If you look at the economies of Eastern Europe, South Caucasus, and the Western Balkans, small and medium enterprises (SMEs) are dominant. They provide the bulk of employment opportunities.
In the six Western Balkan countries, SMEs makeup 99% of all firms, account for 73% of total business sector employment.
In Moldova, SMEs employed more than half of the workforce (55.1%). In Armenia, SMEs constitute 98% of all registered and functioning legal entities, while in Georgia, 99.7% of all firms are SMEs, accounting for 62% of total employment.
SMEs in Eastern Europe have typically ‘wanted to be quiet’, to keep their heads down and just do their business and get along. Now, we’re a generation away from the events of the fall of the Soviet Union. A full generation has matured in these independent states of Belarus, Moldova, and Ukraine, and the business climate is changing.
Add on top of that the financial crisis of 2008 and the COVID-19 pandemic. SMEs have realized that if they’re not going to advocate for their interests and rights, nobody else is going to do it for them.
Here’s our assumption which we’re now piloting and facilitating. Improved regulations and standards would address the needs of the target groups and SMEs if there are three preconditions: (a) advocacy and analytical skills of business associations are improved, (b) data and analyses which are supplied by the business associations to the government are enhanced, and (c) the quality of the public-private dialogue is improved.
So, what is happening in practice?
Helvetas has partnered with the Swedish International Development Cooperation Agency (Sida), together with implementing partners such as the Center for International Private Enterprise (CIPE), to facilitate a regional inclusive and green economic development program, RECONOMY, in 12 countries in Eastern Europe, South Caucasus and the Western Balkans.
One of the main goals of the program is to create sustainable, systemic change in the business environment of Belarus, Moldova, and Ukraine, for young people, women, and other vulnerable and disadvantaged groups. This means that RECONOMY wants to make improvements in advocating for those regulations and laws which are relevant for young women and men, also taking into consideration the pandemic impact on SMEs.
The program aims to tackle the underlying systemic failure in the business environment. Rather than fixing the constraints or directly performing a function in the system, RECONOMY works to leave behind a stronger business environment.
To catalyze systemic change, RECONOMY acts as a facilitator. The aim is to strengthen the capacities, including the incentives, and the relationships of local actors in the system. In this regard, RECONOMY focuses to facilitate private sector-led, bottom-up, evidence-informed advocacy functions and supporting target groups and SMEs to increase their participation and voice. This way, they have better access to economic opportunities.
The program uses the public-private dialogue approach. This requires influencing policies, regulations, and administrative procedures by interacting with a wide variety of individuals and institutions. In this regard, the intervention contributes to improving the process of reform rather than just the result. For this reason, the program prioritizes three entry points. We call them functions, rules, and norms.
The first entry point is to support the capacity development of SMEs and business associations by identifying key areas of inclusive economic development. For example, using local ownership of advocacy tools (e.g. using M-Test and anti-corruption expertise methodology), the program supports making advocacy valuable as a service, facilitating the institutionalization of these tools and approaches.
To be successful, having the capacity is not enough. The program, therefore, secondly facilitates increased trust and confidence between associations and government officials as a result of better analysis and understanding of local patterns of political behavior (informal rules, values, and norms). This requires analyzing and paying particular attention to deep-seated political, economic, and power factors that shape inclusive economic development. This remains embedded in local patterns of political behavior, meaning informal rules and norms.
And the third entry point is to support bottom-up and evidence-informed processes by working with other actors, such as the media, research institutions, and partnering with the academic community, to improve the access to policy and regulatory information as well as stimulate and inform the dialogue.
In other words, RECONOMY works to leave behind a stronger business environment that will generate better employment opportunities and increase income for the target groups, especially for SMEs. In this regard, partner organizations that are involved in making systemic change in Belarus, Moldova, and Ukraine, will share lessons and best practices with other relevant organizations and the private sector.
Leveraging our experiences
We at Helvetas strongly believe that advocacy can work under certain circumstances. That’s why we’ve been engaging in public-private dialogue for the last several years. – from Albania to Serbia, Kosovo, Myanmar, Ethiopia and other countries. There’s always the way to make change happen, to convince decision-makers—be in the private sector or the public sphere, or in civil society—of certain issues and to make the voice of the target groups heard.
However, it depends very much on the specific context, such as the kind of actors in a system, the kind of vested interests around, and how responsive the state is to the demands of SMEs. It also depends on the kind of avenues we have to reach out to decision-makers and convey the message.
Improving transactions/interactions between different actors is at the center of our development efforts. Depending on our thematic focus, they take on different forms and involve different types of players. The added value of development initiatives like RECONOMY is that we work at the intersection between the state, the private sector, and civil society, and in some cases even the academic community. Development initiatives are well-positioned to build alliances, and even build coalitions between allies who might not be partners at the first sight. Such surprising allies are, for instance, between the private sector and civil society organizations.
RECONOMY’s value addition is its regional dimension. In this regard, partner organizations across the region of Eastern Europe will share lessons and best practices, and engage in policy dialogue with relevant EU institutions and counterparts in the private sector, the academic community and civil society.