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Communique report

  1. 1. ifm INSTITUTE FOR APPLIED RESEARCH IN FACILITY MANAGEMENT institute.fm@gmail.com REPORT FOR THE DEVELOPMENT OF THE DRAFT OF THE FINAL COMMUNIQUE OF THE G20 YOUNG ENTREPRENEURS’ ALLIANCE SUMMIT – 2013
  2. 2. Report for the development of the draft of the final communique of the G20 Young Entrepreneurs’ Alliance Summit - 2013 1 “Center for Entrepreneurship” LLC 125047, Moscow 1st Tverskaya-Yamskaya st. 23, b.1 www.cfe.ru Foundation “Institute for Applied Research in Facility Management” 191023, St. Petersburg, Sadovaya st. 21 institute.fm@gmail.com This report was prepared by Foundation “Institute for Applied Research in Facility Management” especially for the Center for Entrepreneurship, which co-hosts the G20 Young Entrepreneurships’ Alliance Summit - 2013. The Foundation appreciates Victor Sedov, president of the Center for Entrepreneurship, for the opportunity to contribute to the communiqué intended for the G20 Leaders. Center for Entrepreneurship is one of the leading forces for development entrepreneurship in Russia. It promotes economic opportunity, helps build a strong middle class, and enhances the relationship between young and active people from all over the world. The report serves as a basis for the final communique of the G20 Young Entrepreneurs’ Alliance Summit. Part of the report is based upon input of hundreds of young entrepreneurs from all G20 countries who gathered in Moscow in June for the 2013 G20 YEA Summit. For participation in the report, the Foundation separately thanks: Igor A. Maksimtsev - Professor, rector of the St. Petersburg State University of Economics, Chairman of the Board of Trustees, Foundation “Institute for Applied Research in Facility Management” Archdeacon Andrey V. Kuraev - Professor, Moscow Theological Academy, Moscow State University, member of the Board of Trustees, Foundation “Institute for Applied Research in Facility Management“ Nadezhda A. Makarova - Master of Classical Philology, St. Petersburg State University, project manager, Foundation “Institute for Applied Research in Facility Management” Natalia V. Baydukova - Professor, St. Petersburg State University of Economics Eugene S. Sapotnitskiy - PhD, Foundation “Institute for Applied Research in Facility Management” Eduard M. Vasushkin - Supervisory Board Chairman, “MashinImpex” LLC, member of the Board of Directors, Foundation “Institute for Applied Research in Facility Management” Illustrations: Victor Tichomirov The work was made possible by funding from the Center for Entrepreneurship LLC Yuriy V. Shestakov, Director, Foundation “Institute for Applied Research in Facility Management” April 2013 © Center for Entrepreneurship LLC
  3. 3. Report for the development of the draft of the final communique of the G20 Young Entrepreneurs’ Alliance Summit - 2013 2 “Center for Entrepreneurship” LLC 125047, Moscow 1st Tverskaya-Yamskaya st. 23, b.1 www.cfe.ru Foundation “Institute for Applied Research in Facility Management” 191023, St. Petersburg, Sadovaya st. 21 institute.fm@gmail.com TABLE OF CONTENTS PRODROME....................................................................................................................................................................................3 SMALL AND MEDIUM-SIZED BUSINESS WORLDWIDE – STATISTICAL OVERVIEW.......................................................................6 DEFINITIONS ..................................................................................................................................................................................6 STATISTICS RESULTS ......................................................................................................................................................................7 YOUTH IN SMALL AND MEDIUM-SIZED BUSINESS .....................................................................................................................11 SMES AND YOUTH ENTREPRENEURSHIP ARE THE KEY DRIVERS OF THE GLOBAL ECONOMY ..................................................14 RECOMMENDATIONS ..................................................................................................................................................................15 1. INFRASTRUCTURE....................................................................................................................................................................15 1.1 QUESTIONNAIRE RESULTS ANALYSIS – INFRASTRUCTURE...................................................................................................16 1.2 RECOMMENDATIONS ............................................................................................................................................................16 1.3 REPRESENTATIVE EXAMPLES OF GOOD SOLUTIONS IN INFRASTRUCTURES REALM ..........................................................17 2. EDUCATION FOCUSING ON THE RIGHT SKILLS FOR YOUNG PEOPLE .....................................................................................19 2.1 QUESTIONNAIRE RESULTS ANALYSIS – EDUCATION ............................................................................................................20 2.2 RECOMMENDATIONS ............................................................................................................................................................20 2.3 REPRESENTATIVE EXAMPLES OF GOOD SOLUTIONS IN EDUCATION AND BUSINESS NETWORKS REALM.........................21 3. BUSINESS AND LABOR LEGISLATION ENVIRONMENT ............................................................................................................25 3.1 QUESTIONNAIRE RESULTS ANALYSIS – BUSINESS AND LABOUR LEGISLATION ENVIRONMENT ........................................26 3.2 RECOMMENDATIONS ............................................................................................................................................................26 3.3 REPRESENTATIVE EXAMPLES OF INCENTIVE LABOUR LEGISLATION PROGRAMMES..........................................................27 4. ACCESS TO FINANCE ................................................................................................................................................................29 4.1 QUESTIONNAIRE RESULTS ANALYSIS – ACCESS TO FINANCE...............................................................................................29 4.2 RECOMMENDATIONS ............................................................................................................................................................31 4.3 THE LIST OF VARIOUS ORGANIZATIONS, CENTERS AND FOUNDATIONS, WHICH ADDRESS DIFFERENT TYPES OF SUPPORT FOR SMES AND YOUTH ENTREPRENEURSHIP.............................................................................................................................31 CONCLUSION REMARKS ..............................................................................................................................................................35
  4. 4. Report for the development of the draft of the final communique of the G20 Young Entrepreneurs’ Alliance Summit - 2013 3 “Center for Entrepreneurship” LLC 125047, Moscow 1st Tverskaya-Yamskaya st. 23, b.1 www.cfe.ru Foundation “Institute for Applied Research in Facility Management” 191023, St. Petersburg, Sadovaya st. 21 institute.fm@gmail.com PRODROME We are the State! In 2013, G20 Summit will be held in St. Petersburg (Russia). Opening of the Summit will take place on the 5th of September. Centuries earlier, on the 5th of September Louis XIV was born - a strong supporter of the principle of absolute monarchy and the divine right of kings, who is credited with the phrase "I am the state!". In honor of the birth of the future Sun King Tommaso Campanella wrote his last work - Latin panegyric poem. This man was one of the first representatives of utopian socialism, author of the famous work "The City of the Sun." Such as the City of the Sun, Campanella wanted to see the world and predicted a future "world state." The G20 Summit brings together the most systemically important economies of the different countries, different levels of economic development, leading international financial organizations interested in the collective decision pertaining to the major world economic and financial problems. Forum member economies together represent 90% of global GDP, 80% of world trade and two-thirds of the world population. The main objectives of the summit are the followings: prevention of the global recession; deflation; strengthening the financial sector and prevention of the protectionism; development of the global financial and economic system; and measures to put the global economy on a path to sustainable growth. In times of economic instability of recent years, developed countries of the world were offered to concentrate on supporting the poorest and most vulnerable people in developing countries, as well as on financing of infrastructure projects that form the basis for economic growth and at the same time provide employment issues. The main message of the G20 in 2012 stated that each country can do whatever it considers necessary, in order to achieve its own internal purposes, but at the same time shall minimize the impact of these measures on other countries. This suggests that G20 leaders – “pre-world state» - expressed a desire to seek "common good". There is no doubt that in times of systemic crisis of the global economy there is a strong need for development of the global action plan, and a clear desire to implement it. Not with reason, classics in the universities do not stop studying intensively works of Plato - one of the first authors who presented to the world his vision of the “Ideal state”, while economists involved in building models, inadvertently keep referring to the "Platonic" ideal. What is important is that the greatness and scale of the objectives are not to crush average person, but to protect him/her. It is important that rational logic of global planning calculations leave room for personal projects and unpredictable human creativity. Recently, humanity has survived the age of the masses, conveyors and standards. But, technological development allows individualization of production, targeting it to specific consumers, be it of goods or services. There is a global shift in relation to small and medium business, if not in reality, then in a public inquiry.
