Six propositions for lifting the brakes on SME development

FEM35-10How to support small businesses in the southern Mediterranean? Femise researchers are answering this question by comparing four cases, Algeria, Egypt, Morocco and Tunisia.

In France it has been only SMEs  which have created jobs in the last decade, according to a KPMG study published in June 2012. Hence there is a need from the southern Mediterranean countries who are suffering from endemic unemployment, to prioritise the development of their small and medium-sized businesses.

SMEs in southern Mediterranean countries, just like those in France, are influential in their number. Experts count more than 600,000 in Algeria, a number which has doubled in fifteen years. In Morocco, SMEs make up 95% of all businesses.Led by Rym Ayadi, researcher at the Centre for European Policy Studies in Brussels, the Femise study FEM35-10 is shedding light on the difficulties faced by SMEs.

The difficulties are primarily structural. The infrastructure, roads in particular, and the existence of a corruption-breeding shadow economy present serious challenges.

SMEs also suffer as a result of their size, which makes it difficult to secure credit and access markets, as well as limiting the possibilities of acquiring competencies internally.

Clear disparities between the countries

The study underlines inequalities between the countries as witnessed by business leaders. More small businesses in Algeria and Tunisia complain of arduous administrative formalities than in Morocco and Egypt.In Egypt, almost eight out of ten business leaders have experienced problems getting access to broadband internet, compared to one in ten in Tunisia.

There are also disparities within the countries themselves. In Morocco, SMEs in the clothing and food-processing sectors experience more financing difficulties than those in the IT sector.

Regional differences have also been unveiled. In Algeria, businesses based in small towns experience more difficulties than those in large urban areas in terms of access to advice services and fulfilling administrative requirements.

The Femise report makes six propositions to governments in two categories.

One on hand basic reforms are needed, such as strengthening training policy, simplifying business licensing, integrating the shadow economy and establishing a dynamic tax system.

On the other hand there are the measures which accompany these reforms, such as building relationships between large and small businesses through sub-contracting agreements, the creation of business clusters and releasing finance to SMEs, via structures such as the Federation of Egyptian Industries, to facilitate their development internationally.

Article based on FEMISE Report FEM35-10 on “Micro, Small and Medium-Sized Enterprises with High-Growth Potential in the Southern Mediterranean: Identifying Obstacles and Policy Responses”
Photo by Christelle Marot Econostrum

Article par Mathieu Bouchard, Econostrum.

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