Overview of the SME sector in Lebanon and the Role of
the Enterprise Team at Ministry of Economy and Trade
Training of Trainers Program on Effective Intellectual Property Asset
Management by Small and Medium-Sized Enterprises (SMEs)
Beirut
June 10, 2013
Zeina El Khoury
Head of Enterprise Team
Ministry of Economy and Trade
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SMEs, Startups, Entrepreneurs are the buzz words these days. What is an
SME? There is no universal definition of SME; different countries follow different
criteria, but all agree that they are enterprises with considerable growth potential
Definition of SMEs
Micro Small Medium
10 employees 50 employees 250 employees
2 M Turnover or 10 M Turnover or 50 M Turnover or
European Union 2 M Balance Sheet 10 M Balance Sheet 43 M Balance Sheet
20 employees 100 employees 500 employees
Unites States
5 employees 15 employees 50 employees
Egypt
Manufacturing SME Service SME
300 employees 200 employees
South Korea
SME
300 employees
Singapore <100 M Turnover
Lebanon
? ? ?
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SMEs contribute substantially to their economies and play a central role in
enhancing economic dynamism, job creation and innovation
SMEs Contribution to Economies
I Generate employment
II Increase output with value added
III Increase household income Increase Growth
IV Increase firms and national competitiveness and productivity
V Spur innovation
VI Increase exports
VII Generate fiscal revenues
Decrease Poverty
VIII Create competition
IX Nurture entrepreneurship culture including that of women and youth
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Worldwide, they represent more than 95% of enterprises, employ around 68% of
developed countries working population, their share of exports amounts to 37% ,
and they contribute to 53% to their GDP on average
SMEs Contribution to Employment, Exports and GDP
SMEs share of Total Workforce SMEs share of Exports SMEs contribution to GDP
Korea 88% China 69% Spain 64%
Germany 79% China 58%
Spain
69%
Spain 79% Japan 57%
China 75% Germany 56% France 54%
Japan 70%
UK Germany
46% 53%
France 61%
USA 52%
France 42%
Malaysia 59%
UK
51%
USA 56% Korea
39% Korea 50%
UK 54%
USA 22% Singapore
Singapore 52% 40%
Egypt 33%
Lebanon 51% Malaysia 19%
UAE 42% Malaysia 32%
Singapore
16% UAE
Egypt 38%
30%
KSA 25% Japan 6% KSA 25%
68% 37% 53%
Developed Countries Developed Countries Developed Countries
UNESCSAP, OECD, SBA country factsheets, CAS 1996
6/9/2013 4
Given their importance and potential, most countries have embedded SME
development in their growth strategies, a plan the Government of Lebanon is equally
adopting in its Economic and Social Reform Action Plan 2012-2015
Economic and Social Reform Action Plan Pillars
1 Public Debt Management and Fiscal Reform
The main focus of the government action
is to support SMEs by:
2 Private Sector Development
Strengthening and upgrading the
3 Infrastructure Rehabilitation
business legal framework
4 Human Development
Facilitating trade and enabling
competition
5 Regional and Municipal Development
Fostering growth and increase access
6 Institutional and Administrative Reform
to finance of SMEs
7 Miscellaneous Enablers
Facilitating the creation of new
businesses and spurring
competitiveness
Economic and Social Reform Action Plan, Presidency of the Council of Ministers, April 2012
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This is not new for the Lebanese Government in general, and for the Ministry of
Economy and Trade in particular, who have undertaken a number of policies and
initiatives to support SMEs during the last decade
Policies and Initiatives Targeting the SME Sector
Introduced Interest rates subsidies for investments in productive sectors
Established the loan guarantee agency Kafalat
Attracted International Donor such as IFC, EIB, AFD that provide cheap and long term financing for SMEs
Established an investment authority IDAL that offers export supporting services and business linkages for SMEs
Created 3 business development centers that offer different support services for SMEs and entrepreneurs
Berytech, BIAT, South BIC
Established units and projects within Ministries to support SMEs, improve the quality of their goods through
quality control and standardization, modernization of production and provision of research (SME Support
Unit, Qualeb, LIBNOR, ELCIM, IRI etc)
