Dr. Boyko Takov, Executive Director BSMEPA: There is no Universal Economic Cure for all Companies
In practice, one business should not go bankrupt for three weeks.
The Coronavirus will completely change our perceptions of business, whether small, family or medium. This is exactly what causes us to think in terms of saving industries for millions of BGN in Bulgaria. In addition to tourism and restaurants, thousands of small businesses are affected and do not know if they will open their doors again. And global losses cannot even be calculated for the time being. One of the representatives of the Bulgarian business is the Executive Agency for Promotion of Small and Medium-Sized Enterprises, which helps different industries to find new markets, to present their innovative products to the world. In a time of crisis, this seems to be in the background, and at this stage, we are focusing on other things, most notably how to survive. But what is the agency planning to do at the time of the pandemic? How will it support the business? What measures can SMEs take? Can the EU help to the extent that it saves Bulgarian business? See what the CEO of the Small and Medium Enterprises Promotion Agency shared with Trud Newspaper.
- Can small businesses be restructured to new opportunities, such as sewing masks?
- Yes, they can and we already have one or two examples, which is impressive. There are already companies which produce protective clothing, helmets, masks, goggles. I would like to give an example for the start of the production of safety glasses. Within 12 days after we started the talks on the topic with Mr Stanislavov, Chairman of the Automotive Cluster, with Prof. G. Todorov, we had a meeting with Minister Karanikolov, and after the task, he had set, we already had the opportunity for production in an industrial environment. The laboratories of the Technical University of Sofia and Sofia Tech Park in partnership with Arexim Engineering have done impressive work. One such process takes more than 40 days in standard production conditions. This is an example of how business can and should work with science. I am very pleased with such examples, which the Agency finances annually. Due to the current situation, we were unable to hold a joint event with BAS on this topic. I strongly believe that after the crisis, business and science will take a more unified view of their joint potential and will give life to many new Bulgarian design ideas and products.
- How would you comment on the idea of GERB municipal councillors in Sofia for a BGN 1 million guarantee fund to support small and medium-sized businesses to alleviate the economic impact of the crisis?
- At the moment, any assistance is extremely important and necessary and I express my admiration for the actions of the Sofia Municipality to create a specific product for the current needs of the business. I had a conversation with my colleague Nikolay Tsenkov, the manager of the Municipal Guarantee Fund, who told me the idea is the fund to provide up to 50% of the principal of every loan approved under this guarantee scheme, but not more than BGN 20,000. There will be much softer terms for the companies themselves. There will be no fees and commissions and the guarantees will be valid for 24 months from their issuance. The funds will be used for running costs, salaries, insurance and other payments. Although the resource is not very large, it will support the SMEs in need and will help them in this atypical situation. Let us not forget that this type of financial mechanism has existed for a long time and the Sofia Municipality has supported over 600 enterprises through it.
- What do you think about the 60:40 scheme? Wasn't it also appropriate the social security burdens to be covered at a time like this?
- We all know how much time and resources, in some business areas, it takes to recruit, train and bring in employees, especially those on management positions. Any promising business will strive to retain its most qualified personnel and accordingly, even in the case of partially or fully terminated activity, it is likely that it will continue to pay their salaries for a given period of time. The scheme is mainly suitable for this businesses and aims to support them in this first stage of this state of emergency. Of course, anyone wishing and falling within the scope has the right to take advantage of it. We must agree that every country should also consider aiding the economy after getting out of the situation we are all in now, so it must carefully consider what it could do in one direction or another without compromising its functionality in economic aspect in the future.
- Which sectors will survive the crisis?
- I do not think that whole sectors can be targeted at this stage. I hope you are clearly aware that, at this point, the answers to these questions are very hypothetical and involve many conventions. Certainly companies that have had organic growth, more conservative financial policies, and are in the less affected sectors will experience less difficulty and will recover relatively quickly over a medium-term emergency.
- And which will not?
