Boosting business in regions - Alexandra Rusu

Presentation by Alexandra Rusu, Economist, CFE, OECD at the 25th Spatial Productivity Lab meeting, held online on 26 February 2025.

More info: https://oe.cd/SPL

1. @OECD_local www.linkedin.com/company/oecd-local www.oecd.org/cfe
BOOSTING BUSINESS IN
REGIONS
Easing administrative burdens and financing constraints
25
th
session of the Spatial Productivity Lab (SPL)
Paris, France
26
th
February 2025

2. © OECD | CentreforEntrepreneurship, SMEs, Regionsand Cities| @OECD_Local|
What affects firms ?
(SME & Entrepreneurship Outlook 2019)
Source: OECD calculations based on the subnational component of the
World Bank Enterprise Survey. N = 227 TL2 regions from 31 countries
Strategic resources
Access to skills
Access to innovation
assets
Access to finance
Business environment
Market conditions Infrastructure
Institutional and
regulatory framework

3. © OECD | CentreforEntrepreneurship, SMEs, Regionsand Cities| @OECD_Local|
What affects firms ?
(SME & Entrepreneurship Outlook 2019)
Source: OECD calculations based on the subnational component of the
World Bank Enterprise Survey. N = 227 TL2 regions from 31 countries
Strategic resources
Access to skills
Access to innovation
assets
Access to finance
Business environment
Market conditions Infrastructure
Institutional and
regulatory framework

4. © OECD | CentreforEntrepreneurship, SMEs, Regionsand Cities| @OECD_Local|
Red tape, corruption, and access to finance are
a pressing problem for firms in OECD regions
Source: OECD calculations based on the subnational component of the
World Bank Enterprise Survey. N = 227 TL2 regions from 31 countries
140
116 123 122
0
50
100
150
200
250
Tax administrationBusiness licensingAccess to finance Corruption
Regions where more than 10% of firms find [..] an obstacle
Administrative burdenStrategic resources Corruption

5. © OECD | CentreforEntrepreneurship, SMEs, Regionsand Cities| @OECD_Local|
How to boost business in regions?
Ensure regulationis efficient
(and decrease corruption incentives)
Improve access to
finance
INSTITUTIONSSTRATEGIC RESOURCES

6. © OECD | CentreforEntrepreneurship, SMEs, Regionsand Cities| @OECD_Local|
How to boost business in regions?
Ensure regulation is efficient
(and decrease corruption incentives)
Improve access to
finance
INSTITUTIONSSTRATEGIC RESOURCES

7. © OECD | CentreforEntrepreneurship, SMEs, Regionsand Cities| @OECD_Local|
Lending volumes differ across OECD regions
Regional outstanding SME loans as a percentage of regional GDP, 2021
7
Flanders
Madeira Corsica
Bolzano-BozenBratislava
Prague
Eastern Lesser Sundas
San Martin
Brussels
Lisbon
Île-de-France
Lazio
East Slovakia
Central Bohemian
Riau Mainland
Huancavelica
0%
5%
10%
15%
20%
25%
30%
35%
BEL PRT FRA ITA SVK CZE IDN PER
Mean Median Minimum / Maximum
Source: Subnational module of Financing SMEs and Entrepreneurs: OECD Scoreboard

8. © OECD | CentreforEntrepreneurship, SMEs, Regionsand Cities| @OECD_Local|
More banking options, stronger regional economies
Effects of lowering banking concentration from the level
of Valenciato the level of Basque Country (0.15 to 0.14)
Higher start-ups rates, survival and
growth
+ 1 500
Establishments
+0.18 pp
Labour productivity growth
Higher productivity and productivity
growth
+ 16 700
Employees
8

