SME – Small- and Medium-Sized Enterprises

As open economies, the transition countries of East Europe have to be able to compete in international markets. This is about more than opening up new markets; increasingly, domestic businesses must also be prepared to compete with international businesses within their local markets. In order to promote the necessary dynamism and openness to innovation, however, certain frameworks must often be established first.

The regulatory environment – including tax regulations, bureaucratic requirements, and legally required licenses – entails high costs, and thus hinders the foundation of promising new businesses, and the growth of small- and medium-sized enterprises.

In order to reduce the corresponding costs for both the state and society, Berlin Economics recommends a modernization of regulations in the field of business. A level playing field for all businesses helps eliminate monopolies and contributes to equality of opportunity in a society.

SME Policy Cuts Across All Portfolios

…and it forms a foundation for long-term, dynamic growth. Compared to their contribution to economic growth, SMEs receive far too little policy attention in transition countries. Integrated SME-promotion programs that are connected with industry and trade policies are the exception – and where there is an awareness of the problem, the necessary know-how to promote innovative businesses is often absent. Berlin Economics advises governments developing strategic approaches for an  efficient, modern SME policy.

Stabilization through Added Value

A developed and dynamic private sector can reduce an economy’s susceptibility to crisis – when its products are innovative and its technology modern. Modern business development concentrates on innovative businesses that add a high degree of value and have high growth potential. Thus effective business promotion strategies influence not only the business climate, but also wages, living standards, and the entire economy.

A special problem for SMEs in transition countries is access to financing possibilities; lack of access can restrict economic growth, and slow the creation of a healthy economic structure. The successful development of a private sector is thus closely connected with the transparent and institutional design of the financial sector.