

Contribution of SMEs to economies Contribution of SMEs is very vital to the well being of various countries as they, by and large: a) Make up over 80-90 percent of all enterprises, b) Provide over 60 percent of the private sector jobs, c) Contribute more than 50 percent of sales or value addition, d) Share more than 40 percent of direct and indirect exports and e) Bring prosperity along the length or breadth of the country through wider dispersal of entrepreneurship.

3. Employment and job-creation SME sector has been the second largest employer after agriculture. There has been sizable migration of the agricultural labour force to the industrial and services sector in the recent years. Both traditional and high-growth SME enterprises, as measured by employment expansion rates, account for a significant share of jobs created and have proved to be the key players in the economic growth of the world. Smaller enterprises

exhibit higher net job creation rates as compared to the large enterprises. Large enterprises are rapidly moving towards automation with reduced dependency on labour but needing highly skilled persons.

4. Exports One of the major contributions of SMEs to nation’s economy is by way of exports. This consists of not only higher exports but also diversified exports and increase in their technology and skill content. It also includes “an expanding base of domestic enterprises able to compete globally; thus competitiveness is sustained and is generally accompanied by rising incomes”. The

ability of SMEs to contribute to exports varies widely and lies between 10 and 60 per cent. This varying ability to export is in itself an indication of how competitive SMEs can or cannot be in the global economy and the fact that specific support measures may be needed to improve their performance.

Sources: SME export contribution OECD country studies. Exports as percentage of GDP – UN country statistics.

5. Major Barriers and Constraints Faced by SMEs According to Asian Association of Management Organisations (AAMO) in the Asian region the following constraints have been brought out and similar constraints exist in other countries: i). Major Constraints for growth experienced by SMEs Taxations laws/ high taxes are major constraints faced by SMEs of India, Mauritius and Malaysia Bureaucracy of the Governments in countries like India, Mauritius and China are posing major constraints for the SMEs. Unfavorable legislation in India, Hong Kong and many other countries is indeed a constraint for SMEs. Poor property right enforcement in Malaysia and India. ii). Infrastructure Availability

China followed by India has observed high growth on account of availability of Roads, Industrial Estates, Power and Transport facilities. However non availability of such facilities in other countries of the region affect SMEs adversely. iii). Major Financial Constraints 71.43percent SMEs in China, 71.11percent of SMEs in Sri Lanka and 42percent of Indian SMEs have experienced difficulties to access finance.

Getting collateral security is the bottleneck for the SMEs of Sri Lanka, China and India to obtain loans.

Mauritius SMEs are facing lot of problems in obtaining working capital loan. The least difficulty is experienced by New Zealand SMEs. iv). Technological Constraints Locating sources of appropriate technology, financial resources to acquire technology, product designs added woes to the SMEs of Mauritius, Thailand and China. The respondents have attributed them as major constraints towards achieving growth. v). Application of ICT (information and Communication Technology) Tools Countries like Thailand, Cambodia, Lao People’s Democratic Republic, VietNam are yet to gear up in using ICT tools in business communication and in sourcing information for marketing and technology development. vi). Relative strength of Certification of SMEs (ISO or Equivalent) In India 32percent of SMEs studied have obtained ISO certification to remain competitive and take advantage of globalization. Indian Government is partly funding SMEs as incentive to motivate them to obtain ISO. SMEs of China and Hong Kong have also shown relatively high percentage (25percent) of ISO certification. Other countries in Asia-Pacific region are lagging. vii). Marketing Constraints Competition in the global market for exports is mostly experienced by India, China and Mauritius.

Lowering of Import duties resulting in free movement of imported

goods has posed major constraints to SMEs of India, Malaysia and Mauritius.

Cut in subsidies and reduction in the extent of protection, which are not WTO compatible have by and large affected the Indian SMEs. viii). Major Threats apprehended by SMEs due to change in Business Environment Technology changes are one of the major threats as experienced by the SMEs of the countries like Mauritius, Hong Kong, India, and New Zealand.

Competition from imports –a major threat, 74.21 percent SMEs of India High cost of production –a phenomena of concern for all countries Threats of having more competitors in the domestic market are being experienced by almost all the countries in Asian-Pacific region.

