Small and medium-sized enterprises (SMEs) are major contributors to job creation and inclusive economic growth worldwide. In particular, dynamic and growth-oriented SMEs integrated into global value chains are key to boosting productivity, innovation and competitiveness. In the seven EU pre-accession economies (Albania, Bosnia and Herzegovina, Kosovo,* the Former Yugoslav Republic of Macedonia, Montenegro, Serbia, and Turkey), SMEs represent the vast majority of firms, account for three-quarters of total employment and contribute to over 60% of total private-sector value added. As the governments of the region move towards higher levels of EU accession and market integration, the South East European (SEE) economies have been undertaking significant efforts to converge towards best policy practices and global standards.

The development of a dynamic and vibrant SME sector is of paramount importance for the seven EU pre-accession economies: Albania, Bosnia and Herzegovina, Kosovo, the Former Yugoslav Republic of Macedonia, Montenegro, Serbia, and Turkey. The region’s productive structure is predominately composed of small and medium-sized enterprises (SMEs), which on average contribute to 75% of total employment and over 60% of total private-sector value added. Nevertheless, important challenges remain to transform the SME sector into a driver of economic growth and employment and to address persistent structural challenges such as high unemployment rates and the per capita income gap. However some of the conditions to leverage growth are already in place.

The SME Policy Index has been jointly developed by the Organisation for Economic Co-operation and Development (OECD), the European Commission, the European Training Foundation (ETF) and the European Bank for Reconstruction and Development (EBRD) as a benchmarking tool for emerging economies to monitor and evaluate progress in SME development policies (see Annex B). The SME Policy Index is structured around the ten principles of the Small Business Act for Europe (SBA; see the Policy Framework and Assessment chapter). The SBA provides for a wide range of pro-enterprise measures to guide the design and implementation of SME policies based on good practices promoted by the EU and the OECD.

The SME Policy Index is a benchmarking tool (Box 0.1) to help emerging economies monitor and evaluate progress in policies that support small and medium-sized enterprises (SMEs). The index was developed in 2006 by the OECD in partnership with the European Commission, the European Bank for Reconstruction and Development (EBRD), and the European Training Foundation (ETF). The South East European Centre for Entrepreneurial Learning (SEECEL) joined the SBA assessment in 2015 (these make up the “partner organisations”; see Annex C). It has been applied to several regions which fall under the Enlargement Policy and the European Neighbourhood Policy: the Western Balkans (in 2006, 2009 and 2012, when Turkey was included for the first time); the Easter Partner (EaP) economies (in 2012 and 2016); and the Middle East and North Africa (in 2008 and 2014). In addition, the SME Policy Index framework and methodology were adapted and applied in the ten Association of Southeast Asian Nations (ASEAN) member countries for the first time in 2014 (in co-operation with the ASEAN Secretariat and the Economic Research Institute for ASEAN and East Asia)...

The SME Policy Index assessment framework aims to assess, independently and rigorously, SME-related policy settings and reforms against European Union (EU) and international best practice, and to provide guidance for policy reform and development.

The purpose of this section is to provide background information on the structure and recent economic trends of the economies covered by the report and profile the SME sector in each one.