SMEs Not Ready for EU Integration

Over 92% of Romanian companies are small sized, with a maximum of nine employees and a turnover of 100,000 euros at the most. What holds the future for these companies, after the European Union integration? The National Agency for Small and Medium-sized Enterprises (SMEs) searched the answer to this question and it ordered an impact study to this end.

The main problem the study identified was the quality of products and services of small companies. "If one does not work to meet quality standards, one does not sell its products," said Bogdan Dumitrache, secretary general of the Agency.
After 2007 the companies which do not meet standards ISO 9001 and ISO 9002 would not be able to do business, not even on the domestic market. "ISO works now as a passport for exporting merchandise, but following the 2007 integration, it would turn into a domestic ID card. The European law would become paramount and companies that will not comply with it will cease to exist," said Despina Pascal, local consultant for technical assistance to the SMEs via the PHARE program. The most vulnerable industries are the textiles [which currently operate heavily on the Lohn system] and the food processing ones.

One other major problem identified by the study shows that SMEs cannot exhaust funds granted by the European Union or international financing institutions like the World Bank. The same stays true for money made available from the state budget. Which are the causes for that phenomenon?
"Talking with representatives of SMEs I found out that many of them did not know that these programs [making funds available] existed," said William McConkey, international consultant for the PHARE program. He added that one other major program was that the entrepreneurs cannot fund the 25% quota of the total cost of the project they seek funding for. This time the banks do not provide credits, or the collaterals they ask go as high as 275% of the loan.
"I addressed this issue with the bankers, and they said they cannot give credits to projects which had little chances to succeed," said McConkey.

One other fundamental problem staying in the way of matching Romanian SMEs with EU money is the fact that few entrepreneurs know how to write a project or business plan that will meet EU standards.

The study on the impact the EU integration will have on SMEs was one of the targets of the technical assistance provided by the PHARE program, said Felicia Milcu, expert with the program. She said that the program also aims to evaluate the SMEs sector, to boost the entrepreneurial spirit, to design policies and programs for SMEs and to inform the SMEs on the impact the integration will have on them.
"The total cost of the PHARE program ear-marked for the SMEs is 1.8 million euros, with Romania covering 25% of it," said Anca Popescu, director with the National Agency for SMEs.