  5. 5. Report for the development of the draft of the final communique of the G20 Young Entrepreneurs’ Alliance Summit - 2013 4 “Center for Entrepreneurship” LLC 125047, Moscow 1st Tverskaya-Yamskaya st. 23, b.1 www.cfe.ru Foundation “Institute for Applied Research in Facility Management” 191023, St. Petersburg, Sadovaya st. 21 institute.fm@gmail.com Today, at a crucial stage of the crisis, which dominates throughout the civilized world, entrepreneurship is one of the important issues. We are witnessing challenges associated with the emergence of new technologies, which require a review of legal and institutional frameworks and adjusting accordingly the organization of economic activity. Rationally organized mass production still remains the basis of our economy. But, more and more people want to be heard in the uniqueness of their requests. New technologies can already do it. It is time to be closer to customers, and not hide behind the thick walls of corporate apparatus and intermediaries. These developments lead to the need to promote structural modernization, provide high-tech jobs, support innovation and stimulate domestic demand, which is an increasingly important factor for investment decisions. The government machinery and the monopolies from their heights will not notice a unique person with his/her unique needs. But there is free enterprise, which allows for the realization of a free and at the same time culturally determined will of the individual. Entrepreneurs are very different, but always aim at finding effective solutions. That is why we suppose that development of the human capital is main factor in the formation and development of innovative post-industrial economy relevant in all G20 countries. Entrepreneurship, especially youth entrepreneurship, describes mobility of thinking and lack of stereotypes, which are the qualities that play a crucial role in the development of economies. G20 countries have different technological and institutional environments, geographical conditions, levels of consumption and trade, monetary and credit systems. These differences serve as an incentive to entrepreneurs, stimulating cross-border cooperation, improvements and job creation. Support and development of SMEs is a factor of stability of the velocity of money and the financial liquidity of the global economy. One of the major concerns of modern economy is structural unemployment, in particular among young people. Access to new forms of production is limited. Entrepreneurship is a tool that provides targeted support for those who are currently unemployed or underemployed and have high potential in the innovation economy. Promotion of youth entrepreneurship is a significant factor in the reduction of social risks and, therefore, the risks of the global economy. Structural changes. A structure is defined by purposes and tasks that are set for all participants. Today, structural changes are combined with the formation of a new regulatory model, and include the following processes:
  6. 6. Report for the development of the draft of the final communique of the G20 Young Entrepreneurs’ Alliance Summit - 2013 5 “Center for Entrepreneurship” LLC 125047, Moscow 1st Tverskaya-Yamskaya st. 23, b.1 www.cfe.ru Foundation “Institute for Applied Research in Facility Management” 191023, St. Petersburg, Sadovaya st. 21 institute.fm@gmail.com - Strengthening of supranational institutions within the framework of regional integration (European Union, Customs Union and the "EurAzEs"), internationalization, and at the same time de-nationalization of the global economy; - Distribution of a planned approach (targeting and decisions) regarding the formation of the global governance system adequate to the level of globalization of financial markets. It is important to consider the impact of monetary policies that encourage long-term investment of resources in the economies, necessary for economic growth that will help the development of small and medium-sized businesses, while minimizing social risks and separatist sentiment in developed and developing countries in the period of transition. Entrepreneurship affects the development of local labor markets, which is an important aspect of an efficient economic system and contributes to the strong, sustainable and balanced growth, declared as a priority by G20 leaders. Human capital is a basis of entrepreneurship. It acts as an obvious priority for social and economic policies of the G20. However, recognition of this fact is not enough for a qualitative leap in the development. It is time for profound changes in many sectors of the economy on the principles that bode well with the modern post-industrial challenges. These challenges are not specifically Russian. Creating a modern, efficient system of human development is actual for all developed countries. At the present stage of development, dominant market position can be achieved by companies, which along with other assets effectively use intellectual capital - the human factor. Moreover, the country that will be able to form a modern, efficient model of human capital development, will receive a huge advantage in the post-industrial world, since the industry's human capital represent a zone of interaction not only social, but also fiscal, investment and political problems. In 2013, G20 Countries will convene in St. Petersburg. This city was founded as the capital of an Empire, and on the day when the previous Empire - Eastern Roman (Byzantine) Empire had been destroyed. There are 250 years between capitulation of the Constantinople and foundation of the St. Petersburg. This is a reminder of how significant was the idea of translation imperii for the western mind - the idea, which came from Virgil and the Biblical book of Daniel, and inspired Charlemagne and Peter I. It were attempts to find unity in many ways, the project global and supranational. Often these projects are fraught with frustrations in utopianism, and in a brutal revenge against the gnarly world between utopian dreamers, who fell greedily to power. Today, we are witnessing the new reincarnation of the ancient idea of universalism. And, of course, we worry about, will not this utopia be its own antipode. Small and medium sized entrepreneurship is an indicator of the "boundaries of patience", which are defined by the socio-political and institutional climate. Business is one of the key drivers of the global economy.
  7. 7. Report for the development of the draft of the final communique of the G20 Young Entrepreneurs’ Alliance Summit - 2013 6 “Center for Entrepreneurship” LLC 125047, Moscow 1st Tverskaya-Yamskaya st. 23, b.1 www.cfe.ru Foundation “Institute for Applied Research in Facility Management” 191023, St. Petersburg, Sadovaya st. 21 institute.fm@gmail.com SMALL AND MEDIUM-SIZED BUSINESS WORLDWIDE – STATISTICAL OVERVIEW DEFINITIONS Small and Medium-Sized Business The European definition: SME employs less than 250 people. For statistical purposes, SMEs are generally defined as those enterprises employing fewer than 250 persons. Small and medium- sized enterprises with 1 to 249 persons employed are divided into:  Micro enterprises: with less than 10 persons employed  Small enterprises: with 10 to 49 persons employed  Medium-sized enterprises: with 50 to 249 persons employed The American definition: Micro enterprises: the most widely used American definition of micro-business by the number of employees is the same of that of European Union: less than 10 employees Small enterprises: with less than 100 persons employed Medium-sized enterprises: with less than 500 persons employed. Non-financial economy: Sectors of economy, which include:  industry,  construction,  distributive trades (motor trades, wholesale and retail trade) and  non-financial services) Role of young entrepreneurs It is younger entrepreneurs who are driving growth, innovation and job creation. Global research shows that 25-35 year olds have the highest rates of entrepreneurial activity (GEM, 2012). Productivity among young people brings disproportionally positive effects in terms of economic growth and social stability that are cumulative and intergenerational (WDR, 2007). Especially in the current climate, demographic and labor market trends indicate that support directed at young people will be a key determinant of future prosperity.
  8. 8. Report for the development of the draft of the final communique of the G20 Young Entrepreneurs’ Alliance Summit - 2013 7 “Center for Entrepreneurship” LLC 125047, Moscow 1st Tverskaya-Yamskaya st. 23, b.1 www.cfe.ru Foundation “Institute for Applied Research in Facility Management” 191023, St. Petersburg, Sadovaya st. 21 institute.fm@gmail.com STATISTICS RESULTS European Union SMEs have been considered one of the ‘driving forces’ of modern economies due to their contributions in terms of technological upgrading, product and process innovations, employment generation, export promotion, etc. The overwhelming majority (99.8%) of enterprises active within the EU-27 are micro, small and medium sized enterprises. Some 20.7 million enterprises contribute 58.7% of the value added generated within the EU-27 non-financial business economy. More than nine of ten (92.2%) enterprises are micro enterprises (employing less than ten persons) and their share of value added within the non-financial business economy (excluding mining and quarrying) is 21.3% (Eurostat Pocketbooks. “Key features of European business with a special feature on SMEs”, 2011). Some 6.5 per cent of SMEs in the EU are classified as small enterprises (employing between 10 and 49 people) and 1.1 per cent are medium-sized (50-249 employees). Large businesses, with more than 250 employees, account for just 0.2 of enterprises in the EU’s non- financial sector. (Ecorys, “EU SMEs in 2012: at the crossroads”. Annual report on small and medium-sized enterprises in the EU, 2011/12) In employment terms, SMEs provided an estimated 67.4 per cent of jobs in the non-financial business economy in 2012. With more than 87 million persons employed the EUs SMEs account for 58.6 % of gross value added generated by the non-financial business economy. The performance of SMEs across the EU is measured with the help of four main indicators: the number of enterprises, their output via their gross value added (GVA), the number of employees on their payroll and apparent labor productivity.