6. Emerging Trends - Technology, Innovation and Knowledge The technological breakthroughs during the last century, based on technology and knowledge, have given an altogether new thrust to the strategies for promoting economic development of not only developing economies but also sustaining the economies of the developed economies of Europe, USA and Japan and many other countries. The classical concepts of factors of production (namely land, labour, capital and entrepreneurship) have now evolved and broadened to include technology and innovations as the corner stone of the new approach to initiating and sustaining economic development and growth. All around the World, technologies and innovation are now recognized as the only tools for survival of enterprises, particularly small and medium enterprises, in a highly competitive environment in a globalised world where trade barriers are being gradually dismantled under various international agreements like the WTO and also foreign trade agreements between different countries under bilateral arrangements. While the location of large and medium scale industrial projects are guided by the consideration of availability of natural resources and infra-structure of power, roads, railways, sea-ports, transport networks, the knowledge economy is not

constrained by the lack of or inadequate development of any of these inputs. These units, which can come up in the SME sectors, are essentially skill-based and therefore mainly based on technological innovations, managed by a well-trained computer literate manpower. Thus earlier concepts of ‘comparative advantage of resource-based economies has yielded place to competitive advantage of information and knowledge based society using services of scientists, engineers and biologists which naturally require educational facilities-school, colleges, universities and R&D institutions.

Silicon Valley in California; aerospace and automotive engineering in Munich, Germany IT & IT related services in Bangalore and biotechnology in Hyderabad, India; electronics and digital media in Seoul, South Korea; petrochemical and energy industry in Brazil, represent the core illustrations of knowledge economy in the present world. These characteristics require new ideas and

approaches from policy makers, managers and knowledge workers. The report of the United Nations Commission on Science and Technology for Development (UNCSTD), concluded that “for developing countries to successfully integrate ICTs and sustainable development in order to participate in the knowledge economy they need to intervene collectively and strategically.

Such collective intervention would be in the formulation of effective national ICT policies that support the new regulatory framework, promote the selected knowledge production, and use of ICTs and harness their organizational changes to be in line with the Millennium Development Goals. The report further suggests that developing countries should also develop the required ICT strategies and policies and institutions for regulations taking into account the need to be responsive to the issues of convergence.

Since rural and urban employment of the youth forms top-most priority of the strategy which takes care of the highly dispersed nature of population in different countries, they have to be carried to the doorsteps of the citizens. Therefore, this require a specific policy framework and institutional setup to back-up the

policy.” This is where the role of WUSME comes in.

7. Knowledge based sectors in the European Union In March 2008, the European Council opened a dialogue on the future of the Lisbon Process post-2010 and on ways towards a European Globalisation Strategy. Discussions underway at both national and European level gravitate around a comprehensive and coordinated approach towards European growth on the global markets, integrating the lessons learned from the Lisbon Process and sector initiatives such as the European Research Area. The EU’s Heads of State and Government discussed the strategy EUROPE 2020 at their meeting in March 2010 and agreed on its essential points. The strategy was officially approved at their meeting in June 2010. The aim of the EUROPE 2020 strategy is to turn the EU into a smart, sustainable and inclusive economy, delivering high levels of employment, productivity and social cohesion. Hence EUROPE 2020 puts forward three mutually reinforcing priorities: a) Smart growth: developing an economy

based on knowledge and innovation. b) Sustainable growth: promoting a more resource-efficient, greener and more competitive economy. c) Inclusive growth: fostering a highemployment economy delivering social and territorial cohesion.

To this end, the Commission aims the following EU headline targets by 2020:  75% of the population aged 20-64 should be employed.  3% of the EU's GDP should be invested in R&D.  The "20/20/20" climate/energy targets should be met (including an increase to 30% of emissions reduction if the conditions are right).  The share of early school leavers should be below 10%, and at least 40% of the younger generation should have a tertiary degree.  20 million less people should be at risk of poverty. EUROPE 2020 can best be achieved through enterprise development backed by knowledge and innovations based on higher education, R&D efforts and above all, enterprise of the youth both men and women.

In this context, the current President of European Parliament H.E. Jerzy Buzek has emphased the growth of Small & Medium

Enterprise giving example by citing his country, Poland’s experience as follows.

“One of the greatest treasures of our Poland country in the enterprise and energy of Poles, released in 1989. Those have largely contributed to the fact that Polish economy was the only in EU to resist the recession of 2009. Our entrepreneurs create work places, contribute to the development of Poland and stand as ambassadors of Poland abroad. One of the objectives of Polish Presidency is to improve the position of Small and Medium -sized Enterprises throughout the European Union. Today such organizations generate approximately 60 % of the Community GDP and offer nearly 70% of work places. Therefore it is a major issue to solve the question of their access to the capital and to create a European patent system.

