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Small enterprises and local economic development policies in Croatia

Small enterprises and local economic development policies in Croatia. Slavica Singer CEPOR. Problems in Croatia:. low competitiveness unemployment low entrepreneurial activity shortage of companies with growth potential low productivity centralized public administration

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Small enterprises and local economic development policies in Croatia

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  1. Small enterprises and local economic development policies in Croatia Slavica Singer CEPOR business growth sibenik-toscana, 24.06.2005.

  2. Problems in Croatia: • low competitiveness • unemployment • low entrepreneurial activity • shortage of companies with growth potential • low productivity • centralized public administration • regional development imbalance business growth sibenik-toscana, 24.06.2005.

  3. Low competitiveness (1) • Growth competitiveness Index: • Croatia 58/80 rank • Italy 39/80 • Economic growth, long term: • technology • public institutions • macroeconomic environment business growth sibenik-toscana, 24.06.2005.

  4. Low productivity (2) • Microeconomic competitiveness Indeks: • Croatia 52/80 rank • Italy 24/80 • Sustainable productivity level: • Business operations and enterprise strategy • National business environment qualitys business growth sibenik-toscana, 24.06.2005.

  5. Our reality • Low entrepreneurial activity (TEA index) • Insufficient number of businesses with a growth potential, inovative businesses (FEA indeks) • Profitability of SME’s is under average business growth sibenik-toscana, 24.06.2005.

  6. Low entrepreneurial activity 2002-2003 average, 41 country New businesses (TEA) World 9.9 vs. Croatia 3.10 (41.) Italy 4.60 (23.) Growth businesses (FEA) World 2.0 vs. Croatia 1.12 (36.) Italy 2.05 (24.) business growth sibenik-toscana, 24.06.2005.

  7. Growth businesses % of employed in growth businesses World 12.3 vs. Croatia 4.50 (39.) Italy 13.21 (18) Slovenia 17.1 (7.) business growth sibenik-toscana, 24.06.2005.

  8. Innovative businesses? • new products? For nobody, 81 % • competitiveness level? high, even 48 % • export? only 17 %,more than50 % of total income prihoda • more than 20 employees • after 5 years? only 5 % • new technology? no, even 94 % business growth sibenik-toscana, 24.06.2005.

  9. Entrepreneur’s profile • Men are 2.6 times more entrepreneurs than women • Highest entrepreneurial activity is between years 25 – 34 • Knowledge and skills are important: Have knowledge vs Do not have knowledge TEA 11.96 TEA 0.21 business growth sibenik-toscana, 24.06.2005.

  10. Causes • not enough knowledge and skills for entrepreneurship • uncoordinated government policies • administrative barriers • financial market is not developed business growth sibenik-toscana, 24.06.2005.

  11. Obstacles in entrepreneurship development • Education • Government policies/programmes • Culture and social norms business growth sibenik-toscana, 24.06.2005.

  12. Values • Self-employment – desirable career? • 58 % yes • Entrepreneurs have high social status? • 48 % NO, 28 % yes, 24 % don’t know • Successful entrepreneur’s stories are presented through media? • 48 % NO, 40 % yes business growth sibenik-toscana, 24.06.2005.

  13. Entrepreneur is being born, one can not become entrepreneur? • No, education has very important role. • People with RELEVANT knowledge and skills are more likely to use entrepreneurial opportunity – more advantage for national economy 11.96 TEA (with knowledge and skills) vs. 0.21 TEA (without knowledge and skills) GEM 2003 business growth sibenik-toscana, 24.06.2005.

  14. Small enterprises, big challenge • SME - dominant structure of economy • SME - only source of new employment • employment in big enterprises is halved • employment in small enterprises hasdoubled business growth sibenik-toscana, 24.06.2005.

  15. SME’sand regional development business growth sibenik-toscana, 24.06.2005.

  16. Regional imbalances TEA 2002 2003 Zagreb 4.38 4.30 Istria, Primorje, Gorski Kotar 4.47 3.05 Dalmatia 3.45 2.43 Northern Croatia2.83 1.99 Lika and Banovina 2.18 1.78 Slavonija and Baranya2.11 1.00 business growth sibenik-toscana, 24.06.2005.