  9. 9. Report for the development of the draft of the final communique of the G20 Young Entrepreneurs’ Alliance Summit - 2013 8 “Center for Entrepreneurship” LLC 125047, Moscow 1st Tverskaya-Yamskaya st. 23, b.1 www.cfe.ru Foundation “Institute for Applied Research in Facility Management” 191023, St. Petersburg, Sadovaya st. 21 institute.fm@gmail.com Number of enterprises, employment, gross value added and labor productivity in EU-27, by size-class, 2012 (estimates) Micro Small Medium All SMEs Large Total Number of enterprises Number 19,143521 1,357,533 226,573 20,727,627 43,654 20,771,281 % 92.2 6.5 1.1 99.8 0.2 100 Employment Number 38,395,819 26,771,287 22,310,205 87,477,311 42,318,854 129,796,165 % 29,6 20,6 17,2 67,4 32,6 100 Gross Value Added EUR Million 1,307,360.7 1,143,935.7 1,136,243.5 3,587,540 2,591,731.5 6,179,271.4 % 21.2 18.5 18.4 58.1 41.9 100 Apparent labor productivity* Relative to total, % 75.3 90.5 105.3 87.8 124.5 100 Source: Ecorys, “EU SMEs in 2012: at the crossroads”. Annual report on small and medium-sized enterprises in the EU, 2011/12 * Source: (Eurostat Pocketbooks. “Key features of European business with a special feature on SMEs”, 2011) The number of SMEs across the EU-27’s non-financial business economy is particularly concentrated within distributive trades, manufacturing and construction. These three activities provide work to 61.9 % of the non-financial business economy workforce in SMEs (Eurostat Pocketbooks. “Key features of European business with a special feature on SMEs”, 2011). As with the employment analysis, SMEs within the EU-27’s distributive trades, manufacturing and construction sectors generate the highest levels of added value. Across the whole of the EU-27’s non-financial business economy, SMEs account for 58.1 % of the generated value added (Ecorys, 2012). USA It is well known fact that SMEs contribute significantly to the development and growth of efficiency in the U.S.A. particularly to innovation, job generation, and international competitiveness. Three key US small business performance indicators include:  Number of SMEs  Share of employment
  10. 10. Report for the development of the draft of the final communique of the G20 Young Entrepreneurs’ Alliance Summit - 2013 9 “Center for Entrepreneurship” LLC 125047, Moscow 1st Tverskaya-Yamskaya st. 23, b.1 www.cfe.ru Foundation “Institute for Applied Research in Facility Management” 191023, St. Petersburg, Sadovaya st. 21 institute.fm@gmail.com  Share of the total annual revenue Firms and Employment in the United States by Firm Size, 2008 (Nonfarm, Nonemployer firms excluded) Total (SMEs & Large) SMEs (Number of personnel: 1 – 19) SMEs (Number of personnel: 20 – 499) SMEs Total (Number of personnel: 1 - 499) Number of enterprises (thousands) 5,930.1 5,295.0 616.7 5,911.7 Number of enterprises (%) 100% 89.3% 10.4% 99.7% Employment (thousands) 120,903.6 21,461.7 38,232.3 59,694.0 Employment (%) 100% 17.8% 31.6% 49.4% Source: U.S. Dept. of Commerce, Bureau of the Census, Statistics of U.S. Businesses. SMEs represent 99.7 percent of all employer firms and employ about half of all private sector employees. Of the 120.9 million nonfarm private sector workers in 2008, small firms employed 59.7 million and large firms employed 61.2 million. About half of small firm employment is in second-stage companies (10-99 employees), and half is in firms that are 15 years or older. Small and medium businesses generated more than a half of the nonfarm private GDP, made up 97.5 percent of all identified exporters and produced 31 percent of export value in FY 2008 (U.S. Dept. of Commerce, Census Bureau and Intl. Trade Admin). The services sectors are the most important for SME economic activity, accounting for 59.0 percent of SMEs’ contribution to GDP. According to U.S. Bureau of the Census (2010) the wholesale and retail trade sectors combined accounted for the largest share of SME GDP (15.3 percent), followed by real estate (11.6 percent) and professional, scientific, and technical services (11.1 percent). Manufacturing (combined with mining) ranked fourth among the economic sectors, accounting for 11.0 percent of SME GDP in 2004, followed by construction (10.0 percent).
  11. 11. Report for the development of the draft of the final communique of the G20 Young Entrepreneurs’ Alliance Summit - 2013 10 “Center for Entrepreneurship” LLC 125047, Moscow 1st Tverskaya-Yamskaya st. 23, b.1 www.cfe.ru Foundation “Institute for Applied Research in Facility Management” 191023, St. Petersburg, Sadovaya st. 21 institute.fm@gmail.com Regions of Asia According to Department of statistics of Malaysia, the economic growth in developed countries such as Japan, Korea, Taiwan and many others, was significantly generated by SME activities. The percentage contribution of SMEs to Gross Domestic Product (GDP/Total Value Added) ranges from 60.0 percent in China, 55.3 percent in Japan and 50.0 percent in South Korea (Conference Proceeding: ASEAN Entrepreneurship Conference 2012). The number of SMEs in the proportion of the total number of enterprises in South Korea exceeds 99.9%. More than 87% of jobs in South Korea come from small and medium businesses. Regions of Latin America Brazil still faces many challenges. SMEs play a crucial role in Brazil’s prospects for a more equitable society. SMEs represents 99% of all companies, and are responsible for 66% of jobs in the country. In 2007, for the first time, the number of entrepreneurial activities motivated by opportunity surpassed the number motivated by necessity. Nonetheless, only 3% of entrepreneurs expect to employ more than 20 people after five years of operation, while thw worldwide averages 9%.
  12. 12. Report for the development of the draft of the final communique of the G20 Young Entrepreneurs’ Alliance Summit - 2013 11 “Center for Entrepreneurship” LLC 125047, Moscow 1st Tverskaya-Yamskaya st. 23, b.1 www.cfe.ru Foundation “Institute for Applied Research in Facility Management” 191023, St. Petersburg, Sadovaya st. 21 institute.fm@gmail.com YOUTH IN SMALL AND MEDIUM-SIZED BUSINESS Youth unemployment is one of the crucial social and economic challenges of this decade in Europe and around the world. The unemployment rate in the European Union (EU), as a whole, reached 9.8 % in November 2011, and the unemployment rate for youth (those under the age of 25) in the European Union stood at more than 22 % in November 2011: approximately five million unemployed young (OECD/European Union, Policy Brief on Youth Entrepreneurship, 2012). Annual and monthly youth unemployment rates in US, EU and selected OECD countries (aged less than 25) Unemployment rate (%) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Nov 2011 USA 10.6 12.0 12.4 11.8 11.3 10.5 10.5 12.8 17.6 18.4 16.8 EU (27 countries) 17.7 18.3 18.8 19.2 18.8 17.5 15.7 15.8 20.1 21.1 22.3 OECD 12.4 13.4 13.8 13.7 13.4 12.6 12.0 12.7 16.7 16.7 - Source: Data for European Union Member States and European average from Eurostat, “Labor Force Survey”; Data for Canada, U.S. and OECD average from OECD Statistics, “Labor Force Statistics". Youth entrepreneurship is not a magic wand for solving the youth unemployment problem, but it is one of the possible approaches to the task. The European Commission’s Eurobarometer conducted a survey across Europe and other industrialized countries in 2009 to learn about the individual’s attitudes towards self- employment and business start-up (The EC’s Eurobarometer, Entrepreneurship in the EU and beyond, Analytical report, 2009). The most effective response has obtained in the United States of America and China, where 36% and 49% of people saw self-employment as ‘very’ or ‘quite feasible’ in the next five years. Just 3 in 10 non-self-employed EU citizens thought that it was possible for them to get self- employed in the next 5 years (8% “very feasible” and 21% “quite feasible”). In South Korea and Japan respondents were less likely to think that it was very or quite feasible to grow self-employed in the near future. Just 12% of Japanese and 22% of South Korean respondents saw self-employment as a possibility. It is surprising that the more people are educated, the less likely they are to consider starting their own business, as they tend to be more aware of the underlying risks. This implies that widening the opportunities for young people to participate in entrepreneurship education may prove useful as it could help individuals become less risk adverse (European Employment Observatory, Workshop on Youth and Self-Employment, 28 November 2011, Brussels, Belgium).
