6.1 Development strategy of small and medium-sized enterprises

Introduction

One of the most important conditions for sustainable convergence is to increase corporate productivity. In the reform

scenario, on the whole, we assume annual productivity growth of 4.0 percent on average, which is considerably

higher than the previously recorded figures (the rate was 1.8 percent between 2000 and 2017). The domestic neity; the main differences between large corporations and SMEs are observed in productivity, capital intensity and wages. Development policy must be formulated with an eye to this heterogeneity.

Chart 6-1: Per capita difference in productivity between

SMEs and large corporations

<≈3

Due to their weight in employment and value added, small and medium-sized enterprises are the most important

corporate sector is characterised by significant heteroge

target group for the development of enterprises. In this group, at present mobilising the demonstrable growth reserves in the SME sector represents the greatest potential. Additionally,

an entrepreneurial ecosystem should be

created that significantly contributes to the revival of the economy and the increase in its flexibility.

In addition to the SME sector, it must also be taken into account that the world has changed significantly in the past three decades, along with the fact that nowadays global value chains fundamentally determine the productivity of a country. Considering that Hungary’s integration into global value chains and its economic openness are remarkable in a European comparison as well, the macroeconomic benefits of foreign-owned companies that are already active in or will come to Hungary in the future as well as the relevant spillover effects should be maximised. In addition, in the case of Hungarian medium-sized and large companies the direct investment opportunities arising in the region should also be utilised in a more intensive manner. of Hungarian enterprises. First, the challenges affecting the

4,8 million HUF

SME

Source: MNB. SME sector are discussed, followed by an analysis of the

13,5 million HUF

LARGE ENTERPRISE

Average annual growth of 3.0 percent in the large corporation sector and 6.0 percent growth in the SME sector is needed for the Hungarian economy to reach the produc

tivity growth rates presented in the reform path (Chart 6-1). The magnitude and complexity of the challenge is underscored by the fact that in recent years average productivity growth in the corporate sector was lower than the above figures in both company groups.

Chart 6-2: Changes in labour productivity (2005–2015,

47 percent of value added and 20 percent of exports. In

percent)

10 Percent

0

-5

-10

2005 2006 2007 2008 2009

Large firms Large firms (mean)

Source: MNB, based on NTCA. 2010 2011 2012 2013 2014 2015

SME sector SME sector (mean) In the following, we provide an overview of the most important challenges and tasks related to the development structure of the economy and its ability to create value.

6.1 Development strategy of small and medium-sized enterprises

The SME sector is crucially important on the convergence

path. Firstly, this is explained by the weight of SMEs: the SME sector accounts for 71 percent of corporate employment, 5

addition, the SME sector is mostly Hungarian-owned and is much more embedded in the Hungarian economy than the

foreign-owned large corporations, which often operate in isolation. 98

Consequently, the SME sector is an important player in the Hungarian economy.

Secondly, significant productivity reserves can be identified in the SME sector. According to our calculations, this productivity gap partly stems from the structure of the sector, and