Middle East & North Africa development of smes exports through virtual market places

Middle East & North Africa

DEVELOPMENT OF SMEs EXPORTS THROUGH VIRTUAL MARKET PLACES


Concept Note- October 2013 –

Revised version (January, 2014)


The World Bank

Finance and Private Sector Development Group

Middle East and North Africa Region
TABLE OF CONTENTS

A.INTRODUCTION AND CONTEXT 6

A.Regional Context 6

B.Sectoral and Institutional Context 7

C.Alignment with Countries National Strategy 11

D.Alignment with the Transition Fund Objectives 15

E.Complementarity with other projects 17

F.Justification for the World Bank as Executing Agency and Partnership with ITC 19

B.PROPOSED PDO/RESULTS 20

C.Proposed Development Objective 20

D.Key Results 20

E.PROJECT DESCRIPTION 21

A.Project context 21

B.Project components 29

C.Project Financing 33

F.KEY RISKS AND MITIGATION MEASURES 35

G.IMPLEMENTATION 35

A.Institutional and Implementation Arrangements 36

G.Financial Management, Disbursement and Procurement 37

H.Monitoring and Evaluation of Results 38

I.Sustainability 39

H.TEAM, TIMELINE AND BUDGET 39

Development of SMEs Exports through Virtual Market Places (“The VMP Project”)

Proposal Outline	The project aims to increase the volume of exports by exporting and export-ready SMEs through Virtual Market Places and create a business-enabling environment for e-commerce. The project is of multi-country nature and the beneficiary countries are Jordan, Morocco and Tunisia. The project will work with Trade Support Institutions (TSIs) that provide support to enterprises in their export diversification efforts, access to business intelligence on foreign markets, as well as coaching and capacity building of SMEs to use Virtual Market Places (VMPs) to increase their exports using new and innovative export channels.
Implementation Arrangements	The Project will be run as World Bank Executed Project with the technical support of the International Trade Centre (ITC). The implementation arrangements include the involvement of trade support institutions (TSIs), business associations and relevant civil society actors across the three countries.
Program Objective	This is a pilot project which aims at achieving two major objectives: - Increasing SMEs exports ‘through existing Virtual Market Places; - Supporting institutional reforms to create an enabling environment for e-commerce. SMEs from the Arab region are not significantly present and active on existing Virtual Market Places. This is mainly due to (a) lack of export management skills and knowledge of e-commerce potential, (b) insufficient access to business intelligence and trade information, and (c) limited access to financial resources to penetrate and develop new markets. As the access to internet and new technologies has become more affordable in the region, the project will allow SMEs to benefit from the advantages of electronic platforms to access new markets and thus reduce geographical barriers. In line with national development priorities, it is expected that growing exports will result in job creation particularly for women and youth. This is supported by the fact that beneficiary countries have seriously engaged in new development policies and programs aiming at diversifying export markets and expanding trade. The project will also support the policy change to improve the business environment for e-commerce policies and regulations in the region need to be further elaborated and modernized to take full advantage of e-commerce (f.e. e-payments, risk insurance systems, e-customs).
Fit with transition Fund Objectives	The higher-level objectives to which the project contributes are aligned with three of the Transition Fund Objectives: i) Competitiveness and integration by facilitating and reducing trade barriers hindering SMEs access to export markets, and ii) Inclusive development and job creation, by generating new business opportunities which impact SMEs growth and job creation. It is aligned as well with the type of innovative activities the Transition Fund intends to finance.
Timeframe	The project will be implemented over a period of 3 years which will result in significant change, ensure sustainability and achieve meaningful impact.
Overall Budget	The amount requested is US$ 3 million over the 3 year program period. This will be split across the 4 program components and 3 target countries.
Summary Program Components	Component I. Institutional Reform (US$ 0.3 million) The new Export Development Policies being implemented by the beneficiary countries involve the resolution of number of bottlenecks such as access to Virtual Market Places, e-payment, logistics, access to finance and export guarantees, quality control, etc. In order to tackle these issues, the three countries plan to implement inter-ministerial committees. These committees will also tackle the business processes related to the public administration that can be offered online such as e-customs and the submission of digital documentation. As describe above, the weak presence of SMEs from the Arab region on VMPs is due to the many barriers SMEs are facing in integrating new technologies as a key driver of their business and in transacting business online. Some major impediments relate to inadequate e-payment systems, lack of risk insurance systems, and inefficient trade facilitation processes that result in high transaction costs directly affecting the competitiveness of SMEs. The project, aims at supporting inter-ministerial committees in each beneficiary country that will lead the transformational reforms to create a conducive environment for e-commerce. The inter-ministerial committees will form a platform for public-private dialog to drive and support policy and institutional change and structural transformation to promote e-commerce The committees will work with TSIs and SMEs to assess what obstacles and difficulties that SMEs are facing in developing their e-commerce activities and design appropriate solutions to alleviate those barriers. The practical experience and case studies will be used to raise awareness of policy makers towards the critical issues. Working through the required institutional mechanisms, the project will provide technical assistance to change the existing policy framework, eliminate existing administrative barriers, and to institutionalize new processes to support and facilitate e-commerce. Component II: Capacity building of SMEs (US$ 1.35 million) Under this component, beneficiary SMEs, that are already exporting or assessed to be export-ready, will benefit from capacity building activities and direct coaching to acquire new skills and competencies in e-commerce. Selected SMEs will be registered in one to three different VMPs, advised on how to make the best use of their presence on these VMPs and coached on how to concretely deal with the inquiries coming from the first potential buyers through the VMPs. Component III: VMP Partnerships, Business Intelligence and Certification (US$ 1.02 million) This component will reinforce the capacity of TSIs to provide business intelligence and trade information to enable the SMEs to benefit from opportunities offered by the VMPs. TSIs will play a key role in monitoring SMEs’ activity on the VMPs and assessing benefit and impact on export development. To ensure the best use of the VMPs, some high-performing/ firms will be offered premium accounts in VMPs so they gain greater visibility from potential clients and will serve as a role model for others. Component IV: Project Management (US$ 0.27 million) This component will finance management and supervision activities at two levels: the Regional Implementing Agency (RIA) and the Project Implementing Units (one by country).