I do believe that the European Congress for Small and Medium sized Enterprises, held in Katowice in early October provided an expert background for activities taken up by Polish Presidency.

Let us remember that thriving and effective entrepreneurs today

mean wealthier, more competitive and safer European Union tomorrow.”

8. Indian Experience in knowledge and innovation based enterprise The single most important factor that has hastened the process of economic evolution is the advancement of technology. As mentioned earlier, increasingly, the traditional forces of production – land, labor and capital – have become less important when compared with technology; and economists have termed this as the 'expansion of the production frontier'. The source of technology is science that is rooted in knowledge. The recent World Development Report highlights the importance of knowledge in the progress of a nation's economy. Developed

economies have a abundant resources of knowledge workers; this poses a significant barrier to entry for developing economies. We are in the era of knowledge-based competition – and the progress of our economy will depend on how best we can leverage our intellectual capital. We have amongst the richest potential resources as far as intellectual capital is concerned. We need to find ways of harnessing this resource to bring about sweeping changes in industry and in society at large.

Indian Knowledge-Based Companies (KBCs) are typically engaged in the areas such as IT & IT related services, consultancy, pharmaceuticals, financial services, engineering services, biotechnology, etc. They operate in a highly competitive environment characterised by rapid change arising from technological advances and have to satisfy increasingly demanding requirements of their customers. Innovation and speed of response to changing market conditions are the critical success factors for them and they are heavily dependent on the accumulated expertise of a workforce consisting primarily of knowledge workers. Clearly, the criticality of operational

efficiency for KBCs cannot be overemphasised.

Another key characteristic of KBCs is the intrinsically global nature of their operations. KBCs are usually export-intensive and have customers across the globe. Furthermore, recent trends point to the necessity of globalizing production bases as well in order to capture advantages inherent in transnational operations.

Therefore, KBCs need a high degree of flexibility to effectively manage global operations. Their operational freedom needs to be comparable to that available to their peers in the rest of the world.

9. IT & IT related Services India IT industry accounts for export earnings of US$ 76 billion

rising from a modest of US $ 4 million in 1980, which had risen to US$ 480 million in 1995, grew to again US$ 4.2 billion in 2002. It is expected in the Indian Information Technology industry accounts for a 5.19% of the country's GDP, while providing employment to a significant number of its tertiary sector workforce. Directly 2.5 million professionals are employed in the sector either directly or indirectly. India's outsourcing industry alone is expected to increase to US$225 billion by 2020. The most prominent IT hub is Bangalore with other emerging destinations Chennai, Hyderabad, Coimbatore, Kolkata, Kochi, Pune, Mumbai, Ahmedabad, NCR (National Capital Region Delhi, Noida & Gurgaon).

10. Software Technology Parks of India One of the most successful initiatives spearheaded by the Government of India is the development of Software Technology Parks in 1991 as areas where Indian and foreign companies can

build and flourish, which served as a “Catalyst to the IT Industry Growth.” This description is quite accurate if one examines government policies that have spurred the IT industry to its current levels. The concept of software technology parks (STPs), which provide the technical infrastructure necessary for IT development, emerged from a growing problem that policymakers began to notice in the early 1980s. The New Computer Policy of 1984 and the 1986 Policy on Computer Software Export, Software Development, and Training set out the objective of expanding the Indian software export and development through data communication links. The policies’ aim was to develop software in India using Indian expertise on sophisticated computers that were being imported duty-free.

Protectionist policies had, until then, stunted the growth of the industry by imposing duties of up to 200% on the imported

hardware needed for advancement of both the hardware and software components of the industry.

It is pertinent to recapitulate in this context that some companies in India did take initiatives in developing software during 80’s.

They, however, grew slowly and steadily but with a sound base.

The first foreign company to identify the Indian potential was Texas Instruments of USA who set up their R&D facilities at Bangalore during 1985-86. Realizing its potential, the Government of India in its wisdom evolved a sound policy framework alongwith several support measures. To harness the potentials of Indian Software Technology Parks of India, as an implementing agency of the Government of India provided support and e-infrastructure by setting up first Software Technology Parks of Bangalore and motivating IT Savy entrepreneurs to start their enterprises in its ready-to-use premises. STPI treated startup companies as Incubators, facilitated them and encouraged them to export software. The policy and its institutional framework did assist the IT sector to flourish in India. Initiatives have also been taken simultaneously to strengthen the IT hardware sector at present. Lot of components are being manufactured in India and exported. The

manufacturing sector in India is also becoming globally competitive. Thanks to the liberalization process initiated in India in July, 1991 and unstinted Government policy support, the private sector companies with Indian enterprising spirit are fully benefiting from the emerging opportunities.

