ILO is a specialized agency of the United Nations

86th Session
Geneva, June 1998



Report of the Committee on Job Creation
in Small and Medium-sized Enterprises

Committee report

Submission, discussion and adoption

Original French: The PRESIDENT -- The next item is the report of the Committee on Job Creation in Small and Medium-sized Enterprises which you will find in Provisional Record No. 13.

I call on Mr. Djupvik, Reporter of the Committee, to submit the report.

Mr. DJUPVIK (Government adviser, Norway: Reporter of the Committee on Job Creation in Small and Medium-sized Enterprises) -- I have the honour to present to you the report of the Committee on Job Creation in Small and Medium-sized Enterprises. The report of the Committee, including the draft Recommendation, is before you in Provisional Record No. 13.

The International Labour Conference decided in June 1997 to place an item on general conditions to stimulate job creation in small and medium-sized enterprises on the agenda of the 86th Session of the International Labour Conference in 1998. The deliberations this year were the second discussion regarding the proposed adoption of a Recommendation on the subject.

The Committee had before it three Conference reports, which formed the basis for the discussions for the debate in the Committee. The Committee expressed its appreciation for the Office reports, which were helpful for an analysis of the issues involved. In our work and in our report, the Committee recognized the increasing importance of small and medium-sized enterprises. Not only are small and medium-sized enterprises particularly important for employment generation, they are also effective in mobilizing human, financial and material resources. Their linkages with other sectors help establish a more flexible and diversified economy.

The Committee recognized the important role of women entrepreneurs in small and medium-sized enterprises. It considered that such enterprises can be an instrument to facilitate the active participation of disadvantaged groups in economic activities. The Committee emphasized that the proposed Recommendation reflects the necessary respect for fundamental international labour standards, to ensure the creation of quality jobs in small and medium-sized enterprises.

Concerning the policy and legal framework required to promote job creation in small and medium-sized enterprises, the Committee members stressed the importance of creating a conducive framework and the development of an enterprise culture which favoured initiative and enterprise creation, productivity and harmonious industrial relations. In this context it emphasized the importance of tripartite dialogue.

The Committee members agreed on more specific guidelines for the development of effective support services for SMEs. These guidelines also identified the specific roles of employers' and workers' organizations and the importance of international cooperation.

I am pleased to note that the draft Recommendation is both comprehensive and forward-looking. I am also pleased to note that the committee's work was an excellent example of tripartite cooperation among Government, Employer and Worker members, and that the Recommendation was adopted by consensus.

In conclusion, I recommend to you for adoption the report and the draft Recommendation submitted by the Committee on Job Creation in Small and Medium-sized Enterprises.

Mr. JEETUN (Employers' delegate, Mauritius; Employer Vice-Chairperson of the Committee on Job Creation in Small and Medium-sized Enterprises) -- As the Employers' spokesperson of this Committee, it is a great pleasure for me to recommend the adoption of the Report of the Committee on Job Creation in Small and Medium-sized Enterprises and the draft Recommendation on this subject.

These documents are the result of lengthy discussions in a spirit of mutual understanding and constant dialogue that has taken place at the Committee level and has been attained by consensus. It has been a rewarding experience for all of us. I would like to thank the Chairperson, Mr. Pliszkiewicz who led the discussions ably and with much patience, and the Workers' spokesperson Mr. Appiah Agyei for the cordial and professional manner in which he directed our discussions.

I should also thank our distinguished Government representatives for their highly valuable contribution, the impact of which is indeed reflected in the proposed Recommendation. My thanks are also due to the memers of the Office for their valuable support and assistance that helped our deliberations, and to the interpreters for a job well done.

A word of thanks is due to my Employer colleagues for their useful contribution, guidance and unflinching support.

Job creation is one of the top priorities of most countries which are plagued with extremely high rates of unemployment. Unemployment on the scale that can be seen today in many developed and developing countries is a cause of growing concern and apprehension among all sections of society, not only because it is a waste of valuable human resources, but also because of its human social, economic and political dimensions. It is in this perspective that an overall flexible framework should help in the creation of an enabling environment that will have a boosting effect on savings, investment, the growth of SMEs and job creation, a propitious environment that will be a seedbed for entrepreneurship.

