Think Big for Small: Small and Medium Enterprises as Pillar for Future-oriented, Sustainable Growth

In most countries, Small and Medium-sized Enterprises (SMEs) contribute over 50 percent to gross domestic product (GDP) and two thirds to formal employment. SMEs, which often form the backbone of the middle class, are important for social stability, innovation, inclusive growth, and poverty alleviation. They are indispensable for a future-oriented, sustainable global economy. However, SMEs are confronted with a number of disadvantages compared to larger firms. OECD studies suggest that SMEs tend to innovate less and have greater difficulties adopting and using new technologies. They often struggle with access to finance as well as qualified personnel and have fewer resources to invest in research and development (R&D). SMEs often struggle with administrative burdens. For example, tax compliance, complex rules of origin (RoO), and export procedures disproportionally affect small businesses In recent years, policy-makers have started to pay more attention to SMEs. The World Bank Group (WBG) finds that in the OECD high-income area, governments have made significant progress reducing the regulatory burden for SMEs. For example, the days required to start a business decreased over the last five years from an average of 11 days in 2011 to 8 days in 2016. However, sizeable cross-country differences remain. Overall, much more has to be done.