It is also significant to mention that revenue per person per year has grown from less than $20,000 to over $50,000 in most large companies in India in the last five years which is rather not much known and productivity continues to improve further even now.

Though the industry is still focused on tapping the huge software services market, most of the big players have moved from lower value services to higher value services. In the early days, the service was primarily to provide technical manpower, which later moved to providing low-value services like coding and testing.

Now Indian companies are operating even at the top end of the spectrum in terms of technology (Corba, Java, E-commerce, etc.) or the services (complete business solutions, consultancy, strategy, etc.). The high rates they command is an indication of the perceived value in the eyes of the customer of the services they provide.

The amazing story of the Indian software industry has spread far and wide. Not only the developed countries but also the developing countries are equally impressed by the performance of the IT sector industry. From the presentations that representatives of various Asian and Latin American countries made in a recent workshop in China on “IT industry in developing countries”, it is evidently clear that many developing countries today want to emulate the Indian success story.

It is understandable that IT being a knowledge-based sector and setting up of IT companies has tremendous potential for generating employment for the educated youth. It offers an excellent working environment for women and will continue generating employment for the youth.

Though these are lofty ambitions, the STPs now serve as intersections where a viable business model, strong Internet infrastructure, and government interface come together for a

successful enterprise the infrastructure facilities include modern, high-speed, broad-band telecom links, powerful computers and network systems beyond the reach of individual firms, consultancy, and training support. Having established the first park at Bangalore, it has 51 STPIs all over the country. In nearly all of the literature on the subject STPs have been heralded as one of the most profitable institutional initiatives for developing the IT industry.

While software parks have proven to be successful in practice, the STP model has theoretical underpinnings grounded in the triple helix model of development. This model consists of a triadic relationship between government, industry, and universities.

Central to the model is the principle of Incubation, which refers to

the special roles each of the triad participants plays in encouraging research, investment, and development. In the original theory of incubators, physical proximity of the participants was not considered a crucial feature; but in the contemporary incubator model, “a common physical space where cross-fertilization among companies can more easily take place” has become much more important.

Software Technology Parks in India fill this requirement well, offering places where several different companies can come together and engage in the networking activities that spur innovation in both business models and actual products.

Governments have the unique catalytic ability to push collaboration among public, private, academic, and foreign agencies; the Indian government has chosen to achieve these ends through STPs, where shared infrastructure and support services encourage firms to learn from each other. Software Technology Parks of India now boast a large client base including Texas Instruments, Motorola, and Microsoft most of which are software companies taking advantage of the high speed data connectivity provided by satellite earth stations and international private-leased circuits.

The author had also set up and commissioned the Software Technology Park in Delhi in 1994 on behalf of National Small

Industries Corporation Ltd. (A Government Enterprise) as its Chairman and Managing Director which was operationalized and inaugurated by the then Vice President of India in July, 1995. It was marketed successfully to incubate forty IT companies.

This initiative of the Indian government has helped to expand the IT industry in India by providing physical space and technology that allow firms to flourish and take advantage of the human capital the country offers.

11. Policy framework and Ministry of Information Technology

The second major initiative is the setting up of a Science and Technology Ministry to coordinate government-administrated projects relating to information technology. A number of different government agencies, formerly under the Ministry of Science and Technology that are concerned with IT, were brought together into an integrated Ministry of Information Technology (also referred to as MIT). It has since undertaken a large number of projects aligned with its vision of “making India an IT Super Power “ Among the objectives identified are “creation of wealth, employment generation, and IT-led economic growth.”

The following specific policy measures adopted by the Government gave a philip to the development to the IT sector: i). Setting up of the administrative organisation to give an impetus for growing IT industry and serve as a catalyst recognizing that India had the potential to exploit its reservoir of highly skilled software engineers and technologist that existed and Government set up a body to coordinate this effort. ii). Indian Technology Institutions that provided full support in this effort and India is unique in that it was a technology sector that experienced the most growth. iii).Security guarantee for foreign investments which resulted in the flow of capital and know how to harness the India’s potential.

