Entrepreneurs and SMEs

I refer to the editorial entitled SMEs: Why Is Malta Lagging So Much Behind? (October 13). We very much appreciate the detailed discussion of our analysis, since one of the central purposes of the fact sheets is precisely to stimulate an open discussion on the environment in which small and medium-sized enterprises operate. In this connection we would also like to respond to a few points addressed in the editorial that might need further clarifications.

Firstly, the statistical analysis in the fact sheets consists of two parts. The first describes how SMEs in the country are performing, i.e. whether the number has increased over the years; SMEs are creating more jobs and whether their business grows.

The second part structured by the 10 Small Business Act policy areas looks predominantly at the conditions in which SMEs operate (e.g. how many days it takes to open up a business, how entrepreneurship is viewed in the public opinion). The latter, of course, impact the former but will never be able to fully explain them. To stick to the example cited in the editorial, it is possible that the number of SMEs grows even though indicators measuring the entrepreneurship policy would look comparatively weak. The decision of founding a business is, after all, not just affected by specific policies but also by many other considerations, e.g., personal preferences, the existence of business opportunities, etc.

Secondly, as regards our overall assessment of Malta’s position, we describe the situation across the different policy areas that define the operating environment for SMEs as “patchy”. This means that Malta is performing in some policy areas better than the EU average, while in others it trails its EU peers. This uneven picture applies also to the specific issue of “entrepreneurship” which is pointed out in the article. What is, for instance, interesting in the case of Malta is that it shows a – by European standards – relatively high share of “opportunity-driven” entrepreneurs, i.e. those that found a business because it is their first choice and not out of “necessity”, i.e. because they see no other career choice. As mentioned in the fact sheet, this is, principally, a good sign. “Opportunity-driven” businesses tend to be more successful and sustainable. However, this is juxtaposed by a relatively small share of the Maltese population that are entrepreneurs. To cut it short: in Malta, few people are running their own business but of those who do many are doing it for the right reasons. We, therefore, share the view expressed in the editorial that Malta has still to fully exploit its “entrepreneurship” potential.

Thirdly, the question of the lack of growth in employment in Malta’s SMEs over the past few years is raised and linked to this the question of whether the SME sector is “in good” shape or “stagnation”. Actually, the report does not contain the expression “good shape” to describe the overall situation of SMEs in Malta. It does point out the discrepancy between, on the one hand, the flat development regarding employment growth over the past years and, on the other, the more encouraging statistics on the number of enterprises and the value added they are creating. Against this background, the report raises the question on what can be done to further improve the employment performance of Malta’s SME sector.

Finally, let me reiterate an important idea that is also clearly pointed out in all the fact sheets we produce. Any statistical analysis has its limits in describing the entrepreneurial realities. It therefore should be seen as only one of many elements that need to be taken into account when the conditions for SMEs are debated and assessed. This holds true in particular in situations and countries, as is the case with Malta, where the available data is comparatively limited.

Thank you for the opportunity to clarify these points. Again, we do appreciate the coverage of the subject and see it as a positive signal that entrepreneurship and SMEs retain a prominent place on the political agenda.