The 2009 Turkey Small and Medium Enterprises Development Conference will be hosted by the leading Turkish economic newspaper, DUNYA Gazette, along with the French Development Agency (AFD) in Istanbul on April 9-10, 2009. The conference will enable business and public knowledge sharing on the critical issues SMEs face in our globalized world.
1 FOSTERING SMES GROWTH: RATIONALE FOR A PUBLIC POLICY
Having a strong and vibrant private sector is considered to be essential in order to trigger economic dynamism, enhance productivity and reduce poverty in developing and emerging economies. Strategies to develop the private sector are manifold and generally encompass several complementary areas, including promoting Small and Medium-Sized Enterprises (SMEs).
SMEs are a powerful engine for the economy. They create employment, maintain social stability and favour both entrepreneurial spirit and innovation.
In the European Union, small and medium-sized enterprises (SMEs) are defined as companies which employ less than 250 people, whose annual turnover does not exceed 50 million Euros and/or whose annual balance sheet total does not exceed 43 million euro. Under this definition, some 23 million SMEs represent 99% of all Companies and provide around 75 million jobs.
Various market failures work against European SMEs, notably the lack of infrastructures, limited access to financial resources, to innovation, shortage of skilled labour, costs of market research, bargaining power, legislative impediments (including national and EU regulations concerning intellectual property rights, labour, taxation…).These market failures often generate costs, which are difficultly borne by individual SMEs.
Policy action is needed in order to improve the business climate, especially for small firms. Governments can, through economic policies, enhance SMEs development. The European Union recognised SMEs as drivers for growth and territorial development and designed specific programmes for that purpose. Other countries, such as Brazil, Tunisia and India, have undertaken to improve their productive sectors through SMEs.
2 AN OVERVIEW OF THE SME SECTOR IN TURKEY
In its 8th Development Plan, the Turkish government elaborated a comprehensive strategy to support Turkish SMEs growth, including training for entrepreneurship and more qualified staff, cheaper and faster processes for business start-ups, enactment of better laws and legislation and taxation, technological and innovation capacity of SMEs, internet services for transactions and experience sharing, increased representation of SMEs on national and international platforms, and new markets opening.
In Turkey, the SME definition is close to that of the European Union. There is a strong entrepreneurial culture; small and medium sized enterprises (SMEs) constitute the backbone of the Turkish private sector – representing by far the largest percentage of companies and employment (99% of all enterprises and more than 75% of jobs) and making about 65% of all production. Business environment in Turkey ranks 57th out of 178 countries in the World Bank’s Ease-of-Doing-Business Indicator and is similar to that of its neighbouring EC member States, such as Romania (48) and Bulgaria (47).
Despite a lot of improvements of the domestic business environment and their contribution to economic growth, unfavourable framework conditions tend to limit Turkish SMEs business opportunities.
Official start-up rates of new businesses are very low in Turkey, in particular in and around the suburban areas, although it should be borne in mind that there are extensive activities in the informal sector. The lack of reliable entrepreneurial data further complicates comparisons in this field.
The SME sector in Turkey is also characterized by great geographical imbalances. SMEs are very unevenly spread across the country. Most of them are based in the Marmara region (including Istanbul) and Izmir, accounting for about 65%, whereas the Eastern regions harbour less than 20% of all SMEs. Besides, the less developed regions concentrate the majority of the smaller enterprises, whereas the Marmara region attracts most of the medium enterprises. In some sectors, such as food processing, textile and retail industries, the productivity of Turkish SMEs appears to be lower than in similar income countries. SME’s contribution to exports and investments remains low.
SME’s access to credit has significantly improved since the early 2000s, but credit distribution remains concentrated in the richest areas of the country. Despite the extension of some retail banks agencies network and the implementation of several donors support programmes, it remains in general short or at best medium term lending.
The above mentioned factors are often mentioned as the main impediments to SMEs development. Nevertheless, for the last decade Turkish SMEs have been facing unprecedented opportunities: the financial sector in Turkey has increased its SME loan portfolio, international companies have set foot in Turkey’s industrial areas, access to the European market has spurred the spread of international standards. SMEs in Turkey are increasingly concerned by innovative strategies and solutions going from microfinance services to cluster formation.
The existence of a critical mass of innovative, internationally competitive SMEs that have the ability and willingness to grow will be a condition for Turkey’s future growth and prosperity. The importance of the SME sector in Turley is never stressed enough; it goes from fuelling the economic growth to providing flexibility, engaging in bridge-building between Turkey and the European Union, and promoting employment. Indeed, during economic crisis SME are among the few firms to create jobs, while large companies conduct downscaling programs.
3 OBJECTIVES AND STRUCTURE OF THE CONFERENCE
The conference is oriented towards the business community and is designed to address best practices, funding opportunities, SME development innovations and trends. It will also facilitate discussions about worldwide experiences and lessons learned from European and Mediterranean countries, as well as other emerging economies.
· Each session will be structured as follows:
- Presentations of international business cases both from AFD’s global client base and from
prominent institutions that have set the benchmark for successful financial and non financial
services to SMEs.
- Most sessions will feature a keynote speaker and a couple of high profile experts chosen for
their strong expertise and outstanding record in dealing with SMEs development issues.