  13. 13. Report for the development of the draft of the final communique of the G20 Young Entrepreneurs’ Alliance Summit - 2013 12 “Center for Entrepreneurship” LLC 125047, Moscow 1st Tverskaya-Yamskaya st. 23, b.1 www.cfe.ru Foundation “Institute for Applied Research in Facility Management” 191023, St. Petersburg, Sadovaya st. 21 institute.fm@gmail.com The attitudes to the feasibility of self-employment in the EU cut off with age. The two youngest age cohorts (15–24 and 25–39) appear to have the highest level of enthusiasm for self- employment with 40 % and 42 %, respectively, responding that self-employment in the next five years was either ‘very feasible’ or ‘quite feasible’, much higher than the figures for the 40– 54 and “more than-55” cohorts (29 % and 13 %, respectively). This suggests that younger cohorts in the population may provide the most potential for entrepreneurship. This is consistent with another question asked in the Eurobarometer survey about whether entrepreneurs are job creators. The youngest cohort (aged 15–24) agreed most strongly (Eurobarometer, 2009). Youth-operated businesses are more likely to be concentrated in certain industries with low barriers to entry and low capital requirements such as information and communication and other services: 12.4 % for youth compared with 7.6 % for adults (OECD/European Union, Policy Brief on Youth Entrepreneurship, 2012). Of the newly born enterprises, only 50% survive after 5 years (EIM Business & Policy Research, 2011). However, young people’s businesses that do survive have more growth potential than those of older entrepreneurs on average. Among businesses that survived three years, those run by people under 30 years old had an average growth rate of 206% which is almost double the growth rate of businesses run by those over 40 (114 %). This suggests that young entrepreneurs are a high risk but high reward type of entrepreneurs (OECD/European Union, Policy Brief on Youth Entrepreneurship, 2012). About 67% of employment in the non-financial business economy is provided by SMEs. Micro enterprises contribute about 30%, small enterprises about 20% and medium-sized enterprises about 17%. If the age of the workforce is considered, the differences between the size classes are more pronounced. On average, micro enterprises tend to employ the highest percentage of older employees (aged 50 years or older) and the lowest percentage of young employees (aged younger than 25 years) of the three size classes. Small and medium-sized enterprises retain the highest percentage of employees aged 25-50 and the lowest part of older employees. Large enterprises, finally, employ the highest percentage of young people (EIM Business & Policy Research, 2011).
  14. 14. Report for the development of the draft of the final communique of the G20 Young Entrepreneurs’ Alliance Summit - 2013 13 “Center for Entrepreneurship” LLC 125047, Moscow 1st Tverskaya-Yamskaya st. 23, b.1 www.cfe.ru Foundation “Institute for Applied Research in Facility Management” 191023, St. Petersburg, Sadovaya st. 21 institute.fm@gmail.com Average percentage of employees from different age groups per enterprise, in the EU37 business economy, by size class (2010) Size class Age range Total <25 25-50 >50 Total 10 (%) 69 (%) 21 (%) 100 (%) Large 17 (%) 65 (%) 18 (%) 100 (%) Small and Medium 14 (%) 70 (%) 16 (%) 100 (%) Micro 9 (%) 69 (%) 22 (%) 100 (%) Source: Enterprise Survey 2010, SMEs and EU Labor Market, EIM/GDCC; conducted during the final quarter of 2010 Apparently, large firms tend to hire younger employees than smaller firms do. Still by themselves large firms will not produce jobs for millions unemployed young people displaced by the on-going economic malaise (The final report of the Small Business Taskforce, 2013).
  15. 15. Report for the development of the draft of the final communique of the G20 Young Entrepreneurs’ Alliance Summit - 2013 14 “Center for Entrepreneurship” LLC 125047, Moscow 1st Tverskaya-Yamskaya st. 23, b.1 www.cfe.ru Foundation “Institute for Applied Research in Facility Management” 191023, St. Petersburg, Sadovaya st. 21 institute.fm@gmail.com SMES AND YOUTH ENTREPRENEURSHIP ARE THE KEY DRIVERS OF THE GLOBAL ECONOMY As previous chapter shows, there are no clear common definition and classification of SMEs. This is due, primarily, to the fact that entrepreneurs are real people, representatives of different nations. Every nation has a specific business practice established under the influence of its religious and cultural characteristics, living conditions and interactions with other people, a wide range of internal and external factors. However, despite the peculiarities of each national business systems, the phenomenon of entrepreneurship is the key to solve many of the problems of the global economy. Entrepreneurship is vivid example of agonistic spirit, ability to overcome adversity, and find a way out of difficult situations. The most important thing now is to prevent the transformation of agonistic spirit in aggression and nihilism. There is a strong need to encourage the development of entrepreneurship, which is a significant factor in the reduction of social risks and, therefore, risks of the global economy, and it is time to emphasize that any seriously grounded policy to reinvigorate growth and job creation should have entrepreneurship at its core, with a strong emphasis on youth.
  16. 16. Report for the development of the draft of the final communique of the G20 Young Entrepreneurs’ Alliance Summit - 2013 15 “Center for Entrepreneurship” LLC 125047, Moscow 1st Tverskaya-Yamskaya st. 23, b.1 www.cfe.ru Foundation “Institute for Applied Research in Facility Management” 191023, St. Petersburg, Sadovaya st. 21 institute.fm@gmail.com RECOMENDATIONS 1. INFRASTRUCTURE For emerging and growth ventures, digital infrastructure and electronic access to government services and payment networks is a necessary platform for future growth, innovation, national and international cooperation. Creating affordable broadband is the basis of the development of SMEs and self-employment. For instance, Estonia is one of the leading research in the case of a rapid development of the Internet economy. By 1997, 97% of Estonian schools have the internet and the country has become one of the leading web-enabled economies. Free Wi-Fi is now ubiquitous. As a result, Estonia now has one of the highest GDP growth rates in Europe. IT sector is also useful in job creation for people with disabilities in the area of software development, remote maintenance and administration. Internet allows for distance learning and, thereby, for future distance work. Infrastructure is paramount
  17. 17. Report for the development of the draft of the final communique of the G20 Young Entrepreneurs’ Alliance Summit - 2013 16 “Center for Entrepreneurship” LLC 125047, Moscow 1st Tverskaya-Yamskaya st. 23, b.1 www.cfe.ru Foundation “Institute for Applied Research in Facility Management” 191023, St. Petersburg, Sadovaya st. 21 institute.fm@gmail.com 1.1 QUESTIONNAIRE RESULTS ANALYSIS – INFRASTRUCTURE The respondents were asked lack of what infrastructural elements had affected their companies’ growth. Limiting factors The variety of infrastructure factors which are adversely impacting business growth could be broken down into two areas: 1. Telecommunication infrastructure; 2. Infrastructure in its general terms, i.e. roads, transport, energy Lack of the reliable telecommunication infrastructure has become a critical factor impeding small and medium-sized companies growth. The telecommunication infrastructure deficiency manifests itself in the following:  Absence of quick and reliable broad band internet supply which is a key limiting factor;  Cost of telecommunication is high;  Low internet channels capacity often results in public servers collapse on tax payment days;  It is a standard case when internet connectivity is available only during office hours;  Availability of the electronically provided government business services and business- related public information is restricted;  Government internet pages are not regularly refreshed;  Accounting reports and electronic payments gateways are rarely acceptable for SMEs Another category of infrastructure factors which are adversely impacting business growth is lack of infrastructure in its general terms, i.e. roads, logistics, transport, energy. Main complaints in this area refer to:  Transport network is not adequately developed;  Transport, logistics and energy costs are high. Both issues adversely affect market competitiveness of SMEs making it difficult for them to keep prices competitive at the market. 1.2 RECOMMENDATIONS: - Ensure access to reliable high-speed internet connections at a reasonable cost for start- up and growth businesses, especially outside of large cities. - Provide government business services electronically, reducing expensive staff and time resources. - Ensure unrestricted digital access to all business-related public information regarding regulations and taxation. - Ensure Internet-neutrality by overseeing companies that control online content flow. - Support the development of global electronic payment networks.
  18. 18. Report for the development of the draft of the final communique of the G20 Young Entrepreneurs’ Alliance Summit - 2013 17 “Center for Entrepreneurship” LLC 125047, Moscow 1st Tverskaya-Yamskaya st. 23, b.1 www.cfe.ru Foundation “Institute for Applied Research in Facility Management” 191023, St. Petersburg, Sadovaya st. 21 institute.fm@gmail.com 1.3 REPRESENTATIVE EXAMPLES OF GOOD SOLUTIONS IN INFRASTRUCTURES REALM BUSINESS3.BIZ BUSINESS3.BIZ represents an information environment that enables to describe the objects in such a way that they can be processed in detail. Today in the field of automatic data processing, there are two major processes - the enterprise management system and search systems. Their main differences are as follows: Search systems work with virtually any input of information, but in practice, it does not handle. Searching system in the majority of cases does not "understand" what is contained in the document, for it is simply a set of words falling under certain statistical regularities. Enterprise management systems, in contrast, do "understand" what is contained in the document and how to handle it, but the document must be prepared specifically for this business process and often not applicable to other process. There are lot of discussions about creation of systems in which documents would be formed in such a way that they can be further automatic processed, i.e. that all data contained in the document would be "understood" by machine and can be processed. One example of such a system is business3.biz. The system has the concept of an object. A roll of object can play an organization, person, product, and any other unit that has a set of unique characteristics, functions and relationships. Objects can be included in one another, for example, an employee in the organization, and the apartment of the house. Based on the values of the presence and the characteristics, an information of the object can be processed. Despite the fact that the technical implementation of this architecture is very complicated, this approach gives a great result. The following problems can be solved within the system: Collection of information. As practice shows, the most painful moment in the operation of any electronic systems is the data entry. In addition to the usual manual input business3 implemented three following types of data collection: - Parsing. Using a specially developed program, gives a chance to gather information from any websites, databases, organizations and individuals, electronic documents and convert it to the view, which is clear for system. - Data transfer. Due to the standardization of all parameters of objects within the system, it is possible to transfer any data from user to user or between user’s databases (with their agreement). Functional transfer can be carried out with descriptions of any object within any process. - Re-use of data. On average, 80% of the data contained in a new document is already contained in any other document. The system allows using the data, which is already entered. This is implemented in the polls, which use information from the profiles of companies, people, and previous surveys and nested descriptions gathering from ready- made descriptions. The latter gives, for example, the ability to change the information on all the apartments in the house, changing the description of the house.
