Joint Cooperation of Sarajevo Regional Development Agency and Japanese Agency for International Cooperation on Project of Promotion of Small and Medium Sized Businesses in the Western Balkans
By Medina Malagić – Sarajevo
The Sarajevo Regional Development Agency is collaborating with the Japanese Agency for International Cooperation on a project that is aimed at the promotion and development of small and medium businesses in the Western Balkans, with the overall aim of sustainable progress in the economic sector of these regions. The project is called ‘Establishing and promoting monitoring systems for small and medium businesses in countries of the Western Balkans’’ (Serbia, Montenegro and BIH). This project will last for three years and includes several areas of focus and phases. Sanela Dževlan, Senior Program Manager of SERDA speaks in detail of the various obstacles that currently face not only the BiH economy, but also problems in the development of small and medium businesses and how its improvement can have an overall postive impact on the BiH economy.
In what areas of the economic sector in Sarajevo does SERDA see as having the biggest potential for improvement, as well as for improving the overall business environment and the economy in the region?
It is a fact that small and medium sized businesses in Western Balkan countries have an important role in the economy and employment. At the same time, due to the lack of financial resources, human resources, knowledge and skills, support to small and medium sized businesses is at a very low level. Also, from the European framework, BiH has the worst business environment, which is confirmed by the fact that a growing number of local firms that are in a state of indebtedness and whose accounts have been blocked. According to the statistics of the Central Bank of BiH, on 1 July 62.790 accounts were blocked, while 38.382 companies had at least one account blocked. At the same time, the country does not lend systematic support for better and more successful business.
Given the above, SERDA is actively implementing activities for the preparation and realization of projects that would improve the business environment and help the development of small and medium sized businesses in the region of the Sarajevo macro region, and which are an integral part of the development of the BiH economy and an increase in employment. Recognizing the need to lend support to small and medium sized businesses through mentoring in order to determine the diagnosis of companies and provide advisory services to businesses to survive on the market, SERDA, in accordance with the procedures and demands of the Japanese Agency for International Cooperation JICA applied with the project “Establishing and Promoting Mentoring System for Small and Medium Businesses in the Western Balkans” (Serbia, Montenegro and BiH), whose goal is the standardization and application of models of mentoring services. It would provide comprehensive and timely support to entrepreneurs and companies that find themselves at a critical moment for development or survival.
The application was approved and the realization of the project officially started in May of this year. This is a regional project because it is simultaneously implemented in three countries: BiH, Serbia and Montenegro. Other partners in the project are the Directorate of Development for Small and Medium Businesses of the government of Montenegro and the National Agency for Regional Development Serbia (NARR), which in the last period successfully realized the project of an institutionalization of mentoring for small and medium businesses in Serbia with the support of JICA. In addition to SERDA as a leading implementer of the project in BiH, the Ministry for Foreign Trade and Economic Relations of BiH is included, which will be responsible for the monitoring of the project. The project is fully financed by the Japanese Agency for International Cooperation JICA.
How long will this project last and during its duration, what does SERDA hope to accomplish? In what ways is the Japanese Agency for International Cooperation involved and what will be the level of their contribution?
Within the three-year project that SERDA will implement, and based on the experience from Serbia and with the technical support of JICA, a monitoring system will be established, which represents the joint work of the mentors and companies and entrepreneurs in order to overcome the current situation and find the most appropriate solutions for future business. Through this approach, the company will receive a uniform, time-distributed continuous support in order to achieve the best results. The Japanese experience in carrying out mentoring has shown that the impact of this kind of consulting is far greater than the temporary and short-term advice. The monitoring system in Japan is in use for 65 years. Given the current business environment in our country, monitoring represents a new form of support for the development of local firms.
In the first phase of the project, a draft study on the state of small and medium businesses in BiH is planned, followed by an intensive training of staff of SERDA in order to acquire the status of mentors in accordance with the requirements and Japanese standards, development of methodologies and guidelines for the monitoring system in BiH, exchange of experience of participating countries in the project, as well as study visits to Japan in order to directly become familiar with the implementation of the monitoring system in this country. Once the project staff of SERDA, with the support of JICA, strengthens its own capacities and receives the status of a mentor, a public call of small and medium businesses will be published so that they could register for the use of free monitoring services for one year, and the maximum number of hours of mentoring services should be 60 hours per client. The project would cover the Sarajevo region, and after that it would expand to other parts of BiH. Given that one of our strategic goals is support for entrepreneurship, current forms of support of SERDA to small and medium businesses is through credit-guarantee funds, counseling and providing various information, different training organizations, introduction of a mentoring service of SERDA that would expand the range of support services in order to facilitate business and to enable the development and opening of new workplaces. This would contribute to the total economic development of our country.
