SMEs LOCAL DEVELOPMENT IN A GLOBALIZED WORLD

MORE SMEs = MORE JOBS = BETTER QUALITY OF LIFE WORLD WIDETHE GROWTH EQUATION FOR OUR FUTURE

By Prof. Dr. Norbert W. Knoll – DornhoffGeneral Secretary

DornhoffGeneral Secretary

1. Reform of Institutions – Ease of Doing SME Biz2. Promotion of equity SME financing3. Mutual SME Funds for Crises Prevention and

Development – Tobin Tax and VAT4. Reform of EIB financing

Khrystyna Kushnir, Melina Laura Mirmulstein, and Rita Ramalho

This note provides an overview of new data on MSME (micro, small, and medium enterprise)

Country Indicators for 132 economies. There are 125 million formal MSMEs in this set of economies, including 89 million in emerging markets.

MSME Density World per 1000 peopleSource: IFC World Bank 2010

MSME DENSITYHigh income –high density

Low income -low density

MSME Employment

Formal MSMEs employ more than one-third

of the world’s labor force, but the percentage drops significantly with income level.

Constraints for MSME Development

ELECTICITY AND

ACCESS TO

FINANCE

HUNGARY

Main constraints for SMEs

DR CONGOMain constraints for SMEs

Self Employment rate and GDP

Entrepreneurship – on average across countries - is a leading indicator of the cycle and Granger-causes increases of GDP. This suggests that entrepreneurs have an essential role in explaining business cycle dynamics. And, more specifically, it suggests that entrepreneurs play an important part in recovering from economic recessions.

EASE OF DOING BUSINESS OR SUFFERING ?

0

20

40

60

80

100

120

GDP p.c

EASE DB

SUFFERING %

0

20

40

60

80

100

120

140

160

180

MALAWI BOTSWANA TOGO BURUNDI

8,5

137

8,9 4

133

52

160180

25 24

1 2

GDP p.c.

EASE DB

THRIVING

0

20

40

60

80

100

120

140

160

180

BRAZIL INDIA DR CONGO UGANDA SOUTH

AFRICA

CHINA RUSSIAN FED HUNGARY

10,93,6 0,32 1,2

10,3 7,619,2 19,3

127134

175

122

34

79

123

46

2

2111

238 14

2234

GDI

EASE

SUFFERING

Source: How big is

Africa Really ?. By Erika Amoako-Agyei

Africa is 30,3 million km² and thus is larger than the combination of:

China (9,6 million km²),

the US (9,4 million km²),

Western Europe (4,9 million km²),

India (3,2 million km²)

and Argentina (2,8 million km²)

plus the Scandinavian countries and the British Isles with room to spare.

FROM TRADING TO INDUSTRIAL PARTNERSHIP

TRADE WITH BRICS

64% IMPORTS from CHINA

58% EXPORTS to CHINA

I. Essential Markets Trends for Africa 2011 and beyond

Africa is, and will continue to be, one of the fastest-growing economic regions in the world, thanks to surging demand both from abroad (from China and India in particular) and at home (fuelled by urbanization and consumerism.

Telecoms, banking, retailing, manufacturing and even agriculture will be the the region’s fastest growing sectors: Africa’s consumer market will

account for the region’s largest growth. Energy from renewable sources, sun, water,wind, biomass, waste Low cost housing Rapidly expanding, Africa’s youthful workforce, will be a key advantage. Smart phones will be the fastest-growing category of handsets, even in the poorer areas,

where they often serve as a substitute for PCs. . commerce will flourish in 2011. Africa is well positioned to profit from natural resources as global demand for commodities

continues to rise.

Companies that succeed in these neglected emerging markets are not only putting down roots in the world’s most fertile soil. They are giving themselves a chance to establish business habits for years to come.

Erika Amoako-Agyei, Jounalist and Africa Expert

IMF – Autumn 2011 forecast GDP growth in percent – 2011 * 2012 – forecast spring

2011

-

1 000

2 000

3 000

4 000

5 000

6 000

7 000

19851986198719881989199019911992199319941995199619971998199920002001200220032004200520062007

mill

ion

USD

Inward FDI stock 1985 -2007

Uganda

Congo, Democratic Republic of

Kenya

Ethiopia

United Republic of Tanzania

Tanzania

Ethiopia

Uganda

Kenya

Congo -DR

Uganda: Best at education

GDP per capita – annual growth in % - 2006

0

1

2

3

4

5

6

7

8

9

10

Uganda Tanzania Kenay Cong DR Sudan Ethiopia

pe

rce

nt

II. ConstraintsRelation Delay in obtaining water connections

(days)and GDP per capita (x 100)

Main constraints: Electricity

Bosnia – Herzegovina

Main Constraints for SMEs

Constraints: The Banks

III. A new framework for development

Millennium Villages

Millennium Regions

The proposed WMR

in Sub Saharan Countries shall be a territories which the Governments 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.

MSME - Technology Park, Center of Competence

Gallup Wellbeing in AfricaRelation to SMEs Ease of Doing Business and GNI per Capita (PPP – Purchasing Power Parity) 2010

SMEs – Ease of Doing BusinessWord Bank Group – Reform of Institutions

SMEs – Start-up Reforms

EIB European Investment Bank

The EIB has not so far produced any evidence that its loans have actually benefited local populations and not corrupted leaders and businessmen even in more stable political circumstances. The EIB has invested in North Africa since 1979 but civil society activists say the lender concentrated too much of its investments on the energy sector.Between 2006 and 2010, the energy sector accounted for about 93 percent of the 1.85 billion Euros lent by the EIB to Egypt and 46 percent of lending to Tunisia.

Promotion of SME equity financing

This can be achieved by retaining greater reserves within the firm, and by seeking sources of external private equity rather than debt finance.

FTL – Finance Transaction Levy

SME Mutual Fund for Crises Prevention and Development

Micro-financing for SMEs, said Gian Franco Terenzi, President WUSME, particularly in agro-industry will have priority for WUSME'

Micro-financing for SMEs, said Gian Franco Terenzi, President WUSME, particularly in agro-industry will have priority for WUSME's Action Plan. This can be achieved by creating national“Mutual SME - Funds for Crises Prevention and Development”, financed with theCTL Currency Transaction Levyand a small percentage of the VAT that SMEs collect free of charge for the Finance Ministers.

Currency Transaction Levy

for economic development and crises prevention in African Countries

Estimated annual revenue of a 0.005% Currency Transaction Levy in selectCommonwealth countries.Country Estimated annual revenue (US$)4Australia $2,211,000,000Canada $1,386,000,000India $231,000,000New Zealand £627,000,000Singapore $396,000,000

South Africa $297,000,000

MALIInternational demand for products such as cotton has dropped, meaning many farmers can no longer afford such essentials as school fees for their children. ©Helen Palmer/Oxfam

THANK YOU FOR YOUR

ATTENTIONWUSME WORLD UNION

OF SMEs

General Secretariat

1026 Budapest, Garas utca 22

Tel: +361- 315 10 59

mailto: wus@europe.com,

web: www.wusme.org

WUSME’s MISSIONa) Facilitate technology transfer from WUSME member countries to the organisations and enterprises in Africa.

b) Enterprise to enterprise cooperation.

c) Training to African Entrepreneurs for setting up SMEs.

d) Undertake mission with a view to provide policy and

institutional reforms