  19. 19. Report for the development of the draft of the final communique of the G20 Young Entrepreneurs’ Alliance Summit - 2013 18 “Center for Entrepreneurship” LLC 125047, Moscow 1st Tverskaya-Yamskaya st. 23, b.1 www.cfe.ru Foundation “Institute for Applied Research in Facility Management” 191023, St. Petersburg, Sadovaya st. 21 institute.fm@gmail.com Searching and filtering. It is possible to search for any object groups that have the characteristics of one type. You can find products, companies, or employees, matching the given requirements, you can find out what types of equipment use certain components and assess their potential market outlets. The calculation of the services cost. By making a certain set of rules, it is possible to carry out calculation of the cost of insurance, shipping and other activities, which have a method for determining the price. This method can be applied to any suitable object. For example, with the help of this system, it is possible to purchase tables, chairs and computers for the office, and if they have the parameters of weight and size, the system will calculate the shipping cost for each carrier and offer the best solution. Collection systems from components. By creating the layout rules, it is possible to build systems. For example, find component parts to make a computer. The system will calculate the overall performance of certain parameters, the adequacy of the power supply etc. In some cases, the system will be able to configure optimal solution for the given requirements and price. Such assemblies can be sold in the system as an object of copyright, making it easier to outsource the design work while expanding the range of ready-made solutions. Preliminary estimates. Using the previous three units, makes is possible to configure and calculate the cost of production of the goods, to obtain a list of supplier plants, transportation companies and other contractors. Smart surveys. While filling out forms and surveys the system is able to generate ready documents from templates. At the moment, on the basis of this functional issue, business3 is trying to find a solution, that allows the entrepreneur to fill out a length survey, and to obtain information about all activities that is necessary to perform in order to comply with all government requirements, and avoid violations and subsequent sanctions, as well as all possible ways of government and non-government support. The system provides a preliminary report on the likelihood of receiving support. This functionality can be used to make a preliminary decision to grant credit, participation in associations etc. Any company registered in the system can technically get such a preliminary decision. It gives chance to promote services to the market, through the agreements on access to pools of customers of other organizations, sharing pools and other methods of cooperation. The idea of the system creators is to make an environment in which an organization can completely abandon the routine concerning infrastructure support and focus on working on its product or service.
  20. 20. Report for the development of the draft of the final communique of the G20 Young Entrepreneurs’ Alliance Summit - 2013 19 “Center for Entrepreneurship” LLC 125047, Moscow 1st Tverskaya-Yamskaya st. 23, b.1 www.cfe.ru Foundation “Institute for Applied Research in Facility Management” 191023, St. Petersburg, Sadovaya st. 21 institute.fm@gmail.com 2. EDUCATION FOCUSING ON THE RIGHT SKILLS FOR YOUNG PEOPLE Human capital is the main factor of sustainable development of post-industrial economy, which increasingly depends on continuous innovation for growth and prosperity. The issue of human capital development is therefore relevant to all G20 countries. The level of education is the most common indicator of the quality of a country's stock of human capital. Knowledge plays a key role in international competitiveness. Entrepreneurial ventures cannot grow without skilled people, and new employers and new employees must evolve together. At the same time, innovative small businesses continually report on the paucity of appropriately skilled people and managers to hire. The proportion of tertiary education graduates with a bachelor’s degree at minimum shall rise significantly especially in the emerging market countries, allowing more young people to either start a successful business or be hired by such. Personnel matters
  21. 21. Report for the development of the draft of the final communique of the G20 Young Entrepreneurs’ Alliance Summit - 2013 20 “Center for Entrepreneurship” LLC 125047, Moscow 1st Tverskaya-Yamskaya st. 23, b.1 www.cfe.ru Foundation “Institute for Applied Research in Facility Management” 191023, St. Petersburg, Sadovaya st. 21 institute.fm@gmail.com 2.1 QUESTIONNAIRE RESULTS ANALYSIS – EDUCATION Educational Attainment – SMEs operating in innovative areas experience shortage of qualified employees. The level of education is the most common indicator to quantify a country's stock of human capital. Knowledge plays a key role in international competitiveness and in a society with a greater need for qualified personnel. Entrepreneurial ventures can never grow without professionals, and the two basic types of professionals needed — new employers and new employees — must evolve together. Personnel matters At the same time innovative small business continually reports on the paucity of appropriately skilled people and managers to hire. There is a strict demand for support of the modernization of higher education. Current education priorities not always ensure young people have access to knowledge and skills vital for the new technological and business realities of the 21st century. Educational opportunities shall be tailored to provide the skills to match business needs. The proportion of tertiary education graduates with a bachelor’s degree shall rise significantly especially in the emerging market countries. The deficit of the skilled and professional staff may be attributed to the following reasons:  Inadequate educational level;  Lack of special knowledge and skills acquired through professional training and practical experience;  Lack of vocational and university training opportunities which are in line with labour market needs;  Lack of specialized business and social networks, as well as technologically advanced business centres at universities. Infrastructure community between universities and business incubators is currently insufficient. Small business associations, networks, organizations – Entrepreneurial networks are not enough developed and structured This is a worldwide true statement that post start-up growth is the far bigger challenge than simply starting a venture. The vast majority of startups has not grown and ended up at the level of just a few employees. Small business “growth-after-start” is an issue, which requires strong support provided in the form of coaching, professional advice, fast tracking to the trusted sources of financing and to the marketplace. The promulgation of universal entrepreneurial behavior culture, cross border services, networking and access to the sources of valid business information are indisputable keys to successful growth of innovative startups. The network of domestic and international accelerator centers, innovation hubs, business associations and incubators shall significantly expand. Meanwhile there is a noticeable lack of cohesive clusters, reputable incubators, and information networks where and with the aid of which startups can develop into SMEs. 2.2 RECOMMENDATIONS:
  22. 22. Report for the development of the draft of the final communique of the G20 Young Entrepreneurs’ Alliance Summit - 2013 21 “Center for Entrepreneurship” LLC 125047, Moscow 1st Tverskaya-Yamskaya st. 23, b.1 www.cfe.ru Foundation “Institute for Applied Research in Facility Management” 191023, St. Petersburg, Sadovaya st. 21 institute.fm@gmail.com - Review educational priorities to ensure young people have access to knowledge and skills vital for the new technological and business realities of the 21st century. - Facilitate promotion of an entrepreneurial culture through all layers of the schooling system, with a focus on the values of ethics and business morals. - Develop standardized enterprise development programs, which include widespread training in basic entrepreneurship and risk management skills, and utilize the Internet to deliver top-quality informational resources. - Support creation of specialized business and social networks (local and international), and technologically advanced business centers at universities, giving students access to the skills and tools necessary to put theory into practice; incubation services and co- work spaces; reduced costs of searching for information, partners and suppliers; and management, recruiting, accounting and other resources for start-up initiatives. - Promote close cooperation between businesses and schools to better link educational pathways with labor market needs, and to effectively support and provide guidance to students in their career choices and job search. - Stimulate the establishment of work-based learning systems (internships, apprenticeships, vocational trainings etc.). - Expand, streamline and coordinate government funding programs targeted to R&D in green growth technology. 2.3 REPRESENTATIVE EXAMPLES OF GOOD SOLUTIONS IN EDUCATION AND BUSINESS NETWORKS REALM Today there are just a few positive examples of the SMEs-related acknowledged educational projects and business networks and organizations. The list of representative examples is given below:  AEN (Aquitaine - Euskadi – Navarra University network) and TEMPUS (Trans European Mobility Programme for University Studies);  The Accelerator Centre founded in Waterloo due to initiative of federal, provincial and municipal governments to support SME growth;  Vast network of supporting institutions in Canada: The Research, Innovation, Commercialization (RIC) Centre, MaRS (Medical and Related Sciences) which have helped SMEs applying for the governmental grants and getting personalized advice from qualified entrepreneurs;  Paris HEC incubator to support the companies created by students, graduates and participants from various groups on campus;  New Enterprise Incentive Scheme (NEIS) which offers practical small business training, business mentoring and financial assistance from the Australian government;  Association of SMEs and large companies to act in favour of the development of SMEs innovation and growth (The International SME Pact). The brief information on the mentioned centres, programmes and institutions:
