Fabian Demicoli

SME effort and resilience in stark contrast with Government’s efforts to implement the pro SME SBA


In the yearly
report published by the European Commission DG Enterprise, the 2013 Small
Business Act Fact Sheet for Malta, it is very evident that while SMEs in Malta
have struggled to advance, the public administration up till the first 3 months
of 2013 has been dragging its feet on the very essential implementation of the
SBA which is 'the EUs flagship initiative to support small and medium sized
enterprises (SMEs)'.

The
report emphasizes that 'more than most other Member States, Malta's economy is
driven by micro-firms', which GRTU feels should be the more reason to implement
the SBA. 'SMEs in Malta provide about 80% of jobs in the business economy and
create 71% of the overall value added, which is 14 percentage points more than
the EU average'. The report carries on to describe Malta as belonging 'to the
very small group of MS that saw their SME sector expand over the past five
years in the number of firms and employees'. It says that 'the performance of
Maltese SMEs since 2008 has been extraordinarily robust' however the report
outlines several policy weaknesses where Malta is scoring below the EU average.
Overall, weaknesses to date have not been a fundamental impediment for the
expansion of Malta's SMEs yet these challenges need to be confronted more forcefully
for the sake of Malta's competitiveness.

GRTU
welcomes a more complete profile analysis for Malta which is a result of
Government's efforts to increase Malta's representation in international
statistics. It was very disappointing however 
to learn that additional indicators did not help to improve Malta's
overall performance.

Malta
scores below the EU average in five – entrepreneurship, second chance, state
aid and public procurement, access to finance and skills and innovation – of
the 10 pillars, some of which were already problematic while others have
dropped below the EU ranking only recently. One of the most important pillars –
think small first – for SMEs could not be calculated due to insufficient data
from Malta.

The report
confirms GRTUs long standing arguments that most existing schemes were
inefficient, unfit for SMEs and not aggressive enough in helping SMEs.

The
report also confirms that 'some measures announced in 2011 for implementation
in 2012 still need to be enacted'. These include very important policy measures
on which GRTU has been insisting since the introduction of the SBA, amongst
which; the legal instrument to institutionalize the SME test and ensure that
new acts cannot come into force before 2 months from official publication,
regular customer satisfaction surveys for public institutions providing
services to SMEs and a guarantee scheme by Government for SME loans.

The
Pillars:

 

1. Entrepreneurship

Malta
continues to trail the EU average. Rates of entrepreneurship and self-employed
and the preference for self-employed and the perceived feasibility of becoming
self-employed remain below the EU average. GRTU feels one of the main reasons
for this is the challenging business environment in Malta. There was however
some marginal improvement and the traditional attitude seems to be changing at
a slow but steady pace. The Malta Enterprise Create scheme is mentioned here
however we do not know how effective this scheme really was.

 

2. Second Chance

Here
Malta is once again below the EU average. The fact that the time to close a
business in Malta is long combined with a lower level of support for
entrepreneurs seeking a second chance makes an environment which is difficult
for second starters. This has an impact on entrepreneurship.

Worryingly
no policy instruments were introduced to tackle this weakness.

GRTU had
proposed a specific scheme in this regard as part of its 2014 Budget proposals
which however was in no way introduced.

 

3. Think Small First

The burden
of Government regulation is just off the EU average. Several of the policies
falling under this pillar have been mentioned but not implemented. This is
particularly relevant for the SME test, which is the basis of the SBA , and on
which nothing has been done yet. The report mentioned that the Maltese
Government here indicated the Enterprise Consultative Council as a success but
as users we feel this is an over statement.

 

4. Responsive administration

Malta is
in line with the EU average. Start-up conditions are said to be relatively
competitive however our major challenges are of reducing the time to start a
business which stands at 7 days while the EU average is 5 days, the cost of
enforcing contracts and the complex licensing system. The Malta Enterprise
Business First is quoted as the main reason for the good conditions however we
feel that Business First could do much more in terms of outreach and reporting.
Its facilities are utilized only by those that come across it so many still set
up business without using Business First which is both lengthier and costlier.
Not enough promotion is done of the support schemes and stakeholder involvement
in both drafting schemes and promoting them is still limited which leads to low
utilization of certain schemes. GRTU agrees with the report that states that
much more needs to be done to advance the idea of an administration that is
truly responsive to business needs.

