Small and medium-sized enterprises (SMEs) or small and medium-sized businesses are businesses whose personnel numbers fall below certain limits. SMEs play an important role in the economy, employing vast numbers of people and helping to shape innovation.
IMPORTANT ROLE OF SMEs
According to the Statistical Office of the Republic of Serbia reports, small and mid-size enterprises makeup 99% of the Serbian economy, participate in GDP with 57.7 percent, and employ over 65 percent of employees in the non-financial sector. Consequently, SMEs represent a major player in the Serbian economy, and are considered one of the leading forces of economic development.
CHALLENGES
The World Bank stated that a big problem in the structure of Serbian economy as a whole is an insufficient number of dynamic medium-sized companies.
They often encounter the problem of not being able to overcome development challenges on their own. The reasons are mainly lack of capacity in a broader sense - workforce, knowledge, managerial skills, access to finance and the market, but also in approving loans because of the modest capital base.
SOLUTION
SMEs can overcome some of these problems through effective cooperation and association. They could become more productive, more resistant to crisis and get a better chance for promoting their ideas and interests.
Primarily, an association of the SMEs in the same sector (for example cluster of higher value-added food producers) would help achieve economies of scale needed for growth and development, but one should not stop there.
For instance, a cooperation within the same sector can be achieved between less experienced companies and those that are already established, and such alliance could be beneficial for all parties. The established companies could outsource fewer demanding parts of production (e.g. subcontracts) with the less experienced and focus their resources on more demanding parts of business the business, while the less experienced companies, in addition to work, would get the opportunity to learn from the successful ones.
The concept of clustering can be best observed in the automotive industry because this sector involves many industries - metal processing, textile industry, paint and varnish industry, electronic industry, rubber industry, glass industry, etc.
Namely, the statistics show that it is becoming popular to connect different sectors into different types of platforms that can be called innovation clusters such as Manufacturing and Robotics, Plant/Infrastructure Safety Management, Biotechnologies and Materials, IT technologies and Agriculture or Medicine.
In conclusion, this is also a colossal opportunity for the growth of international competitiveness of the national economy. This is why the institutional support is crucial. Although it exists, it must be stronger and tailor-made for the SME’s economic development. When it comes to SME’s modest capital base and needs for funds, it is necessary to ensure coordinated financing through grants and loans from public and international sources.
Authors
Marina Tanaskovic, Business Developer
Sara Elmazi Vlajic, Legal Intern
*The information in this announcement does not represent legal advice and is provided for general informational purposes only.
*Legal Intern in cooperation with IVVK Lawyers
29/06/2022
