Business development services for SMEs and for entrepreneurs, as well as measures to facilitate access to public procurement opportunities are important policy areas to foster enterprise creation, growth, and productivity. They facilitate SMEs and start-ups access to resources, advice, and markets. This chapter focuses on the diversity and availability of support services for SMEs, start-ups, and entrepreneurs, whether those services are articulated in national SME development strategies or plans where they exist, and the existence of measures to facilitate SME access to public procurement and provisions to ensure timely payments for SME suppliers to the state.
SME Policy Index: Latin America and the Caribbean 2024
Towards an Inclusive, Resilient, and Sustainable Recovery
SME Policy Index
6. Dimension 4: Business development services and public procurement
Abstract
Assessment framework
Given their small resource base, SMEs and entrepreneurs rely significantly more on services provided by external sources compared to large firms. These services include supporting day-to-day business functions such as accounting services, legal services, human resource management, and information systems. They also include longer-term and strategic advice such as management counsel, development of human resources, access to technology, and access to markets. The diversity and accessibility of these business development services (BDS) help SME managers and entrepreneurs to achieve various goals, from focusing their attention and resources on their core businesses and strategies to attaining growth and greater productivity through training and advisory programmes (OECD/CAF, 2019[1]).
The first two sections of this chapter focus on policies to promote BDS for SMEs and entrepreneurs. In this context, BDS comprise temporary support provided by private firms, non-government agencies, public agencies or donor agencies to SMEs and entrepreneurs. Given that BDS for SMEs and for entrepreneurs are closely linked and are often provided by the same actors, the analysis of sub-dimensions 4.1 and 4.2 is interlinked. The last section of the chapter analyses measures to facilitate SME participation in public procurement, which refers to the purchase by governments and state-owned enterprises of goods, services and works (see Figure 6.1).
Figure 6.1. Assessment framework – Business development services for SMEs and entrepreneurs and public procurement
Analysis
The regional average score for this dimension is 4.18 for all nine countries covered. Six countries perform above the average: Chile, Colombia, Brazil, Uruguay, Argentina, and Mexico (see Figure 6.2). Of the seven countries covered in the 2019 edition, four registered an improvement in policy performance for the overall dimension: Argentina, Colombia, Ecuador, and Uruguay. Chile registered the same performance while Mexico and Peru witnessed lower scores than in 2019.
Figure 6.2. Weighted scores for Dimension 4: SMEs development services and public procurement
Scores are on a scale of 1 to 5, with 5 being the highest. The comparison with 2019 is not exact due to changes in the methodology. Please refer to Chapter 2 for further information on the methodology. 2019 data for Brazil and Paraguay is not available as they did not participate in the 2019 assessment.
Sub-dimensions 1 and 2 Business development services for SMEs and entrepreneurs
As noted in the 2019 edition of this report, business development services help SMEs and entrepreneurs to develop new competencies and achieve long term objectives such as accessing new markets, increasing sales, improving productivity, acquiring, and developing technology and innovations, etc. BDS are one of the main tools for providing targeted support to specific SMEs and entrepreneurs. BDS can include business counselling and consulting, trainings, and access to information and specialised advice. Furthermore, BDS can be delivered through government agencies, NGOs, private sector providers, business associations, etc. They can be fully or partially subsidised by the state.
Support services for entrepreneurs are a category of BDS that aims to foster an entrepreneurial culture while helping businesspeople to launch and grow new ventures. BDS and support services for entrepreneurs are closely related. They are often, but not always, supported by the same agencies or actors and can also be categorised into training, advice and access to information. Specific services include business incubators, accelerators and collaborative workspaces providing access to specialised facilities (e.g. high-speed internet, video conferencing, meeting space, etc.) as well as specialised business advice and mentoring, networking, financial support, etc. Table 6.1 and Table 6.2 provide an overview of the performance of the assessed countries in these sub-dimensions.
Table 6.1. Sub-dimension 4.1: Business development services
Note: Scores are on a scale of 1 to 5, with 5 being the highest.
Table 6.2. Sub-dimension 4.2: Support services for entrepreneurs
Note: Scores are on a scale of 1 to 5, with 5 being the highest.
