The Government has paid substantial attention to supporting small and medium-sized enterprises (SMEs) for the past few years, as a key factor in creating a stronger and more diversified economy.
Below is an interview with the Director of Department for Development of Small and Medium-Sized Enterprises in the Ministry of Labor, D.Battogtokh, about state policy on supporting SMEs in the coming years.
Let’s start our interview with the current outlook of the SME sector.
The New Government for Change has been primarily adhering to the policy of supporting SMEs in order to increase stable jobs. In order to balance the labor market and increase proper employment, policy measures such as supporting sectors with large workforce absorption capacities and increasing the quality of the workforce have been taken. As of the second quarter of 2014, about 52,000 companies have been actively operating; 47,560 of which, or 90.38 percent, are SMEs, according to our department’s estimate. Compared to the same period of the previous year, the number has increased considerably.
The SME sector accounts for about 70 percent of the total Mongolian workforce. In other words, 760,000 of the economically active 1,100,000 residents are either owning or working in the sector. Developing SMEs poses several advantages to a nation, including creating lots of jobs, increasing the diversity of economic structure, and making it less prone to economic crisis.
How does the Ministry of Labor support SME owners? What policies does the ministry adhere to?
The SME support policy, SME Support Program Through 2014-2016, has been accurate. It can be said that policy had been abandoned since 2010. We included a simple objective to “increase employment through creating economic growth by improving the competency of SMEs” in the SME Support Program approved by the government.
Generally, we support SME owners, both financially and non-financially. Soft loans, loan collateral guarantees, and financial lending services are included in the financial support. While, non-financial support means creating a favorable legal environment and focusing on improving the skills of SME owners and employees.
In other words, rendering SME owners capable of determining goals and objectives, creating business plans, operating in accordance with those plans, and providing a solid understanding of the legal environment and technology, are included in the non-financial support.
What objectives did you set as a means to realize the goals of the SME Support Program?
We cooperated with international experts, advisors, researches and analysts and formulated the program in order to initiate and gain approval for the SME Support Program Through 2014-2016.
Several positive factors were observed as result of the numerous research and environmental assessments we conducted. For instance, an active movement directed towards manufacturing arose within the market, international donor organizations started supporting our endeavors to improve business capacity, and management consulting services are prevailing in Mongolia.
Besides, I also ought to mention the fact that there are several deficiencies, such as a scarcity of financial services, weak strategic planning and lack of knowledge for running business. In addition, there are many shortcomings, including excessive competition in the domestic market, a scarcity of new ideas and innovations, and weak export and transportation conditions. Based on these and other environmental assessments and research, we set six objectives:
– To improve the legal environment
– To develop by cluster
– To develop research and innovation
– To invigorate SMEs
– To increase the amount and abundance of financial resources
– To support them to expand their markets
There is a prevailing complaint among SME owners that they fail to run their business as planned because loans are not granted in the amount they request.
That’s an issue related to financial support. Funding for the SME Support Program was increased by 150 billion MNT in 2011, 50 billion MNT in 2013 and 100 billion MNT this year. In general, loans of more than 100 million MNT at the district and province level, and of more than 200 million MNT at the city level, was granted from the SME Support Fund. Loans of less than these amounts are approved by vice councils. The councils are headed by district governors and have structure of odd numbers encompassing resident representatives and labor departments. We don’t always adhere to the policy of reducing the amount of the loans business owners have requested. However, there are cases where commercial banks reduce the amount of the loans supported by the councils and vice councils upon issuing the loans due to a shortage of collateral and low production profit.
Certain financial resources from the Chinggis Bond are provided through the SME Support Fund. Can you elaborate on this?
The 2014 Government Resolution No. 176 was ratified to issue 100 billion MNT through the SME Support Fund for financing SME support, export promotion and import substitution projects of less than two billion MNT. In the frameworks of the resolution, 28.2 billion MNT of the resource is allocated for financing micro-businesses and SMEs in provinces, and the rest for other projects. As of today, 284 project implementing companies and individuals have received financing of about 73 billion MNT.
How are all these objectives connected to the labor market?
The main sector that supports the demand of the labor market is SMEs. Because this sector has a large workforce absorption capacity. In the framework of policy on employment, the Ministry of Labor has been especially focusing on creating jobs and invigorating the workforce. The National Vocation Program that prepares employees for positions requested by employers in a short period of time, through technical and vocational education and training, can be mentioned here. The program is significant, as it balances the demand and supply of the labor market and decreases unemployment.SOURCE: Ub Post