Comment: The report of the Small Business Forum, published last week, outlined 15 specific recommendations, all designed to help remove challenges and barriers experienced by small businesses and to help support their future growth, both here in Ireland and internationally where appropriate.

Over the years, facts and statistics about the contribution made to the economy by multinationals have been communicated on a regular basis. However, the comparable numbers for the indigenous small business sector are ones that are not as commonly known.

As a result, there has been insufficient focus on the policies and supports required to ensure the continued growth and development of that sector.

One of the first tasks undertaken by the forum was to quantify exactly how significant the "small business sector" is.

It is clear that the importance of the small business sector in the Republic cannot be overstated.

Small companies contribute €10 billion to the Exchequer on an annual basis and employ almost 800,000 people - more than the numbers employed in larger companies. Once we had captured these facts, the importance of the role at hand became clear.

The recommendations in the final report address 10 issues which were identified throughout the consultation process. These all fall under three focus areas:

create a better environment;

stimulate growth;

inspire entrepreneurship.

All areas identified in the report are priority ones and that is why there are specific recommendations to address them.

However, if I were to pick one key area that emerged through our research, and one which I think will have a profound impact on the future health of the economy if not addressed in a timely and effective manner, it has to be the low rates of productivity that exist within the small business sector.

When looking at international productivity comparisons, the gross value added per person employed in the manufacturing sector in 2003 shows that the Republic was by some distance the leader among the 10 countries examined. This can be explained mostly by the effects of large-scale foreign direct investment.

However, the overall performance masks the significant difference in productivity performance across different categories of companies in terms of numbers employed.

Out of 10 countries, productivity in Irish manufacturing companies ranks fifth for those companies with between one and nine employees; eighth among companies with between 10 and 19 employees and fourth in the case of companies employing between 20 and 49 people.

The pattern is similar when the data for the services sector are explored, with Ireland again falling mid-table at best when doing comparisons in the categories of hotel/restaurants; transport, storage and communications; and real estate, renting and business activities.

Given the importance of services to today's economy and, because the bulk of small businesses operate in the services sector, these figures are very concerning.

In an environment of rising costs and increased competition from abroad, there is a real need for productivity levels to increase in order to offset the impact on competitiveness of the other environmental factors.

There are three specific recommendations which have been made in the report of the Small Business Forum, Small Business Is Big Business, to address this challenge.

The first is to raise the level of management capabilities in the small business sector by stimulating demand among owners and managers for management development initiatives, and by establishing a management development council to ensure that the supply of management programmes meets the needs and learning styles of owner/managers through continuous monitoring and evaluation of the available programmes.

Secondly, there is a need to stimulate innovation. It is too much to request that small businesses focus on research and development - most do not have the scale nor are they operating in a technological environment.

However, this doesn't mean they cannot embrace the whole area of non-technological innovation. The recommendation in the report is to make innovation vouchers available to small businesses in every sector to be exchanged for advice, expertise and information from accredited knowledge providers.

It is also recommended that knowledge acquisition grants are given to small businesses to enable those in the manufacturing and internationally traded services sectors to gain access to research-based knowledge, expertise and facilities in higher education institutes, research bodies and large private enterprises on a co-funded basis.

Finally, it is recommended that awareness and understanding of the role of ICT in improving business performance is driven by creating a subsidised scheme costing €2 million a year for three years to help small businesses to avail of an ICT audit.

Through the scheme, they can access independent professional advice on how to use ICT to improve productivity and foster growth.

The solutions are relatively simple. The challenge is immense. There will be no overnight result in this area, but I believe that the measures set out in the Small Business Forum report and accepted by Minister for Enterprise, Trade and Employment Micheál Martin will make a huge difference once implemented.

One thing is clear: if Ireland Inc does not move to address the productivity challenge it will not just be the small business sector that will require a new policy focus - it will be the economy as a whole.

Joe Macri is managing director of Microsoft Ireland and chairman of the Small Business Forum; The report of the Small Business Forum, Small Business Is Big Business, is available at www.smallbusinessforum.ie