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Support to SMEs in the context of AA/DCFTA
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Study results
- 1. Ukraine October 6th 2015 Support to SMEs in the Context of AA/DCFTA: Study Results Mark Hellyer Team Leader 1
- 2. AA/DCFTA: Different kind of Agreement Not just tariff preferences Alignment of Legislation with that of the EU (commitments) Once aligned, free movement without further checks (equal treatment) NOT AUTOMATIC BUSINESS AFFECTED How? How much? When? What can be done to help? Main benefits: Better market access (> 500 million consumers) Improved business climate Increase competitiveness Consumers have better quality, cheaper and safer products For Business Increased production for sales in national, EU and global markets 2
- 3. AA/DCFTA Audit – Direct Effect on Business Area of Association Agreement Likely Impact on business Money laundering/crime & corruption Requirement for increased financial reporting/controls Market access Opportunities in EU and cheaper imported inputs Approximation of TR, standards, and CA Adaption of production and CA. Approximation of SPS Compliance with EU SPS and animal welfare Approximation to EU customs law (code) Procedures for customs administration Approximate on public procurement Opportunities to bid on EU contracts Use of GIs Rebranding Approximation relating to energy cooperation Standards regarding energy and labelling incl buildings and products GMO monitoring Use and control of GMOs Road transport Road and vehicle safety Company law, corp. gov., accounting auditing Changes in corporate governance Environment (Control of industrial pollution) Control vehicle emissions waste and waste- water) Health and safety Safety and health of workers at work,, use of work equipment, personal protective equipment 3
- 4. Complex Change in business operations 100 million product in Catalogue TARIC >10,000 products Differing impacts Administrative Management processes and Reporting Product and Production Product design, plant and technology Horizontal Requirements Changes to plant Testing and verification In house and external How will business be affected? 4
- 5. Administrative Affect on Business Accounting Requirements for record keeping, P&L, balance sheets Requirements for reporting/auditing to authorities Publication of accounts Accounting systems (manager or accounts) – and/or software External audit services Form filling for authorities Publication costs EXAMPLES – Accounting Practices 5
- 6. Legislation Affect on Business (1 part of contaminants – Dioxins) Control of contaminants Control of pesticide residues Control of residues of veterinary medicines Health control of products Traceability Labelling for foodstuffs Section 5 – sets limits for dioxins and dioxin-like PCBs in meat New machinery to chemically remove dioxins in meat Test/verify Health Cert from competent authority Export or as/when nationally approximated Example: Compliance with Product Requirements (eg Chicken meat) 6
- 7. Legislation Affect on Business Council Regulation (EC) 561/2006 due to be approximated into national legislation in Ukraine within 5 years Investments (fleet of 20 vehicles with 3 depots €20,000) Tachograph unit €850 per vehicle Tachchograph uploader € 900 per 10 vehicles Software and analysis systems €400 plus PC per depot Analysis of records Reporting to Authorities Example: Horizontal Measures (transport: limits on drivers working time) 7
- 8. Legislation In house Laboratory or external certification Marketing Requirements For Dangerous Chemicals This requires Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) with the European Chemicals Agency (ECHA) 21 chapters of TARIC affected (chemicals, soaps, metals….) Manufacturers must evaluate chemicals and manage risk. The directive describe how gas chromatography/mass spectrometry utilizing the chemical ionization (CI) technique Registration with ECHA Document risk assessment Border inspection Example: Testing of Dangerous chemicals 8
- 9. Strategy 1 - Awareness National Business Awareness Campaign • Development of Promotional Materials • Training of journalists • Dialogue events • Direct advertising • Media Advertising • Press coverage • Social media Outreach Programme for and through Financial Institutions, BSOs and Government Development of network of institutions for AA/DCFTA information dissemination General awareness raising Training in collection of information Specific information campaign 9
- 10. Strategy 2: Know How Availability of BDS for AA/DCFTA strategy &planning System of national certification of AA/DCFTA mentors/advisers Private sector BSO advisors Public sector BSO advisory services Training programmes Thematic Specific BDS (new and existing) Capacity of BSO providers Testing services Training programmes Education programme targeting skills for AA/DCFTA compliance Creation of BSOs Business Linkages Approach • Building sector trade associations • Utilising Knowledge from EU Sector Trade Associations • Business Angels • Supply Chain Approach Establishment of National AA/DCFTA Centre • Helpdesk and webpage • Translate DG Trade Export Helpdesk 10
- 11. Strategy 3 –Investment Finance Credit Lines for compliance with regulations Promotion of the Facility Verification of link to AA/DCFTA Credit Lines and Guarantees Interest Rebates Credit Lines for Approved Technologies (for transport, energy efficiency and environmental protection) Draw-up the list of approved technologies Promotion of the Facility Credit Lines and Guarantees Credit Lines for Equipment for testing Draw-up the list of approved technologies Promotion of the Facility Credit Lines and guarantees 11
- 12. Strategy 4 – Supporting Certification and Approvals Financing Certification Costs Grants for Certification Costs Government Approvals Subsidies Group Certification Pre assessment Surveys Facilitating Access to Certification Bodies Information Database of Certification bodies/accredited laboratories Networking of certification bodies 12