12. To sum up the success of the Indian Experience in Knowledge and Innovation Based Companies Major Initiatives responsible for growth of IT and IT Related Services in India are: i. Policy framework - Ministry of Science & Technology and subsequently a separate for Ministry of Information and Communication Technology took many proactive policy measures. ii. Software Technology Parks and other supporting institutions iii. Policies to mobilize Indian Diaspora

The above three factors culminate into the success of Indian IT sector apart from the Indian enterprise.

13. Potential for job creation Knowledge sectors have created excellent job opportunities in India both for men and women in urban as well as rural areas with a healthy working environment. Topic chosen by WUSME is relevant more SME and more jobs is amply demonstrated by India’s success of knowledge sectors.

14. Recent Initiatives to strength knowledge based job creation National Knowledge Network The Government of India decided to set up National Knowledge Network (NKN) with an initial amount of Rs. One billion in 2009. A High Level Committee was set up to coordinate and monitor the establishment of the National Knowledge Network (NKN). On 25th March 2010 the Government approved the establishment of the National Knowledge Network (NKN) at a cost of above US$ 1.2 billion, to be implemented by National Informatics Centre (NIC) over a period of 10 years. The objective of the National Knowledge Network is to bring together all the stakeholders in Science, Technology, Higher Education, Research & Development and Governance and covers, Agriculture, Education, Health, e-governance, Grid Computing (High Performance Computing) It is a high capacity countrywide Infrastructure at education &

research Institute level, network to support education and research applications, and other application as envisaged by these institutions which require very high bandwidth. A high speed data communication network would be established, which would interconnect Institutions of higher learning. Thus, this Network will facilitate creation, acquisition and sharing of knowledge resources among the large participating Institutions; collaborative research; country wide classrooms (CWCR) etc. and help the country to evolve as Knowledge Society.

15. Current Status A core Backbone consisting of 18 Points of Presence (PoPs) have been established with 2.5 Gbps capacity. A total 96 number of Institutions have been connected to National Knowledge Network and 15 virtual classrooms were setup.

Total 102 links have been commissioned and made operational.

Total 50 Core links have been commissioned and made operational.

Trans Eurasia Information Network (TEIN3) links is integrated with National Knowledge Network.

National Knowledge Network (NKN) has signed, MOU with top companies like Tata Institute of Fundamental Research (TIFR) and GLORIAD (The Global Ring Network for Advanced Applications Development).

16. Knowledge based incubators – UAE (Dubai) We were invited by the Department of Economic Development (DED), Government of Dubai, UAE to set up an industrial incubator. Our team had close interaction with the DED and other officials of the Dubai Government, Dubai Chamber of Commerce

& Industry, financial institutions and banks, government and nongovernment support organizations, educational institutions, academicians and educationists, industrialists & businessmen, opinion leaders and above all entrepreneurs and SMEs. Analysis was carried out based on the information and interaction our team members had and we recommended setting up of Knowledge-based Incubators which was agreed by DED. We recommended the following knowledge based incubators: i) Information Technology,

ii) Design Technology (Interior & Exterior), iii) Health Technology and iv) Hospitality Technology v) Fashion Technology In addition, we also identified host institutions for five incubators providing incubation and Business Development Services. We developed a policy framework and plan of action with our recommendations for Department of Economic Development (DED), Government of Dubai, UAE. Our proposal has been accepted and the project is under implementation.

Recently we conducted a study for United Nations, Economic and Social Commission for Asia and the Pacific (ESCAP) for development of Policy Guidebook for SME Development in Asia and the Pacific and gave the following recommendations.

Globalization and opening of economies have enhanced opportunities and also competition. The survival of SMEs at any point of time depends on their competitiveness. The Future perspective depends on the ability to address this issue in the light of the constraints faced by them. The emerging issues require careful considered remedial and reformative measures for sustained development of the SME sector which have been discussed here. They not only raise concerns for such countries which are embarking on massive development plans but also give enough signals to the respective Governments for attending to the resultant implications through policy reforms. Major issues are: (i) SMEs are structurally strong and a major economic segment of

contribution to total development including employment, industrial output, exports and the GDP. Many countries have no comprehensive policy structure to provide enabling environment and proper support to the sector especially in the area of credit, target market identification and marketing support. (ii) There is a steady shift from agriculture to manufacturing. This trend is not healthy as most of the countries in Asia are having agrarian economy. Opportunities may have to be provided for

value addition activities to agriculture and agro-based economies through proper guidance to generate employment opportunities in the rural areas by setting up SMEs and prevent urban ward migration. (iii) In few countries, Governments have not yet worked out clear cut policies for entrepreneurship and SMEs development and employment generation by this sector. (iv) There is a wide disparity in the status of SMEs in countries of Asia-Pacific region. SMEs in the LDCs do not appear to have reaped the benefits of globalization and technological developments happening around them. SMEs need to be exposed to the advancements and global markets to reduce gap and harness their growth potential.

