Project proposal for the MENA transition fund
SME Development Strategy for Libya
April 2013
Date of Submission to Coordination Unit:
18.04.2013
A. GENERAL INFORMATION
1. Activity Name
SME development strategy for Libya
2. Requestor Information
Name: Mrajeh GHAITH
Title: Deputy Minister of Finance
Organisation and Address: Ministry of Finance, Tripoli, Libya
Telephone: +218 21 711 7118
Email: [email protected]
3. Recipient Entity
Name: Mr. Rajab Khalil
Title: Director General of Libya Entreprise
Organisation and Address: Libya Enterprise, Gargaresh Road, Hai Andalus, Tripoli, Libya
Telephone: +218 21 711 7118
Email: [email protected]
4. ISA SC Representative
Name: Fabrizio PAGANI
Title: Head of Sherpa office
Organization and Address: OECD, 2 Rue Andre Pascal, 75016 Paris
Telephone: +33 1 4524 1855
Email: [email protected]
5. Type of Execution (check the applicable box)
√
Type
√ One ISA-Execution
Endorsements
Written
endorsement from
designated ISA
(OECD ).
Justification
The OECD has extensive experience supporting
developed and emerging economies identify
barriers to competitiveness and improve the
business climate. The OECD has undertaken a
number of business climate reviews in the MENA
region. The activity will build on the results of
that review, a subsequent update, and on other
tools for improving competitiveness.
The OECD also co-ordinates several regional
Working Groups on issues such as SME
development and competitiveness. This project
will use those working groups to discuss issues of
concern for the economic development of the
country and to foment appropriate linkages.
The OECD is also carrying out a MENA-wide
project to develop an SME policy index,
benchmarking individual countries against one
another. Libya will be included, with co-funding
from this project.
Libya Enterprise is the main Libyan institution
responsible for enterprise development – a
challenge that requires broad Government
action, due to the limited development of the
sector and the reliance of the economy on oil
revenue.
As they will carry the main responsibility for
formulation a strategy to promote and support
SME’s, as well as monitor its implementation not
only internally, but across a range of involved
agencies and ministries, they have a crucial role
to play in the implementation of this project.
They will provide on-the-ground support and
staff time to all project activities, as indicated as
in-kind contribution in the budget.
Geographic Focus
The Libyan Republic
6. Amount Requested (USD)
Amount Requested for direct Project
Activities:
(of which Amount Requested for direct
ISA-Executed Project Activities):
$ 2,440,000
$ 2,440,000 for OECD
Amount Requested for ISA Indirect Costs
$ 176,000 for OECD (technical product
coordination)
Total Amount Requested:
$ 2,616,000
7. Expected Project Start, Closing and Final Disbursement Dates
Start
Date:
July 2013
Final
Disbursement
Date:
31 October 2016
Closing Date:
30 September
2016
8. Pillar(s) to which Activity Responds
Pillar
Primary Secondary
(One
only)
Investing
in Yes
Sustainable
Growth. This could
include such topics
as innovation and
technology policy,
enhancing
the
business
environment
(including for small
and medium-sized
enterprises as well
Pillar
(All that
apply)
Enhancing Economic
Governance.
This
could include areas
such as transparency,
anti-corruption and
accountability
policies,
asset
recovery,
public
financial management
and oversight, public
sector
audit
and
evaluation, integrity,
Primary
Secondary
(One only)
(All that
apply)
Yes
as for local and
foreign investment
promotion),
competition policy,
private
sector
development
strategies, access to
finance, addressing
urban congestion
and
energy
intensity.
Inclusive
Development and
Job Creation. This
could
include
support of policies
for
integrating
lagging
regions,
skills and labour
market
policies,
increasing
youth
employability,
enhancing female
labour
force
participation,
integrating people
with
disabilities,
procurement reform,
regulatory quality and
administrative
simplification,
investor
and
consumer protection,
access to economic
data and information,
management
of
environmental
and
social
impacts,
capacity building for
local government and
decentralization,
support for the Open
Government
Partnership, creation
of new and innovative
government agencies
related
to
new
transitional reforms,
reform
of
public
service delivery in the
social
and
infrastructure sectors,
and sound banking
systems.
Yes
Competitiveness
and
Integration.
This could include
such
topics
as
logistics, behind-theborder
regulatory
convergence,
trade
strategy
and
negotiations, planning
and facilitation of
cross-border
infrastructure,
and
promoting
and
facilitating
infrastructure
projects, particularly
vocational training,
pension
reform,
improving
job
conditions
and
regulations,
financial inclusion,
promoting
equitable
fiscal
policies and social
safety net reform.
in the areas of urban
infrastructure,
transport,
trade
facilitation
and
private
sector
development.
B. STRATEGIC CONTEXT
9. Country and Sector Issues
In the aftermath of the radical changes in 2011, enterprise development is at the forefront of
the economic development priorities of the Government of Libya. One of the most important
tasks for the Libyan government in terms of enterprise promotion and in the aftermath of the
events in 2011 is to establish a comprehensive SME development strategy, with concrete
measures to facilitate access to finance for entrepreneurs and existing companies, including SMEs.
Although 96% of the enterprises in Libya are small and medium enterprises, their contribution to
the GDP of the country is only 4% (General Information Authority, 2005)1. SMEs are more
concentrated in the North Western part of Libya (about 46% of total number) than in the North
East (about 36%). About 80% of them are privately owned and run by individuals, while only 16%
are established in the form of small corporations, and 3% are family-owned. Food and Beverages
industry (retail restaurants) rank first in both the number of firms and employees, followed by
metals and heavy metals products, wood and paper, textiles and clothing, ceramics and bricks, and
furniture.
In general, the Libyan government needs to promote enterprise creation and growth to diversify
its economic activities away from oil and to provide employment and income opportunities to its
population. Hydrocarbons currently contribute to around 70% of GDP, 90% of government
revenues, but offer only 5% of employment2. SMEs and entrepreneurs have the potential to
become growth engines for Libya’s private sector, in particular those that identify and reap
opportunities for economic diversification by exploiting international markets and global value
chains. Nevertheless, the conception and implementation of comprehensive measures for
enterprise development will take some time and will require adequate and stable government
institutions.
The proposed SME development strategy would provide a clear roadmap for such
comprehensive measures. These would cover not only enhancing the capacity of core agencies,
such as Libya Enterprise, but a wide range of public sector activities – from tax incentives over
infrastructure to education and employment policies. It would be firmly nestled within a range of
different economic development policies and harmonised with tangentially related policies and
programmes, such as infrastructure planning. In particular, the strategy will be closely integrated
with policies and strategies on investment, as both Foreign Direct Investment (FDI) and enterprise
policies are needed to develop new, productive sectors with a potential to gain a comparative
advantage and, eventually, contribute to the Libyan export basket.