Therefore, monitoring is comprehensive and a relatively long process of support to businesses and entrepreneurs who are at a crucial moment for the further development or survival in general. The monitoring process represents a certain number of hours that is implemented in direct contact with the owner of the company or the entrepreneur.
The content of the monitoring service includes:
-Diagnostics: Analysis of current situation of the company or entrepreneur
-Assist in preparation of development activities/plans/projects in order to achieve better business results
-Consultation and coordination of activities aimed at accessing funds, new technologies, consulting services, etc.
-Assist in preparation of documents to be submitted to business banks and when applying for programs to support small and medium businesses
-Assistance in implementation of development activities/plans/projects
-Assistance in finding business partners
-Assistance in finding necessary information and consulting
The importance of mentoring for small and medium businesses is confirmed by the results in Serbia, which were obtained after the evaluation of these services in the past. Almost all users have pointed out that there is an observed effect of mentoring on some aspect of its business, the total annual income of its beneficiaries increased by 7,6 percent over 8,3 billion dinars, and the average number of employees with users increased by 15,6 percent to more than 17. Until now in Serbia free mentoring services were received by 312 businesses, and based on recent public calls this year 108 more companies will receive this service. In Serbia, 71 mentors have been certified so far.
What types of small and medium businesses in BiH are supported through the project, or in what areas does SERDA see the most potential for the overall economic growth of the region?
The metal industry is one of the strategic directions of the development of BiH, and the Sarajevo economic region, with a number of comparative advantages and the biggest share in the total exports of the country (almost 40 percent of the total BiH exports are realized by the metal industry). On the other hand, this is a sector with a number of obstacles and shortcomings such as outdated technology and equipment, impaired long-term business cooperation with international partners, lack of skilled workers for the application of new technologies, lack of institutional support in the process of quality control, certification and CE marking, insufficient marketing activities and inadequate strategic branding, low level of innovation capacities, and etc. The awareness and potential of the metal sector in BiH, and the attempt to contribute to overcoming its existing shortcomings and problems, as well as adopting to globalization trends, SERDA developed a project called “EUMETA” and applied with this project to the call for proposals published by the Delegation of the EU to BiH in July 2009 as part of the program “EU Support to the Economic Development of BiH-call 6”. The project officially started in September 2010 when an agreement was signed between SERDA and the EU Delegation and realized in March 2013. In addition to SERDA as a leading implementer, partners in the project are the Ministry of Education and Science of Canton Sarajevo and the Ministry of Economy of Canton Sarajevo. The total value of the project is 896.670 KM. The goals of the project are aimed at strengthening the competitiveness of the metal sector through support to small and medium businesses of the Sarajevo region and metal professional schools in Canton Sarajevo, and the promotion of career and employment opportunities in the metal industry. In the last period activities were realized equipping the Center for New Technologies in Central Mechanical Technical Schools in Sarajevo (purchase of CNC machines, 15 computers, 2 printers and 1 projector) and in the high school center Hadžići (licensing software for programming of CNC machines for 15 work places). There is a developed curricula and program for eight scarce skills in the metal industry (CNC technologies and metalworking) that was approved by the Ministry of Education, Science and Youth of Canton Sarajevo. Over 270 participants (200 unemployed and 70 employees in the metal industry) successfully completed the training and were awarded the official certificate of professional development. Also, 50 unemployed people who finalized the training process were included in the program of co-financing internships, that includes co-financing for a period of 4 months in the amount of 290 KM a month per person. With the goal of strengthening the export capacity of firms, 21 companies were supported at 3 fairs of the metal industry (Hannover Messe 2011 and 2012 in Hannover and Midest 2011 in Paris). Around 300 business contacts were made at the fairs. The process of including ISO standards have been completed in 8 companies, and these are ISO 9001 in 3 companies and ISO 14001 in 5 companies. The international certification company certified the companies “Volksvageh”, “Unis Fagas” and “Eding Telecom” Bureau Veritas and TUV, which is an added value to the project. A study was also done called “Requirements for the establishment of a scientific and research center for UNSA-with a focus on the metal industry’’, and a training on the topic “CE Mark” was organized for representatives of companies.