Taking into consideration the emerging issues requiring urgent policy interventions, following areas seem relevant for consideration by countries which are embarking on massive SME development plans and creating more jobs.

Close look into challenges and prospects both by, Government, NGOs, and others involved.

Creating Enabling Environment: Policy and Legal framework.

Greater focus on Finance and Innovative Finance adequacy, timeliness and cost.

Technology, Creativity and Innovation and creating required framework.

Infrastructure Development (Power, Roads, Communication, IT etc).

Marketing and Strategic Alliances. Treating globe as one market.

Enterprises Development and Capacity Building through skill

development.

Institutional Network and BDS (Business Development Services).

Adopting cluster approach as the strategy of SME development.

Strengthening of NGOs and Civil Society organizations and encourage them for PPP mode.

Creating required awareness on World Trade Organization (W.T.O) obligations and other intermediate commitments such as

Intellectual Property Rights (IPRs).

17. The Importance of SMEs for job creations SMEs (small and medium-sized enterprises) account for 60 to 70 per cent of jobs in most OECD countries, with a particularly large share in Italy and Japan, and a relatively smaller share in the United States. Throughout they also account for a disproportionately large share of new jobs, especially in those countries which have displayed a strong employment record, including the United States and the Netherlands. Some evidence points also to the importance of age, rather than size, in job creation: young firms generate more than their share of employment. However, less than one-half of start-ups survive for more than five years and only a fraction develop into the highgrowth firms which make important contributions to job creation. Hence enabling policy intervention and institutional support mechanism needs to be strengthened in most of the countries for the survival and growth of SMEs and creations of more jobs.

NOTES 1) 2) 3)

The World Bank Group - Small and Medium Enterprises (SMEs) Finance, September 1, 2015 FAO – Food and Agriculture Organization of the UNO- Smallholders and rural poverty http://www.fao.org/economic/esa/esa-activities/esa-smallholders/en/ EUROPEAN COMMISSION – EASME Executive Agency for SMEs https://ec.europa.eu/easme/en#pillar-smesupport

4) 5) 6) 7)

8) 9) 10) 11) 12)

13) 14) 15)

16)

17) 18) 19) 20 21) 22) 23) 24) 25) 26)

Global Sherpa - BRIC Countries – Background, Key Facts, News and Original Articles http://globalsherpa.org/bric-countries-brics/ 2016 CGAP (Consultative Group to Assist the Poor) - http://www.cgap.org/ IMF – Staff Discussion Note, 1st January 2016 http://www.imf.org/external/pubs/ft/sdn/2016/sdn1602.pdf World Bank/IFC – MSME Country Indicators 2010 http://www.ifc.org/wps/wcm/connect/9ae1dd80495860d6a482b519583b6d16/MSME-CIAnalysisNote.pdf?MOD=AJPERES World Bank Group – Ease of Doing Business Reports GEM – Global Entrepreneurship Monitor Reports WEF – World Economic Forum – The Global Competitiveness Reports European Commission – Making trade work for you (2016) http://ec.europa.eu/trade/policy/in-focus/ttip/ Norbert Knoll von Dornhoff – Article in http://www.evancarmichael.com/library/norbertknoll-von-dornhoff/From-Entrepreneurship-to-Entreprenology-New-findings-ofentrepreneurial-research.html JOSEPH E. STIGLITZ, Princeton University, PARETO EFFICIENT AND OPTIMAL TAXATION AND THE NEW NEW WELFARE ECONOMICS OECD – Tax, http://www.oecd.org/tax/ TOP 10 Crowdfunding Sites for Fundraising http://www.forbes.com/sites/chancebarnett/2013/05/08/top-10-crowdfunding-sites-forfundraising/#6cf5ede41cfb EASME - Executive Agency for SMEs – HORIZON AND COSME PROGRAM https://ec.europa.eu/easme/en/cosme Foundations – Wikipedia - https://en.wikipedia.org/wiki/Foundation WUSME World Union of Small and Medium Enterprises – www.wusme.org The Future of FinTech: A Paradigm Shift in Small Business Finance - WORLD ECONOMIC FORUM, 2015 CNN – What is Bitcoin - http://money.cnn.com/infographic/technology/what-is-bitcoin/ The Global Competitiveness Report 2013–2014 MSME Country Indicators - Khrystyna Kushnir, Melina Laura Mirmulstein, and Rita Ramalho Swedish Economic Report - Thurik, Koellinger - ENTREPRENEURSHIP AND BUSINESS (GDP) CYCLES 2012 Gulzat Elvung, The Review of Economics and Statistics, November 2012, 94(4): 1143–1156 Vilfredo Pareto - Pareto efficiency - https://en.wikipedia.org/wiki/Pareto_efficiency Barr, Nicholas (2012). "3.2.2 The relevance of efficiency to different theories of society".