Despite being a key element of enterprise development policy and economic policy, BDS and services for entrepreneurs are not well articulated in national strategies
Promoting SME productivity and growth, as well as supporting entrepreneurs and start-ups are often identified as key tools to advance national strategic priorities such as increasing economic growth, reducing inequalities, advancing innovation, and improving competitiveness. A successful integration of BDS and entrepreneurial support into national development strategies broadly requires:
Sound assessments of the needs and challenges of businesses and entrepreneurs.
Co-ordination mechanisms involving beneficiaries and providers of support, as well as other interested parties.
Monitoring and evaluation mechanisms to assess whether BDS and entrepreneurship policies and programmes reach their objectives.
Several countries declare to adopt a strategic approach to BDS and entrepreneurship in the form of medium-term SME policy objectives reflected in a strategic document, such as a national SME development strategy. However, in most cases the details of the actions to advance BDS and entrepreneurship and how they link to national development plans are very scarce. Table 6.3 gives an overview of how BDS and entrepreneurship support are reflected in national plans.
In line with the analysis in the section devoted to SME development strategies in Chapter 1, only Paraguay and Uruguay have distinct multi-year SME development strategies where BDS are reflected, and Brazil declares to be working on a new SME development strategy following the expiration of the previous one in 2023. Chile and Colombia declare that BDS and entrepreneurial services are reflected in and aligned to advance their national development plans, however, there is a lack of specific details on how programmes and support advances those plans.
In Ecuador the strategic guidance for SME policy and therefore for the provision of BDS and services for entrepreneurs is somehow fragmented, with strategic guidelines in the National Development Plan 2030, and the Industrial Policy 2016-2025, as well as the new orientations yet to be provided by the new administration.
In Argentina, the BDS and entrepreneurship support guidelines are contained in technical support programmes financed with international funding, but they are not explicitly linked to a national development strategy or national SME plan. In the case of Mexico and Peru, the guidelines are contained in institutional strategic documents but do not appear to be explicitly linked to wider economic and SME plans.
Hence, across the region there is a lack of articulation between the supply of BDS and entrepreneurship support and the overall national development, economic or enterprise development policy. To fill this gap, LAC countries could develop national SME and entrepreneurship strategies (as recommended in Chapter 1), building on sound needs analyses, comprehensive consultation, co-ordination mechanisms between public, private and other institutions engaged in BDS and entrepreneurship support (including sub-national governments, universities, NGOs, private sector providers, etc.), and detailed and robust monitoring and evaluation mechanisms to measure effectiveness.
LAC countries have in general a varied set of institutions and mechanisms to deliver BDS for SMEs and entrepreneurs.
All countries have one or several flagship agencies in charge of providing or subsidising BDS for SMEs and entrepreneurs. For example, Brazil implements its national SME policy and programmes through SEBRAE, the federal agency in charge of this. Chile and Uruguay rely on a diversified portfolio of institutions catering to different types of businesses and entrepreneurs, including innovative businesses, industrial activities, internationally oriented businesses, etc. The rest of the countries implement their policies through national ministries of economy, industry or similar, and in some cases through specific units or agencies dependent on those ministries. Table 6.3 shows examples of the BDS and support for entrepreneurship flagship initiatives carried out across the region.
This also algins with the messages from chapter 1, which posit that SME policy responsibilities are clearly assigned across the region, but that inter-ministerial coordination is still underdeveloped and that the mandates for policy design, implementation and monitoring are often not clearly defined.
In general, the analysis of these two sub-dimensions shows that there is plenty to do to reflect the provision of BDS for SMEs and entrepreneurs into national development agendas and SME development agendas. A few countries with new administrations declare to be working on that, while other countries expecting a change in administration in the coming months should introduce a strategic articulation of BDS with national objectives. Adopting such approaches could help to provide better coherence to the many existing initiatives across the region, address duplications of efforts and fill out voids. Such approaches would also help to introduce more solid monitoring and evaluation mechanisms, largely absent across the region.
Table 6.3. Overview of business development services and services for entrepreneurs
Sub-dimension 4.3: Measures to facilitate the access of SMEs to public procurement opportunities
The state is a major player in the economy and public markets represent a vast opportunity for the development of SMEs and potentially, for entrepreneurs. However, small businesses face many barriers to participate in public procurement, for example the inability to supply large orders, difficulties in navigating administrative steps and accessing information, the need to provide guarantees to participate in some tenders, lack of technical and quality certifications, and late payments in the public sector that create financial stress.