- Look, the survival of one or another company depends on many things, here I would even say that sectoral division is of great importance, but not decisive. Most companies will probably be able to survive for several months and this won't affect them very negatively in long term. Of course they will also experience difficulties. In theory and practice, a running business of this type should not go bankrupt for three weeks. Our economy is very connected to the supply chains and until they recover, the companies associated with them will not return to their pre-pandemic condition. Here, the companies that have more diversified counterparties may be able to recover faster. Imagine if a company is working mainly for one client and he finds himself at a disadvantage, this will naturally affect the company as well. At the moment, intercompany debt is likely to increase and it would be a problem for the economy to if companies fail due to artificially created situations, panic and other irrational actions.
– Do you have data on already bankrupt SMEs?
- At this stage, we at the Agency do not have such data and yet let us not forget that only three weeks have passed since the beginning of the state of emergency.
- What else can the state do to help small and medium-sized enterprises?
- Anything that can be done, must be done and the government takes action. It is now important, perhaps more than ever, to have a constructive dialogue between the state, employers' organizations and trade unions. If everyone looks in one direction, acts responsibly and thinks about others, we will be able to get through the crisis more easily. Together we are stronger, we see many examples of mutual assistance between private companies or between them and the state.
- With what programs are you currently helping the businesses with?
- At the moment, our programs to help businesses reach foreign markets are impossible to execute, but we are working and preparing our business for immediate launch at the earliest opportunity. We will be launching an information and communication technology voucher very soon and will be able to support 450 companies. Our resources are just over BGN 9 million and they will be spent on information and communication services and solutions, provided by Bulgarian providers of relevant services for Bulgarian enterprises. We are about to launch the National Innovation Fund, and with a resource of about 5.5 million BGN we will support the development of innovations in and from Bulgarian companies and scientific units. Times like today outline the need for innovation and production based here. We have sent our proposals to the Minister of Economy Emil Karanikolov, which can be started as soon as possible. This way we can increase our support for the Bulgarian business, representing liquidity for the most common types of expenses. These are short-term solutions, but we have to think about the time after the pandemic, which is why we are in constant contact with the International Small and Medium Enterprises Network (INSME), the European Association of Small and Medium Enterprises Agencies (ETPOA), and with Commissioner Mariya Gabriel and we are looking for opportunities for programs and projects at this stage. I would like to express special thanks to all of them for their support.
- What new opportunities are opening up?
- This is a very interesting question because I think this crisis will give new tilts to the global economy, its positioning and structure. Many conclusions will be drawn and this will lead to new perspectives, and I hope that the European Union will make the most of it and prioritize it in the long term. It is assumed that after the crisis is over, all export-oriented companies should make use of the full range of opportunities opened by supply chain disruptions.
- Can the small outlets save themselves if they don't pay fees and rent?
- This depends on the desire of the particular business investors, owners, management and the previous model of work. There is no universal answer for everyone, no one, universal economic cure for all. Small businesses still work, yes, they may have fewer clients, but they work. There is a problem for the tourism sector, for restaurants, bars, hotels. I hope everyone is aware that the situation is almost the same throughout Europe and not only. I do not think any country wants to hinder its economy from growing - but you must agree that difficult decisions are needed at the moment.
Dr. Boyko Takov is Executive Director of The Bulgarian Small and Medium Enterprises Promotion Agency, appointed by an Order of the Minister of Economy, Mr. Emil Karanikolov, dated November 12, 2018.
Dr. Takov has a proven executive management track record and over 12 years of experience in business management. He spent four years at The Executive Agency „State Property of the Ministry of Defense“, where he served in various expert positions. From 2008 to 2012 he was CEO and member of the Board of Directors of the Bulgarian subsidiary company of a leading South Korean energy company.
Over the years, he had been at executive and management positions in some of the most advanced areas of business and investment, where project and finance management in agriculture, energy and infrastructure was only part of his biography.
He earned his doctorate in Economics, Industrial Engineering and Management at the Technical University in Sofia and his Master’s degree in Marketing and Economics at the University of National and World Economy, Sofia.
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