G20 performance on entrepreneurship and SMEs

With performance in this area falling below average, G20 leaders could employ several measures to increase compliance, from making fewer commitments to implementing a multi-year timetable

During its 2020 presidency, Saudi Arabia has emphasised empowering people through trade and investment cooperation, with special attention given to promoting entrepreneurship and small and medium-sized enterprises for a prosperous economy. These are key priorities for the Riyadh Summit, especially in response to the impact of COVID-19 on the global economy. It is promising that the G20’s performance on entrepreneurship and micro, small and medium-sized enterprises has increased from 2008 to 2019, to reach a solid level now. Still, for Riyadh more improvements could be made.

Conclusions

Since the 2008 Washington Summit, G20 leaders have addressed entrepreneurship and SMEs at all but two summits: London 2009 and Los Cabos 2012. The summits from 2008 to 2019 produced 11,832 words on the subject in their communiqués, averaging 845 words for 6% of their total words per summit. This peaked at the 2016 Hangzhou Summit with 3,302 words, for 20%. The 2019 Osaka Summit produced 550 words for 8%.

From 2008 to 2014, the G20 focused on promoting entrepreneurship in developing countries and lowering barriers to financing for SMEs to stimulate the global economy. Since 2015, its focus included gender equality and youth entrepreneurship. The G20 endorsed the Action Plan on SME Financing at Antalya in 2015 and the Entrepreneurship Action Plan at Hangzhou in 2016. At Hamburg in 2017, the leaders launched the Women Entrepreneurs Finance Initiative.

Commitments

The G20 has made 69 collective, future-oriented and politically binding commitments on entrepreneurship and SMEs. It did so at all summits except Washington in 2008, London in 2009 and Los Cabos in 2012. The first commitment came at the 2009 Pittsburgh Summit, which accounted for 1% of all commitments made there. The peaks came with 20 commitments (9%) at the 2016 Hangzhou Summit and 19 (4%) at the 2017 Hamburg Summit.

The first phase, from 2008 to 2014, produced 18 commitments, or 26% of the total. The second phase, from 2015 to 2019, produced 51 commitments, or 73% of the total.

Compliance

The G20 Research Group has assessed 13 of these commitments for compliance before the next summit was held. Compliance averaged 64%, which is below the G20’s 71% average across all subjects. However, the overall average was lower than the 88% compliance with commitments on entrepreneurship and SMEs made at the 2013 summit, 90% compliance from the 2014 summit and 75% compliance from the 2015 summit. The 2010 Seoul Summit at 39%, the 2016 Hangzhou Summit at 54% and the 2017 Hamburg Summit at 35% were below average. Canada was the highest complier at 96%.

Causes of compliance

Several measures under the leaders’ direct control contribute to increased compliance.

One such measure is the proportion of words and commitments on entrepreneurship and SMEs. Fewer commitments and fewer conclusions coincide with higher compliance. The three summits with the highest compliance, which averaged 84%, had 8% of the conclusions and 3% of the commitments on SMEs. The three summits with the lowest compliance, which averaged 43%, had 10% of the conclusions and 5% of commitments.

A second measure that can help leaders increase their compliance is the binding level of the commitments. Less binding commitments correlate with higher compliance. The eight assessed commitments using highly binding verbs, such as ‘we commit’, averaged lower compliance of 61% than the five commitments with lower binding verbs, such as ‘we promote’ and ‘we support’, which averaged 69%.

A third measure is linkage to another subject. Commitments linked to macroeconomic policy had the highest compliance with 90%. Those linked to information and communications technologies and digitalisation had the lowest compliance, averaging only 13%.

A fourth is a multi-year timetable. The commitments without a multi-year timetable averaged compliance of 69%, whereas those with one averaged only 33%.

Corrections

Therefore, to improve compliance with their commitments on entrepreneurship and SMEs, the G20 leaders at their Riyadh Summit can use the following four low-cost accountability measures.

First, they should make fewer commitments that focus on entrepreneurship and SMEs.

Second, those commitments should link to the macroeconomic subjects of investment, long-term financing and economic development.

Third, they should make less binding commitments on SMEs.

Fourth, they should make commitments without multi-year timetables.