In its brief but contorted metamorphosis, the mythology of transition has brought about several figures very popular, but just as difficult to localise concretely. One of these omnipresent figures is the Small and Medium Enterprise (SME). It periodically receives loans from the World Bank or the European Union and successively loses various accounting facilities, business incubators are built for it, and it is expected to produce the 1.3% economic growth. According to statistics, SMEs together account for 98% of private companies' capital and provide 60% of the budget revenues.
But this image would be incomplete without another, complementary group, less homogenous in public perception and therefore less consequential, the big enterprises - BE. BEs suffer in the collective perception from a fragmented image - there are state BEs, which consume a lot of energy, there are foreign BEs, resulted from privatisation or a multinational company's entry, and, a rara avis, there are the domestic private-capital BEs.
The standard scheme by which SMEs would help the Romanian economy prosper in the following years was to absorb the workforce freed by the energy-intensive state BEs and increase their output and share in the GDP - largely sustained by exports.
The inaccessible foreign market
While it is theoretically feasible that excess labour could be absorbed, the second hypothesis, that of exports, stumbles over BEs' incompetence on the international market. Today, Romanian exports still pass through the hands or companies of the few foreign trade specialists trained in specialised companies or in the great state enterprises back in the times when Romanian foreign trade flourished - the '80s. Besides the relative inflexibility of the exports structure resulted from the use of already acknowledged schemes, it also implies limited SME access to the foreign market - due to the unavailability of qualified personnel. The only exceptions are the new sectors, such as the software industry, but they still account for minor shares of the economy's structure, although seen as a hope.
The domestic industrial market - small or picky
Without immediate access to the international market, SMEs still have the domestic market. In the tradition of Western states, this is their very purpose - to act as suppliers to the big national companies. But this also means their fate hangs on that of big enterprises at a moment when a component of the latter, the energy consumption, is going through a restructuring period - a contraction, to be precise. Under these circumstances, the private component, foreign or domestic, of the BEs, would take over the role of a sales market for SMEs. Aside from several special sectors, however, big companies still hesitate to work with domestic SMEs - this has already been verified in Central European states, somewhat more advanced in their transition. The first explanation is product quality - which is not as high by Western standards, but there are other reasons as well - among them the lack of management skills demanded by such a collaboration.
The domestic consumer market - the last resort
Left without a domestic industrial sales market, SMEs still have a chance - the domestic consumer market. A comment that does not need statistics is that most SMEs operate on this market - small shops, service units, foreign trade and public food outfits. The "small" component of the SMEs is therefore dominant. Lacking a lower limit on the SME size (most definitions pertain to the upper limit, whether in terms of employee numbers, 500, or turnover), this category has included virtually all "family" ventures, which are unlikely to absorb too many of the laid-off.
For a selective SME support
In this situation, which with minor changes has been common to all transition countries, the most suitable solution was to sustain the "medium" component of the SMEs, which is more efficient, is able to self-finance to a larger extent and can access the foreign market more easily; or to sustain the component that may become a supplier to foreign investors. Unfortunately, and not only in Romania's case, but throughout the region, these two segments are extremely rarefied - if they exist. In most cases, the industrial structure contains a few very large companies, the inheritance of times gone, and a horde of "family" SMEs.
But some tend to think size doesn't matter, that the industrial structure can live with such anomalies. In Italy, for instance, there is an abundance of small companies with less than ten employees (one quarter of the European Union's micro-companies), most of them concentrated in the industrialised North, where they work for the large companies.
In Germany, however, most of the industrial space is taken up by medium enterprises (which account for over 50% of GDP), able to capitalise on their size. This is the argument many analysts use when they advise Central European countries to help their medium-size enterprises.
SMEs' problems
The problems SMEs run into are entirely different from those that can be solved with financing programmes backed by governments and international institutions, or by business incubators. The latter can only produce a few more "bite-size" SMEs, hardly adaptable to the market, and therefore condemned to a brief and tormented life. Financing itself is not the main problem SMEs face, despite the image created by every programme designed to fill this gap - which indeed exist for the small component, and less for the medium one, which can self-finance to a larger extent and can have a measure of credibility before banks.
An EBRD study classified corruption as the first problem for SMEs, followed by unfair competition from rivals, taxes and other legal limitations, improper infrastructure and high inflation.
The fiscal credit and tax facilities are therefore suited to support the SME sector, especially since it favours a selective development of companies that make a higher profit and are therefore economically viable. Financing on administrative criteria, whether by analysts in banks or investment funds, cannot be better than a market selection. On the other hand, bringing to light many SMEs that now delve in the twilight of the informal economy will have another effect - besides the hypothetical growth of budget revenues due to a wider taxation base - access to bank financing. Operations in the grey economy, however profitable, limit access to bank funds - not because of banks' excessive ethics, but because in this grey area profits are easier to conceal, and credits are easier to hold back.
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