COVID-19 UpdateCOVID-19 has a far-reaching impact on the ability of Micro, Small and Medium Enterprises to grow and thrive. The shock effects from this crisis are closing down SMEs and displacing their workers across the globe. Movement restrictions and the sharp decrease in demand will have a disproportionate effect on MSMEs, as they depend mostly on local markets and are highly reactive of economic fluctuations.
The drying up of liquidity produces immediate effects on SMEs as they operate on short-term sales and turn over business. In addition, their limitations to access funds and resources give them fewer options to respond to the sudden stop of economic activity. SMES are thus struggling to keep their operations ongoing.
It is critical to ensure that SMEs – the source of income for millions of workers – can remain afloat during the sharp downturn and so as to be able to restart operations as soon as conditions allow. Strong policy responses need to be put in place to support business continuity, especially for MSMEs and the self-employed (e.g. through subsidies, credit mediation/re-financing to overcome liquidity constraints). The EESE team in the SME unit has produced a policy brief, reviewing and analyzing potential policy interventions to create an environment that supports MSMEs beyond the immediate crisis created by the COVID-19 pandemic. The brief provides guidance to policymakers on how to address reform priorities in the medium- to long-term and reconfigure their policy settings toward a more resilient and robust economy driven by sustainable micro, small and medium enterprises and more productive and decent employment.
The EESE Team aims to improve the enabling environment for sustainable enterprises. The work undertaken by the team builds on the 2007 ILC Conclusions on the Promotion of Sustainable Enterprises, which underlines the importance of a conducive environment for SMEs and describes some basic conditions that create opportunities for sustainable enterprises. The work is also based on the 2015 ILC Report on SMEs and Decent and Productive Employment Creation which summarises global evidence with respect to creating an enabling environment for sustainable enterprises and facilitating enterprise formalization.
Why EESE?Getting the enabling environment right is of key importance as there is limited value in promoting enterprise development for the creation of more and good jobs in an environment that is hostile to them. This is especially relevant for small and medium enterprises (SMEs) who are often hit harder by an unconducive environment than larger enterprises which is frequently referred to as a lack of level playing field. It is expected that an improvement of the enabling environment provides access to new services that will help SMEs perform better or reduce their cost of doing business leading to additional investment and creation of more and decent and productive employment. Thus, an enabling environment seeks to improve the economic prospects particularly of SMEs, overcome decent work deficits for workers and ensure that economic activities are environmentally sustainable.
What is EESE?It is a comprehensive and powerful ILO methodology developed to assess, advocate and reform the environment in which enterprises start up and grow. EESE:
- allows stakeholders to identify the major constraints hampering business development;
- fosters dialogue between workers, employers and the government to reach shared policy recommendations;
- supports the adoption of effective reforms;
- unlocks entrepreneurial potential, boosts investments and can generate overall economic growth, create better jobs and reduce poverty.
Examples of results
EUROPE, MontenegroSocial partners involved:Montenegrin Employers Federation (MEF)
Achievements: a Business Advocacy Agenda and Strategy (“The Five Business Killers in Montenegro”) has been developed. Two policy papers were drafted as a basis for advocacy.
Priorities identified: inadequate regulatory framework, access to finance, informal economy, corruption, skills mismatch on the labour market
Social partners involved: National Business Council of Honduras (COHEP)
LATIN AMERICA, Honduras
Achievements: a reform programme and action plan were elaborated. Based on the ILO assessment of the business enabling environment in Honduras and successful advocacy efforts of the Confederation of Honduran Employers, the mandatory use of notarial services when registering a new enterprise was eliminated resulting in a yearly reduction of registration cost of USD 5 Mio and giving an incentive to several thousand informal businesses to formalize.
AFRICA, MalawiSocial partners involved: Employers' Consultative Association of Malawi (ECAM), Malawi Congress of Trade Unions (MCTU), Ministry of Industry and Trade
Achievements: an action plan has been developed and is being implemented. As a concrete follow-up to the action plan a cooperation with Illovo Sugar (Malawi) Limited was initiated to assess the framework conditions for a youth entrepreneurship development programme in two districts where Illovo has sugar estates with a seasonal maximum of 10.000 workers. The tripartite action plan has also inspired UN Women to develop a collaboration with the ILO on women entrepreneurship development in Malawi.
Priorities identified: entrepreneurial culture; legal framework, specifically for MSMEs
ASIA, CambodiaSocial partners involved: Cambodian Federation of Employers and Business Associations (CAMFEBA)
Achievements: four policy papers have been drafted covering each of the below priorities identified
Priorities identified: workplace relations, skills, governance, and the legal and regulatory environment