ISSUE Vol. VII No. 1 January 2012 CONTENT ERENET PROFILE __________________________ WINTER MESSAGE 2 PAPERS PUBLISHER Dr. Péter Szirmai – Editor DEVELOPMENT OF ENTREPRENEURSHIP AND Dr. Antal Szabó – Scientific Director SME-SECTORS IN SOUTH-EASTERN CAUCASUS: Ágnes Kiss – Website Editor Tamás Tóth – Designer Development of the SME Sector in the Era of 3 INTERNATIONAL BOARD Emerging from the Economic Crises in Armenia Desislava Yordanova AleksanderPoghossian-TigranSukiasyan 29 St. Kliment Ohridski University Development of the SME Sector in the Era of Dr. Sanja Pfeifer Emerging from the Economic Crises in Azerbaijan University of Osiek AlakbarMammadov Dr. Hans-Jürgen Weißbach Emerging out the Economic Crises and Strategies of 44 Fachhochschule Frankfurt am Main Entrepreneurship Improvement and SME Dr. Dumitru Matis Development in Georgia Babeş-Bolyai University EteriMamukelashvili Dr. Szabo Zsuzsanna University of Tirgu Mures Dr. Eric Dejan CONFERENCE PAPERS University of Belgrade • GlobalMicrocreditSummit2011concludedinSpain 61 Dr. Mateja Drnovsek • Dynamo-FirstNationalDayonBusinessContinuity 63 University of Ljubljana • RecognizingInnovativeSMEsinMalaysia 64 Dr. Toni Brunello Studiocentroveneto INSTITUTIONAL PROFILE Dr. Renáta Vokorokosová, University of Kosice • InternationalCouncilforSmallBusiness-ICSB Dr. Krzysztof Wach CALLS EVENTS Cracow University Dr. Sonia Heptonstall • GlobalBusinessIncubatorManagementTraining, 66 UBIS Geneva Istanbul 68 Dr. Sybille Heilbrunn • DoctoralCourceinEntrepreneurshipEducation, Ruppin Academic Center Aarhus 69 Dr. Dilek Cetindamar • ConferenceonSpiritualityandSustainability,Visegrád Sabanci University PUBLICATION NEWS - BOOKS Dr. László Szerb • ECStudyonBusinessDynamics:Start-Ups,Business 72 University of Pécs TransfersandBankrupcy Dr. Zoltán Bajmócy • SmallCompaniescreate85%ofnewJobsinEU 74 University of Szeged • BringingyouBusinesstoLife 76 Published by: ERENET NETWORK Small Business Development Centre, Corvinus University of Budapest [email protected] www.erenet.org © ERENET PROFIL, 2011 ISSN 1789 -624X ERENET Profile Vol. VII, No. 1. www.erenet.org WINTER MESSAGE OF THE SCIENTIFIC DIRECTOR Distinguished ERENET Members and Friends , Quo Vadis European Union? To be or not to be EURO? These are the two main important questions facing the policymakers andcivilians today. The ship of the EU is facing major problems and challenges. It is crackling and crunchingandwe do not knowwho to steal the thunder in ordertosavethesail-yardnottobreakinhalf.EUstillfacing enormous economic crises and the economic stability is far fromthenormalcourse. IremembertheinternationalworkshopheldpriorintroducingtheEUROheldattheUN Headquarters in Geneva, when followingthe presentation bythe representative of the European CommissiontheheadoftheEconomicAnalysesdepartmentoftheUNECEdrewattentionofthe participantthatlaunchingthenewEuropeancurrencyitisratheranambitioustaskassimilartothe stuntofjumpingfromthehighshoreintheswiftcurrentwithoutacrush-helmetnotknowingwhere aretheunderwaterstickingrocks.Itisapoliticaldecisionwhichdoesnotjustifyfromeconomicand fiscal points of views. A unique common currencyneeds unique centrallyplannedandmanaged economicandfiscalpolicyandgivingupthenationalsovereigntyanddelegationofmajorpolitical andeconomicdecision-makingmechanismtoaninternationalselectedgoverningbody.However,it will be a danger of losingnational independence andthis will be similar to the former "socialist brigademovement" álacarte oftheEU.TheEUROwasintroducestoworldfinancialmarketsasan accounting currencyon 1 January1999. Since late 2009, it has been immersed in the European sovereigndebtcrises,whichhasledtothecreationoftheEuropeanFinancialStabilityFacilityaswell asotherreformsaimingatstabilizingtheeconomyandthecurrency.BerlinandParisarepreparinga newEUstabilitypactwhichrequiresthe17countriesintheEURO-zonetolimitbudgetdeficitsto 3% anddebt to 60% Gross Domestic Products. This figures are not news, theyare the EURO convergencecriteria(Maastrichtcriteria).TheproblemisthatthemajorityoftheEUcountriesblew itandfartoomanyexceededthislimits.Thissituationleadtocurrentcatastrophicsituation.And most suffered the vulnerable small new EU countries, whose exchange rate is continuously deteriorating, the foreign debt is increasing, and the civil society suffering from the luxury overspendingbehavior of the reach Western countries. It is not surprisingthan sometimes street protestersflyingintoarageareburningpubliclyEUflag. Itisevenmorefrustratingthebehaviorofsomepolicy-makers.ThetruthoftheEuropean democracyisout.HungaryhastolearnthebitterlessonfromtheWesternandUSmediawhenits Government is trying to behave like a national one. President Sarközy awarded the former HungarianPMactingearlierasasocialistsecretagent,butwarnPresidentOrbántotreatleniently