1
2
http://www.ajbasweb.com/ajbas/2012/Nov%202012/234-239.pdf
http://libyabusiness.tv/blogs/LIbyabusiness/smes-in-libya-promises-and-challenges.html
10. Alignment with Transition Fund Objective
The SME development strategy in Libya seeks to enhance entrepreneurship and SME development
which is essential to respond to the Transition Fund objective of improving the lives of citizens
and assisting the Transition Countries in their transformation process. Indeed, as reflected in the
11 April 2013 G8 Foreign Minister’s meeting statement, ‘’Supporting the growth of small and
medium enterprises (SMEs) in the region will be central to economic development and growth
[and] implementation of SME Action Plans will take place in parallel with a new initiative to
provide mentoring support to SMEs”. Based on these action plans, the strategy aims to support the
Libyan government in the implementation of policies and measures to reinforce SME
development.
As outlined in the SME Action Plans, in which SME development plays a core role, Libya faces a
huge problem of underemployment, in particular among the young, and economic diversification.
The development of thriving, competitive local enterprises should be a cornerstone of Libyan
economic development policy. The private sector lacks competitiveness, with hydrocarbons
making up over 95% of the country’s exports. As a first step towards implementation of the Libyan
SME Action Plan, the country sorely needs a clear SME development strategy and capable
institutions to implement it.
Such a strategy would contribute to improvement of all thematic areas within the scope of the
Transition Fund. It would address the business climate and innovation (investing in sustainable
growth), by setting clear priorities for the promotion of high-growth enterprises and start-ups. It
will also be tied closely to the overall economic development plans of the Government of Libya, in
particular plans to promote foreign direct investment and linkages between SMEs and multinational enterprises (MNE’s).
The strategy would also make a contribution towards employment, in particular among the
young and among vulnerable ethnic groups. While efforts to stimulate start-ups and high growth
enterprises with high degrees of capital accumulation and technology usage are at the forefront,
SMEs in services and light manufacturing, geared largely to the domestic and regional market, are
also needed to create the number of jobs necessary in Libya today. Even so, the strategy will
provide a roadmap for ensuring that these companies also increase their productivity, either by
improving and branding their products, or streamlining the production, or both.
The strategy would enhance economic governance by setting clear priorities for the services
and public inputs (laws, regulation, and oversight) that the public sector should provide to SMEs –
in particular through Libya Enterprise, but also through education, infrastructure, and taxation
structure. It would complement Libyan plans to set up Special Economic Zones and incubators
throughout the country, providing guidance on how they could provide fair, targeted, and effective
assistance.
Implementation of the strategy would make a substantial contribution to overall
competitiveness of the Libyan economy, as well as to its integration into the rest of the region
and world. Support of high-growth enterprises would lay the foundation for creating net exporting
sectors outside of hydrocarbons, while value-chain initiatives would increase productivity and
promote integration with multi-national enterprises operating in the country.
11. Alignment with Country’s National Strategy
Due to the changes brought about by the transition process and the uncertainties following
multiple elections, there is no overall economic development policy in place in Libya. The Ministry
of Planning has been established recently, and will most probably take the lead in developing such
a plan. The project will involve close collaboration with that and other involved ministries to
ensure full alignment with the emerging broader economic development strategy of the
country. At any rate, economic diversification to create employment and reduce oil dependence
will be at the forefront of the economic development agenda, and a solid SME policy, along with
one for foreign investment, is part and parcel of such an effort.
The strategy will also be closely aligned with the plans of the Libyan government to corporatise,
and, eventually, privatise state-owned enterprises, active in a range of productive sectors in the
economy. These provide ample opportunities for investment, project initiatives, and collaboration.
Finally, the strategy will provide justification, backbone, and structure for many of the SME
promotion initiatives already in place. These include the emerging network of enterprise
development centres and incubators. There is also a patent need for strategic direction for efforts
to defray the cost and availability of financing – resources for credit guarantee mechanisms have
been allocated, but the project has yet to be implemented.
C. PROJECT DESCRIPTION
12. Project Objective
The overall objective of the project is:
To contribute to the diversification of the Libyan economy and the sustainability of growth.
The project development objective (PDO) is as follows:
To develop and strengthen the overall legal and institutional framework for promoting
entrepreneurship and high-potential SME’s in Libya.
13. Project Components
The project will have five components, each with a number of related activities. Scheduled to run
over 3 years, or 12 quarters, it starts with Component 1 – Diagnostic study. This component
surveys all available research and provides an in-depth look at the SME environment in Libya,
using, inter alia, the SME Policy Index – a tool developed by the OECD, the European commission,
the European Training Foundation, the European Investment Bank and the European Bank for
Reconstruction and Development. Component 2 develops, through a participative process, the
actual SME development strategy. Component 3 develops, as part of the implementation of the
strategy, the necessary legal framework, proposing amendments and, if appropriate, a separate
SME law – all based on international good practices, in particular from OECD members, other
countries in the MENA region, and other countries facing the same economic challenges (resource
dependency and lack of economic diversification). Component 4 provides substantial
implementation assistance, covering both general institutional capacities and the design and
implementation of key projects, such as the growing network of incubators tied to universities
already under development by the project beneficiary, Libya Enterprise. The final component 5
provides a comprehensive programme to improve access to finance for SME’s and start-ups.
Below is a detailed description of each of the components, the activities to be undertaken and
expected outputs and outcomes. All the activities will be executed by the OECD with the
assistance of Libya Enterprise, through in-kind contributions. (For detailed information on
the distribution of responsibilities, see table )
The first component, Diagnostic study ($ 790,000 from TF), will be implemented by the OECD,
with the assistance of Libya enterprise. The component aims at deepening the common
understanding among project stakeholders as to the priorities for SME development in Libya. This
is absolutely necessary, in particular given the tumultuous changes in recent years. In particular,
the legal situation remains tenuous, with lacking, overlapping, contradictory legislation – part of
which is not implemented in practice. Further, the country needs to build up new, modern
institutions that simply were not present in the era of Ghadaffi, and a thorough understanding of
the legal and institutional environment is crucial to develop a helpful SME development strategy.
This component will draw heavily on existing research and a range of OECD tools. Crucially, the
MENA-OECD Investment Programme would include Libya in its SME Policy Index, a tool based on
the Small Business Act of the European Union designed to benchmark and evaluate the policy
framework of a number of countries in the MENA region, yielding concrete policy advice. The
component would also rely heavily on the OECD methodology Business Climate Development
Review and Strategy (BCDS), which provides a framework of 242 indicators affecting the overall
business environment. The BCDS was conducted in Egypt and Morocco. Sector-specific issues as
well as sector targeting would take place using the OECD Sector Competitiveness Strategy, which
is part and parcel of the BCDS methodology. The results would be disseminated and discussed in a
Knowledge and Policy Forum, scheduled for the third quarter of the project.