Any instrument we devise should be flexible, universally acceptable and administratively and economically feasible. I am pleased to say that the proposed Recommendation satisfies these criteria. These are important considerations because we want an instrument to be widely disseminated and widely used.

We are in favour of an instrument that will give an impetus to job creation. We have done our best to develop a Recommendation for the next millennium, for posterity, and for the prosperity of our peoples through job creation.

In the rapidly changing world environment, flexibility should be the order of the day. When we talk about policies, incentives, training, technology, productivity, quality -- all these things require adaptation on the part of governments, social partners, enterprises, and workers. There is no doubt that flexibility of an instrument will help to ensure a smooth adaptation in this era of globalization.

We are convinced that the proposed Recommendation is very comprehensive and very flexible. It recognizes the fact that enterprises, particularly SMEs, are the lifeblood of the economy, just as the family is the basis of society. Flexibility, competitiveness, quality and productivity are all-important determinants of the success of enterprises.

All these aspects are taken into account in the proposed Recommendation. It also takes into account the important role that the ILO has played and should continue to play with regard to the promotion of job creation by SMEs and the development of SMEs in general. The ILO has thus placed itself at the forefront of action to combat unemployment. It is concerned with the serious problem of unemployment and with the creation of jobs. It is concerned with devising an instrument that should be a landmark for all countries.

Earlier this year the ILO launched the ISEP programme which consolidates previous efforts made in small enterprise development. This initiative on the part of the ILO is timely and most welcome. We are sure that this Recommendation will contribute to the fulfilment of ISEP's objective and be just as forward-looking, innovative and flexible. In this respect we fully endorse the proposed Recommendation.

Shakespeare said that men are sometimes masters of their own fate. We now have a real opportunity to shape our destiny by working together in a true tripartite spirit. All of us can act in unison to promote job creation by SMEs which will, in turn, contribute to an improvement in the standard of living of millions of people worldwide.

Mr. APPIAH AGYEI (Workers' delegate, Ghana; Worker Vice-Chairperson of the Committee on Job Creation in Small and Medium-sized Enterprises) -- On behalf of the Workers' group of this Committee, I would like to express support for the adoption of this Recommendation concerning general conditions to stimulate job creation in small and medium-sized enterprises.

This Recommendation is particularly important because SMEs account for an increasingly large majority of the world labour force. So this Recommendation will have implications for the majority of the world's workers, and those workers need assistance.

In both the developing and the industrialized countries, the level of wages, job security, social protection and working conditions is lower in SMEs than in the large enterprises. Various labour protection rules do not apply in SMEs. The legal right to freedom of association, so basic to the ILO, has traditionally excluded SMEs in many countries, so depriving workers there of the right to organize and find representation to defend their interests. In many countries, even the applicability of national occupational health and safety standards varies widely according to the size of the enterprise. Meanwhile, SMEs are not large companies which employ the bulk of the world's 250 million child workers.

Therefore, the Workers' group took on its starting point in their discussion of this instrument, the requirement that this Recommendation should make a decisive contribution to improving basic working conditions in this sector.

I am glad to say that we were able to persuade the other members of our Committee of the importance of these considerations, and I would like to take a moment to draw the attention of this 86th Session of the International Labour Conference to some of the most important aspects of this Recommendation.

Its most important principle is absolutely equal treatment of workers in small and large enterprises. This is emphasized in Paragraph 61(b) concerning policies for productive and sustainable employment and adequate social conditions, which calls on ILO Members to ensure the non-discriminatory application of labour legislation in order to raise the quality of employment in SMEs.

This particular aspect requires follow-up by governments in a range of other areas, the most important being freedom of association. Governments should examine their legislation with a bearing on trade union rights, in line with Conventions Nos. 87 and 98, and should, if necessary, revise it to ensure the full application of freedom of association for workers in small companies.

Government action to improve conditions for workers in SMEs would also apply, of course, to areas such as non-discrimination against women, and all other aspects concerning the terms and conditions of employment.

