Improvements in fiscal institutions, fiscal rules, public-private partnership, foreign financing partly in the form of grants, improvements in public investment management frameworks are some of the possible “remedies” that might generate improvements in the infrastructure in the CESEE region. 3. SMEs’ investment activity and access to finance  Apart from the needs for investment in infrastructure, as mentioned above, apparently what the region is also in need of are the investments in more technologically advanced and innovative segments, investments that are very often led by SMEs, or start-up companies. In order to grow and to be economically productive, this sector needs stable sources of financing. Without access to finance SMEs are unable to invest, which impairs their capacity to improve productivity, raise competitiveness, promote innovation, generate employment, and contribute to economic growth and development. And the importance of the SMEs sector is continually increasing. According to some studies, majority of enterprises globally are SMEs, accounting for approximately more than a half of private sector employment. In fact, the latest data on SMEs in the EU, as well as some of the countries in the region, confirm the importance of this sector in terms of the number of companies, its share in the total value added, as well as in the total employment. 6  Transition report 2015-2016 “Rebalancing Finance”, European Bank for reconstruction and development.
Transition report 2015-2016 “Rebalancing Finance”, European Bank for reconstruction and development. 7  Chart 8: Quality of infrastructure in CESEE region vis-à-vis EU 28 Quality of infrastructure index (difference in p.p.) Real public capital stock, per capita, % of EU-28  0.0  0.80  -0.5  0.70  -1.0  0.60 0.50  -1.5  0.40  -2.0  0.30 -2.5  CESEE  CEE  SEE  2015  2013  2014  2011  2012  2009  2010  2007  2008  2006  2004  2005  2017-2018  2002  2010-2011  0.20  CESEE  2003  2007-2008  Baltics  2000  SEE  2001  CEE  Baltics  Source: World Economic Forum, IMF Investment and Capital Stock Dataset (2017) and NBRM calculations. Complementary and equally important question is whether CESEE countries invest in costeffective, viable and long-term growth supportive projects. Largest part of infrastructure projects in CESEE region is publicly financed (60-70% in transition countries, compared with 15 to 60% in the EU15 economies6). This is problematic because of two reasons – first, public resources may become insufficient for infrastructure financing, given the tight fiscal constraints and rising public debts and second, in practice, very often, public investment decisions are not guided by economic rationale which might lead to inefficient and unproductive projects.