  23. 23. Report for the development of the draft of the final communique of the G20 Young Entrepreneurs’ Alliance Summit - 2013 22 “Center for Entrepreneurship” LLC 125047, Moscow 1st Tverskaya-Yamskaya st. 23, b.1 www.cfe.ru Foundation “Institute for Applied Research in Facility Management” 191023, St. Petersburg, Sadovaya st. 21 institute.fm@gmail.com AEN (Aquitaine - Euskadi – Navarra University network) and TEMPUS (Trans European Mobility Programme for University Studies) projects AEN and TEMPUS are the European Union’s programmes which support the modernisation of higher education in the EU's surrounding area and establishing relations through education with several key markets. (AEN, TEMPUS). Aquitaine Euskadi Navarra Network (AEN) is a border area of higher education and research for university cooperation and competitive dynamics at European and international level. AEN network’s aim is to promote cooperation between universities network across borders as well as internationally to promote their integration into the European Space of Higher Education and Research. AEN network is positioning itself as a key player in the construction of the European Higher Education and Research with the following objectives:  Build a border area of higher education and research on regional space-Aquitaine- Euskadi Navarra by promoting: o mobility of faculty, students and administrative staff within the partner universities, o the establishment of joint training courses (course Integrated Studies, co- supervised theses) o the development of joint research projects and cooperation with businesses, o exchange of good practices, sharing of know-how and harmonization of expertise, o mutual knowledge and regional identity (establishing cultural activities, development of language skills areas in collaboration with local authorities and chambers) o foster these collaborations at European and international network among universities with third parties o the development of European Masters of Excellence (type Erasmus Mundus) o mounting international projects in training, research and / or transfer of know- how (such as Erasmus Mundus External Cooperation Window- EM ECW) o Cooperation with third countries (e.g. TEMPUS Projects) TEMPUS TEMPUS is the European Union’s programme which supports the modernisation of higher education in the EU's surrounding area. Tempus promotes institutional cooperation that involves the European Union and Partner Countries and focuses on the reform and modernisation of higher education systems in the Partner Countries of Eastern Europe, Central Asia, the Western Balkans and the Mediterranean region. Waterloo Accelerator Centre The Accelerator Centre (AC) in Waterloo, Ontario is a world-renowned, award-winning centre for the cultivation of technology entrepreneurship. The Centre has been made possible through funding from Federal and Provincial Governments, Ontario Centres of Excellence, the Regional Municipality of Waterloo and the University of Waterloo, along with industry and academic partners. The AC was established to accelerate the creation, growth, and maturation of
  24. 24. Report for the development of the draft of the final communique of the G20 Young Entrepreneurs’ Alliance Summit - 2013 23 “Center for Entrepreneurship” LLC 125047, Moscow 1st Tverskaya-Yamskaya st. 23, b.1 www.cfe.ru Foundation “Institute for Applied Research in Facility Management” 191023, St. Petersburg, Sadovaya st. 21 institute.fm@gmail.com sustainable new technology companies and to generate economic benefit of Waterloo Region within Ontario and Canada's broader economy. RIC Centre The Research, Innovation, Commercialization (RIC) Centre is a virtual incubator that supports creative technical innovators to get to the marketplace successfully. RIC can provide access to programs & workshops that can help strengthen and expand business knowledge. The Centre works with technology entrepreneurs in Aerospace, Advanced Manufacturing, Life Sciences and Emerging Technologies, providing key connections to fast-track their journey to market success. The Ministry of Economic Development & Innovation supports RIC Centre. As a not-for-profit organization RIC offers a comprehensive range of supporting activities for entrepreneurs including one-on-one coaching, practical training and networking events. MaRS (Toronto, Canada) Originally, MaRS was a filename: Medical and Related Sciences. Then the realm of activities expanded, including a broader range of innovative sectors. MaRS provides resources — people, programs, physical facilities, funding and networks — to ensure that critical innovation happens. L’incubateur HEC Founded in 1881 by the Paris Chamber of Commerce and Industry, HEC Paris specializes in education and research in management sciences. The HEC Incubator is a program of the Centre for Entrepreneurship at HEC Paris. The HEC Incubator was born in September 2007 to address the need to support the many companies created by students, graduates and participants from various groups on campus. NEIS New Enterprise Incentive scheme The New Enterprise Incentive Scheme (NEIS) is an Australian government unity which provides job seekers with accredited small business training, business mentoring, and income support to help them turn a business idea into a viable business and help them to become a self-employed business owner. The scheme is delivered by a national network of NEIS providers under Job Services Australia (the employment services system), in locations right around the country. NEIS providers include local organisations, such as Business Enterprise Centres, TAFE Small Business Centres, community organisations, and private sector businesses. A NEIS provider gives job seekers personalised assistance to help them achieve their business goals, and will maintain regular contact for the first year of the new business to provide help to the NEIS participant to work through any business problems. Job seekers participating in the scheme receive a NEIS Allowance for up to 52 weeks while they are operating their NEIS business. The amount received is not affected by the income received from the NEIS business and some participants may also be eligible to receive NEIS Rental Assistance. Association of SMEs and large companies to act in favour of the development of SMEs innovation and growth (The International SME Pact).
  25. 25. Report for the development of the draft of the final communique of the G20 Young Entrepreneurs’ Alliance Summit - 2013 24 “Center for Entrepreneurship” LLC 125047, Moscow 1st Tverskaya-Yamskaya st. 23, b.1 www.cfe.ru Foundation “Institute for Applied Research in Facility Management” 191023, St. Petersburg, Sadovaya st. 21 institute.fm@gmail.com The program was launched in 2005 by OSEO (French Public investment bank) and the Comité Richelieu (a professional association uniting high-tech SMEs). The SME Pact is a tool to help SMEs identify international contacts, to get advice on the markets, partners and locations.
  26. 26. Report for the development of the draft of the final communique of the G20 Young Entrepreneurs’ Alliance Summit - 2013 25 “Center for Entrepreneurship” LLC 125047, Moscow 1st Tverskaya-Yamskaya st. 23, b.1 www.cfe.ru Foundation “Institute for Applied Research in Facility Management” 191023, St. Petersburg, Sadovaya st. 21 institute.fm@gmail.com 3. BUSINESS AND LABOR LEGISLATION ENVIRONMENT There is strong demand for easy-to-understand, employment-friendly labor laws, which are currently considered to be complex, rigid, a huge drain on SME resources in terms of both administrative resources and compliance, and high risk vis-à-vis hiring and laying-off employees. The importance of intellectual property right becomes increasingly important for SMEs engaged in proprietary software & web development, business process outsourcing, and knowledge process outsourcing. These areas are critical to global value chains operating efficiency. Any institutional changes should be directed toward the sustainable development and ability of SMEs to scale-up, which will lead to positive cumulative effects on the global economy as a whole. Red tape
  27. 27. Report for the development of the draft of the final communique of the G20 Young Entrepreneurs’ Alliance Summit - 2013 26 “Center for Entrepreneurship” LLC 125047, Moscow 1st Tverskaya-Yamskaya st. 23, b.1 www.cfe.ru Foundation “Institute for Applied Research in Facility Management” 191023, St. Petersburg, Sadovaya st. 21 institute.fm@gmail.com 3.1 QUESTIONNAIRE RESULTS ANALYSIS – BUSINESS AND LABOUR LEGISLATION ENVIRONMENT SMEs see the big difficulties as a consequence of the rules regarding labour, tax and intellectual property protection laws. The ability of companies to flexibly manage their workforce is an important factor in general business competitiveness. There is a strong demand for easy-to-understand, employment- friendly labour law which at present is considered to be complex and rigid. Employment legislation is a big administrative headache for the small business. It is very often excessively complicated and unstable. The entrepreneurs continually encounter with time taking bureaucratic obstacles. This is especially the case for non-European market. The importance of intellectual property right becomes increasingly important for SMEs engaged in proprietary software & web development, business process outsourcing, and knowledge process outsourcing. The existing intellectual property protection policies and laws are judged by the entrepreneurs as unclear or outdated. International property and patenting polices in the different countries are not unified and contradictory. It specifically creates problems with certification of the new technologies and/or of the equipment manufactured abroad. There is a strong need for increased harmonization of commercial laws in different countries. Business legislation environment shall be further improved in terms of stability, publicity, clarity and predictability. SMEs operating on international market face financial losses because of high import taxes and inapplicability of tax credit benefit solutions (for example R&D tax credit programme is inapplicable to a Canadian small company performing research and development outside of Canada). Tax and tariffs incentive programmes addressed to tax burden decrease for SMEs operating in the innovative areas shall be further developed. 3.2 RECOMMENDATIONS: - Revise the tax burden on labor (including both wage and non-wage labor costs on the part of the employer, as well as income taxes on the part of the employee) in two priority areas:  Innovation (implementation of scientific and technical programs, improvement of the technical means of production, and the development of new high-tech equipment and technologies);  Social entrepreneurship (for example, social care, opening of schools, or the launching of immigrant assimilation programs). - Harmonize labor laws to strike the right balance between the needs of workers and employers by introducing simplified labor regimes for start-ups in the first three years of their existence; establish simplified rules for hiring and laying-off; and organize simple procedures for dispute resolution.
