Improving Business Environments Programme

The issue

The business environment (BE) in which private enterprises in general and small and medium-sized enterprises (SMEs) in particular operate is often not conducive to their growth and competitiveness. A biased policy framework and regulatory regime on the one hand, typically coupled with lacking or inappropriate institutional support systems and mechanisms on the other hand have since long been identified as key factors preventing private sector SMEs from fully mobilizing their development potential. Biases regularly arise from policies that do not take account of SME-specific constraints, putting these firms at a disadvantage compared to large enterprises, and from overly complex regulatory set-ups that represent a disproportionate burden (market entry and exit constraints, high transaction costs) on small and medium operators. Inefficient PSD/SME support institutions and/or business development service (BDS) markets or providers constitute further obstacles to enterprise growth.

The solution

UNIDO’s interventions rest on the premise that the creation and maintenance of a conducive business environment is a necessary condition for enterprise development, yet must not remain limited to a narrow set of regulatory reforms. Easing business registrations or providing property rights – while all critical – on its own will ultimately not be sufficient to foster private sector development in a broad way. For the latter to happen, supplementary action at other fronts is required.

 Therefore, combining advisory and capacity building assistance, UNIDO’s BEP Service aims not only at fostering national capacities towards the creation and unabated upgrading of a business environment that ultimately enhances the private sector’s contribution to poverty alleviation. It also extends support for the formulation and - increasingly so - the implementation of coherent policies and policy measures aiming for a PSD/SME enabling framework. Assistance is furthermore provided towards the design, development and effective functioning of an institutional infrastructure better suited to help private businesses operate in a level playing field.

Specific emphasis is placed on the strengthening of the role and capacities of private sector-owned and -driven entities, referred to as business membership organizations (BMOs), i.e. notably chambers of commerce and industry as well as sectoral business associations. 

Specific areas of work

The varied nature of PSD/SME-related policies and institutions with a potential to accelerate small business development is reflected in the range of services that BEP can provide. Such services in the recent past have placed emphasis on:

• Design and installation of PSD/SME-supportive legal and regulatory systems;
• Facilitation and/or moderation of, as well as capacity-building on, public-private sector dialogue for policy formulation and implementation;
• Appropriate institutional arrangements for the implementation and monitoring of PSD/SME policy measures and support programmes;
• Capacity-building of business membership organizations (BMOs), in particular chambers and business associations;
• Sustainable business development services (BDS) offered by private and public institutions;
• Specific policies for SME development to facilitate access to crucial resources such as finance and information, and to stimulate a geographically more balanced distribution of business activities within countries.

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