Challenges for Romanian small and medium-sized entreprises on the European single market.
Bretcu, Angela ; Milos, Marius
1. INTRODUCTION
The contribution of small and medium-sized companies to the
economic growth is very important in most European Union's member
states. If traditionally the small firms were acting mainly on national
internal markets, nowadays, a larger number of SMEs manage to reach the
global markets. Approximately one fifth of the small and medium-sized
companies, involved in productive activities in the OECD countries,
achieve in latest times a percentage of 10 to 40 of the turnover from
businesses developed by activities on external markets (Klapper et al.,
2002). The way in which companies are able to obtain finance may offer
an important advantage for future development. Romanian SMEs have been
confronted for a long period of time with a lack of financial support.
2. THEORETICAL BACKGROUND
The SMEs participate with 25% to 35% to the world industrial
exports and have a significant contribution to the foreign investments
achieved at global level. Furthermore, regarding the situation for the
European Union approach, it could be stated that the SME sector
contributes with an important part to the GDP formation and to
diminishing the unemployment rate (60% of GDP and approximately 70% of
the total work force).
The lack of competitiveness in Romania of the SMEs sector is due,
mostly, because of their maladjustment to the European standards. SMEs
in Romania face a low internal demand, instability of the legislative
framework and there is also little correlation of the active work force
to the qualifications requested by the market workforce. The Romanian
SMEs may become vectors of the economic growth only in case they will
manage to face the global competition and the new knowledge based
economy. The lack of present-day competitiveness of SMEs is also present
because of the difficulties in obtaining the necessary capital for new
investment projects and of the existence of serious constraints towards
financing alternatives. Unlike the large economic entities, the SMEs do
not have the possibility to access the financing opportunities offered
by the capital markets. These continue to be limited to self-financing,
requesting loans from banks, financing through leasing and also some of
them use factoring, in order to receive the money quicker from their
solvable debtors. Consolidating positions on the European Unique Market
requires increasing competitiveness and also profitability for the
developed activities. Implementing some investment strategies depends
now also on the access to the new financing sources supplied by
structural European funds. The financial aid obtained through structural
funds refers mainly to the introduction of new technologies,
implementation of some quality systems and improving environment
protection requirements.
Romania's accession to the European Union has been perceived
by most SMEs as a major opportunity for their future development.
Considering a recent survey on the factors that represent the most
positive impact of the European Unique Market on the SMEs activity in
Romania, there are very interesting results worth being analysed.
Firstly it has been indicated a better access to markets( by 35.67 % of
companies), secondly the improved legislation (31.67 %), then the
existence of some better and /or cheaper suppliers (19.76 %), access to
new technologies (5.14 %), more fair public procurement procedures (3.76
%) and better cooperation regarding innovation process with firms and
public institutions (3.43 %). A graphic representation is supplied in
diagram 1.
[FIGURE 1 OMITTED]
So within an economy based on knowledge, the competitiveness of
Romanian SMEs depends on their capacity to value adequately the existing
financing opportunities. Only in this way, the SMEs sector may become
the backbone of the economy, role which is fulfilled successfully in
most countries of the European Union.
3. TRADITIONAL FINANCING MEANS USED BY ROMANIAN SMEs
As regards the financing sources used by SMEs, an important step
for choosing the bank loans as external financing option was achieved in
2002 by creating the National Fund for Loans Guaranteeing. Partnerships
with the most important Romanian commercial banks have been
consolidated, determining the stimulation of crediting activity and
developing the investment capacities of SMEs, facilitating their access
to bank credits despite the existence of some insufficient guarantees.
Through the guarantees supplied, the Fund contributed to maintaining and
creating approximately 35,000 direct jobs. The first three positions
regarding the activity areas where guarantees have been granted are held
by commerce, services supplying and constructions. Equal percentages
have been recorded for the food industry, transportation and wood
processing areas (White Book of SMEs, 2006).
The obtained results confirm that good business plans improved the
access to financing for many SMEs, although there was a significant lack
regarding sufficient material guarantees or financial resources (please
see table 1).