Activity 1.1: Macro-economic study ($ 100,000 from TF): The OECD will conduct, with the
assistance of Libya enterprise, a macro-economic assessment of the Libyan economy. The
evolution of the main macro-economic variables will be assessed as will the structural make-up of
the economy and its fragility. In particular, the study will look more in-depth at the exposure of
the Libyan economy to fluctuating oil and gas prices, as well as the prospect for employment and
wealth distribution.
Activity 1.2: Business Climate Study ($ 300,000 from TF): the Business Climate Study will be
conducted by the OECD, with local inputs from Libya enterprise. Based on prior OECD work in the
area of business climate assessment and strategy, the process will be divided into three phases.
The first one consists in assessing the business climate, identifying existing business climate
reform projects and challenges to formulate key policy recommendations; Libya Enterprise will
have a major role during this phase. The second phase, defines the strategy, through consultation
with main stakeholders, to set policy priorities to improve Libya’s competitiveness and business
climate. The third phase is to support Libya enterprise in implementation through targeted
actions.
Activity 1.3: SME Policy assessment ($ 140,000 from TF): This activity will be implemented by
the OECD with local inputs from Libya Enterprise. Following-up on the SME Policy Index, a tool
developed by the OECD and partner organisations (European Commission, the European Training
Foundation, and the European Bank for Reconstruction and Development) to assess SME policies
in the southern Mediterranean neighbourhood countries, the OECD will focus on the assessment
of SME’s and SME development policies and programmes in Libya, based on a number of
dimensions included in the SME Policy Index (see annex). The OECD will then benchmark Libya’s
performance to MENA economies and to international good practice. Finally, priorities for
improvement and actions to be implemented will defined in necessary policy areas.
Activity 1.4: Sector competitiveness study ($ 200,000 from TF): This activity will be executed
by the OECD with the assistance of Libya enterprise. Using a well tested and established
methodology, the OECD will select and analyse priority sectors, taking into account both their
attractiveness to the economy and the attractiveness of the economy to investors. For the priority
sectors, the study will look deeper into value chains, potential investors, and recommendations for
targeted policies to support the sector.
Activity 1.5: Knowledge and policy forum ($ 50,000 from TF): This activity will be executed by
the OECD with local inputs from Libya Enterprise. The output of the diagnostic component will be
discussed and presented at a forum, with high-level attendance from the Libyan government. A
series of workshops integrated into the forum will yield crucial input for the next component,
developing the Libyan SME development strategy.
The second component, Libyan SME development strategy ($ 500,000 from TF), will also be
implemented by the OECD with the assistance of Libya Enterprise. The Government of Libya
would be actively involved in the actual development and drafting of the strategy, which would be
accepted by the Project steering committee and officially adopted by the Government of Libya. The
scope of the strategy would be determined in detail by the beneficiary, Libya Enterprise, based on
recommendations put forward by the project co-ordinator. See the annex for a more detailed
discussion of what such a strategy would typically address.
The overall approach of the strategy is to use the output of Component 1 to develop and prioritise
two kinds of policies: vertical and horizontal. After that, the project will focus on understanding
and optimising the institutional framework necessary. A broad consultation mechanism ensures
that input is garnered from a variety of stakeholders. More specifically:
Activity 2.1: Development of horizontal policies ($ 150,000 from TF). This activity will be
executed by the OECD with local input from Libya Enterprise. This activity seeks to develop,
evaluate, and prioritise measures to develop the overall business climate for SME’s. It will look
into reducing the overall cost and risk of doing business across the economy. Topics include
property rights, intellectual property protection, shareholder rights, legal protection of investors
and entrepreneurs, and licensing. At the same time, it will look into priorities in improving soft
and hard infrastructure to cater better to current and potential SMEs in the country – ranging
from education and vocational training over transport infrastructure to utilities provision. Based
on OECD experience in working with SME promotion in a variety of countries as well as on the
views of actual and potential SME investors, the project will attempt to identify initiatives that will
have the largest lever effect on SME development in the country.
Activity 2.2: Development of vertical policies ($ 150,000 from TF). This activity will be
executed by the OECD with local inputs from Libya Enterprise. This activity looks at the output of
the sector competitiveness analysis from Component 1. Given that business climate improvement
alone is not going to be sufficient to help Libya diversify away from hydrocarbons, the Libyan
Government should make selected, carefully managed, and strictly evaluated efforts to promote
the development of a few priority sectors. These efforts could range from improving public inputs,
such as regulations and common services, into actual strategic bets on pilot projects.
Activity 2.3: Development of an institutional framework ($ 150,000 from TF). This activity
will be executed by the OECD with local inputs from Libya Enterprise. A range of institutions will
be involved in the implementation of the SME development strategy. Libya Enterprise will be at
the core, but varying degrees of involvement of other ministries and civil society will be necessary.
The strategy also needs to ensure full alignment with directly or indirectly related national
planning instruments – from overall economic development planning to education, infrastructure,
and state revenue. This activity aims at mapping out the roles and responsibilities of institutions
involved and positioning Libya Enterprise clearly as a co-ordinator of all policies related to SME
development. At the same time, the structure and capacities of Libya Enterprise will be evaluated,
and recommendations for how the agency could best be structured to assume this co-ordinating
role will be made.
Activity 2.4: Preparation of the strategy and presentation to the Government of Libya ($
50,000 from TF): This activity will be executed by the OECD with local inputs from Libya
Enterprise. This activity will develop and pilot a solid, regular consultation mechanism for the
acceptance, implementation, modification, and evaluation of the SME development strategy. The
mechanism will probably involve a higher-level steering committee and a number of technical,
working committees, all working under the secretariat oversight of Libya Enterprise.
The third component, Legal framework for enterprise creation and growth ($ 275,000 from
TF), will be implemented by the OECD with the assistance of Libya Enterprise using legal
consultants. OECD will provide input, feedback on drafts, and suggestions on methodology and
points legislation would typically cover. The component would take a significant step towards
implementation of the strategy. It would aim at the adoption of a series of complementary legal
acts aimed to facilitate the implementation of the objectives in the strategy on the basis of existing
laws and regulations.
Activity 3.1: Broad consultation of stakeholders and good practices ($ 75,000 from TF): This
component would be implemented by the OECD with minor inputs from Libya Enterprise. In
particular, Libya Enterprise would contribute to the consultation meetings by gathering experts
from the MENA region and the OECD would gather experts from member countries. The
component starts out with a broad review of the structure of similar legislation in MENA countries
and OECD members, paying attention to which practices have been the most efficient, and in
which circumstances.
Activity 3.2: Gap analysis ($ 75,000 from TF). This activity would be implemented by the OECD
with the assistance of Libya Enterprise. The theoretical good practice framework will be carefully
compared with existing Libyan legislation and an understanding to the extent to which the
legislation is implemented. The activity will then analyse the gaps and propose ways to amend
those gaps in the most efficient manner, given the existing legal framework.
