Small business

2.3 Setting out the role of central, regional and local authorities and agencies
Objective: To ensure local empowerment.
Local empowerment plays a key role in creating the conditions for SME development. There are limits
to central government’s role in supporting the development of entrepreneurship. The basic elements of
entrepreneurship cannot be supplied by central government, and a ‘bottom up’ development philosophy
in favour of SMEs can only function with substantial local empowerment, as local and regional authorities
are closer to their business communities. 
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A clear vision of the respective role of central and local efforts and of the ways in which central
government can facilitate and support local and regional efforts, are therefore essential. 
EFFECTIVE POLICIES FOR SMALL BUSINESS - © OECD 2004
2. Policy Setting
33
In Hungary, the law provides for a three-tiered territorial system of development councils: at the municipality group, county
and county group level. The latter were created to handle the larger decentralised development issues. While the system seemed
a logical approach to development at different levels, it has been criticised for inadequate local (particularly: private sector
and civil society) representation, lack of coordination among tiers, limited decentralisation of financial resources and a lack
of identification of actors with the county groups, which many consider arbitrary. 
In the People’s Republic of China, local authorities have considerable financial powers and a high degree of freedom to
engage in a variety of local development activities. This has been a major factor in the strong growth of the small enterprise
sector, which again had a major share in the impressive growth rates achieved in the last two decades. The large state owned
industry sector now produces less than fifty percent of industrial output.