Introduced a range of tax incentives and exemptions, most recently the reduction on profit taxes of export
oriented industrial firms (waiting for parliament ratification)
Provide financial support to encourage participation in fairs and exhibitions
Secured a loan from the World Bank to create a fun at Kafalat in order to provide early stage equity
financing and concept development grants for SMEs and entrepreneurs (waiting for parliament ratification)
Introduced innovation vouchers to stimulate the development of innovative concepts
Ongoing
Committing to adopt an ambitious legislative and regulatory reform to improve the business environment in
Lebanon under the Improving Business Environment Initiative IBEL (bankruptcy law, secured lending,
competition law, code of commerce etc)
Developing economic zones (Tripoli Economic Zones)
6/9/2013 6
Despite the existence of a range of public initiatives and other private sector and civil
society initiatives, the SME sector still faces challenges and performs below its
potential
Challenges Facing the Lebanese SME Sector
Political and security issues
Macroeconomic uncertainty and increasing production costs
Unreliable Infrastructure
Limited access to finance particularly equity financing and high levels of collateral
Limited levels of compliance with international standards, limiting access to markets
Weak investments in research and development
Legal, regulatory and administrative inefficiencies (costly, timely and cumbersome)
Weak rule of law and enforcement, including IPR protection
Persistent mismatch between the skills acquired at university and the requirements of business
Limited awareness of different support initiatives and minimal coordination between stakeholders
Large number of SMEs operating in the informal sector
Limited availability of evidence and statistics for the sector
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To overcome those, the Enterprise Team with related stakeholders, have embarked in
formulating a COMPREHENSIVE SME SUPPORT STRATEGY, building on the
drivers of SME development, where IPR and enforcement mechanisms are strongly
present
Framework for SME Development Drivers
Institutional Structure
Political
Stability
Regulatory Framework
and Enforcement
Macroeconomic
Environment
Entrepreneurship
Support
Programs and
Institutions
Infrastructure Policy Efficiency Drivers
Business Environment Drivers
Statistics and Research Firm Competitiveness Drivers
Regular and Consistent Data
and Research Core Driver
6/9/2013 8
Where are we from completion and what have we done so far?
SME Strategy Formulation and Implementation
1 2 3 4
Policy and
Assessment of the Monitoring and
Initiative Implementation
Current State Evaluation
Formulation
Took stock of already Transformed challenges
existing initiatives into prospect initiatives
Track and report
Assessed Lebanons Consult with progress of initiatives
standing in Business stakeholders, prioritize
Environment indicators initiatives and secure Implement initiatives as Identify potential
buy in per agreed-upon action improvement
Defined drivers for SME plans and timelines opportunities
development Assign owners for
initiatives Adjust implementation
Assessed drivers, accordingly
benchmarked SME Agree on timelines and
performance, and implementation plans
identified challenges
6/9/2013 9
Last month, in cooperation with the Presidency of Council of Ministers, we organized
a national workshop to discuss the challenges and possible solutions. The workshop
resulted in developing a proposal on the immediate needed next steps
Next Steps Needed
The taskforce will be responsible of
prioritizing the strategys initiatives
1 Establish a National SME Taskforce and developing a detailed action plan
for each with measurable targets and
specific deadlines
The observatory would be in charge of
collecting and disseminating data,
2 Establish an SME Observatory
conducting surveys and monitoring
the developments of the sector
6/9/2013 10
The workshop was the first milestone in the process of building the strategy.
The Enterprise Team will continue its efforts in spearheading the formulation of the
SME sector strategy!
To stay tuned on our progress and other activities, please visit our section at the
Ministrys website and/or contact us.
Zeina El Khoury Nathalie Wehbe
Head of Enterprise Team SME Assistant
[email protected] [email protected]
Thank you for your attention!
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