Activity 3.3: Developing complementary legal acts ($ 125,000 from TF): This activity would
be implemented by the OECD with the assistance of Libya Enterprise. After identifying the gaps
that need to be filled, the project will, in close concertation with relevant authorities, draft the
legislation and the legislative amendments proposed to fill those gaps.
A qualified team of local and international legal experts will make sure to deliver drafts that can be
easily adopted and implemented. Libya Enterprise will be in charge of this component and recruit
outside expertise as appropriate; the OECD will provide guidance, structure, and feedback.
The fourth component, Assistance in the implementation ($ 575,000 from TF): The OECD
would have a primary role in the implementation of this component with assistance provided by
Libya Enterprise. The component carries a significant part of the resources requested for this
project. It aims at achieving considerable progress in the implementation of the SME development
strategy and targets areas that Libya Enterprise consider strategic and that are important to
ensuring success in the implementation of the strategy overall. In particular, the component will
also help institutionalise and align initiatives already underway or in planning, such as the
Enterprise Development Centres.
Activity 4.1: Establishment of the institutional structure ($ 100,000 from TF). This
component would be led by the OECD. The project will assist Libya Enterprise and related
institutions in setting up the appropriate institutional structure to implement the project and
build appropriate capacities. A series of targeted trainings will help fill the human capacity
constraints the new organisation will indubitably have.
Activity 4.2: Development of regional business centres ($ 125,000 from TF). This component
would be led by the OECD based on the fact that Libya Enterprise is building a network of socalled Enterprise Development Centres, with the objective of setting up centres all over Libya. As
these are a key element in the implementation of any SME development strategy, this activity will
help ensure that their structure, mandate, and priorities are well in line with the SME
development strategy. Targeted trainings will be held on issues of particular urgency, with the aim
of training trainers that can pass on the lessons learned to the expanding network.
Activity 4.3: Development of a network of incubators ($ 150,000 from TF). This activity will
be executed by the OECD with the assistance of Libya Enterprise. Incubators linked to universities
are another cornerstone in the mandate of Libya Enterprise, with a few pilot projects underway.
Incubators may not yield considerable employment in the short term, but they are an essential
tool to lay the foundation for the development of high-value added sectors able to compete with
the resource sector in terms of productivity and capitalise on the knowledge and research of
Libyan universities. This activity would help develop the department responsible for developing
incubators in Libya, training and coaching employees, training trainers, and ensuring full
alignment with the overall SME development strategy.
Activity 4.4: Establishment of an advisory competitiveness council ($ 100,000 from TF):
This activity will be executed by the OECD with the assistance of Libya Enterprise. A high-level,
multi-stakeholder council could be set up not only to approve and monitor the SME development
strategy, but to advocate for and co-ordinate efforts to improve the competitiveness of the Libyan
economy across the board. Several similar institutions abound both in OECD countries and in the
MENA region. It should be chaired by the Prime Minister or a Cabinet Minister and include
ministers, heads of relevant agencies, leading representatives from business associations, and
major foreign and domestic investors and companies. This activity would assist in the
establishment and institutionalisation of the council depending on the need of the beneficiary. At
the very least, the activity will yield a report on the bylaws, the institutional structure, and the
mandate, based on worldwide experience and the particular needs of the Libyan council
Activity 4.5: Assistance in the implementation of the legal framework ($ 100,000 from TF).
This activity will be executed by the OECD with the assistance of Libya Enterprise. This activity
supports the implementation of the structural and procedural framework developed in
Component 3, providing targeted coaching and training sessions, depending on the need of the
beneficiary institutions.
The fifth component, access to finance for SMEs, will be implemented by the OECD in
collaboration with the IDB ($ 300,000 from TF). The IDB, through its private sector arm
Islamic Corporation for Private Sector Development, has an established SME programme, both
regionally and in Libya, which aims to enhance access to finance for fast-growing SME’s that
contribute to job generation, economic development and stability. One of the objectives of the IDB
SME programme is to develop strong and sustainable institutions for SME finance and consulting,
both to local companies, local start-ups, and SME investors interested in Libya.
The OECD together with the IDB, working through its project to provide technical assistance to the
SME development fund, will work on addressing the funding gap in the Libyan SME sector. It will
provide (a) technical assistance for the establishment of venture capital fund for SME projects and
start-ups, (b) technical assistance for the establishment of a Libyan SME financing bank.
Component five can be considered horizontal, as it requires its own diagnostic study, a
development strategy, a legal framework, and assistance in the implementation of the strategy.
For this reason, component five starts at the same time as component one. It also yields
substantial input for the SME development strategy, in particular as finance is often identified as
the major obstacle to company growth and investment. It has been designed to complement the
planned project to set up an SME development fund, with assistance from the Islamic
Development Bank under the aegis of the Libyan Ministry of Economy.
Activity 5.1: Assessment and assistance for the establishment of venture capital fund for
SME projects and start-ups ($ 150,000 from TF). This activity includes, first of all, an
assessment of existing private equity institutions and other financial actors and how they are
meeting the demand of SMEs and start-ups. In a second step, it will develop a feasibility study for
implementing a venture capital fund, building up on international good practices and previous
experiences.
Activity 5.2: Assessment and assistance for the establishment of an SME financing bank ($
150,000 from TF). The bank’s objectives have to be agreed on after in-depth discussions among
the different actors. Nevertheless, the main objectives of the bank should include:
Facilitating access to SME funding by providing finance and guarantee schemes that are adapted to
the needs and the means of the SME’s in terms of, inter alia, the risk exposure and the availability
of various financing products, including Islamic financing ones. Providing assistance to facilitate
the establishment and the development of SME’s by assisting entrepreneurs in elaborating project
feasibility studies, accompanying them in the funding process, and informing them about the
potential incentives offered by the government. The emphasis on Islamic Finance is justified by
the high and pressing demand from the entrepreneurs’ side. The annual report of the National
Program for Small and Medium Enterprises in Libya in 2010 already mentioned that the “lack of
Islamic finance causes the reluctance of some entrepreneurs to complete the procedures after the
approval of the bank”3. After the revolution, and in the light of the growing demand for Islamic
Finance, the Libyan authorities decided to set up a Higher Committee for Islamic Finance that is in
charge of elaborating a road map for the development of Islamic finance in the country.
The study should build on international good practices in implementing SME financing banks. The
feasibility study will include:

A gap analysis study to identify what financial institutions in Libya offer in terms of
products targeted to SME’s, the various needs and financial constraints of SME’s, and the
market potential.

A bank development strategy that includes information on the ideal bank type, bank size
(capital requirement), the funding terms, and a plan for raising the required capital funds
from potential investors.

Commercial feasibility study providing detailed financial modelling, and projections with
different scenarios.

The regulatory and legal requirement for setting up the bank.

Information on Shari’ah applicability and the efficiency of the tax system.
The components and activities are presented in the table below.
