SMALL AND MEDIUM-SIZED ENTERPRISES AND EMPLOYMENT: THE CASE OF TURKEY Naci GÜNDOĞAN

SMALL AND MEDIUM-SIZED ENTERPRISES AND EMPLOYMENT: THE CASE OF TURKEY Naci GÜNDOĞAN Anadolu University IABE Conference Stockholm, June 06-08, 2008

There is a broad concensus in the world about the central role played by SMEs in • economic growth, • competitiveness, • innovation, • job creation and employment, • regional & local development, • social cohesion.

SMEs are dynamic tools for • restructuring economies, • combating poverty, • accelarating the social & economic development

SMEs are particularly important in supporting economic growth and livelihoods in developing countries, because they: • tend to use more labour-intensive production processes than large enterprises, boosting employment and leading to more equitable income distribution;

provide livelihood opportunities through simple, value-adding processing activities in agriculturally-based economies; • nurture entrepreneurship; and • support the building up of systemic productive capacities and the creation of flexible economic systems, through linkages between small and large enterprises.

Table1- Definition of SMEs

Table 2- The New SME Definition, Which Entered into Force on 18 May 2006

OVERVIEW OF SMEs IN TURKEY SMEs constitute a major part of the Turkish economy, accounting for a large proportion of the country’s businesses and total employment. They constitute; • 99 per cent of all the enterprises, • 76 per cent of employment, • 8 per cent of export, • 38 per cent of value added, • 26 per cent of investments.

Table 3- Size Distribution of Firms in Selected Countries and Turkey (2003) (%)

Table 4- Characteristics of SMEs in Selected Countries and Turkey (2003) (%)

Table 5- Sectoral Distribution of Enterprises in Turkey

EMPLOYMENT IN SMEs Table 6- Distribution of Employment by Firm Size (2003) (per cent)

EU considers SMEs as “a key source of jobs and main driver for innovation”. Europe’s private sector jobs are in: • Micro-enterprise: 29.8 % • Small enterprise: 20.8 % • Medium-sized: 16.5 % • Large: 32.9 %

In Turkey, SMEs currently employ 76 per cent of the labour force. • Indeed, 75 per cent of all businesses employ five people or less.

The employment share of micro enterprises is substantially higher in Turkey than in the developed countries. • While the average European enterprise employs 6 people, Turkish enterprises only 2-3 people.

Table 7- Size Distribution of Enterprises and Employment in Manufacturing Sector

Table 8- Average Size in Sectors in Terms of Number of Employeesin Turkey

SOME OF THE NEGATIVE FEATURES OF SME EMPLOYMENT IN TURKEY • Informality and unregistred employment • Underemployment • Inadequate training • Low Wages • Lack of employment security • Low unionisation • Common use of child labour

CONCLUSION AND FUTURE STUDIES • In conclusion, it is apparent that SMEs play an important role in the Turkish economy due to their large share in the total number of enterprises and in total employment. • The general importance of SMEs is widely recognised, because of their vital role in job creation. But directly linking with SME growth to job quality is an issue remaining to be addressed in future studies. • In short, there are two concerns dealing with SMEs, these are namely job creation and job quality as a whole. These two concerns have to be brought more closely together.

THANKS FOR YOUR PARTICIPATION

SMALL AND MEDIUM-SIZED ENTERPRISES AND EMPLOYMENT: THE CASE OF TURKEY Naci GÜNDOĞAN