/ Centre for Development of the South-East
planning region
(CDSEPR)
/ Centre for Development of the South-East / ES (CEA)
planning region
(CDSEPR) / We are making a difference

STRATEGY ON SME FOR THE SOUTHEAST PLANNING REGION FOR THE PERIOD

2013-2015

September 2012

Table of Contents:

INTRODUCTION

DRAFTING AND ADOPTION OF THE STRATEGY ON SME IN THE SEPR

PROFILE AND CHARACTERISTICS OF SME IN THE SEPR

Profile

Characteristics

LEGAL FRAMEWORK FOR SME IN MACEDONIA

INSTITUTIONAL AND OTHER TYPES OF SUPPORT TO SME AND ENTREPRENEURSHIP

SWOT ANALYSIS

Platform and Resources for the SWOT analysis

SWOT Analysis on SME in the SEPR

Vision and Strategic Objectives of the SEPR regarding SME

ACTION PLAN FOR THE STRATEGY

Project Matrix

Sources of financing

Implementation and Financing Schedule

INTRODUCTION

The creation of a more competitive and a more dynamic knowledge-based economy that is capable of economic growth, creating more jobs and increased social cohesion undoubtedly depends on the success of enterprises, and especially of small and medium enterprises – SME.The category of small and medium enterprises comprises 98% of the total number of active business enterprises and thereby plays the role of the engine behind the total business activity in the country.From the aspect of their size and flexibility, small and medium enterprises represent, not only the most dynamic, but also the most sensitive business segment, the performances of which directly and objectively reflect the general condition of the country’s economy.

The development of this Strategy for development of small and medium enterprises in the Southeast planning region – SEPR included a detailed approach for an on-site assessment of the situation and the needs of business, with special emphasis on the opportunities and methods for internationalisation.Such studies and surveys are commonplace in the EU[1].This Strategy is developed with the aim of understanding and correctly describing the problems facing business in the SEPR, but also for the purpose of creating a method of comparison with EU countries on the basis of consistent indicators.

The development of this SME Strategy, supported by the GIZ RED Programme, comprised two phases:

  1. Initial phase and
  2. Analysis of the SME sector in the SEPR.

During the initial phase, the Steering Committee (stakeholder representatives) and the working groups were established.Activities during this phase included identification of resources, development of the questionnaire, preparation of meeting agendas, preparation of interview schedules, stakeholder identification etc.Each drafted document was approved by the advisory group and by the Steering Committee.The Steering Committee was chaired by a representative of the Centre for Development of the SEPR – CDSEPR.

In the course of the work of the Steering Committee and the working groups, all relevant and appropriate documents and information were gathered and the analysis of SME in the SEPR commenced.A critically important aspect of this phase was to secure the involvement and cooperation of the business community in the SEPR and to achieve consistency with the relevant documents at the national level.The questionnaire for the field research was developed during this phase of the SME analysis, which then served as the basis for the drafting of the Report from the analysis of the SME sector in the SEPR[2].This analytical report supported the process of defining the mission and vision and carrying out a SWOT analysis of the SEPR, as well as the development of the Strategy.

An analysis was made of the legal framework, the strategic documents and the by-laws on the national, regional and local level, which aim to directly or indirectly support the development of SME.The analysis shows that there are a large number of regulations, namely approx. 90 laws and approx. 200 by-laws, which directly or indirectly govern the operations of SME; however, it may be concluded that the legal framework for SME has been improved.

At the end of the process, a SWOT analysis was carried out in the working group, the result of which was the Action Plan for the Strategy.Several meetings with the business community were held in the course of the SWOT analysis.

The questionnaire, which served as the basis for the Analytical Report, was designed on the basis of a previous survey on the context and the nature of the issue.The working groups, as well as representatives of the municipalities tasked with the survey, were consulted on the questionnaire structure and design prior to the survey.The survey was conducted on a sample of 168 randomly selected business enterprises from the ten municipalities in the SEPR.The following municipalities were covered by the survey:Konche, Strumica, Valandovo, Vasilevo, Bosilovo, Bogdanci, Radovish, Dojran, Gevgelija and Novo Selo.

The goal of the Analytical Report was to understand the main circumstances and root causes behind the (lack of) success of small and medium enterprises, to gather information on the problems/limitations they are facing, to analyse the factors affecting their operations, as well as to identify examples of successful businesses, especially businesses involved in some kind of internationalisation.

The Analytical Report was focused mainly on the companies’ general features, on the perceptions of business regarding the obstacles and limitations they are facing, on the issues of competition and human resources, and a special emphasis was placed on the opportunities for internationalisation and innovation.The Strategy includes only the key messages from the Analytical Report.The full text of the Analytical Report is available upon request from the Centre for Development of the Southeast Planning Region.

On the basis of the analysis and the information in the Analytical Report, the Steering Committee and the working groups carried out the SWOT analysis and adopted the vision of this Strategy on SME in the SEPR.The visions then served as the basis for the strategic objectives and the detailed projects that should result in the achievement of the strategic objectives.