3
The annual report of the National Programme for small and medium enterprises in Libya 2010. Unpublished.
Table 1: Components and sub-components of the project and time-line for execution
Components and activities
Q1
(July
2013)
Q2
Q3
Component 1: Diagnostic study
1.1 Macro-Study – macro-level
assessment (based on secondary
sources) on the Libyan economy
in general and SME’s in particular.
1.2 Business climate study study of the Libyan business
climate with relation to SME’s.
1.3 SME Policy assessment –
Follow-up of SME Policy Index
1.4 Sector study – study of
targeted productive sectors,
outside of oil and gas. These can
be sectors that already exist or
that otherwise are shown to have
great potential.
1.5 Knowledge and policy
forum – Forum to present the
result and main policy
recommendations.
Component 2: The Libyan SME development strategy
2.1 Development of horizontal
policies – improving the business
climate
2.2 Development of vertical
policies – promoting sectors
2.3 Development of an
institutional framework for
implementing the strategy, based
on existing institutions, including
processes, roles, and
responsibilities
2.4 Preparation of the strategy
and presentation to the
Government of Libya
Component 3: A legal
Q4
Q5
Q6
Q7
Q8
Q9
Q10
Q11
Q12
Components and activities
framework for enterprise
creation and growth
3.1 Broad consultation of
stakeholders and good
practices
3.2 Gap analysis
3.3 Developing complementary
legal acts
Component 4: Assistance in the
implementation
4.1 Development and
strengthening of the
institutional structure 4.2 Development of the
incipient network of enterprise
development centers – one is
planned for every medium to
large urban center in the country
4.3 Development and
strengthening of the nascent
network of incubators tied to
universities around Libya (about
ten are already under
development)
4.4 Strengthening of a national
competitiveness council – plans
to set up one are already
underway.
4.5 Assistance in the
implementation of the legal
framework
Component 5 – SME’s access to
finance
5.1. Assessment and assistance
in the establishment of a
venture capital fund for SME
projects and start-ups
5.2 Assessment and assistance
Q1
(July
2013)
Q2
Q3
Q4
Q5
Q6
Q7
Q8
Q9
Q10
Q11
Q12
Components and activities
Q1
(July
2013)
Q2
Q3
Q4
Q5
Q6
Q7
Q8
Q9
Q10
Q11
Q12
in the establishment of a SME
financing bank
14. Key Indicators Linked to Objectives
Project Development Objective (PDO): To develop and strengthen the overall legal and
institutional framework for promoting entrepreneurship and high-potential SME’s in Libya.
Indicators linked to this objective are listed below.
Indicator One: Improvement in SME Policy Index value of Libya, developed and published by the
OECD and the European Commission
Indicator Two: Improvement in the ranking of Libya in the Global Competitiveness Report,
published by the World Economic Forum
Indicator Three: Improvement in the dimension Business Sophistication of the Global
Competitiveness Report
Indicator Four: Improvement in the dimension Business Innovation of the Global Competitiveness
Report
Indicator Five: Improvement in the index of economic freedom, published by the Heritage
Foundation4
These indicators all refer to regularly updated and easily available reports. They have been chosen
to reflect the particular development priorities of Libya in terms of enterprise development. The
SME policy index has not been carried out for Libya yet, but this will happen in the first phase of
the project as part of Component 1, yielding a baseline from which progress can be monitored.
Each indicator has a target value that has been set to reflect ambitious but realistic expectations of
the progress that the Government of Libya, with the assistance of the project, could make within
the next couple of years. The project will attempt to provide recommendations, strategic
direction, and ample assistance in the implementation process.
Subsidiary to the PDO are the Intermediate results. These, as well as the indicators linked to them,
are provided in section F of the application (Results framework and monitoring).
4
http://www.heritage.org/index/ranking
D. IMPLEMENTATION
15. Partnership Arrangements (if applicable)
The main beneficiary of the project is Libya Enterprise, formerly the Directorate General for
Enterprise in the Ministry of Economy and Trade. Libya Enterprise was established in 2012 as an
independent agency for enterprise development. Libya Enterprise will participate in all project
activities, providing staff time and logistical support to a significant extent. They will host and lead
all major events, conduct survey, and integrate the project in a series of initiatives underway,
notably the development of Enterprise Development Centers throughout the country.
The project will be implemented by the OECD in close collaboration with the Islamic Development
Bank (IDB). The IDB, through its private sector arm Islamic Corporation for Private Sector
Development, has an established SME programme, both regionally and in Libya, which aims to
enhance access to finance for fast-growing SME’s that contribute to job generation, economic
development and stability. One of the objectives of the IDB SME programme is to develop strong
and sustainable institutions for SME finance and consulting, both to local companies, local startups, and SME investors interested in Libya.
As an implementing agency, the OECD will be in charge of the overall day-to-day co-ordination of
the project. As detailed below, a Project Steering Committee will be formed to streamline decision
making. Key public agencies strongly involved in enterprise development will be integrated into
the process – in particular development banks, the Libya Investment Board, the General
Directorate for Investment Promotion and Privatisation, and multilateral organisations involved
in economic development-linked activities. Business associations, such as the Chamber of
Commerce, will be consulted, as well as successful SME’s and potential investors. As appropriate,
the project will also consult with civil society in the development of the SME strategy. Universities,
already linked up to technoparks under the current plans of the Government of Libya, will be
consulted as well, in particular in Component 4, which provides targeted assistance on
technoparks and incubators.
16. Coordination with Country-led Mechanism/Donor Implemented Activities
The project will be closely co-ordinated with all local and donor-led programmes and
initiatives. In particular, the project will ensure full alignment with the economic development
plan that the newly founded Ministry of Planning will assemble. Similarly, as the SME
development strategy will address a series of areas outside the remit of Libya Enterprise, the
project will ensure close co-ordination with key line ministries – such as oil, infrastructure,
finance, and education.).
The project will also draw heavily on existing research and indices, especially in the diagnostic
phase. A cornerstone of the project is the integration of Libya into the SME Policy Index, including
a full-scale report for Libya. This will provide a useful baseline for monitoring and evaluating both
the project, the activities of Libya Enterprise, and the development of SME’s in Libya overall. Key
to monitoring and evaluation – both of the project and of enterprise development overall – will be
the Global Competitiveness Report, in particular the sub-dimensions on business sophistication
and innovation. Other key sources include the Heritage Freedom Index and the World Bank-IFC
Doing Business Index, measuring economic freedom and the burden of business regulation.
Similarly, the project will assist Libya Enterprise in several of its planned and ongoing
activities – for this reason, about a third of project resources are allocated to Component 4,
assistance in implementation. Specifically, the project will support the developing network of
incubators, the network of enterprise development centers across Libya, and the
strengthening of a national competitiveness council, which is being formed. One key initiative is
a guarantee fund to underwrite loans to entrepreneurs and existing SME’s for new projects; the
project will provide appropriate guidance, as this kind of project, while essential, has to be
structured carefully to ensure that public resources are spent wisely and with maximum effect for
sustainable growth.
