Volume 1 Cedric - revised luca Final - RUIG-GIAN

medium-sized companies employing 24.8 per cent of the workforce. Only 0.3 per cent ofthe active companies were large (over 250 employees), but still employed 34.3 per cent ofthe total workforce. The largely nascent feature of the SME sector in the country alsotranspires in the sample considered in our survey, whereby 33 out of 36 enterprises werefounded in the 1990s.The SME sector accounts for 43 per cent of the national revenue. 106 SMEs areconcentrated principally in the trade sector (52 per cent), followed by the mechanizedindustry sector (13 per cent), 6 per cent are involved in craft production and 4 per cent inthe tourism industry. The SME sector in the country is characterized by low risk and lowcapital-intensive operations. To the eyes of several commentators, this rapid developmentof the sector has yet to be consolidated, as a large number of businesses are barelysurviving and bankruptcy rates remain high as compared to European standards.5.1.2. Structural challengesThe macro-economic context in the FYROM is marked, to date, by limitations andconstraints typical of transition economies. Two features are discussed below as pertinent toSME sector development.Firstly, the establishment of a market-oriented system of governance is still a challenge.While the body of laws is now largely in place, the negative effects of an inadequately andpoorly implemented legal and regulatory framework still impair the development of formalprivate sector activity, and has engendered a rise in the informal sector. 107 Such a rapid andlarge growth of the private sector calls for a solid legal, regulatory and policy framework, thatis implemented and enforced transparently. Furthermore, policies are often designed without aclear strategy of implementation, with a lack of transparency and with insufficientcoordination between various governmental agencies, a state of affairs that communicatesunclear or contradicting signals to the SME sector.The financial infrastructure in Macedonia, as in other transition economies, is anotherelement hindering the development and consolidation of the SME sector. The majority ofbanks still experience difficulties in guiding savings toward investment in the private sector,and especially towards small businesses, resulting in high costs for productive loans. Theextension of credits to small businesses has also been hampered by the fact that newly-createdor privatized banks often face liquidity constraints, resulting from insufficient equity capitalprovision, inherited liabilities from the central planning era and/or from massive repaymentdelays. In addition, banks have typically followed conservative strategies with respect to thefinancing of private enterprises (see Section 4.3 of this study). 108 As far as non-intermediatedaccess to capital, other limitations do exist. The stock exchange in Macedonia is a recentinstitution founded in 1995. There are reported problems in non-disclosure of all relevant dataand unreliability of financial reports. 109 The problem of financial report accuracy is a directresult of the low level of institutional infrastructure, disregard of international accountingstandards and non-existence of rating agencies. 110 Such a situation obviously hampersattractiveness of the country to foreign investments.106 Ministry of Economy of the Republic of Macedonia, 2005, http://www.gov.mk/English/Tela.htm107 Smallbone, David, ‘Institutions, Governance and SME Development in Transition Economies’ Expert meetingon Good Governance for SMEs 1 to 2 April, 2004, Geneva. http://www.unece.org/indust/sme/papers.html108 Smallbone, David, ‘Institutions, Governance and SME Development in Transition Economies’ Expert meetingon Good Governance for SMEs 1 to 2 April, 2004, Geneva. http://www.unece.org/indust/sme/papers.html109 ibid110Eric, Dejan, ‘Basic Corporate Governance Problems in Some South-Eastern European TransitionalEconomies’. Expert meeting on Good Governance for SMEs 1 to 2 April, 2004, Geneva.http://www.unece.org/indust/sme/papers.html125