DRAFTING AND ADOPTION OF THE STRATEGY ON SME IN THE SEPR

The development of this SME strategy, supported by the GIZ RED Programme, comprised two phases:

  1. Initial phase and
  2. Analysis of the SME sector in the SEPR.

During the initial phase, the Steering Committee (stakeholder representatives) and the working groups were established.Activities during this phase included identification of resources, development of the questionnaire, preparation of meeting agendas, preparation of interview schedules, stakeholder identification etc.Each drafted document was approved by the advisory group and by the Steering Committee.The Steering Committee was chaired by the CDSEPR.

In the course of the work of the Steering Committee and the working groups, all relevant and appropriate documents and information were gathered and the analysis of SME in the SEPR commenced.A critically important aspect of this stage was to secure the involvement and cooperation of the business community in the SEPR and to achieve consistency with the relevant documents at the national level.The questionnaire for the field survey was drafted during this phase, which then served as the basis for the Analytical Report on SME in the SEPR.This Analytical Report supported the process of defining the mission and vision and carrying out a SWOT analysis of the SEPR.

The Steering Committee for the development of the Strategy comprised the following members:

  1. Zhulieta Gjurkova / Manager of the CDSEPR
  2. Risto Chivchiev - Project Coordinator in the CDSEPR
  3. Pavle Donev / GIZ RED Regional Coordinator
  4. Trajche Zaev – President of the Regional Economic Chamber - Strumica
  5. Trajko Gogov – President of the Regional Economic Chamber - Gevgelija
  6. Sofche Janeva – Municipality Strumica
  7. Lazar Gazepov – Municipality Radovish
  8. Mitko Vlahov – Municipality Bogdanci
  9. Elpida Paneva – Municipality Vasilevo
  10. Branko Georgiev – Municipality Dojran
  11. Risto Atanasovski –Foundation for Local Development and Information Technology Development – Municipality Gevgelija
  12. Marijan Nikolov – CEA Consultant

The following working groups were involved in the process:

  1. Working Group on Agriculture
  2. Elpida Paneva – LED Unit, Municipality Vasilevo
  3. Goce Vasev – LED Centre Radovish
  4. Natalija Mitrova – Municipality Vasilevo
  5. Milica Chivchieva – Training Centre - Strumica
  6. Magdalena Krecheva – LED Unit – Municipality Dojran
  7. Working Group on Industry
  8. Stole Georgiev – LED Centre - Radovish
  9. Sofche Janeva – LED Unit - Municipality Strumica
  10. Nikola Trendov – Business Incubator - Strumica
  11. Mitko Dimitrievski – Regional Economic Chamber - Strumica
  12. Marija Tasheva – SME Development Foundation - Strumica
  1. Working Group on Services
  2. Mitko Vlahov – LED Unit - Municipality Bogdanci
  3. Lazar Gazepov – LED Unit - Municipality Radovish
  4. Risto Atanasovski – Foundation for Local Development and Information Technology Development - Gevgelija
  5. Branko Georgiev – LED Unit - Municipality Dojran
  6. Filip Atanasov – CDSEPR - Strumica
  7. Karolina Dodevska – LED Unit – Municipality Vasilevo

PROFILE AND CHARACTERISTICS OF SME IN THE SEPR[3]

Profile

  • Regarding the legal form of the enterprises, most of the business in the SEPR are registered as DOO (limited liability companies) or DOOEL (sole proprietorship limited liability companies), making up 85% of the total number of registered business enterprises.The main characteristic of the DOO is that the partners are not personally liable for the company’s debts.Small number of enterprises are registered as public companies (4.7%) and joint-stock companies (4.1%).
  • 22.89% of the total number of surveyed businesses operate in the area of trade, and 14.08% work in agriculture (primary production or processing), which is mainly the result of the natural characteristics of the region.10.24% of businesses have their main business activity in the food industry, while 8% work in construction, 6% in the textile industry, and 5.4% in wholesale purchasing of agricultural products.
  • More than half of respondents, namely 57.49%, have been present on the market for more than 10 years, while approx. 25.7% have been operating for 5-10 years, which shows that the enterprises are able to persevere or the market in the long term.Only 1.8% are new enterprises established in the past year, which shows that there is a small rise in the number of start-ups.
  • According to the number of employees, enterprises are categorised in 4 groups, in line with the legal categorisation of enterprises according to their size, and micro enterprises (max. 9 employees) make up 52.4% of the total number of businesses in the SEPR. 46.99% of companies are small and medium enterprises.Taking into consideration that small and medium enterprises are considered the main engine behind economic growth, it may be stated that the nature of businesses in the SEPR allows them to be the force behind regional economic progress.
  • According to the business activities of the enterprises, 58% work in the area of services, and 32.9% have manufacturing facilities.
  • Private capital accounts for 90% of enterprises in the region, while 8.33% or the total number of surveyed businesses reported a share of foreign capital.