  28. 28. Report for the development of the draft of the final communique of the G20 Young Entrepreneurs’ Alliance Summit - 2013 27 “Center for Entrepreneurship” LLC 125047, Moscow 1st Tverskaya-Yamskaya st. 23, b.1 www.cfe.ru Foundation “Institute for Applied Research in Facility Management” 191023, St. Petersburg, Sadovaya st. 21 institute.fm@gmail.com - Promote business legislation that minimizes the stigma and punitive nature of bankruptcy. 3.3 REPRESENTATIVE EXAMPLES OF INCENTIVE LABOUR LEGISLATION PROGRAMMES CIR - The Research Tax Credit (France) CIR is a corporate tax relief measure based on R&D expenses incurred by firms operating in France. SMEs can receive an immediate research tax credit rebate for R&D expenditure incurred in the previous year. All R&D expenses are taken into account (salaries, social security contributions, running costs, depreciation, patents, technology watch, etc.). The SR&ED Program (Canada) The SR&ED Program is a federal tax incentive program, administered by the Canada Revenue Agency (CRA), that encourages Canadian businesses of all sizes (including SMEs), and in all sectors to conduct research and development (R&D) in Canada. It is the largest single source of federal government support for industrial R&D. The SR&ED Program gives claimants cash refunds and/or tax credits for their expenditures on eligible R&D work done in Canada. Feed-in Tariffs (Germany) An economic policy created to promote active investment in and production of renewable energy sources. Feed-in tariffs typically make use of long-term agreements and pricing tied to costs of production for renewable energy producers. By offering long-term contracts and guaranteed pricing, producers are sheltered from some of the inherent risks in renewable energy production, thus allowing for more diversity in energy technologies. The feed in tariff approach could be illustrated by German Renewable Energy Act (EEG). Tax credits (“TEPA Law” France) According to “TEPA Law” money invested in the capital for SMEs shall be deducted from the solidarity tax on wealth levied on the investor. Personal allowance According to French legislation the would-be entrepreneurs who decide to resign from job to start a new company are granted with 15 months unemployment allowance. NAFTA (The North American Free Trade Agreement) The North American Free Trade Agreement (NAFTA) is an agreement signed by Canada, Mexico, and the United States. NAFTA can be judged as a good representative example of the international trade agreements supporting small and medium-sized businesses. A key source for innovation, job creation and export growth in each of the NAFTA countries has been smaller, often newer firms. How does NAFTA benefit trade? First, it eliminates tariffs. This reduces inflation by decreasing the costs of imports. Second, NAFTA creates agreements on international rights for business investors. This reduces the cost of trade, which spurs investment and growth especially for small businesses. Third, NAFTA provides the ability for firms in member countries to bid on government contracts. Fourth, NAFTA also protects intellectual properties.
  29. 29. Report for the development of the draft of the final communique of the G20 Young Entrepreneurs’ Alliance Summit - 2013 28 “Center for Entrepreneurship” LLC 125047, Moscow 1st Tverskaya-Yamskaya st. 23, b.1 www.cfe.ru Foundation “Institute for Applied Research in Facility Management” 191023, St. Petersburg, Sadovaya st. 21 institute.fm@gmail.com The SME Pact The "International SME Pact" (Le Pacte PME) was launched in 2005 by OSEO (French Public investment bank) and the Comité Richelieu (a professional association uniting high-tech SMEs) The core idea of SME Pact is to enhance the role played by large corporations in supporting SMEs in foreign markets. This type of support shall be exercised in the form of sharing experiences and address book or logistical support. It embodies the mobilization of large French companies to serve SMEs to give them certain abilities that their size does not allow them to possess.
  30. 30. Report for the development of the draft of the final communique of the G20 Young Entrepreneurs’ Alliance Summit - 2013 29 “Center for Entrepreneurship” LLC 125047, Moscow 1st Tverskaya-Yamskaya st. 23, b.1 www.cfe.ru Foundation “Institute for Applied Research in Facility Management” 191023, St. Petersburg, Sadovaya st. 21 institute.fm@gmail.com 4. ACCESS TO FINANCE Making credit markets work for start-ups, as well as for SMEs, is a policy prescription of long standing, and yet one that is often unrealized. Supporting the sustainability of enterprises converges with the objective of generating quality jobs. Access to finance is an important prerequisite to enterprise growth, be they newcomers to the market, or those seeking financing for a new type of product or service. Finance and ideas (levels of paternalism) Current problems: 1. Poor or lack of collateral. It is necessary to study the legal basis for foreclosure. 2. In small and medium-sized enterprises, as a rule, there are poor financial records, making it difficult to monitor the solvency of borrowers, which is obliged to banks. 3. Lack of understanding of the banking products by SMEs. 4. Opacity of the borrowers. 5. Insufficient development of the branch network in the regions 4.1 QUESTIONNAIRE RESULTS ANALYSIS – ACCESS TO FINANCE
  31. 31. Report for the development of the draft of the final communique of the G20 Young Entrepreneurs’ Alliance Summit - 2013 30 “Center for Entrepreneurship” LLC 125047, Moscow 1st Tverskaya-Yamskaya st. 23, b.1 www.cfe.ru Foundation “Institute for Applied Research in Facility Management” 191023, St. Petersburg, Sadovaya st. 21 institute.fm@gmail.com Financing is necessary to help SMEs set up and expand their operations, develop new products, and invest in new staff or production facilities. The main conclusion, which could be drawn from the respondents’ answers is: SMEs are at a particularly severe disadvantage when trying to obtain financing relative to larger and more established firms. Access to finance is a key barrier to the growth of SMEs. The three key institutional features preventing access of small firms to formal sources of external finance (such as banks, capital markets or other suppliers of credit) are:  High interest rates environment: SMEs tend to be newcomers to the market, or seeking financing for a new type of product or service. Hence they represent a higher risk to banks and cannot be assessed in the same manner as large firms. Banks respond to greater risks by charging higher interest rates. This makes it practically impossible for many SMEs to borrow money at all because the price of credit is too high.  Collateral approach: There is an incomplete range of financial products and services suitable for a small business company with no solid track records enforced by sufficient collateral.  Limited Angels community The angel investor market is limited. Detailed list of most common barriers between small firms and sources of external finance include the following:  SMEs tend to be newcomers to the market, or seeking financing for a new type of product or service. Hence, they represent a higher risk to banks and cannot be assessed in the same manner as large firms.  Banks respond to greater risks by charging higher interest rates. This makes it more impossible for many SMEs to borrow money at all because the price of credit is too high.  Banks may avoid providing financing to start-ups and very young firms that typically lack sufficient collateral and/or don’t have solid track records. Many entrepreneurs rely on the “seed” money, which comes from friends, professional contacts and family.  Banks may avoid providing financing to SMEs, whose activities offer the possibilities of high returns but at a substantial risk of loss. Sometime the companies producing value added products face more obstacles in obtaining funding than companies working in primary sectors.  There is an incomplete range of financial products and services tuned to SMEs specificity. The angel investor market is limited.  Gaps in the legal framework and regulatory rigidities make the financing procedure quite bureaucratic and time consuming.  Lack of information on both the bank’s and the SME’s side. It is not always possible to obtain qualified consultancy on financing arrangement.