Finally, the project will complement with relevant donor-funded projects. The Islamic
Development Bank (IDB), through the Islamic Corporation for Development of the Private Sector
(ICD) has already established a regional SME Programme, to address the challenges faced by
SMEs. As a member country of the IDB, Libya is a beneficiary of this initiative which focuses,
among other things, on strengthening SMEs’ access to finance. This is reflected in Component 5 of
the project proposal, which will be implemented by the OECD in collaboration with the IDB. The
SME Programme, led by the IDB, would be part of the strategy to be implemented by the OECD.
In addition, the SME Programme covers other areas such as entrepreneurship education and
training and business support services. Once the proposed strategy for SME development is
implemented, providing support services and reinforcing entrepreneurship skills, through the
SME Programme, will be necessary to boost SME development.
A number of projects are also being conducted by the European Commission to support Libya in
the transition period. One of these projects is a public administration capacity building facility,
which is jointly managed with the International Management Group. It aims to contribute to the
modernisation, stabilisation and functioning of the public administration in Libya. This would
remove obstacles to SMEs such as bureaucracy and red tape, and facilitate administrative
procedures for SMEs such as registration, licensing etc…
17. Institutional and Implementation Arrangements
The MENA-OECD Investment Programme will have the major responsibility for implementation,
with the assistance of the Islamic Development Bank (IDB, in particular the Islamic Corporation
for the Development of the Private Sector (IDB-ICD) and Libya Enterprise. The following
committees and roles are intended:
Project Steering Committee (PSC):
The PSC will meet every six months starting at the inception of the project. It will approve the
project inception report, assure sufficient political leverage, and set key priorities. Members
should include high-level representatives from the Libyan government, the OECD, the IDB, and
other stakeholders. As many of the members of the PSC will also be members of the Libya
Enterprise, the meetings may be co-ordinated. The Project Director will chair the meetings, and
the project co-ordinator will prepare the agenda.
Project Sponsor:
The project sponsor will be the Director General Libya Enterprise.
Project Director (PD):
The Project director is a competent Libyan national nominated by Libya Enterprise. He will chair
PSC meetings and serve as a key advocate for the project in the Libyan administration.
Project Co-ordinator:
The project co-ordinator which will have the overall co-ordination responsibility for all project
activities will be at the OECD, on a full-time basis. He will be responsible for overall project coordination, preparation of PSC meetings, staff recruitment and administration, and control of all
project outputs.
Roles in the implementation
OECD will have the overall co-ordination responsibility for the technical implementation, as well
as the responsibility for all components and related activities. This is well in line with OECD
expertise in these areas and builds on existing OECD tools and methodologies.
The Islamic Corporation for the Development of the Private Sector is the private sector
development arm of the Islamic Development Bank Group. IBD-ICD will contribute with relevant
technical expertise, notably in the area of venture capital fund management. Libya Enterprise will
participate in all activities, providing local support and expertise.
Libya Enterprise will contribute staff resources to all activities and be actively involved
throughout the process.
The exact distribution of responsibilities is laid out in the table below.
OECD
Component
Component 1:
Diagnostic
study
Subcomponent
IDB
Libya Enterprise
1.1 Macro-Study – macro-level
assessment (based on secondary
sources) on the Libyan economy
in general and SME’s in particular.
Primary
Secondary
1.2 Business climate study - study
of the Libyan business climate
1.3 SME policy assessment in
Libya based on a follow-up of the
SME Policy Index
Primary
Secondary
Primary
Secondary
Component 2:
The Libyan SME
development
strategy
Component 3:
A legal
framework for
enterprise
creation and
growth
Component 4:
Assistance in
the
implementation
of the SME
development
strategy
Component 5:
SME access to
finance
1.4 Sector study – study of
targeted productive sectors,
outside of oil and gas. These can
be sectors that already exist or
that otherwise are shown to have
great potential.
1.5 Knowledge and policy forum –
Forum to present the result and
main policy recommendations.
Primary
Secondary
Primary
Secondary
2.1 Development of horizontal
policies – improving the business
climate
Primary
Secondary
2.2 Development of vertical
policies – promoting sectors
Primary
Secondary
2.3 Development of an
institutional framework for
implementing the strategy, based
on existing institutions, including
processes, roles, and
responsibilities
2.4 Preparation of the strategy
and presentation to the
Government of Libya
Primary
Secondary
3.1 Broad consultation of
stakeholders and good practices
3.2 Gap analysis
Primary
Secondary
Primary
Secondary
3.3 Developing complementary
legal acts
Primary
Secondary
4.1 Development and
strengthening of the institutional
structure
Primary
Secondary
4.2 Development of regional
business centers
4.3 Development of a network of
incubators
4.4 Establishment of an advisory
competitiveness council
Primary
Secondary
Primary
Secondary
Primary
Secondary
4.5 Assistance in the
implementation of the legal
framework
Primary
Secondary
5.1 Assistance to the
establishment of venture capital
fund for SME projects and startups
5.2 Assistance to the
establishment of an SME
financing bank
Primary
Secondary
Tertiary
Primary
Secondary
Tertiary
Primary
Secondary
Secondary
Total project cost (excluding ISA indirect costs)
18. Monitoring and Evaluation of Results
Regular and in-depth monitoring of progress and evaluation of results and outcomes is key for the
success of the project and, ultimately, SME development in Libya. In particular:
Monitoring and reporting
The OECD will monitor the project taking the lead on controlling output quality and the time line.
As detailed in the table below on indicators, the OECD will conduct a number of formal and
informal surveys to monitor the impact of the project, although the real impact of a good and well
implemented SME development strategy will lie several years down the road. Monitoring and
reporting will be facilitated by a common OECD SharePoint platform, allowing the sharing of a
range of key documents that allow the PD, the PSC, and other key stakeholders to monitor
progress to any level of detail. In addition, the following administrative reports will be provided
(in addition to the technical reports related to each project component):
Inception Report
The Inception Report will likely be presented within 8 weeks after the commencement of the
contract. The report will contain a project synopsis, a situation analysis, detailed action plan, with
proposed implementation strategy, detailed work plans for the project components, correlated
time-phased project activities and the corresponding revised Logframe matrix with outputs,
milestones, risks and assumptions, indicators and sources for their verification, and resource
allocations. Deviations from the original project proposal will be detailed as necessary, with the
understanding that any significant deviations from the original allocation of funds must be
approved by the Steering Committee of the Transition Fund.
The Inception Report will also include a list of special reports and documents to be delivered
during the project for use by the various project beneficiaries. The Inception Report also defines
the required and agreed commitments of staff and resources from the project partners, the
Communication and Visibility Plan of the project, and the allocation of the budget for short term
consultants to individual project activities.
