The small and medium sized enterprises (SMEs) that EBRD president Sir Suma Chakrabarti has identified as “the engines of an economy” were complaining on Thursday about problems with human talent, opaque policy and inconsistent availability of capital.
Their concerns are numerous, even among companies that have thrived in the region. “The biggest obstacle to the private sector is the availability of capital,” said Vaja Jhashi, president and CEO of Trans Oil group, an agricultural commodity leader in the Back Sea region.
“You can have all the vision, all the business plans in the world, but if you don’t have money to go with it and support from financial institutions it’s not going to work. You have the car but you don’t have the gas,” he said.
Ruben Vardanyan, founder and chairman of RVVZ Foundation, a philanthropic body, bemoaned the lack of long-term commitment to education in the region, both in terms of vision and execution. “Unfortunately, it does not exist in most of the countries we are talking about today,” he said.
Theirry Deau, founding partner and CEO of Meridiam, an asset manager specialising in public and community infrastructure, said the biggest challenge was “the inability of the government to partner with us. The human capital is not developed consistently enough to have people engage and put together complex social infrastructure”.
He also complained about inconsistent policies that were insufficiently friendly to investors, “from fiscal policies to tax to regulations that should make things more simple and transparent”.
Gokalp Cak, general manager of ICL Transport & Logistics in Turkey, said: “The biggest problem we have is staff.”
LONG-TERM PERFORMANCE
Chakrabarti described the EBRD’s role as “an advocate of the business community” reflecting corporate concerns to the region’s authorities, but acknowledged “regulation, red tape and excessive taxes can of course stifle economic activity with some serious consequences”.
He pledged to work with governments in the region “to allow private business to thrive and flourish”. He also noted that broader economic growth did not automatically translate into a favourable environment for new business. “The belief that the rising tide lifts all boats conceals serious imbalances and rising inequalities,” he said.
Meanwhile the bank plans to undertake its first ever study into the long term performance of SMEs it engages with, its director of small business support Charlotte Ruhe told Emerging Markets.
The study, which will start this year, will take a three to five year horizon. “We’ll look at whether sales have increased, profitability, earnings and EBITDA. We want to see whether the company is higher leveraged, and in what ways it has improved.”
However, she acknowledged that the relationship between greater efficiency and employment was “tricky”. “You can help the company with capital investment that helps save on labour costs,” she said. “In the short term this could mean a reduction in labour. But there could be an increase over the long term.”
By Chris Wright and Steve Gilmore