9. © OECD | CentreforEntrepreneurship, SMEs, Regionsand Cities| @OECD_Local| 9
Boosting business in regions by easing access to
finance for viable firms
•Credit guaranteesare the main policy to improve access to finance
•All 38 OECD countries have national credit guarantee schemes
•Regional examples: Elkargiin Basque Country (ESP)
•Public development banks can provide credit guarantees
•National (British Business Bank)or subnational (German L-Banks)
•Other policy instruments exist, but public spending is more limited
•Examples: grants, government loans, venture capital funds, non-financial policies

10. © OECD | CentreforEntrepreneurship, SMEs, Regionsand Cities| @OECD_Local|
How to boost business in regions?
Ensure regulationis efficient
(and decrease corruption incentives)
Improve access to
finance
INSTITUTIONSSTRATEGIC RESOURCES

11. © OECD | CentreforEntrepreneurship, SMEs, Regionsand Cities| @OECD_Local|
How to boost business in regions?
Ensure regulationis efficient
(and decrease corruption incentives)
Improve access to
finance
INSTITUTIONSSTRATEGIC RESOURCES

12. © OECD | CentreforEntrepreneurship, SMEs, Regionsand Cities| @OECD_Local|
Efficient regulation in regions
•Efficient regulation achieves its goalswhile imposing minimal burdens
•Regions with fewer administrative barriers have more start-ups and higher incomes.
•Rules affect regions differently
•Set andimplemented by national governments(e.g. trade regulation)
•Set by national governments, implemented subnationally(e.g. labour regulation)
•Set and implemented subnationally→key areas at subnational level:
land use, business registration andbusiness licensing

13. © OECD | CentreforEntrepreneurship, SMEs, Regionsand Cities| @OECD_Local|
Red tape discourages business in regions
Less efficient regulation
(and more corruption)
Less entrepreneurship, investment and innovation
Higher costs More uncertainty More institutional problems

14. © OECD | CentreforEntrepreneurship, SMEs, Regionsand Cities| @OECD_Local|
Regions with shorter waiting times for
operating licenses havemore start-ups
0%
2%
4%
6%
8%
10%
12%
0 to 30 days30 to 60 days60 to 150 daysMore than 150 days
Days to obtain an operating licence
New firms as share of total, %
25% lower
25% of all regions
Source: WBES, 168 TL2 regions from 24 countries (2019-2021)

15. © OECD | CentreforEntrepreneurship, SMEs, Regionsand Cities| @OECD_Local|
0
2
4
6
8
10
12
0 to 60 days60 to 120 days120 to 240 daysMore than 240 days
Regions with shorter waiting times for
construction permits havemore start-ups
Days to obtain a construction permit
New firms as share of total, %
33% lower
25% of all regions
Source: WBES, 176 TL2 regions from 24 countries (2019-2021)

16. © OECD | CentreforEntrepreneurship, SMEs, Regionsand Cities| @OECD_Local|
How to achieve efficient regulation in regions?
Source: WBES, 176 TL2 regions from 24 countries (2019-2021)
•Simplify the rules
•Existing rules: simplify business registration & licencing, accelerate construction permits,
adopt flexible land use regulation (BulgarianBusiness Registry,SARE)
•New rules: regulatory impact assessments, consider interactions
•Streamline compliance
•Build one-stop shops (BizPal)
•Embrace digital tools and invest in digital infrastructure & skills (e-Estonia)
•Plan for the future
•In fast-moving sectors: adopt agile regulation (MEAT Hamburg, Sandbox.Rio)
•Consult stakeholders (Territoiresd’Industrie) and run regular regulatory reviews

17. © OECD | CentreforEntrepreneurship, SMEs, Regionsand Cities| @OECD_Local|
How to boost business in regions?
Ensure regulationis efficient
(and decrease corruption incentives)
Improve access to
finance
INSTITUTIONSSTRATEGIC RESOURCES

18. @OECD_local www.linkedin.com/company/oecd-local www.oecd.org/cfe
Thank you.
[email protected]
Centre for Entrepreneurship, SMEs, Regions and Cities (CFE)