theprofithungryFrenchcompanies.USforeignministerHillarywithSorossupporttheformation of a newsocialist political grouping again the current Government. Just when not a European Government and media did not protested when the Slovakian Government deprives of the citizenshipofa99yearoldHungarianteacherwhowasborninherbirthplacebutherhomelandgone withthewindofhistory,andlastyearduetotheHungarianLawonDoubleCitizenshipsheapplied forheroriginalcitizenship. Quousquetandemabutere,Europe,patientianostra?Howlong,OEurope,will abuseourpatience?IwonderwhethertheDanishEUPresidencywilldealwithsuchkindofinjustices. Dr.SzabóAntal ScientificDirectorofERENET 2 ERENET Profile Vol. VII, No. 1. www.erenet.org Dr. Aleksander Poghossian PrincipalConsultantandtheManagingDirectorofAlphaPlusConsulting Yerevan, Tigran Sukiasyan NationalEconomicandEnvironmentalOffice OSCEYerevanOffice,Armenia E-mail:alex.poghossian@ alphaplusconsulting.com DEVELOPMENT OF THE SME SECTOR IN THE ERA OF EMERGING FROM THE ECONOMIC CRISES IN ARMENIA 1 ABSTRACT Significant economic growth was recorded during the period of 2001-2007 in Armenia. The economic crises hit the Armenian economy, however, it become to revitalized since 2010. Small and medium-sized enterprises (SMEs) companies played an important role in the economic revitalization. This paper illustrates how the economic policy promoted economic stability in Armenia, and what kine of measures were taken by the Government to promote small and medium- sized businesses. JEL Code: F14, L26, O12, O57 1. NATIONAL ECONOMY AND THE SME SECTOR Recent development of the national economy RecentlydiscussionsconcerningdevelopmentoftheArmeniannationaleconomyhaveintensified, because Armenia faces newchallenges due to its quite complicated geopolitical location, namely by the impactsoftheworldfinancialcrisis. ArmeniaisasmalllandlockedcountrysituatedattheintersectionofEuropeandAsia.Itisbordered byGeorgiato the north, Azerbaijan to the east, Iran to the south, andTurkeyto the west. Armeniais a mountainouscountrycoveringanareaof29,800squarekilometerswithapopulationofjustover3.2million atthemostrecentestimate(officialfigure). Duringthelast15yearstheArmenianeconomyhasbeengrowingcontinuously.Afterthecollapseof theSovietUnionandsevereeconomicdownturnin1991-1993,thenationaleconomyexpandedformorethan threetimes.Averageannualgrowthrateduring1995-2008was9%.Significanteconomicgrowthwasrecorded during2001-2007:onaverageabout13%.InthesameperiodthepercapitaGDPalsoincreasedfrom670 USDin2001to3,689USDin2008.Duringthelastquarterof2008theworldeconomiccrisesmadethereal growthrateslowdownsignificantly:asopposedtothepreviousyearsof2-digiteconomicgrowth,in2008it made6.8%.Inspiteofthatfact,theoutputin2008exceededthelevelof2002foraround2,thelevelof1995 -for3,andthelevelof1990-for1.7times,duetothecontinuouseconomicgrowthofthepreviousyears. Theeffectofthecrisescontinuedduring2009,whenthe nationaleconomyexperienceddownturnofabout 14%.However,in2010theeconomybegantorevitalizeand2.1%realGDPgrowthwasrecorded. 1 Study prepared within the framework of the KAS-BSEC-ERENET Project and presented at the Workshop on Enterpreneurship and SME Development in the BSEC Region in the Time of Emerging from the Economic Crises held in July 2011 in Istanbul. 3 ERENET Profile Vol. VII, No. 1. www.erenet.org Thecountry’snominalgrossdomesticproductin2008wasUSD11.9billionorUSD3,700percapita, whichwashigherthanUSD9.2billionofthepreviousyear(USD2,853percapita).In2009nominalGDP deceasedtoUSD8.7billion(USD2,686percapita)contrarytothegovernment’sbudgetforecasts(over$13.6 billionwasestimated). Anfinallyin2010whenrealgrowthrevitalized,nominalGDPalsoincreasedreaching USD9.7billionwhichequalsto3,041percapita. % 20 15 10 5 0 -5 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 -10 -15 -20 Figure1EconomicGrowthinArmeniain1997-2010 AsconcernsthestructureofGDP,in2009shareofindustrymadeup13.6%(itdecreasedduringthe last 5 years), share of agriculture was 16.2% (decreased), share of construction – 18.8% (decreased), trade comprised20.7%(increasedoverthelastyears),andtherestwascomprisedofothersectors. Asof2008averageexchangeratefortheArmeniannationalcurrencydramhadbeencontinuously appreciatingforseveralyearsandwasstabilizedatAMD306for1USdollarfortheyear2008.However,it depreciatedsuddenlybyabout 20-25% during2009 economic crises, reachingeven 384 AMD for 1 USD duringthe last quarter of 2009. Inflation, which remainedfairlylowin the earlyto mid2000s, increased significantlyas aresult of higher pricedimported goods cominginto the countryandjumpedfrom4.4% annualaveragein2007to9%in2008.Averageexchangeratefortheyear2009stabilizedat363AMDfor1 USD,howeverin2010itagainreachedthelevelofabout380AMDper1USD. TheannualunemploymentrateinArmeniawas7%in2009,upfrom6.3%ayearearlier.Thiswas