We would further like to draw your attention to two specific references to child labour, one in the Preamble and one in Paragraph 61(c). These call on ILO Members to eliminate child labour on the basis of Convention No. 138.

We would particularly like to express our appreciation for the strong support of the Employers' group in adopting this clear and effective reference to child labour.

Paragraph 8 of this Recommendation was introduced at the request of the Workers' group and refers to the Asian financial and economic crisis. It states, and I quote, "In times of economic difficulties, governments should seek to provide strong and effective assistance to small and medium-sized enterprises and their workers." We believe that this Paragraph helps to demonstrate the capacity of the International Labour Organization to respond rapidly and effectively to changing world developments.

Finally, we would like to mention the last Paragraph of this Recommendation. This seeks to ensure consistency of application of policies between the ILO and other organizations.

It states that "Members should promote the contents of this Recommendation with other international bodies.". We believe that when ILO Members implement this Recommendation, this will help to make other institutions, like the World Bank, become increasingly influenced by the strong social content of the policies of the ILO.

What is important now is the follow-up to this instrument. Although this is a Recommendation, and not a Convention, we trust nonetheless that all the Government members of the ILO will give this the serious consideration it deserves, and will implement its proposals rapidly and effectively.

Finally, I would like to extend the thanks of the Workers' group to Mr Jeetun, the Employers' Vice-Chairman, for ensuring a courteous and instructive debate; to the many Government members of this Committee for their many helpful suggestions to help our Committee reach consensus and move forward; to the ILO Office for their efficient assistance in our deliberations and last, but certainly not least, to the Chairman of our Committee for making a very considerable personal contribution to the attainment of a very successful and balanced set of conclusions.

With these words, I would like to commend this Recommendation for adoption by this 86th Session of the International Labour Conference.

Original French: Mr. PLISZKIEWICZ (Government adviser, Poland; Chairperson of the Committee on Job Creation in Small and Medium-sized Enterprises) -- The debate within the Committee on Job Creation in Small and Medium-sized Enterprises was both constructive and productive. In this connection I should like to recall the sizeable amount of work carried out during the discussions last year. I should like to highlight the work carried out by the Office in preparing the series of reports and in providing documentary support. This made the work of the Committee a great deal easier.

During our meetings, the discussion remained at a high level both in technical terms and as regards the enduring spirit of tripartite social dialogue.

I should particularly like to thank my two Vice-Chairpersons, Mr. Appiah Agyei, representing the Workers, and Mr. Jeetun, representing the Employers. They showed great flexibility in seeking viable solutions to overcome the difficulties that cropped up during our work. I was impressed by their skill, tripartite spirit and ability to outline their groups' opinions.

Obviously, I should also like to extend my thanks to the members of their groups who were less visible during our Committee's sittings but who made a great contribution to the final outcome.

I should also like to pay tribute to the representatives of Governments who contributed enormously to the Committee's achievements. Many difficult situations were resolved thanks to the ability, foresightedness and drafting skills of the Government group. Some members of the Government group are here in the hall, and I would like to thank them for their work.

Once again, I would also stress the overwhelming desire to conclude our work successfully and the spirit of social dialogue exhibited by all members of the Committee.

The best way of assessing the quality of our work is to examine its fruits, to wit, the Recommendation adopted by the Committee. I am proud to say that this instrument is a truly unique reflection of principles and values which counterbalance a whole range of both qualitative and quantitative concerns in terms of job creation in small and medium-sized enterprises. It provides useful guidelines on a whole series of important issues related to job creation in small and medium-sized enterprises. It also provides a sensible balance between general principles, flexibility and detailed targets.

The Recommendation does not give any definition of small and medium-sized enterprises. It is up to member States to reach such a definition in consultation with the most representative employers' and workers' organizations based on appropriate criteria and taking into account the economic and social conditions which prevail in the given countries. The Recommendation emphasizes the link between economic policy, including an active employment policy, non-discriminatory application of labour legislation, and respect for national and international standards aimed at eliminating child labour.

The instrument then goes on to deal with issues of developing a business culture, establishing an efficient services infrastructure, defining the respective roles of employers' and workers' organizations and stresses the importance of international cooperation.

