The lead sentence from Dumas’s Three Musketeers, symbolising team work and cooperation towards a common goal, came into my mind at our recent event, the CEE Supply Chain Dialogue, organised with the participation of Hungarian, Polish, Croatian, Czech, Romanian, Serbian and Slovenian government organisations, investment agencies, and export banks. Our aim with the event was to discuss opportunities to better connect SMEs in CEE to the global economy via GE’s supply chain, and ways in which GE can catalyse and support this process. Clearly a case of ‘all for one and one for all.’
For GE the objective is clear: we aim to extend our recent procurement volume of 1.7 billion US dollars massively by 2020 by better integrating all of our 6,500 SME partners as well as integrating new ones into our supply chain.
The importance of SMEs is unquestionable not only for GE, but also for all economies around the globe. GE, well embedded in emerging Europe, is here, with its massive purchasing power, innovative products and technologies, and access to global markets, and we are ready to increase our purchase volume and partnership with more SMEs.
This is where the one, GE, needs to join forces with the all, the SMEs, in order to remove the obstacles in our way. Let’s now take a look what these challenges are, and what solutions we have identified.
Limited access to capital
One of the obstacles is the alpha and omega of all businesses: access to capital, in which regard we live in a controversial world. Thanks to the abundance of liquidity in the banking system, the financial sources are there, but financial institutions are not willing to bear the risk and provide a bridge between SMEs and multinational companies. On the other hand, SMEs in emerging Europe suffer from scarce visibility and knowledge about EU programs and funding, as well as the complexity of the documentation needed to apply for EU or government support.
One way to address that challenge might be a ‘prequalification label’ for SMEs created by multinational companies in order to facilitate the efforts of SMEs to access financing. This label could indicate to their banks that they are stable, trusted partners of their customers. Structural wise, I think that government institutions (ministries, development banks, and the chambers of commerce) still have some potential to ease the process by establishing a one-stop-shop to navigate SMEs through different possible sources of financing.
We also need to ask if everything has been done to feed the order pipeline for SMEs and here I think it’s worth looking more closely at the investment plan for Europe, which is supposed to unlock public and private investments of at least 315 billion euros by 2018, supporting access to risk financing for companies of all sizes. At least a quarter of the European Fund for Strategic Investments (EFSI) of 15 billion euros shall be made available to SME projects via the ‘SME Window,’ provided through financial intermediaries such as banks or venture capital funds. The role of the National Investment Agencies in cooperation with local financial institutions will be crucial in the implementation of the programme, which is definitely an appropriate platform to strengthen the SME sector in emerging Europe.
Limited access to partnership
As for institutions, it is also about how we can further leverage the efficiency of public-private partnerships (PPP). Reviewing the number of different PPP models GE is running across emerging Europe, I feel the common sense of all stakeholders that the early phase research IP (intellectual property) policies, risk taking management as well as the creation of a regulatory framework that supports PPP investments in complex and long-term arrangements might be better facilitated. What is needed is clarity in legislation regarding IP including the possibility to share IP between companies for joint innovation and R&D projects.
Apart from the regulatory framework however, the adaptation of digital technologies cannot be emphasised enough when thinking of increasing the competitiveness of SMEs and national economies. I love the idea of a digital one-stop-shop database for each country with information regarding SME profiles, expertise, equipment and installed base, which is accessible to public and private entities.
Representing GE, leading the way in developing and applying digital technologies, I cannot emphasise enough how crucial the access to disruptive technologies is to increase the competitiveness of SMEs. Understanding the social, economic and regulatory implications of six disruptive technologies such as autonomous cars, additive manufacturing (3D printing), blockchains, wearable technologies, unmanned aerial vehicles (UAVs) and robots will be needed in order to take full advantage of the digital opportunities and also to catalyse the R&D activities of the SME sector.
Access to Global Markets/Raising Competitiveness of SMEs
The need to develop SMEs is unquestionable. In OECD countries, SMEs account for 99 per cent of all companies, 70 per cent of employment, and 50 per cent of exports, while in CEE the SME sector accounts for only 45 per cent of employment and 33 per cent of exports. All this output, and these results are, however, almost exclusively via large multinational companies, which clearly shows that integration with large companies is essential for the success of SMEs, and local economies as well.
So, finally it will be about connecting SMEs to large multinational firms to serve two equally important purposes.
First, by ensuring successful pre-selection of suppliers in case of large projects, ‘emerging Europe for emerging Europe supply’ can be realised when a regional SME – via GE’s supply chain for example – participates in another emerging European country’s project. Second, partnering with companies like GE, aiming to pull up an ecosystem of SME suppliers, academic partners, and employees to a higher level of technology and productivity, offers SMEs direct access to global markets, thus an opportunity to extend their market presence and to increase competitiveness.
As a CEE-hearted global citizen, I strongly believe that these examples demonstrate that whichever road we take, GE needs emerging Europe and emerging Europe needs GE to grow and to increase its competitiveness. This can only be done if we collaborate. In other words: All for One, and One for All.
The views expressed in this opinion editorial are the author’s own and do not necessarily reflect Emerging Europe’s editorial policy.
Main photo: courtesy of IMDB.com