Economics of the Welfare State (5th ed.). Oxford University Press. p. 46. ISBN 978-0-19929781-8.

Sen, Amartya (October 1993). "Markets and freedom: Achievements and limitations of the market mechanism in promoting individual freedoms" (PDF). Oxford Economic Papers 45 (4): 519–541. JSTOR 2663703. Greenwald, Bruce; Stiglitz, Joseph E. (1986). "Externalities in economies with imperfect information and incomplete markets". Quarterly Journal of Economics 101 (2): 229–264. doi:10.2307/1891114. JSTOR 1891114.

Tomoiagă, B.; Chindriş, M.; Sumper, A.; Sudria-Andreu, A.; Villafafila-Robles, R. Pareto Optimal Reconfiguration of Power Distribution Systems Using a Genetic Algorithm Based on NSGA-II. Energies 2013, 6, 1439-1455.

27) 28) 29) 30) 31) 32)

33)

34) 35) 36) 37)

38) 39)

40)

41) 42) 43)

WORLD BANK GROUP – Enterprise Surveys Methodology: http://www.enterprisesurveys.org/methodology HERITAGE FOUNDATION - http://www.heritage.org/ EFA – European Fundraising Association - European Foundation Statutes – http://www.efa-net.eu/?id=244 UNITED NATIONS ECOSOC - https://www.un.org/ecosoc/en WUSME MAGAZINE 2017 – Norbert W. Knoll von Dornhoff - www.wusme.org Norbert W. Knoll von Dornhoff: Statement at the WUSME General Assembly on 16 th April 2016 on Financing of SME Foundations for Crises Prevention and Development – https://issuu.com/norbertknollvondornhoff/docs/1-_wusme_workshop_-_statement_knoll BIAC, B20 China, World SME Forum, SME Finance Forum (2016) Financing Growth ; SMEs in Global Value Chains. http://biac.org/wp-content/uploads/2016/06/Financing-Growth-SMEs-in-Global-ValueChains.pdf Susan Bowen, Chief of Staff, Hewlett, SMEs and big companies – friends or foes?

World Health Organization Global Health Expenditure database, http://www.who.int/healthaccounts/ghed/en/ Örn Thorvardarson – Article HEALTH AND ECONOMY, Iceland 2011 Wikipedia, List of countries by total health expenditure (PPP) per capita Eucomed, Medical Technology, Position Paper, 2011, THE SYNERGY BETWEEN HEALTH EXPENDITURE AND ECONOMY, SANDA DURA1, H. DURA2, Lucian Blaga” University of Sibiu, 2010BMC Public Health, Promoting mental health in small-medium enterprises: An evaluation of the "Business in Mind", Angela Martin, Kristy Sanderson, Jenn Scott and Paula Brough, 2009 Michael Byrne, Financing medical equipment, 2011 E. Colombatto, IS THERE A HEALTH-CARE PROBLEM IN WESTERN SOCIETIES? Working Paper No.14/2011 Stephanie Ditta, Health expenditure around the world, 2010 Weak Economy Curbs Health Spending, The WALL STREET JOURNAL, 1/ 2012, UK: Government opens up to SMEs, The Cabinet Office has announced a package of measures to give small firms, charities and voluntary organisations a better chance of winning government business Tobin Tax - https://en.wikipedia.org/wiki/Tobin_tax Norbert W. Knoll von Dornhoff, Article GLOBAL TRENDS OF ECONOMIC EFFECTS OF MIGRATION-Impacts on Small and Medium Enterprises (SMEs)http://www.evancarmichael.com/library/norbert-knoll-von-dornhoff/LABOUR-MIGRATION-DEVELOPENT-OF-SMALL-BUSINESS-AND-CRAFTS-BOOST-ECONOMIC-GROWTH--Part-IVRecommendations.html Migrant Hometown Associations and Opportunities for Development: A Global Perspective – http://www.migrationpolicy.org/article/migrant-hometown-associations-and-opportunitiesdevelopment-global-perspective/ Millennium Development Goals - http://www.un.org/millenniumgoals/ World Migration Report 2015 - IOM Global Migration Data – https://www.iom.int/world-migration-report-2015 Europe’s refugee surge: Economic and policy implications - Shekhar Aiyar, Helge Berger, Enrica Detragiache, Antonio Spilimbergo - 29 February 2016 http://voxeu.org/article/europe-s-refugee-surge-economic-and-policy-implications