I firmly believe that this instrument will help member States in their efforts to stimulate the creation of jobs, high quality jobs, in small and medium-sized enterprises. I think it will, in so doing, help us cope with the serious employment problems which they are often faced with.

The world, which is now in the throes of globalization, interdependence and competition, needs to take innovative measures to create jobs. I think we can be proud of having drawn up an instrument which can be extremely effective in helping us meet the needs of the twenty-first century.

This naturally brings me to the question of the future because the ultimate success of our work will be judged by how far the principles and values contained in the Recommendation are applied. It is, I think, up to us to ensure that this Recommendation is implemented in our respective countries. I should also like to ask the ILO to ensure that the work which went into the adoption of our Recommendation is followed up as specifically as is possible.

I am pleased to hear that the International Labour Organization has just launched the International Small Enterprises Programme, better known by its English acronym, ISEP, which, I feel, is a useful way for the International Labour Organization to support the application of our Recommendation internationally. I would ask everyone, therefore, to support fully the Office's efforts in this respect.

In conclusion, I should like to emphasize that job creation in small and medium-sized enterprises is a problem of that concerns all Members of the ILO in developing and industrialized countries. This has been in evidence throughout the work of our Committee.

Original French: PRESIDENT -- I now open the general discussion on the report.

Mr. PETERSON (Government delegate, United States) --The creation and promotion of good jobs depends upon a business environment in which successful firms can grow. The proposed Recommendation concerning general conditions to stimulate job creation in small and medium-sized enterprises contains many useful ideas which can further strengthen the expansion of SMEs.

We are pleased to support its adoption and believe that allowing such firms to grow is crucial to expanding employment opportunities. The processes of globalization have created new opportunities for SMEs. Fields of human endeavour as diverse as medicine, environmental protection, agriculture, entertainment, transportation, material science and information technology, to name but a few, are moving ahead with astonishing speed. It is a world of enormous change and provides unprecedented opportunities for small and medium-sized enterprises willing to compete in the global market-place which has literally become as near as our own backyards.

We have found that in the United States successful small and medium-sized enterprises generate substantial job growth. A small number of successful SMEs grow very rapidly, but SMEs also fail at a disproportionate rate and social safety nets play an important role in assisting workers during times of need.

A vital SME sector plays a critical role in the economy as the crucible from which new innovative firms emerge. They are the risk-takers, entrepreneurs and builders of a new economy. They believe that Silicon Valley is not a place but a state of mind; that in the next ten years new entrepreneurial companies will create US$100 billion in new wealth in the global economy. They believe that the history of technology has been that when something is shown to be possible in principle, it becomes reality through the innovation and entrepreneurship of the creative mind.

SMEs are often the source of new ideas, technologies and methods having far-reaching implications for the business environment. Albert Einstein was once asked what the difference was between him and the average person. He said that if you asked the average person to find a needle in a haystack, the person would stop when he or she found a needle. He, on the other hand, would go through the entire haystack looking for all the possible needles. There are often such Einsteins in SMEs exploring the boundaries of contemporary science and technology.

Successful SMEs recognize that new inventions are products that often do not succeed in the market for which they were originally designed and are flexible enough to make the necessary adjustments. Peter Draker tells the story of a man by the name of John Wesley Hyatt who invented the roller bearing. He made up his mind that it was just right for the axles of railroad freight cars. Railroads traditionally stuffed the wheels of their car with rags soaked in oil to handle the friction. The railroads, however, were not ready for radical change. They liked their rags, and Mr. Hyatt went bankrupt trying to persuade them otherwise. When Alfred Sloane, the man who later built General Motors, graduated from MIT at the head of his class in the mid-1890s, he asked his father to buy him Hyatt's small bankrupt business. Unlike Hyatt, Sloane was willing to broaden his vision of the product. It turned out that the roller bearing was ideal for the automobile which was just coming onto the market. In two years, Sloane had a flourishing business and for 20 years Henry Ford was his biggest customer. As they say, the rest is history.

