people). In the United States, more than 50% of private employees are employed by SMEs, and they account for 78% of employment in nonprimary industry in Japan. This is especially true of the service sector, where SMEs are particularly prevalent.

In order to promote these types of enterprises, governments of advanced countries enact policies and programs that promote entrepreneurial activity. Most OECD countries have specific agencies responsive for promoting small business. Agencies such as the Small Business Administration in the U.S., the Small and Medium Business Administration in South Korea, and the Small Business Service in the United Kingdom provide assistance and support for people trying to start a small business. However, there are often many regulatory hurdles that small business founders must contend with to gain access to the incentive programs and benefits provided by the government, which potentially discourages would-be entrepreneurs. Best practice in this area are “one-stop shops” for SME information and program benefits, such as One Stop Capital Shops in the U.S., and the UK’s Direct Access Government online resource.

Lack of finance availability is a major impediment to small business growth. Governments often facilitate venture capital and other methods of financing in order to spur growth of small firms. In addition, many governments provide fiscal incentives, such as grants or tax breaks, to provide financial incentives for small enterprise growth. A particularly effective form of growth for SMEs is through exports. Therefore, many countries have also targeted SMEs with export credit programs and/or assisted them with accessing foreign markets.

Innovation is also an important part of small business development. Best-practice governments provide grants for R&D to small enterprise, as well as providing technological support through diffusion programs designed to promote the flow of expertise throughout the economy. In addition, ICT technologies are providing significant opportunities for cost cutting and to widen their market penetration through B2B and B2C ecommerce, providing opportunities for SMEs to serve very small market niches that might otherwise be impractical and unprofitable.

**<u>Table 10. Best Practice in SME Promotion</u>**

||**Regulatory reform**|**Funding and**<br>**promotion**|**Innovation and technology**|**Market access**|
|---|---|---|---|---|
|•<br>•<br>•<br>•<br>•<br>•|US – One Stop<br>Capital Shops<br>UK (regional), Direct<br>Access Government<br>Portugal – Centres for<br>Company Formalities<br>South Korea – Small<br>and Medium Business<br>Association<br>Norway – Action Plan<br>for Small Enterprises<br>Turkey – Small and<br>Medium Industrial<br>Development<br>Organization|•<br>UK – Enterprise<br>Investment Scheme,<br>Venture Capital<br>Trusts<br>•<br>Netherlands – SME<br>Credit Guarantee<br>Scheme<br>•<br>US – Small Business<br>Investment<br>Companies,<br>NASDAQ<br>•<br>Denmark –<br>VaekstFonden Loan<br>Programme|•<br>US – Small Business<br>Innovation Research<br>programme<br>•<br>South Korea – Enterprise<br>Information Incubator<br>Project<br>•<br>Canada – Industrial<br>Research Assistance<br>Program<br>•<br>Sweden – Foundation for<br>Technology Transfer<br>•<br>Ireland – Small Business<br>Operational Programme|•<br>Spain – 100 Policy for<br>SMEs<br>•<br>Turkey – Export<br>Credit Programme<br>•<br>US –Export Express<br>•<br>Mexico – Export<br>Guidance System<br>•<br>Australia – Export<br>Access Program<br>•<br>Netherlands – New<br>Businesses in Foreign<br>Markets|

_Source_ : OECD _SME Outlook 2000._ Paris.

# **_III.3 Expanding the Service Sector_**

As an important measure of increasing employment and enhancing international competitiveness, the Chinese government should especially encourage the development 19