Characteristics

  • From the aspect of legal form, enterprises in the SEPR are mostly micro (52.4%) and small and medium enterprises (47%); 60% of them work in services.Private capital is dominant in 90% of enterprises.The most common legal forms are DOO and DOOEL.
  • According to the companies’ replies(enterprises from various groups according to size and duration and type of business activity), the greatest obstacle to achieving better business performance is the difficult access to financing.Companies have still not managed to build trust in their business relations, which is the second most significant limitation to business performance.At the same time, there is general discontent with the support from the institutions at the different levels of government.One of the main obstacles limiting business performance is the high cost for telephone services, heating, internet and communications; 45.1% have faced this problem in the past two years.These are followed by the lack of efficiency of public administration and the lack of appropriate infrastructure.
  • As for institutional support, only 40% of respondents have used the services of the chambers of commerce in the area of education, networking, marketing and information.71.1% of respondents stated that they have not received any support from NGOs, 61.8% from the business chambers, 60.4% and 47.5% from the central and the local government, respectively.However, 22.4% have received support from local government, and 15.6% considered this support to be useful.Businesses stated that they are most satisfied with the support from the local level of government.The reduction of obstacles related to the legal framework is the result of the reduction of regulatory obligations according to 61.54% of respondents, and the result of the simplification of regulations and their enforcement by the Government according to 30.7%.
  • Impact of the CrisisAs much as 23.5% of respondents believe that the access to financing has been made more difficult in the past two years.
  • Transaction Costs.Companies spend more time and effort carrying out administrative tasks, such as gathering information and filling-out forms for the needs of local and central government.Most of the companies, namely 61.6%, spend up to 30 working days on these tasks.However, a relatively high number of companies (11.6%) spend as much as 150 working days on such activities.
  • It may be noted that 46.3% of enterprises (31.5% of manufacturing enterprises) do not use any environmental management system or measures for saving electricity or resources.This is worrying, since the enterprises are not using savings achieved through the implementation of appropriate measures and systems to increase their competitiveness.Appropriate awareness raising programmes in this area for the enterprises should be introduced and ways of increasing motivation for using energy saving systems and for environment conservation need to be found.
  • Import and export are still the traditional manners of internationalisation; investments abroad and joint ventures are still not used as a sustainable method of strengthening the international business strategies of the enterprises.23.8% and 18.9% of the companies have imports and exports, respectively.12.9% have penetrated markets in neighbouring countries. Technological cooperation is a method used by 11.5% of internationalised enterprises.
  • The most commonly exported products are agricultural produce and foodstuffs, with as much as 60% of internationalised enterprises working in agriculture/ forestry, 75% of enterprises purchasing agricultural products and 60% of internationalised textile companies exporting their products abroad. Companies that go through the process of internationalisation most often are those existing on the market for more than 10 years, with 73.3% of the total number of internationalised companies.
  • The greatest percentage of internationalised enterprises is recorded in Bogdanci (78%), Strumica (72%), Radovish (63%) and Gevgelija (62%).On the other hand, all enterprises in Konche, 78% of those in Dojran and 56% of enterprises in Bosilovo were not engaged in any form of internationalisation.
  • Analysed from the aspect of the participation of exports in the company's total annual income, most companies (over 60%) have an annual export volume accounting for up to 10% in the company’s total sales.18.8% of export-oriented enterprises realised exports in the amount of more than 50% of total income.
  • In the past three years, almost 39.4% of internationalised enterprises have introduced new products/services, which were introduced for the first time on the domestic market, and 14.9% have introduced products/services, which were new for the domestic and for foreign markets.Non-internationalised companies introduce products that are new only in the company’s portfolio more frequently than the internationalised enterprises.
  • Barriers to Internationalisation.The analysis shows that the greatest obstacle to internationalisation are the high costs, with 14.9% of surveyed businesses giving this reply.Providing easily accessible information on international markets and subsidising commercial presence with the aim of facilitating access to foreign markets may be appropriate support measures aimed at overcoming this barrier.As much as 40.5% of businesses faced no external barriers to internationalisation.Approximately 46.6% of companies face the problem of lacking information, a problem that does not allow them to achieve some form of internationalisation; this result is similar to that for the EU member states, where 44% of enterprises have reported that the lack of information is a barrier to internationalisation[4].Apart from the stated external barriers, 9.6% reported that securinga guarantee for the purposes of guaranteeing good performance or timely payment abroad is a barrier that negatively impacts their competitiveness on foreign markets.
  • Regarding the opportunities for business with EU member states, companies believe that what is especially important for their competitiveness on the foreign markets is the abolishment of border controls and the application of the same market rules in the EU member states and in the Republic of Macedonia.It is interesting that 67.5% of respondents believe that the introduction of EU standards in the Republic of Macedonia would benefit the business sector and contribute to its development and better performance.
  • In general, approx. 70.7% of the total number of surveyed enterprises use the internet in their business activities.Use of internet meant a direct use of the internet in the company for the purposes of manufacturing, management, learning etc.
  • Internationalisation and E-business.Internationalised companies realise more activities on the internet than the non-internationalised.For example, 43.5% and 35.1% of internationalised companies have posted information on the company or presented their products/services on the internet, respectively.Unlike them, only 23.4% of non-internationalised enterprises posted information on the internet, and 35.1% presented their products on the internet.There is a great difference in the number of companies receiving orders over the internet, with 21.4% of internationalised and only 4.5% of non-internationalised businesses receiving online orders.