Thomas Edison's invention of a practical system of lighting involved combining wiring in parallel circuits with high-resistance filaments in the bulbs; two things that were not considered possible by conventional thinkers, in fact, were not considered at all because of an assumed incompatibility. Because Edison could tolerate the ambivalence between two incompatible things, he could see the relationship that led to his breakthrough. Such innovation, creativity and entrepreneurship have become the hallmarks of an enterprise culture fully endorsed in the Recommendation we have before us.

The synergy induced by an entrepreneurial culture is remarkable. There would probably have never been a laser were it not for the "maser" Microwave amplification by stimulated emission of radiation, as Charles Townes called it in 1954. Working at Colombia University, he and the graduate student, James Gordon, built a device in which a generator emitting radiation at microwave frequencies excited a beam of ammonia molecules. On 8 April 1954, Gordon walked into Townes' weekly physics seminar and reported that he had achieved their goal: when the excited ammonia molecules relaxed, they emitted microwaves at a specific identical frequency. In 1957, Townes teamed up with his brother-in-law, Arthur Shallow, of Bell Labs, to design a new version. Their "optical maser" would amplify light, not microwaves, producing a very narrow beam of a single frequency -- the laser was born. Now lasers cut tissue in surgery, vaporize tumours, reattach torn retinas, erase birthmarks, read price codes, play music encoded on a CD, read data on a

CD-ROM and measure continental drift. It is a remarkable age of discovery, invention and human progress. And notice in this example, the close connection between an environment of freedom and individual initiative, a supportive university environment and the proximity of larger centres of research and experimentation -- all significant elements in the process of innovation and creativity.

During the past year, the US version of an enterprise culture saw the nation's economy turn in its best performance in a generation. Over the course of 1997, output growth in job creation remained vigorous while inflation declined. Real gross domestic product (GDP) grew 3.9 per cent and employment rose by 3.2 million at an average rate of 260,000 jobs per month. The unemployment rate dropped below 5 per cent for the first time in 24 years, yet core inflation averaged only 2.2 per cent -- its lowest for more than 30 years. This exceptional economic performance occurred during a period of historic deficit reduction: declining from US$ 290 billion in the 1992 fiscal year to US$ 22 billion in 1997. A principal force behind the current expansion has been private fixed investment. Almost none of the growth in GDP over this expansion has come from increased government spending, whereas close to one-third has come from greater private fixed investment.

We have also found that in the United States women-owned businesses have been among the fastest-growing sectors of the economy in recent years. Some have even observed that women are leading an entrepreneurial revolution.

Let me say in conclusion, we are especially encouraged by the Recommendation's recognition of "the need for the pursuit of the economic, social, and spiritual well-being and development of individuals, families, communities and nations" as the setting for the proposals before us. We are pleased to join the consensus supporting acceptance of this far-reaching Recommendation and believe that within its principles are to be found the seeds of employment creation, personal fulfilment and the prosperity of nations.

The CLERK OF THE CONFERENCE -- There is a correction to the English version, on page 13/4 of the report. Paragraph 21, fifth line, should read "SME", instead of "SM7E".

Original French: The PRESIDENT -- Let us now proceed to the adoption of the body of the report. May I take it that paragraphs 1 to 207 are adopted?

(The report is adopted -- paragraphs 1 to 207.)

Proposed Recommendation concerning general conditions to stimulate job creation in small and medium-sized enterprises

Original French: The PRESIDENT -- We now move on to the adoption of the proposed Recommendation concerning general conditions to stimulate job creation in small and medium-sized enterprises. May I take it that the proposed Recommendation is adopted as a whole?

(The proposed Recommendation is adopted as a whole.)

In accordance with article 40, paragraph 7, of the Conference Standing Orders, the proposed Recommendation will be submitted to the Drafting Committee of the Conference for the preparation of the final text. Tomorrow morning there will be a record vote on the Recommendation.

I would like to thank the Chairperson, the Vice-Chairpersons, the Reporter, Mr. Peterson who has come up with some very interesting ideas, and the whole Committee for the excellent Recommendation which they have prepared, and which I am sure is going to be an asset to the programme of the Organization.

Updated by VC. Approved by RH. Last update: 26 January 2000.