- 13. Debate Discussion on making recommendations work in Georgia Strategy 1 – Awareness Strategy 2: Know How Strategy 3 –Investment Finance Strategy 4 – Supporting Certification and Approvals 13
Notas del editor
- Presentation to provide some broad conclusions and findings from the study on EU Support to the Private Sector in the context of Association Agreements (AA) including the Deep and Comprehensive Free Trade Area (DCFTA) and covers the newly signed agreements in Georgia, Moldova and Ukraine Research in the 3 countries undertaken between Sept and Dec 2014 The objectives of the study was “to propose recommendations on the design of EU support package targeting the private sector in order to accompany the process of implementation of the AAs/DCFTAs in Georgia, Moldova and Ukraine, notably in relation to the compliance with the EU norms in the domestic legislation.” [and taking advantage of the opportunities it provides to business]
- better access to a market of over 500 million consumers; not only larger market but more valuable with average earnings $39k cf Ukraine around US$5k pa (Ukraine stat); $4.4 in Georgia and $3.3k pa Moldova Zero tariffs on majority of goods traded >99% of existing trade Complying with EU technical regulations will mean access for Ukrainian products to EU market with Ukrainian products being treated the same as EU remember– EU is much bigger than domestic market - 38 times larger (GDP) of even ukraine, so on, average your market opportunity will be 38 times larger than now help improve the business climate in each country and rule of law in business, creating more certainty and transparency and therefore reducing business risk EU laws monitored by EU means less opportunity for onerous practice help increase efficiency and competitiveness of Ukraine’s’ industry through adoption of improved production norms/standards Adoption of EU standards will mean modernisation of Ukraine’s industry through new technology required to comply, as well as production processes - Access to global supply chains that are made possible by using the same technical requirements – eg in EU car industry outsources about 500 parts per car, and 40% of the value of car outsourced from outside the EU – so when you comply with EU technical requirements in Ukraine, you have the opportunity to sell into these supply chains provide Ukraine will have cheaper safer products both imported and locally produced products Safer from regulations, cheaper from local and imports from EU: increased competition from EU suppliers means that Ukrainian business will have to provide the same quality products for the same or less so that leads to increased domestic efficiency – more competitive production means that you are more competitive in Ukraine, in EU and of course around the world making prospects over the medium – long term growth much better than in a relatively small protected domestic market Increased sales globally as if you can produce to EU standards, products accepted globally and more efficient production - This process already happened in Europe - AFNOR (the French Standards Body) study of impact of Single European Market tech regs application show they have raised productivity by 15-30% across Europe But benefits not automatic – business will have to change
- 11 areas of agreement with direct effect all business whether exporting or selling locally. 2 other areas for exporters
- Each product will be effected differently, so will producers, importers and sellers of the 10,300 different products in the nomenclature Based on the lists of EU legislation that has to be adopted in the areas that affect business, more than 500 EU Directives will be adopted in each country, plus >5,000 standards up to 10,000 in some countries
- Awareness of AA/DCFTA to business must be more than current “headline” approach and be specific as to the ‘effects’ (as well as impact) on SMEs business operations. The specific objectives will be: to ensure that all SMEs understand how the agreements affect business; to stimulate SMEs to consider and incorporate AA/DCFTA implications into their corporate planning; to ensure FIs and BSOs understand the needs of SMEs; to encourage government to consider and communicate changes to business.
- The specific objectives of this strategy will be: Increase the cadre of skills and knowledge of how to operate and adapt business under the AA/DCFTA To create and make available adequate and available BDS for AA/DCFTA compliance
- The general approach to providing finance to SMEs to assist in compliance with the requirements arising from national implementation of the AA/DCFTA in Georgia, Moldova and Ukraine must have the following considerations: SMEs in each country need investment for upgrading to meet market requirements and to ensure competitiveness. Whilst this investment is needed, it is not necessarily linked to the needs arising from compliance with the rules to be adopted as a result of the AA/DCFTA. Therefore, it is important that the facilities offered provide a direct link to effects of AA/DCFTA compliance. It should be recognised that the focus should not just be on compliance but for taking advantage of the resulting opportunities. So although existing exporters already comply with the EU acquis, facilities should also be made available to potential exporters to the EU.. Therefore, the principle focus should be on SMEs supplying structured domestic markets and potential exporters.
- The specific objectives of this strategy will be: to ensure that certification and approval processes do not become a barrier to compliance with national legislation adopted within the context of AA/DCFTA implementation or access to the EU market; to reduce the cost of certification for SMEs; to improve access to competitive market for certification and approvals.