Due to the successful implementation of the realization of the project “EUMETAL”, the second phase of the project “Increasing competitiveness of small and medium businesses in strengthening cross-border cooperation in the metal industry” was launched-“EUMETAL 2”, which was approved in the second call of cross-border cooperation of Serbia and BiH. The functional leading partner from BiH is SERDA, and the local partner is the Ministry of Economy of Canton Sarajevo, while partners from Serbia is the Regional Development Agency “Zlatibor” and the National Agency for Regional Development of Serbia. The total value of the prject is 716,142.90 KM, of which the EU Delegation to BiH and Serbia is participating in the financing with 595,839 KM or 83,20 percent, while partners in the project finance the rest of the amount of 120,303.10 KM or 16.80 percent. The duration of the project is 20 months. The aim of the project is to increase the competitiveness of 20 small and medium businesses from the metal industry with a special focus on strengthening the export capabilities of these companies. The metal industry in Bih and Serbia has a significant share in foreign trade and in export structures participates up to 40 percent. When exporting to foreign markets, companies face significant problems that this project seeks to reduce. The project will treat issues that are related to: achieving required European standards of quality of production and connection with foreign markets and development of human resources. The results that will be achieved with the realization of the project are:
1.Adoption and Presentation of Project Activities of EUMETAL
2.Improving Skills and Knowledge of Employees in Small and Medium Businesses
3.Target Company of Cross-Border Areas to Meet Formal Requirements for Export to EU Market
4.Target Companies Promoted at Regional and International Level
How would you compare the development of businesses and entrepreneurship endeavors in BiH with the rest of the region? What are currently the main obstacles in the development of this sector in BiH?
Strengthening entrepreneurship in BiH has already been established as a prerequisite for the rapid development of the private sector, and especially for the growth of small and medium businesses. Compared with other countries in transition, BiH has the smallest number of enterprises per 1000 inhabitants, and the establishment of a company is the lowest in a region. The importance gaps in the existing legal framework for the work of small and medium businesses and the lack of adequate infrastructure for the support of business, as well as a difficult and complicated access to loans represent major obstacles for the development of businesses in BiH in comparison with most other countries in the region. At the same time, there are institutions that still have not met the expectations and needs of small and medium businesses, which resulted in a condition in which there are no well-developed programs or specific measures of concrete support for the development of small and medium businesses. The general economic situation in BiH is very bad, economy is faced with high lending rates, poor financial sustainability, high debt, lack of high-quality collateral, relatively high costs of processing loans, and insufficient skills in preparing loan applications. The lack of a single economic space and the size of the shadow economy represent a special problem. Also, some analysis have shown that the biggest causes of degradation of small and medium businesses in BiH is due to the lack of the development of a business environment and legal framework, lack of real support from the state, lack of capital at realistic prices and unfair competition. However, the causes of degradation of newly established companies lie in the fact that managers established them and experts that did not adequately prepare to lead their own businesses. Therefore, it is necessary for entrepreneurship education at the level of regular education, as well as at the level of added training, seminars and similar forms of education.
At the same time, in a report by the European Commission on the progress of BiH for 2012 in the area of policies for small and medium businesses, small progress has been made. The RS adopted a strategy for the development of small and medium businesses for 2012-2015. The Council for the development of small and medium businesses and entrepreneurs did not meet after the first three meetings held in 2011. The new state strategy for small and medium businesses was not adopted. In the FBiH, it continues to be necessary to adopt a law on the promotion of small and medium businesses and entrepreneurs, which provides for the establishment of small and medium businesses. The draft law on the promotion of small and medium businesses and entrepreneurs was withdrawn from parliamentary proceedings, as well as the draft amendments to the law on the Agency for the Promotion of Foreign Investments. BiH continued to participate in the implementation of the act on small businesses. The lack of coordination with the state level caused the delay in finalizing the assessment of the act of small businesses from 2011 according to which the country has made progress in the registration of businesses and access to financing. In BiH, there has still not been an introduction of an analysis of Regulatory Impact Analaysis-RIA). In the RS a strategy of regulatory reforms was adopted, and the introduction of regulatory impact assessments for 2011-2015. There has been no progress on the introduction of harmonized measures of financial support. Data from the pilot study of the structural business statistics are published for the first time in the entire country, and it showed a high proportion of inactive small and medium businesses in the business register. To ensure the high quality of records and to facilitate access to data, the RS adopted a law on the Unified Register of Business Entities. BiH did not establish a unique system of registration of small and medium businesses in order to facilitate the operations of both entities.
The fact is that in the budgets of all levels of government, every year there is a lack of significant funds for the support of small and medium businesses. With this in mind, it is necessary for local institutions and organizations to prepare quality projects of support to small and medium businesses, and to maximize the opportunities that are provided through the EU funds, as well as the programs of bilateral cooperation that would ensure their additional financial resources for the support of the development of small and medium businesses in BiH.