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Policy and Legal Environment for the Growth of the SME Sector in Bulgaria

1. General Orientations

The Policy Forum aims to identify those factors that will improve the economic and legal environment for the growth of the small and medium sized enterprise ("SME") sector in Bulgaria. The forum has brought together some of the country’s most influential individuals, representing various institutional and independent bodies, to discuss the constraints that are hindering the development of the SME sector and to propose and review various recommendations to overcome these obstacles.

The paper attached hereto is a compilation of those recommendations contributed and discussed at the forum. By preparing recommendations in advance of forum meetings based on the topics to be discussed, participants were able to provide a greater number of feasible recommendations for the development of the SME sector. In addition, by discussing the recommendations in an open forum setting, immediate feedback was provided for proposals and it also created wide support and acceptance of the report.

2. The Background Paper

The background paper is broken into three main sections. Section 1 discusses the actions needed to improve the economic climate to support the SME sector. Section 2 discusses the actions needed to improve the institutional and legal environment for SMEs. Section 3 describes a monitoring system to determine whether or not the proposed actions from Sections 1 and 2 have been implemented with the desired results obtained. Each section is further divided into ACTION LINES. BACKGROUND information is given under each Action Line followed by its OBJECTIVES. Then, specific ACTIONS are described to achieve the objectives of the Action Line.

3. The Importance of the SME Sector

The success of Bulgaria’s SME sector is essential to the development of the economy as a whole. Foremost, SMEs are labor intensive and capable of creating many new jobs at low costs. These jobs will be necessary to absorb new unemployment created by restructuring former State Owned Enterprises ("SOEs"). Among other important SME contributions to the economy are:

  1. SMEs service the needs of larger corporations and provide services that facilitate business. One role that SMEs can play is as suppliers to larger companies thus contributing to the external competitiveness of these firms.
  2. SMEs are a source of innovation on the basis that they are more flexible, more dynamic and more sensitive to shifts in demand than larger firms.
  3. SMEs contribute as "Seed-Beds" from which large companies can grow.
  4. SMEs will provide an additional market for the purchase of second-hand equipment from SOEs.
  5. SMEs train entrepreneurs needed to develop the private sector and foster private investment.

As a result of these factors, the larger and more developed the SME sector, the greater the SME contribution to the growth of the economy.

Therefore, it is imperative that during this time of concern, that the Bulgarian authorities take into consideration the role of SMEs in the economic development of the country.

The product of this policy forum will provide a guideline for officials to adhere to when developing the overall plan for the country so that the proper recognition of the important role of SMEs in the development of the Bulgarian economy is included.

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