 

5. State Aid and Public Procurement

Malta is
just below the EU average and certain data is very worrying. While SMEs in
Malta appear to have a greater chance to participate in public procurement they
face severe difficulties in benefitting from state aid measures. While in Malta
state aid for SMEs is measured as almost non existent in some countries such as
the UK the figure reaches 18%. This is not surprising to GRTU which has been
concerned and complaining about the low amount of state aid going to SMEs for
years. Something is clearly wrong and the administration does not even
acknowledge the problem. Malta is doing quite well on the share of SMEs using
e-procurement services. This might also be because this is the only way that
tendering for public contracts can be done. The absolute  majority of our member from a wide variety of
sectors however complain that the new e-procurement system which Government is
said to have facilitated is still very complex. It requires them to attend a
course to help them in submitting the tender however it is still difficult and
more time consuming, members report that without the course it would be
hopeless.

 

6. Access to Finance

On
access to finance Malta scores below the EU average. It is reported that
comparatively SMEs are successful in obtaining loans form banks, which we feel
this is because comparatively Malta was not as affected by the crises and
therefore banks maintained their lending trends. Two indicators describing the
share of EU structural fund financing reserved for SMEs show that Malta is far
below the EU average. Malta's 2.8% is shockingly low when compared to countries
like Denmark and Finland where the share is almost ten times as much. Policy
measures undertaken between end 2012 and beginning 2013 have not addressed
these issues. The BStart scheme is mentioned however we highly doubt the use
and effectiveness of this scheme for SMEs.

 

7. Single market

Malta's
headline score declined from last year as compared with the EU average. The
indicators measuring exports from MS imports into the single market by
Maltese  shows Malta trailing the EU
average by some distance. In exports in the single market Malta's share is only
a quarter of the EU average, one of the lowest figures of all EU Member States.
Efforts to help SMEs export have to become more effective and result oriented.
This includes schemes such as Gateway to Export and the trade missions
organized by Malta Enterprise.

 

8. Skills and innovation

Here we
are just below the EU average and the report states that 'Malta has much room
for improvement' especially related to the innovative capacity of SMEs. Another
negative indicator was the percentage of businesses that provided training to
employees which was only 16%. Malta is however in line with the EU average when
it comes to percentage of SMEs carrying out business online. Two schemes are
mentioned, the Commercialisation Programme launched in 2013 which augurs well
but it is too early to measure its effectiveness and the Quality + scheme
implemented in 2012 on which we have not as yet heard success stories.

 

9. Environment

'This is
an area where Malta trails behind the EU average in many respects'. Few SME
offer green products or services however the situation is better when it comes
to investments in resource efficiency and the number of SMEs that have
benefited from public support for production of green products. More effort is
required in policy measures aimed to address this gap.

 

10. Internationalisation

Malta is
comfortably within the EU average. A significant gap is once again recorded for
exports, this time outside the EU, however Malta performs well with regards to
the enabling conditions of costs and time for trade. While it can be cheaper
and faster to trade from Malta, there is also more paper work with the
authorities requiring on average two more documents from traders than the EU
standard. To improve overall export performance the report suggests investing
in physical infrastructure and awareness-raising among businesses. Once again
GRTU emphasizes that trade missions and schemes targeted at exports should be
result oriented. One can easily draw the conclusion that the picture is not a
positive one.

We are
concerned that the absolute majority of issues have not been addressed in the
slightest in this year's Budget. GRTU hopes that many of the issues that it had
been flagging for so long will be addressed especially now that they are backed
by the Commission. It is evident that much greater effort is needed from the
side of the administration to really help 
the most important chunk of businesses, SMEs. Policies have to be
effective and result oriented and carried out in close cooperation with SME
representatives, that know the needs of SMEs best.

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