  32. 32. Report for the development of the draft of the final communique of the G20 Young Entrepreneurs’ Alliance Summit - 2013 31 “Center for Entrepreneurship” LLC 125047, Moscow 1st Tverskaya-Yamskaya st. 23, b.1 www.cfe.ru Foundation “Institute for Applied Research in Facility Management” 191023, St. Petersburg, Sadovaya st. 21 institute.fm@gmail.com Meanwhile some successful stories were also reported by the respondents. In the countries with competitive financial market, lending to SMEs has been encouraged by Credit Guarantee Schemes. Irrespectively of the Scheme arrangement particulars, it is intended to address two distinct barriers to lending: inadequacy of collateral and inadequacy of understanding of the novelty of a business model, market, sector or technology. It is exclusively targeted towards companies who are unable to access credit because of these two particular market failures. The Credit Guarantee Scheme uses government guarantees on unsecured borrowing by banks, enabling them to borrow at a cheaper rate. Credit Guarantee Schemes are a common feature of financial systems across the world. The Scheme has been an instrument to improve access to finance by SMEs and young firms during the recent global financial crisis. Over 2008-2010, in many countries, new guarantee programmes were set up and existing loan guarantee programmes started up, as part of government anti-crisis packages. In several non-OECD countries, the credit guarantee schemes have also developed rapidly as a mechanism to expand credit markets and improve financial inclusion. 4.2 RECOMMENDATIONS: - Facilitate the development of a comprehensive range of financial products and services suitable for start-ups/small businesses, including development of the methodology for financial institutions that finance SMEs, striking a balance between "risk" and "trust". - Ensure that funding on favorable terms is available from a variety of private funds, local banks, as well as state and local government sources for higher risk investment in capital expenditures for new product development and marketing. - Reduce bank requirements concerning amount of mandatory reserve fund allocations when lending to SMEs, and enable the use of mandatory reserve funds for support of their current liquidity. - Require international and regional development banks to set up programs tailored to support cross-border cooperation between growth ventures and corporations in the development of new products and technologies. - Develop regulations to accommodate development of new innovative forms of financing, including online cross-border platforms and networks of investors and entrepreneurs. 4.3 THE LIST OF VARIOUS ORGANIZATIONS, CENTERS AND FOUNDATIONS, WHICH ADDRESS DIFFERENT TYPES OF SUPPORT FOR SMES AND YOUTH ENTREPRENEURSHIP  Mediateur du Credit aux entreprises (Mediator of credit to businesses)  OSEO (French Public investment bank)  Early Stage Venture Capital Limited Partnerships (Australia)  NACO (National Angel Capital Organization, Canada) – Building innovation economy through angel investing
  33. 33. Report for the development of the draft of the final communique of the G20 Young Entrepreneurs’ Alliance Summit - 2013 32 “Center for Entrepreneurship” LLC 125047, Moscow 1st Tverskaya-Yamskaya st. 23, b.1 www.cfe.ru Foundation “Institute for Applied Research in Facility Management” 191023, St. Petersburg, Sadovaya st. 21 institute.fm@gmail.com  Fondation du Maire  Quebec Entrepreneurship Contest  SAJE Montreal Centre (Youth Program Sponsors)  Canadian Youth Business Foundation (CYBF)  BDC Advice Centre (Canada)  National Research Council of Canada - Industrial Research Assistance Program Services  Atlantic Canada Opportunity Agency (ACOA)  Ontario Centres of Excellence Brief information on the listed organisations is given below: Mediateur du Credit aux entreprises (Mediator of credit to businesses) Mediation is available to businesses facing funding difficulties or credit insurance. Mediation of credit was created to leave no single company meet its financial difficulties. OSEO (Public investment bank) OSEO was born in 2005, by bringing together ANVAR (French innovation agency) and BDPME (SME development bank). Its mission is to provide assistance and financial support to French SMEs and VSEs (Very Small Enterprises) in the most decisive phases of their life cycle: start up, innovation, development, business transfer / buy out. By sharing the risk, it facilitates the access of SMEs to financing by banking partners and equity capital investors. OSEO covers three areas of activity:  Innovation support and funding: for technology transfer and innovative technology- based projects with real marketing prospects.  Guarantee funding granted by banks and equity capital investors.  Funding investments and operating cycle alongside the banks. OSEO head structure is a holding with public status. It reports to both the Ministry for Economy, Finance and Industry, and Ministry for Higher Education and Research. Investment Programme for the Future: EUR 300 million for strengthening the competitiveness of SMEs and industrial strategic sectors. Early Stage Venture Capital Limited Partnerships (Australia) An early stage venture capital limited partnership (ESVCLP) raises capital and invests in high-risk start up enterprises.
  34. 34. Report for the development of the draft of the final communique of the G20 Young Entrepreneurs’ Alliance Summit - 2013 33 “Center for Entrepreneurship” LLC 125047, Moscow 1st Tverskaya-Yamskaya st. 23, b.1 www.cfe.ru Foundation “Institute for Applied Research in Facility Management” 191023, St. Petersburg, Sadovaya st. 21 institute.fm@gmail.com NACO (National Angel Capital Organization, Canada) – Building innovation economy through angel investing The National Angel Capital Organization (NACO) is Canada’s industry association representing Angel capital in Canada, an asset class that invests an estimated $1-billion annually in Canada’s growth-oriented companies. Fondation du Maire Since its creation in 1996, the Foundation has invested over $5.6 million in grants in 780 new businesses that created over 2,328 jobs. Furthermore, thanks to a network of experienced business people, the Foundation provides training, coaching and mentoring to its laureates free of charge, in order to accompany them, and even guide them, through the start-up of their business. Quebec Entrepreneurship Contest The organization’s mission is to develop Québec entrepreneurial culture through the start-up and recognition of new businesses and entrepreneurial projects in the schools. The Québec Entrepreneurship Contest focuses on young people in schools and on new entrepreneurs who are often at the business planning stage. SAJE Montreal Centre (Youth Program Sponsors) Montreal Centre is a management consulting firm whose mission is to stimulate, promote and support the startup and growth of small and medium enterprises. The Centre provides technical assistance in the preparation of the business plan and financial assistance in the form of non-repayable grant. Canadian Youth Business Foundation (CYBF) The Canadian Youth Business Foundation (CYBF) helps to bring a business idea to life. From pre- launch to growth and expansion, CYBF supports entrepreneurs throughout the life-cycle of their businesses by providing coaching, financing, mentoring and business resources. BDC Advice Centre (Canada) Mission of the Centre is to help create and develop Canadian businesses through financing, venture capital and consulting services, with a focus on small and medium-sized enterprises (SMEs). National Research Council of Canada – Industrial Research Assistance Program Services Industrial technology advisors (ITAs) assist clients through every aspect of the innovation process, from concept to commercialization, providing technical and business advice, referrals and other innovation services as needed. Through its industrial technology advisors, IRAP offers financial assistance to eligible firms under Youth Employment Program. This Program provides financial assistance to innovative small and medium-sized enterprises in Canada to hire post-secondary science, engineering, technology, business and liberal arts graduates. Graduates work on innovative projects within the small and medium-sized enterprise environment and may participate in research,
  35. 35. Report for the development of the draft of the final communique of the G20 Young Entrepreneurs’ Alliance Summit - 2013 34 “Center for Entrepreneurship” LLC 125047, Moscow 1st Tverskaya-Yamskaya st. 23, b.1 www.cfe.ru Foundation “Institute for Applied Research in Facility Management” 191023, St. Petersburg, Sadovaya st. 21 institute.fm@gmail.com development and commercialization of technologies. In addition to meeting the needs of innovative small and medium-sized enterprises, this program facilitates the transition of highly skilled young people to a rapidly changing labour market. Atlantic Canada Opportunity Agency (ACOA) ACOA provides guidance in preparation of business and marketing plans. ACOA also helps with a list of organizations and programs that may help finance a business idea. Ontario Centers of Excellence (OCE) In addition to support for technologies and ideas with demonstrated commercial potential, OCE also supports and invests in early-stage projects, where the probability of commercial success and potential total return on innovation are both substantial.
  36. 36. Report for the development of the draft of the final communique of the G20 Young Entrepreneurs’ Alliance Summit - 2013 35 “Center for Entrepreneurship” LLC 125047, Moscow 1st Tverskaya-Yamskaya st. 23, b.1 www.cfe.ru Foundation “Institute for Applied Research in Facility Management” 191023, St. Petersburg, Sadovaya st. 21 institute.fm@gmail.com CONCLUSION REMARKS This report begins with an epigraph, which states: "We are the State!". Every person represents a certain country and culture. Every country has its own direct-action laws, which do not have a verbal interpretation. Often, such laws look like products of a sophisticated cabinet-thought rather than political wisdom. They are easy and enjoyable to learn, but difficult to execute, and they are designed for the abstraction, not the specifics. Perfect society is required for their implementation - society, which does not need any laws; following the Decalogue of Moses or Percepts of Gospel would be enough. But, entrepreneurs are real people, which do not want the abstract patterns of freedom and equality, they insist on open space for business initiatives and safety of persons and property. Today, one of the most important characteristics of economic relations is the degree of paternalism in the relationship between states and entrepreneurs. Governments are obliged to take responsibility for the economic situation, or rather to make a choice between different goals and methods of economic policy in terms of entrepreneurial development, especially the youth.

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