In October, at the request of the representative of
the United States Agency for International Development (USAID) in
Sofia, CSD initiated a process to produce a recommendation paper
addressing the policy and legal constraints facing small and medium
size enterprises (SMEs) in Bulgaria, and to identify a set of
possible solutions to encourage the growth of this key sector of
the economy. The main purpose of this policy paper was to set out a
specific and comprehensive agenda for an assistance program in this
area.
Building upon its experience and extensive network
of contacts, CSD started a process of development of the SME policy
paper which consisted of two stages of consultations. Each stage
was completed by a public discussion at CSD. The first stage
included the initial drafting of the paper and consultations at the
expert level. The second stage aimed at providing bi-partisan
political support for the policy agenda outlined in the paper and
endorsement of its priorities by policy makers from across the
political spectrum.
I. The Process
1. Stage One: The Expert Level
Networking
At the outset of the drafting process, CSD put
together two task force groups of experts to write the economic
policy and legal sections of the paper. The final, monitoring
section was initially drafted by CSD's Director of Research. With a
view to adopting a comprehensive approach in the paper, CSD
contacted a number of Bulgarian and international institutions,
involved in the development of SMEs, with a request to provide
suggestions and comments to the paper. As a result, the paper
reflected a variety of viewpoints and experience thus ensuring a
consensus on its recommendations.
The first round of consultations was held at the
expert and civil service level including independent experts,
deputy ministers and heads of ministerial departments,
representatives of other government agencies and leaders of
business associations. The paper was presented to over 50 experts
and government agencies, business associations, research NGOs,
trade unions, international and foreign donor organizations and
individual SMEs. Special attention was devoted to including the
perspective of Bulgaria integration to the European Union,
particularly the provisions on SMEs in the Europe Agreement and the
EU definition of SMEs.
The Policy Workshop
The first stage of consultations was completed by a
policy workshop held on November 20, at CSD with representatives of
the organizations involved in the preliminary consultations.
Following an introductory plenary session, the workshop continued
in two separate sessions у on economic policy and on the legal and
institutional environment. The discussions were moderated by
members of the task force. A final plenary session was devoted to
the discussion of a monitoring system presented by Alexander
Stoyanov, CSD Director of Research.
2. Stage Two: the Policy Makers Level
Networking
Following the workshop discussions, members of the
task force groups and CSD experts held individual meetings with a
number of policy makers who had been invited to participate in the
forthcoming Policy Forum. The draft paper, amended as a result of
the expert discussion, had been circulated in advance together with
some background information about the objectives of the Forum.
During the meetings, the experts provided additional clarification
on the action lines as well as on the overall context of the
drafting exercise.
Believing that in order for the paper to provide an
agenda of a feasible long term assistance program it needs to enjoy
widespread support among politicians and the business community,
CSD consulted representatives of the major parliamentary parties,
the government, the governor of the National Bank, leaders of
business associations and trade unions to comment on the paper and
take part in the forum discussions. By enlisting the support of key
political figures and institutions in advance of the Forum, CSD
managed to build a consensus for the agenda which is a key
prerequisite for its successful implementation.
The Policy Forum
The policy forum was held on November 29 at the
conference hall of CSD. Following some introductory remarks by
CSDпs President, Dr. Ognian Shentov, Mr. John Tennant, USAID
Representative and Ms. Rose Likins, Charge dнAffaires at the US
Embassy presented the Implementing Policy Change Program. In his
address to the Forum, Mr. Petar Stoyanov, President-elect of the
Republic of Bulgaria, expressed his support for a program
encouraging the development of the private sector in Bulgaria, and
particularly SMEs.
The first session of the forum was chaired jointly
by Mr. Atanas Paparizov, Minister of Trade and Foreign Economic
Cooperation and Dr. George Prohaski, Executive Director of the Open
Society Fund-Sofia and discussed the economic policy
recommendations of the paper. The second session, dealing with the
policy and legal environment for SMEs was chaired by Mr. Atanas
Zhelezchev, Deputy Chair of the National Assembly. The concluding
part of the forum included a presentation by Mr. Alexander Stoyanov
and Professor Zahari Karamfilov, Chairman of the National Institute
of Statistics on a system monitoring the state of the SME sector
and the implementation of the policy agenda outlined in the
paper.
