Competing in the Single Market - SMEs and ... - Erhvervsstyrelsen

Figure 4: SMEs Share of Employment and Value Added, 1989-98Source: World Bank (2002)Despite some early reforms by the post-communist countries in the early 1990s (EuropeanCommission (2002e)), there are still significant structural barriers to SME development in thetransition economies as pointed out by the European Commission in its 2003 Implementation Reporton the European Charter for Small Enterprises in the Candidate Countries :Small enterprises in the Candidate Countries remain to a large extent underdeveloped. Newenterprises are mainly created in the traditional service sectors and there are only few innovativecompanies. The life cycle of companies is shorter than in the EU and the methods of the economictransition towards an open economy have not always been favorable to new and small enterprises.European Commission (2003j, p.18)Thus, although EU accession offers SMEs new export opportunities, it will also bring increasedcompetition in domestic markets (see also Box 5). While the more stringent quality and technicalstandards, coupled with an increase in the number of players, should lead to generally morecompetitive companies in the Accession Countries in the longer run, SMEs are currently at adisadvantage. The disproportionate effect (relative to larger enterprises) of compliance costs meansthat SMEs will have a more difficult time in capitalizing on the opportunities afforded by marketintegration. Experience from Western Europe suggests that the main market integration effects will36