· Expected speakers will include:
- Representatives of AFD Group (Jean-Michel Severino, AFD’s CEO),
- CEOs of Turkish and international banks,
- CEO of Turkish innovative SME’s,
- The Heads of professional organizations,
- Representatives from the European Commission,
- Key figures of the international Development Financial Institutions and members of AFD’s blog
“Ideas 4 Development”, such as Kemal Dervis or Pascal Lamy
(http://www.ideas4development.org/en/).
You will find attached the detailed draft programme of the conference. The conference is designed to be strongly interactive for it to be as useful as possible for you. Each round table will include an open discussion session in order to allow you further questioning. On the evening of the ninth, there will be a Gala dinner, which will give you the opportunity to meet various personalities from the world of Turkish and international economy: the OECD, the WTO, the Istanbul Chamber Of Commerce, the European Commission, TUKSIAD, IFC, various Turkish banks…
For any additional questions, please contact us at (Website : Conference SMEs in a Global World))
4 TARGETED AUDIENCE
- Turkish SMEs
- SMEs from Mediterranean and other emerging countries
- Banks and Development Banks interested in the Turkish market
- Business associations, Industrial Zones and Chambers of Commerce
- Export credit insurance and Venture Capital companies
- Turkish authorities (such as Ministry of Finance, Under secretariat of Treasury , State Planning Organisation, Central Bank, Ministry of Industry and Trade),
5 SCOPE
sessions with 3-4 high profile guest speakers and will be moderated by a chairperson. AFD staff, as well as one or two personnel from the conference’s sponsors will participate as speakers and/or moderators.
The sessions will cover the following topics:
Session 1: SMEs & Big Business linkages: living in a global competitive environment
SMEs face many new challenges on their national territory. How can they develop in an increasingly competitive world? The dispersion of international production and the expanding number of intertwined multilateral and regional trade agreements are changing the global economic landscape. Market “rules” rapidly evolve and companies must adapt in order to remain competitive. As a consequence, many firms have modified their strategies and have become transnational, increasing their presence in emerging and developing countries. This is source of new opportunities for SMEs.
Rooted in their local environment, SMEs prove to be valuable partners to larger companies, in particular as concerns local knowledge and contacts. Linked to local SMEs, transnational companies manage to operate more effectively, optimize costs, achieve quality and flexibility, as well as to maintain “social license to operate”. In return, such linkages help SMEs to develop locally, bringing positive social and economic impacts to the wider community.
This session will focus on the local -to international -commercial and financial links between SME’s in the context of a growing competition and the on-going global trade liberalization process. It will give the scope of the conference, shedding a light on the challenges that SMEs face in the global economy and the benefits they can draw from it.
Session 2: SMEs as Development Drivers: Best practices to promote SMEs
This session will explore some public policies and experiences in fostering SME growth as well as their role in local development, in several economic areas, drawing from concrete international examples in the European Union and some emerging countries. How to create an enabling business environment for SMEs to prosper? How to reduce barriers to SMEs’ participation in global markets? How to enhance their know-how and technology and improve their quality standards? How to increase their impacts on social and economic development locally? Several strategies have proven to be promising, such as global value chain approaches, clusters, non-financial services streamlining etc.
This session intends to present, through selected case studies, such as the European cluster initiative and a Brazilian experience, worldwide best practices to promote SMEs development.
Session 3: CSR and SMEs: an opportunity or a luxury?
Corporate Social Responsibility (CSR) is an evolving notion. The European Commission defines it as a “concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis”. Most key principles and tools have been developed by, for and in the context of large Companies. Indeed, SMEs have different characteristics then larger enterprises (e.g. in terms of ownership, relations with their local environment/community, resources, and ways to do business etc….), hence specific ways to implement CSR principles. Perceptions have often been that CSR did not apply to SMEs or were too much of a burden for them. Nevertheless, some SMEs have started to adopt CSR principles in order to qualify as suppliers to larger enterprises (‘supply chain effect’). More generally, SMEs can draw benefits from CSR.
This session will give an insight into this issue through debate between CSR think tanks, SME’s and DFIs, while giving examples of successful CSR processes applied to SMEs.
Session 4: Innovative solutions in SMEs development and finance
One of the main impediments that SMEs encounter is access to capital and financial services. Commercial banks tend to primarily serve large companies and have reservations against financing SMEs due to high fixed cost, lack of information about individual SMEs and the market, insufficient guarantees, difficulty to assess the credit risk through classical financial analysis.
This market segment requires a specific set of procedures for banks. Access to long-term financing is particularly difficult, especially for the lower end of the SME sector. However banks have increasingly been investigating this market and SME lending is growing in Turkey.
This session will discuss current shortcomings in SME credit in Turkey as well as financial -and non financial -tools or garanties that can be used to address them. It will also focus on Capital Investment: majority or minority shareholdings in the capital of small and medium unlisted enterprises.
Session 5: Concluding Session: Regional economic integration
Competitively factors and Turkish SME’s recent market shares growth on the European and Mediterranean markets will be explored. In this regard SMEs quality standards, technical regulations, price and quality advantages will be discussed. Examples on certification, quality, environment, labelling, safety and social standards will be presented.
The ways to develop competitive advantages, to enter higher value-added markets or to respond to the growing regional consumer market will be presented. European private and public initiatives to further involve SMEs from both sides of the Mediterranean area within the framework of the customs union will be discussed.
This session will focus on private and public regional economic integration initiatives, particularly into the European and Mediterranean markets. The experience of a leading industrialized and regionally integrated Turkish SME will be discussed.