Small and Medium Business Agenda Final 1 Table of Contents 0.1 Overview ............................................................................................................................................ 4 1. Introduction ........................................................................................................................................ 4 1.1 Definition of SMEs ...................................................................................................................... 5 1.2 Characteristics of SMEs in Jordan ........................................................................................ 6 1.3 SMEs and Employment ............................................................................................................. 7 1.4 Jordan's Economy ...................................................................................................................... 9 1.5 Moving Forward ......................................................................................................................... 12 2. Tax Incentives .................................................................................................................................. 14 2.1 Background and Issues .......................................................................................................... 14 2.2 Benchmarking and Best Practices ...................................................................................... 22 2.2.1 VAT Collection Threshold ............................................................................................... 26 2.2.2 Less frequent filing requirements for small firms ................................................ 27 2.2.3 Cash accounting for small firms ................................................................................. 28 2.2.4 Income Tax Simplification Provisions ....................................................................... 28 2.2.5 Simplified Financial Accounting for Small Firms ................................................... 29 2.2.6 Other Simplification Measures ..................................................................................... 30 2.3 Gap Analysis ............................................................................................................................... 31 2.4 Recommendations .................................................................................................................... 32 3. Innovation .......................................................................................................................................... 34 3.1 Background and Issues .......................................................................................................... 34 3.2 Benchmarking ............................................................................................................................ 37 3.2.1 Global Innovation Best Practices ................................................................................ 39 3.2.2 United States of America ............................................................................................... 41 3.2.3 Germany .............................................................................................................................. 42 3.2.4 Sweden ................................................................................................................................. 42 3.2.5 UK ........................................................................................................................................... 43 3.2.6 Singapore ............................................................................................................................ 44 3.3 Gap Analysis ............................................................................................................................... 45 3.4 Recommendations .................................................................................................................... 49 4. Access to Capital ............................................................................................................................. 52 2 4.1 Background and Issues .......................................................................................................... 52 4.1.1 Debt Finance ...................................................................................................................... 52 4.1.2 Commercial Banks ........................................................................................................... 54 4.1.3 Seed Money and Venture Capital (Equity Capital) .............................................. 56 4.1.4 Incubators ........................................................................................................................... 60 4.1.5 Loan Guarantees ............................................................................................................... 61 4.1.6 Other Financial Support Instruments ....................................................................... 62 4.1.7 SMEs and Interest Rate Structure ............................................................................. 62 4.2 Benchmarking ............................................................................................................................ 64 4.2.1 International Reports ...................................................................................................... 65 4.2.2 Experience of Other Nations ........................................................................................ 69 4.3 Gap Analysis ............................................................................................................................... 71 4.4 Recommendations .................................................................................................................... 74 5. Improving Exports .......................................................................................................................... 78 5.1 Background ................................................................................................................................. 78 5.2 Benchmarking ............................................................................................................................ 81 5.3 Gap Analysis ............................................................................................................................... 87 5.4 Recommendations .................................................................................................................... 88 6. Education ......................................................................................................................................... 90 6.1 Background ................................................................................................................................. 90 6.2 Benchmarking ............................................................................................................................ 93 6.3 Gap Analysis ........................................................................................................................... 93 6.4 Recommendations .................................................................................................................... 94 7. Government Procurement ........................................................................................................... 95 7.1 Background ................................................................................................................................. 95 7.2 Benchmarking ............................................................................................................................ 98 7.3 Gap Analysis ............................................................................................................................. 100 7.4 Recommendations .................................................................................................................. 102 3 0.1 Overview Sawtouna is Jordan's first Civil Society led, proactive, entrepreneur, start-up, and small/medium enterprise (SME) advocacy effort. The project strives to make grassroots entrepreneurship commonplace in the Jordanian business environment. Sawtouna was formed, and is overseen by, the Public Policy Advocacy Committee (PPAC) at the Young Entrepreneurs' Association (YEA), which has been advocating public policy reform through proactive position papers to legislative bills since the YEA's inception in 1999. The third round of Sawtouna focuses on developing a Small and Medium Business Agenda (SMBA) for Jordan. The components of the small business agenda include several key pillars: I. Small and Medium Business Tax Breaks: Within this component, potential legislation improvements and a tax credit system will be suggested. II. Improved Access to Capital: Examining bank lending practices, support to smaller communities, and increased support for underserved communities, as well as support for rural business. III. Improved government procurement options that will help grow SMEs and expand their employment potential. IV. Increased SME Exports: Advocating trade promotion and export regulations, helping micro-enterprises export, improving export access to finance, amongst other factors V. Development and Education Opportunities for Entrepreneurs: Developing programs, focusing on disadvantaged groups, looking at entrepreneurial infrastructure VI. Encouraging innovation: Focus on