Table 6.4. Sub-dimension 4.3: SME access to public procurement
Note: Scores are on a scale of 1 to 5, with 5 being the highest.
Almost all countries put in place measures in their legal and regulatory framework to facilitate access to public procurement for SMEs
All countries, assert to have in place several measures to facilitate SME access to public procurement. For example, Chile, Colombia, Uruguay and Brazil, have a full set of measures including:
Allowing for tenders to be split into smaller lots so that SMEs can bid to parts of a larger order.
The possibility for SMEs to form consortia or groups of firms which, under certain conditions, can jointly bid and supply an order.
Administrative simplification and other mechanisms that facilitate SME participation, such as easier procurement procedures or the use of framework agreements with pre-established terms and conditions for future purchases of goods and services.
Set asides or quotas for SME participation in a given tender, and margins giving some preference for SMEs over larger firms (for example, the possibility to offer slightly more expensive goods or services compared to other firms given a level of quality and characteristics).
Mandating timely payments for contracts (e.g., 15, 20, 30, 45 days). This is important to avoid creating financial stress in small firms, which are naturally more cash constrained than larger firms.
Table 6.5 provides an overview of these measures across the region and shows that a few countries can expand the set of such measures. It is important to note, however, that there may be arguments against some of these measures on competition grounds, particularly in areas related to set asides or quotas and margins, which favour some types of firms over others, and the formation of consortia of firms for joint bidding, which may contravene competition law.
The use of e-procurement is widespread but there is less evidence on specific support programmes to facilitate SME access to this market
Electronic procurement (e-procurement) consists of the use of digital networks and automated systems to manage the process of purchasing goods, services and public works. It can involve all or specific steps in the public procurement process, including issuing procurement notices, request for quotations or bids, bid evaluation, awarding and publication of results, contract management, and payment and closure. It can also include registries of suppliers which are databases about vendors, contractors or service providers including company profiles, contact information, characteristics of their offerings, qualifications, certifications and past performance records. Registries of suppliers are useful for firms participating or wishing to participate in various bids in time.
The assessment shows that e-procurement is widespread across the region; however, there is less evidence on other support programmes such as trainings for SMEs to use e- procurement platforms and programmes to access public procurement in general, support for the formation of consortia, programmes to comply with quality standards, etc. There is a vast opportunity for BDS and other support services to integrate such programmes and increase the participation of SMEs in the vast public procurement market.
Table 6.5. Overview of public procurement initiatives for SMEs
BDS and Public Procurement for the development of women-owned or led SMEs
Chile and Uruguay demonstrate effective approaches to promoting gender-inclusive procurement and BDS
The Chilean government, through ChileCompra, has been actively promoting the inclusion of women and women-led SMEs in state procurement processes since 2016. This effort is notably facilitated through the implementation of Directive No. 20, the issuance of the Women-Owned Business Seal, and various training initiatives aimed at providing buyers with the necessary tools to incorporate gender-related criteria into their purchasing decisions. In November 2022, Directive No. 20 underwent an update, streamlining its content to further emphasize the importance of gender perspectives in the procurement processes conducted by various governmental entities. This revised directive seeks to facilitate the selection of women-owned enterprises in public procurement activities and enables comprehensive monitoring of their participation.
Meanwhile, in Uruguay, efforts have been made to integrate gender considerations into the Public Procurement Subprogramme aimed at fostering the development of SMEs. This initiative arose from the need to draft the regulatory decree for Law No. 19,685, which was subsequently integrated into the revised wording of Article 44 of Law No. 18,362. Various options for incorporating gender-related variables into the criteria for awarding the Mipyme +G certificate were explored and presented. This certificate, building upon the SME Certificate, serves as a recognition of businesses that actively promote gender equality and women's participation in the entrepreneurial landscape.
The way forward
Table 6.6. Policy recommendations for Business development services and public procurement
References
[1] OECD/CAF (2019), Latin America and the Caribbean 2019: Policies for Competitive SMEs in the Pacific Alliance and Participating South American countries, SME Policy Index, OECD Publishing, Paris, https://doi.org/10.1787/d9e1e5f0-en.