II. The Paper
Three sets of recommendations ("action lines") are
presented in the paper:
- legal and institutional framework;
Economic Policy Recommendations
The economic destabilization and deterioration of
the Bulgarian business environment has seriously restricted the
development of the SME sector. While such macro-economic failures
affect all private enterprises, the impact on the SME sector is
compounded due to its general inability to access capital and
information. The policy paper is intended to provide a guideline
for officials to adhere to when developing the overall plan for the
country so that the proper recognition of the important role of
SMEs in the development of the Bulgarian economy is included. The
success of Bulgaria's SME sector is essential to the development of
the economy as a whole. Foremost, SMEs are capable of creating many
new jobs at low costs. These jobs will be necessary to absorb new
unemployment created by restructuring formerly state-owned
enterprises.
The paper identifies a set of action lines aimed at
providing a basis for a comprehensive and coherent action plan for
promoting the growth of this key sector of the economy. The first
group of action lines addresses the development of the SME sector
vis-a-vis the stabilization and improvement of the Bulgarian
economy including:
- development of an anti-crisis program;
- development of a strategy for accelerated, full-scale
privatization;
- development of a national strategy for mobilizing domestic
investment and attracting foreign capital;
- implementation of measures designed to increase the absorption
capacity of the country with respect to international SME support
programs;
- actions against shadow economic and criminal activities.
Further, recommendations focus on implementing a
consistent, long term strategy for the creation of the appropriate
environment to promote SME development and for the attainment of
competitive power and European standards. In particular, the
actions foresee:
- building of an institutional infrastructure for encouraging and
supporting SMEs;
- implementation of a consistent policy of support measures and
relieves for SMEs;
- development of a program for the financial assistance and
relief;
- development of a foreign economic policy for the attraction of
government support for the SME sector.
Recommendations to Improve the Legal and
Institutional Environment
This action line includes recommendations aimed
at:
- improving the implementation of existing laws affecting small
and medium size enterprises;
- drafting additional laws for SMEs;
- improving the institutional framework for small and medium size
enterprises and enhancing the institutional efficiency.
The Bulgarian Parliament has passed a number of laws
relevant to the activity of SMEs that have not been effectively
implemented. Failure to implement the laws has been due to lack of
relevant experience among implementing officials and
representatives of SMEs, the lack of institutional framework to
support the laws and legally fixed implementation procedures that
slow down the process. In all such cases, SMEs suffer due to the
inability of institutions and the private sector to implement, or
act under, laws that are the result of already existing political
consensus in society. Thus, appropriate actions should be taken
towards implementing existing and non-implemented legislation with
each sector, private and public, doing their part to become
educated about how new laws function in order to obtain the desired
results.
Furthermore, regardless of many steps taken towards
creating an enabling environment for SMEs, there are still a number
of laws that need to be drafted in the near future. In drafting
such laws, special attention should be paid to two factors:
- stability of the legal system should be preserved as much as
possible in this process which implies change and motion;
- special attention should be paid to prevent the passage of
retroactive legislation which represents the worst form of legal
instability.
Particularly, new legislation should take into
consideration that Bulgaria has signed an Association Agreement
with the European Union and has adopted a policy towards
approximation of its internal legislation with EU law. The paper
does not intend to propose an exhaustive list of laws that need to
be drafted in order for the legal framework for SMEs to be
completed but rather to suggest important pieces of legislation
which are necessary for the development of the SME sector. These
include foreclosure, leasing, consumer protection, electronic
commerce, trade mark, government procurement legislation, as well
as specialized SME legislation.
Finally, this action line proposes measures to
improve institutional efficiency. In many cases high quality
legislation fails to have a positive impact on the relationships
governed by it. This is due primarily to inefficient and
non-uniform implementation by the relevant agencies. Thus the paper
proposes the creation of standardized operating procedures,
including the use of standardized forms.
Monitoring System
In light of the proposed recommendations, a
monitoring system is of principal importance for the success of an
SME development strategy. The objective of this action line is to
design and implement a comprehensive monitoring system to determine
whether or not policy recommendations are being administered and
enforced and, ultimately, if the desired level of success has been
achieved. The system would perform at least two functions:
- to monitor the direct impact of policy decisions and to assess
the effectiveness of policy change efforts in the SME sector;
- to provide relevant vehicles (based on analyses and relevant
data) to decision makers that would both inform them of
developments in the SME sector and provide support for policy
change.
The paper is published in both English and
Bulgarian.
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