  17. Šibenik-Knin County • GDP per capita (2003.) • 2030 USD, Croatia 6385 USD, City of Zagreb 18.843 USD • ICE (intellectual capital effectiveness) • 1.58, Croatia 2.28, Ličko-senjska county 2.72 business growth sibenik-toscana, 24.06.2005.

  18. Šibenik-Knin County - ICE • Rogoznica 3.07 • Tisno 2.32 • Drniš 2.20 • ... • Šibenik 1.43 • Knin 1.36 • Primošten 0.88 • Murter – champion, 100 % increased value business growth sibenik-toscana, 24.06.2005.

  19. How to achieve changes? 55 policy recommendations for raising Croatian competitiveness, National Competitiveness Council, 2004. – accepted by Government 8 of them are directly focused on streghtening SME’s, but tightly connected with education for growth and development rule of law, compatible with the EU cost and price competitiveness innovation and technology development regional development and clusters leadership mindset business growth sibenik-toscana, 24.06.2005.

  20. 8 recommendations • Develop an open entrepreneurial culture (#34) • Formulate consistent government policies and instruments to encourage entrepreneurial activity (#35) • Eliminate administrative barriers (#36) • Stimulate the development of the capital market (#37) • Set up an institutional infrastructure to provide professional services to SME’s (#38) • Establish productivity benchmark (#39) • Encourage the “export mentality” among SME’s (#40) • Diminish regional development inequalities – clusters (#41) business growth sibenik-toscana, 24.06.2005.

  21. Develop an open entrepreneurial culture • Recommendations • Formal education – TASK FORCE? • Student enterprise • Student enterprise trade fairs – Zagreb fair • Best students business plan • Government plans: • Students cooperatives • Education ???? • Student business plans, student enterprise trade fairs ??? business growth sibenik-toscana, 24.06.2005.

  22. Formulate consistent government policies • Recommendations: • Task force to coordinate policies, instruments and programs that encourage entrepreneurial activities in educations, tax, export and financial policy • Government plans: • ? business growth sibenik-toscana, 24.06.2005.

  23. Eliminate administrative barriers • Recommendations • Time to register 3 days (20 days 2004., 16 days 2005, 12 days 2006., 8 days 2007., 3 days 2008.) • Number of necessary forms and documents: 5 • Number of licences and certificates: 1 • Government plans : • ? business growth sibenik-toscana, 24.06.2005.

  24. Stimulate the development of the capital market • Recommendations • Regulatory framework for business angels and social investors • Stimulate SME’s for usage of equity funds, ESOP, IPO...) • Government plans • Subsidized financing • Young • Women • Defenders • Turism • New ways of financing??? business growth sibenik-toscana, 24.06.2005.

  25. Set up an institutional infrastructure to provide professional services to SME’s Recommendations An impact analysis of all government and international programs to support the development of institutional infrastructure for the SME’s • Elaborate strategy for developing professional services markets for SME’s • Elaborate a map of infrastructure institutions • To identify market segments • Certification for consulting services • Government plans: • Financing development odcenter’s for entrepreneurship, incubators, business areas • Certification for consulting services (HAMAG) • Analyses, strategies??? business growth sibenik-toscana, 24.06.2005.

  26. Productivity benchmark • Recommendations • Comparative analysis of the material costs, labour costs and profit margins in Croatia and EU • FINA(financial agency) indicators publicly available • Stimulating quality certification • Government plans : • Subsidizing quality certificates • Analysis??? • FINA(financial agency) ??? business growth sibenik-toscana, 24.06.2005.

  27. Encourage the “export mentality” among SME’s • Recommendations: • Research in foreign market niches • Loans for export programs • Participation in international trade fairs • Government plans: • Loans for export programs • Participation in international trade fairs business growth sibenik-toscana, 24.06.2005.

  28. Diminish regional development inequalities – clusterss • Recommendations • Clusters • Government plans: • Clusters business growth sibenik-toscana, 24.06.2005.

  29. Contact • SME Policy Center - CEPOR Trg J.F. Kennedy 7/I HR-10000 Zagreb, Croatia telephone: +385 1 2305 363 fax: +385 1 2345 577 www.cepor.hr E-mail: cepor@zg.htnet.hr business growth sibenik-toscana, 24.06.2005.

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