Ukraine

Modern SME policy would 1. boost Ukraine’s economy 2. enable SMEs to challenge big businesses and 3. break up oligopolistic networks. Watch our video and tell us what you think. Small and medium-sized enterprises (SME) have played an important role in Ukraine’s transition process since the 1990s. However, the SME sector has received too little attention of Ukrainian policy makers for decades. The economic and legal conditions for SMEs are clearly below the international average. A consistent policy framework supporting SME development is yet lacking. The government limited SME policy to tax incentives and privileges for micro businesses. It neglects the needs, problems and impediments of growth-oriented companies. Only recently some of Ukraine’s policy makers realize the importance of SME to the country’s economic development. The motivation and contribution of the Friedrich Naumann Foundation for Freedom (FNF) is based on the FNF 2014-2016 project objective for Ukraine “to identify the major SME needs in Ukraine and propose appropriately targeted measures to improve the SME framework, thus expanding liberal policy approaches, identifying obstacles and initiating learning processes and social change to facilitate economic activity”. We have sketched a modern SME policy approach. It addresses the specific needs and problems of Ukraine’s various groups of SME. We founded our proposals on international experiences and scientific research. Ukraine’s SME sector is very special in many aspects. We adapted the international experience and research to Ukraine’s characteristics to help policy makers to formulate an adequate policy. Our policy proposals differ from those of many SME experts. Firstly, we do not recommend supporting SMEs for their sake. The point is not whether a company is big or small. The point is whether it is entrepreneurial. We see entrepreneurship as a means of personal development, reflecting the freedom of choice of occupation. Pseudo self-employment and subsistence businesses are the opposite of entrepreneurship. Therefore, we focused on helping people being in such occupations. They are to move on to better forms of income generation. Entrepreneurial firms that intend to grow and to innovate are the ones that contribute to Ukraine’s economic development. Secondly, we focus on policy measures that require only little or medium public expenditure, that are easy to implement and that will show directly positive effects. We see the relevance of other long-term SME policy programmes such as educational and training programmes, subsidy programmes and incubators etc. However, those measures are often not adequate for Ukraine. Ukraine faces decreasing public budgets. Therefore, the government cannot finance such programmes sufficiently. Ukraine has weak institutions and few capacities to manage such programmes. Ukraine’s current policy makers need short-term success stories and cannot wait for long-term effects. Thirdly, we emphasise the link between SME policy and competition policy. One of the biggest problems of Ukraine’s economy is the lack of competition. Many policy makers have served the big oligarch business networks to protect them from competition. The results of missing competition are low innovation, high prices as well as poor quality products and services. A policy that tries to support SME but avoids to threat big incumbent companies fails to create significant welfare effects. Foster fair competition, challenge incumbent industries and eliminate the unfair protection of oligarch networks, in sum: create a level playing field! That is the way out of Ukraine’s economic deadlock. Last but not least, we want to point out the link between SME policy and industrial policy, innovation policy, education policy, trade policy, FDI attraction policy and financial sector policy. From the perspective of an institution, it is against intuition to have an isolated small SME department within one ministry or to have one single SME development organisation. SME policy formulation should be a joint task of all ministries, parliament committees and state institutions that are involved in economic policy. http://www.ukraine.fnst.org http://www.facebook.com/fnf.ukraine http://fnst.org/sites/default/files/uploads/2016/10/24/2016competitionpolicyeng4web.pdf http://fnst.org/sites/default/files/uploads/2016/08/01/aeinukraineeng4web_0.pdf http://fnst.org/sites/default/files/uploads/2016/08/02/20141103smeinukrainefinal.pdf Alexander Knuth – Economist and Consultant, Expert for entrepreneurship and SME http://twitter.com/Alexander_Knuth Miriam Kosmehl – Head of Office Friedrich Naumann Foundation Ukraine and Belarus http://twitter.com/MiriamKosmehl Ansgar Otto - Produktion http://ansgarotto.de Nataliia Korobenko–Additional footage https://www.facebook.com/NataliTaliya Sarah Huzel – Hair and Make-up Artist

• published: 16 Jun 2017
• views: 825