An inception workshop will forge consensus about the activities of the project among
stakeholders. This consensus will be officially confirmed in the subsequent first meeting of the
Project Steering Committee.
Progress reports
Interim reports will be prepared every six month in advance of the PSC meetings and aligned with
the reporting schedule stipulated by the Coordination office of the Deauville Transition Fund. It
will summarise progress, measure it against the project implementation plan in the inception
report, suggest any changes, and pinpoint obstacles to progress. It will also monitor overall project
objectives and results, indicating – using qualitative and quantitative evaluation – progress
towards these objectives.
Final report
The final report will be prepared, as a draft, by the project co-ordinator and submitted by the PD
to PSC members at the latest six weeks before the end of activities. It will describe all activities in
the projects, detail main recommendations, and carefully detail progress towards the objectives of
the project. After comments from all key stakeholders, the final report will be approved at the final
PSC meeting, to take place in the final weeks of the project.
Mission reports
Short-term OECD and non-OECD experts will submit mission reports, in addition to the relevant
technical report. These mission reports will detail the progress of the mission, both from an
administrative and technical perspective. These will remain with the OECD as the project co-
ordinator, but be available for consultation upon request.
Evaluation of results
The project co-ordinator will monitor and evaluate the progress continuously using a bespoke
monitoring and reporting system based on the indicators in this proposal and other relevant
metrics proposed in the inception report.
E. PROJECT BUDGETING AND FINANCING
19. Project Financing (including ISA Direct Costs5)
The estimated project budget is $ 3,300,000 (excluding ISA Indirect Costs). Of that amount,
the Libyan Government, through Libya Enterprise, will provide $700,000, in the form of in-kind
contribution, largely through the provision of staff and expertise for the PIO. The OECD will
provide $160,000, in the form of in-kind contribution. As a consequence, the amount requested
from the Transition fund is $2,616,064.
The budget per component is provided in the table below.
5
ISA direct costs are those costs related to the ISA’s direct provision of technical assistance within the project.
Table 2: Financing by component6
Use of funds
from TF
Source of funds
Component
Subcomponent
1.1 Macro-Study – macro-level assessment (based
on secondary sources) on the Libyan economy in
general and SME’s in particular.
1.2 Business climate study - study of the Libyan
business climate
Component 1:
Diagnostic study
1.3 SME policy assessment in Libya based on a
follow-up of the SME Policy Index
1.5 Sector study – study of targeted productive
sectors, outside of oil and gas. These can be
sectors that already exist or that otherwise are
shown to have great potential.
1.6 Knowledge and policy forum – Forum to present
the result and main policy recommendations.
2.1 Development of horizontal policies – improving
the business climate
2.2 Development of vertical policies – promoting
Component 2: The sectors
Libyan SME
2.3 Development of an institutional framework for
development
implementing the strategy, based on existing
strategy
institutions, including processes, roles, and
responsibilities
2.4 Preparation of the strategy and presentation to
the Government of Libya
Component 3: A 3.1 Broad consultation of stakeholders and good
legal framework for practices
enterprise creation 3.2 Gap analysis
and growth
3.3 Developing complementary legal acts
4.1 Development and strengthening of the
institutional structure
Component 4:
Assistance in the 4.2 Development of regional business centers
implementation of 4.3 Development of a network of incubators
the SME
4.4 Establishment of an advisory competitiveness
development
council
strategy
4.5 Assistance in the implementation of the legal
framework
5.1 Assistance to the establishment of venture
Component 5: SME capital fund for SME projects and start-ups
access to finance 5.2 Assistance to the establishment of an SME
financing bank
Total project cost (excluding ISA indirect costs)
ISA indirect costs
Transition fund (USD)
Libya enterprise (in kind
contribution)
OECD (in kind
contribution)
OECD
Total project
volume
$100,000
$25,000
$10,000
$100,000
$135,000
$300,000
$50,000
$25,000
$300,000
$375,000
$140,000
$30,000
$50,000
$140,000
$220,000
$200,000
$50,000
$50,000
$200,000
$300,000
$50,000
$15,000
$50,000
$65,000
$150,000
$50,000
$150,000
$200,000
$150,000
$50,000
$150,000
$225,000
$150,000
$50,000
$150,000
$200,000
$50,000
$30,000
$50,000
$80,000
$75,000
$10,000
$75,000
$85,000
$75,000
$125,000
$10,000
$25,000
$75,000
$125,000
$85,000
$150,000
$100,000
$25,000
$100,000
$125,000
$125,000
$150,000
$100,000
$50,000
$125,000
$150,000
$225,000
$200,000
$100,000
$30,000
$100,000
$130,000
$100,000
$50,000
$100,000
$150,000
$150,000
$25,000
$150,000
$175,000
$150,000
$25,000
$25,000
$2,440,000
Voluntary contribution admin
$700,000
$160,000
6.30%
$150,000
$175,000
$2,440,000
$176,064
$3,300,000
$176,064
The project will be carried out in co-operation among the OECD, the Islamic Development Bank,
and Libya Enterprise. The division of the budget is estimated in the table below.
Table 3: Division of tasks between project partners
Organisation
Role
Resources
Estimated
value
MENA-OECD
Investment
Project co-ordination,
expertise
Project co-ordination, shortterm experts, policy analysts
$2,600,000
($2,440,000
6
Libya Enterprise’s co-financing will be in the form of in-kind contribution
Organisation
Role
Resources
Estimated
value
from the TF and
$160,000 of cofinancing from
the OECD)
Project co-ordination,
expertise
Logistical support, local
travel, office space
(in-kind
contribution
from Libya
Enterprise)
Programme
Libya Enterprise
Short-term experts (local
and international)
20. Budget Breakdown of Indirect Costs Requested (USD)
Description
OECD: for grant administration
Amount (USD)
$ 176,000
F. Results Framework and Monitoring
Project Development Objective (PDO): To develop and strengthen the overall legal and institutional framework for promoting
entrepreneurship and high-potential SME’s in Libya.
Cumulative Target Values
Responsibility
for Data
Collection
Description
(indicator
definition etc.)
Unit of
Measure
Baseline
Indicator One: Improvement in
SME Policy Index value
TBC
TBC
TBC
TBC
TBC
Once a
year
OECD report
PIO
Ranking of
different
aspects of good
practice SME
policy
Indicator Two: Improvement
in the Global Competitiveness
Report
Ranking
113 of
144
110
105
100
Once a
year
Global
Competitiven
ess Report
PIO
Composite
competitivenes
s ranking
Indicator Three: Improvement
in the dimension Business
Sophistication of the Global
Competitiveness Report
Ranking
116 of
144
110
105
100
Once a
year
Global
Competitiven
ess Report
PIO
Sub-component
of GCR rating
the level of
professionalis
m among
businesses
Indicator Four: Improvement
in the dimension Business
Innovation of the Global
Competitiveness Report
Ranking
129 of
144
125
120
110
Once a
year
Global
Competitiven
ess Report
PIO
Sub-component
of GCR ranking
levels of
innovation
(patents etc.)