Executive Summary


Jim Yong Kim’s speech, October 1, 2013: “We will be bold. We will take risks –smart risks. And by that, I mean we will invest in projects that can help transform the development of a country or a region – even if it means we might fail.
[…] We are also expanding our group of partners to include those which are pioneering new business models. In just a few years, Alibaba has fostered the creation of growth of over 6 million small and medium enterprises in China […]. This is an example of a transformational business model.”
In line with this inspiring speech, the MNSFP department has prepared an innovative project aiming at unlocking the so far untapped economic growth potential of regional SMEs.

The World Bank found out that i) improving export capacity skills in export-ready SMEs, and ii) actively promoting their products and services through global virtual Market Places such as Alibaba.com would significantly increase their revenues, leading to more job creation, market diversification and increased integration to the global economy.

The development objective of this 3-year project is to provide capacity building to approximately 600 SMEs selected in Jordan, Morocco, and Tunisia (200 companies in each country)). It is expected that a relatively high return in terms of economic value will be achieved since one dollar spent would yield a US$ 4.1 return¹ in additional revenues for beneficiary SMEs. The project has been designed as a pilot. It can be easily expanded to other beneficiaries (such as West Bank and Gaza or Egypt).

Project partners are: the Ministry of Trade of Jordan, the Ministry of Trade of Morocco, the Ministry of Trade of Tunisia, the International Trade Center in Geneva and the World Bank.

Advanced discussions on the design of this project have already been held with Alibaba.com.

This project has been prepared with the active participation of the beneficiary countries (at the highest Ministerial level). In addition, prior to the project appraisal and during the finalization of the concept note two surveys have been distributed among SMEs with the support of trade authorities, chambers of commerce and sector associations. Almost 300 companies provided feedback.