44)

45) 46) 47) 48)

49) 50) 51) 52) 53) 54) 55) 56) 57)

Asylum Seekers and the Right to Work in the European ... https://www.migrationwatchuk.org/briefing-paper/316 - sylum Seekers and the Right to Work in the European Economic Area. ... In Switzerland an asylum seeker can apply for work if after three months ... European Union MW ...

Danger Zones – African Countries – http://answersafrica.com/top-10-most-dangerous-countries-in-africa.html Renaissance Capital boosts sub-Saharan Africa team Millennium Village Project - http://millenniumvillages.org/ The Millennium Villages Project is working well | Jeffrey ...www.theguardian.com › World › Development › Aid - Jeffrey Sachs: The project is not throwing 'gazillions' of dollars at poverty, ... What's life like at Ghana's Millennium Village Project? Published: 25 Jun 2012 GEM Global Entrepreneurship Monitor - http://gemconsortium.org/report WUSME Workshop 2011 – www.wusme.org From Waste to Resource, The World Waste Challenge, Professor Philippe Chalmin, February 2011 World Bank, WHAT A WASTE, A Global Review of Solid Waste Management, Daniel Hoornweg and Perinaz Bhada-Tata, March 2012, No. 15.

Renewable Energy World.Com, June 2014. An Independent Engineering Evaluation of Wasteto-Energy Technologies United Nations Global Marketplace – UNGM - https://www.ungm.org/ European Small Business Portal - http://ec.europa.eu/small-business/finance/index_en.htm EUROPEAN INVESTMENT FUND - Supporting entrepreneurship and innovation in Europe http://www.eif.org/what_we_do/equity/news/2016/EUR200m_cosme_innovfin.htm Global Competitiveness Reports – https://www.weforum.org/reports/the-globalcompetitiveness-report-2016-2017-1

58)

ABOUT THE AUTHOR Norbert Wilhelm Knoll von Dornhoff, date of birth 27th March 1941 in Vienna, Austrian nationality. Married, three children. Studied jurisprudence and national economics at the Universities in Vienna, Austria and St. Gallen, Switzerland. Graduated Dr.jur. (LL.D)and Dr. phil. and Mag.rer.soc.oec (MBA). Professor (adj. associate) of Economic and Fiscal Policy of the International University for

Entreprenology, Hawaii, USA. Languages: German, English, French, Hungarian. Attorney at Law, later Head of the Environment and Energy Department of the Austrian Federal Chamber of Commerce, then appointed Secretary General of the Austrian Federal Chamber of Architects and Engineers. Austrian Delegate to International Organisations (e.g. UNO, ECE, OECD), often as Extraordinary Ambassador and Authorised Minister. 1979 to 1982 Deputy Director Finance of Wienerberger Baustoffindustrie AG. From 1983 to 1991 Permanent Observer SACEP South Asian Cooperative Environment Programme (Governmental Organisation) to UNIDO in Vienna. From 2010 up to date General Secretary of WUSME World Union of Small and Medium Enterprise in Special Consultative Status with United Nations ECOSOC since 2013

ZHUO YAN LIN Master in International Finance, Vice Chairman of Council of China’s Foreign Trade, Chairman of the Outlet Assets and Equity Exchange, Chairman of China Outlet Association and multiple prize winner such as: “international business model innovation award”, “Asian companies influence award”, “Chinese annual business leader”.