Although the Guaranteeing Fund has improved its efficiency and the
capacity to support a higher number of small and medium-sized companies
regarding the access to financing, it is still necessary for the
existing facilities that companies adapt to the several requirements of
the European Union. Therefore it is important to enhance the added value created by the SME sector and to increase the investments volume
achieved by the small and medium-sized companies. There are still
certain constraints connected to financing that might be compensated
through accessing the new financial sources under the form of structural
funds designated to the investments in new technologies and implementing
quality systems. Structural funds are also available for consultancy
services, consultancy which may help the beneficiaries of structural
European funds.
Romania's recent accession to the European Union has a
positive impact on the Romanian economy through valuing also the
additional opportunities SMEs have received also regarding the financial
support.
The financing perspectives of SMEs show a multitude of funds meant
to bring important contributions to increasing the competitiveness of
SMEs, a prerequisite for increasing the competitiveness of the whole
Romanian economy.
The estimated value of structural funds granted to the SMEs sector
is approximately of 800 million EUR for the whole period of 2007-2013.
This financial aid is ensured within the European Regional Development
Fund (ERDF).
Following a recently survey, it states that the financing manners
used by SMEs in Romania were the following ones:
* 77.72 % of the companies supplied self-financing
* 47.32 % have obtained bank loans
* 29.71 % have used leasing
* 3.29 % used factoring
* 2.76 % have obtained loans from specialized financial
institutions
* 0.54 % used other financing forms (credits from suppliers,
natural persons and from shareholders, sponsorships)
* 0.08 % of the companies accessed the National Fund for Loans
Guaranteeing.
This situation is due mostly to the difficult financing conditions
existing in Romania, especially for crediting (red tape, high interest,
large guarantees), but also to the opportunities held by some companies
to finance their activities on their own.
If we consider the age of SMEs, it is found that the SMEs older
than 15 years have the highest percentage (60 %) regarding financing
through bank loans. This could be explained by considering that they are
more trustworthy for bank institutions. At the same time, they hold the
smallest percentage of companies undergoing self-financing (65%). In
contrast, the SMEs with a low seniority choose financing sources under
the form of self-financing (77.47 %). If we take into account the
regions in Romania from where SMEs come, it can be seen that, in the
West region, self-financing holds the most significant percentage among
the traditional financing sources (85.14 %)
4. CONCLUSIONS AND FURTHER RESEARCH
Increasing the economic competitiveness and developing the economy
based on knowledge is part of the six national development priorities
comprised in the National Development Plan strategy. This objective
focuses further on a variety of priority areas and sub-areas. By
reaching the established economical targets, the existent social and
economic gaps between Romania and the other European Union member states
will be overwhelmed. Also the support for developing a strong SMEs
sector is part of the stimulation social and economic development
according to the Cohesion Policy of the European Union (National
Strategic Development Frame, 2006).
It is very important for the Romanian economy to support also the
development of the financial intermediation and of the capital market.
In this way, the access to financing will be easier for SMEs and new
investments could be targeted. It has been stated that only through
permanent investments SMEs may be able to compete on a free market. The
coming years must also be valued by spending wisely the European
structural funds. These should diminish the existent development gaps
within regions in Romania but also within different countries of the
European Union.
5. REFERENCES
Klapper, L., Allende, V. S. & Sulla, V. (2002). Small and
Medium-Size Entreprise Financing in Eastern Europe, World Bank Policy
Research Working Paper, No.2933, Available from:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=63629, Accessed:
2009-02-01
*** (2006) http://www.fonduri-structurale.ro--2007-2013 National
Reference Strategic Development Frame, Accessed on: 2009-02-01
*** (2004) http://www.aniimmc.ro--National Agency for Small and
Medium Entreprises, Governmental strategy for sustaining and supporting
the development of SME in the 2004-2008, Accessed on: 2009-02-01
*** (2006) http://www.cnipmr.ro--CNIPMR, White Book of SMEs,
Accessed on: 2009-02-01
*** (2003) http://ecc.europa.eu--European Comission, 2003
Observatory of European SMEs, Accessed on: 2009-02-01
Tab. 1. Financial data at the level of year 2006 belonging to the
National Fund for Loans Guaranteeing for SMCs
INDICATORS 2005 2006
Turnover (lei) 1,300,620 7,501,720
Net profit (lei) 3,179,580 10,206,000
Guarantees (millions EUR) 122