Putting SMEs first

We talk a lot about the need to create growth and generate more and better jobs. Europe has devised a whole process, called the Lisbon Strategy, to create the European momentum and encourage the reforms necessary to spur economic growth and jobs. But when focusing on our economy where do we need to direct our efforts?

While we should continue working hard to attract more investment towards our shores, the likes of Lufthansa Technik, HSBC, SmartCity, the big names in the financial services sector, we cannot forget that 98 per cent of our economic operators are small- and medium-sized enterprises and their issues should be the bread and butter issues that should concern us all.

SMEs are not only important for the local economy but also at European level and for this reason the European Union is taking a number of important initiatives like the recent European Commission communication Putting SMEs First. Within this framework, and the ambitious target set that by 2012 the costs of bureaucracy for entrepreneurs are reduced by 25 per cent, the government has commenced an extensive simplification exercise to make this target ours too.

Some concrete initiatives we are taking include easing the burden of financial reporting: rather than imposing the extensive body of International Accounting Standards there would be a more focused and less burdensome reporting framework. These new standards should lower the cost and complexity to SMEs and their financial service providers in financial statements. From a body of standards in excess of thousands of pages we are reducing this to a document of around 100 pages. This will ensure that while financial reporting requirements of third parties, such as banks, creditors, tax authorities are safeguarded, the cost of preparation for the business is reduced.

Also, to further reduce costs, the government is extensively reviewing the fees charged to small companies by regulatory authorities, particularly those related to company formation and registration, and annual-related fees. This should place a more equitable regulatory burden related to the size of the enterprise, while on the other hand balancing the need of timely filing of returns.

But possibly the two most important initiatives that will have an impact on Maltese business at large, and particularly small and micro businesses, are the implementation of the Services Directive and the present European debate on the need for a Small Business Act, clearly an important tool to make us all think small first.

This is all part of a simplification process whereby a number of laws are being reviewed with the specific intention of making life simpler for SMEs.

Other areas being explored include efforts to reduce the costs of cross-border payments and simplifying Customs procedures. The whole process will cover a staggering 220 pieces of legislation and 1,400 pieces of secondary legislation will have gone through this SME-friendliness review during the last three years.

The Services Directive will not only provide another important tool to reduce the administrative burdens for service providers but also assist Maltese service providers who want to test new markets in other member states or who are thinking of establishing themselves to offer their services in the EU. While many SMEs are service providers that might face increased competition, most small enterprises are consumers of services that will benefit from more price competition and which will therefore reduce also the burden of cost of various services.

The ministry is also undertaking a major exercise in order to identify, simplify and dismantle barriers to the provision of services including a revision of current legislation that will be concluded by November of this year.

One interesting development which could be a consequence of the implementation process of the Services Directive is the possibility of taking this opportunity to consolidate the various services offered to business and potential entrepreneurs into one central unit in order to improve our administration from the resulting synergies and to offer the business community a focal point for its needs.

Another important initiative is the EU Commission proposal of a Small Business Act for Europe in order to fully establish SMEs at the heart of EU policy making and irreversibly anchor the Think Small First principle in policy-making at all levels within the EU. While strongly supporting the Commission on this initiative, I want to clearly declare that the Commission needs to be more ambitious. The Small Business Act cannot simply be a body of principles and targets; it has the have the legislative punch to act in favour of SMEs.

With these issues in mind, the government aims to be in the forefront in the negotiations on the Small European Act. However, much as we agree with the Commission's thrust, we believe that such an initiative must not be left at a European level alone but should be acted upon at national level, by building on the good points emerging from the Commission proposals but also adding those elements that are closer to the national interests.

Throughout the legislature, my commitment is to keep listening to the needs of smaller companies with an important objective: not only to see them survive but rather to grow, generate more wealth and create even more jobs for the benefit of Maltese and Gozitan families.

Mr Fenech is Minister of Finance, the Economy and Investment