Indicator Five: Improvement
in the index of economic
freedom
Ranking
175 of
178
170
160
150
Once a
year
Global
Competitiven
PIO
Degree of
openness of the
PDO Level Results Indicators
YR 1
YR 2
YR3
YR 4
YR5
Frequenc
y
Data
Source/
Methodolog
y
ess Report
economy for
SME’s and
other investors
INTERMEDIATE RESULTS
Intermediate Result (Component One): Deepened common understanding among stakeholders as to the priorities for SME development in
Libya.
Results
Unit of
measure
Baseline
YR1
Intermediate Result indicator
One: Number of participants in
the Knowledge and Policy
Forum.
Number
0
50
Intermediate Result indicator
Two: Formal acceptance of all
outputs.
Yes/No
No
YR2
YR3
YR4
YR5
Yes
Frequenc
y
Data Source
Responsibility
Once
Forum report
MENA-OECD
Once
Interim report
MENA-OECD
Frequenc
y
Data Source
Responsibility
Description
Intermediate Result (Component Two): Acceptance and adoption of the SME development strategy.
Results
Unit of
measure
Baseline
YR1
YR2
Intermediate Result indicator
One: Acceptance of the strategy
by the PSC.
Yes/No
No
No
Yes
Once
Interim report
MENA-OECD
Intermediate Result indicator
Two: Adoption of the strategy
Yes/No
No
No
Yes
Once
Interim report
MENA-OECD
Frequenc
y
Data Source
Responsibility
YR3
YR4
YR5
Description
Intermediate Result (Component Three): Adoption of complementary legal acts.
Results
Unit of
measure
Baseline
YR1
YR2
YR3
YR4
YR5
Description
Intermediate Result indicator
One: Acceptance of
complementary legal acts
Yes/No
No
No
Yes
Intermediate Result indicator
Two: Formal adoption of at least
two legal acts as proposed by
the Project
Number
of acts
adopted
0
0
0
2
Once
Interim
report
MENA-OECD
Every six
months
Interim
report
MENA-OECD
Intermediate Result (Component Four): Considerable progress in the implementation of the SME development strategy.
Results
Unit of
measure
Baseline
YR1
YR2
YR3
YR4
YR5
Frequenc
y
Data Source
Responsibility
Intermediate Result indicator
One: Adoption of institutional
structure
Yes/No
No
No
No
Yes
Once
Interim
report
MENA-OECD
Intermediate Result indicator
Two: At least five additional
Enterprise Development
Centers are operational.
Number
of EDC
TBC
0
3
5
Every six
months
Interim
report
MENA-OECD
Intermediate Result indicator
Three: At least five additional
incubators are operational.
Number
of
incubator
s
TBC
0
3
5
Every six
months
Interim
report
MENA-OECD
Intermediate Result indicator
Four: Competitiveness Council
established and at least three
meetings held.
Number
of formal
meetings
0
0
1
3
Every six
months
Meeting
reports
Libya
Enterprise
Intermediate Result indicator
Five: At least three sectoral
development plans developed.
Number
of
approved
sectoral
developm
ent plans
0
0
0
3
Every six
months
Interim
report
MENA-OECD
Description
Approved by
the PSC
Intermediate Result (Component Five): Considerable improvement in access to finance for Libyan SMEs.
Results
Unit of
measure
Intermediate Result indicator
One: VC fund investment
Length of
balance
sheet
Intermediate Result indicator
Two: SME financing bank
established
Intermediate Result indicator 2:
Lending to SMEs increased
Baseline
YR3
YR4
Description
YR2
0
0
0
5M
Yes/No
No
No
No
Yes
Bank
established in
line with
recommendatio
ns of the
project
USD lent
to SMEs
TBC
TBC
TBC
TBC
Lending should
increase by
100% over the
first five years.
20 M
YR5
Frequenc
y
YR1
50 M
Once
Data Source
Responsibility
Interim
report
MENA-OECD
Equity capital
invested in
Libyan projects
by the fund
2.
ANNEX – PROJECT PROPOSAL
This annex contains more detailed discussion of the project, containing information which
was outside the scope of the application form.
PROJECT DELIVERABLES AND RESULTS
In addition, the expected project outputs per sub-component are provided in the table
below:
Table 4: Project deliverables and expected results
Components and activities
Deliverables
Deadline
Overall project administration
Inception report
Within 12 weeks
of project start-up
Interim reports
Intermediate
results
Direct result
All reports
accepted by the
PSC
Every six months
Final report
One month before
end of project
Component 1: Diagnostic study
1.1 Macro-Study – macro-level
assessment (based on secondary
sources) on the Libyan economy in
general and SME’s in particular.
Diagnostic
report on SME’s
in Libya
1.2 Business climate study - study of
the Libyan business climate in relation
to SME’s.
1.3 SME Policy assessment
End of Q2 of the
project
End of Q4 of the
project
Follow-up of the
SME policy index
for Libya
Deepened
common
understanding
among
stakeholders as
to the priorities
for SME
development in
Libya.
Report
accepted by the
PSC
1.4 Sector study – study of targeted
productive sectors, outside of oil and
gas. These can be sectors that already
exist or that otherwise are shown to
have great potential.
1.5 Knowledge and policy forum –
Forum to present the result and main
Completion of
event
Q4 of the project
Event report
completed and
Components and activities
Deliverables
Deadline
Intermediate
results
policy recommendations.
Direct result
accepted
Component 2: The Libyan SME development strategy
2.1 Development of horizontal
policies – improving the business
climate
Draft SME
development
strategy
Q5 of the project
Write-up of
consultation
Q6 of the project
Acceptance and
adoption of the
SME
development
strategy.
Draft strategy
accepted by
PSC and put
forward for
formal
adoption
2.2 Development of vertical policies
– promoting sectors
2.3 Development of an institutional
framework for implementing the
strategy, based on existing institutions,
including processes, roles, and
responsibilities
2.4 Preparation of the strategy and
presentation to the Government of
Libya
Write-up
accepted by the
PSC
Component 3: A legal framework for enterprise creation and growth
3.1 Broad consultation of
stakeholders and good practices
Write-up of
consultations
Q6 of the project
Adoption of
complementary
legal acts.
Write-up
accepted by the
PSC
3.2 Gap analysis
Gap analysis
report
Q6 of the project
Report
accepted by the
PSC
3.3 Developing complementary
legal acts
Draft pieces of
legislation
Q7 of the project
Draft pieces of
legislation
accepted by the
PSC
Component 4: Assistance in the implementation of the SME development strategy
4.1 Establishment of the
institutional structure
Targeted
consulting
By Q6 of the
project
Seminar with
experts from the
OECD and the
MENA region
4.2 Development of regional
business centers
7
Targeted
consulting
Q10 of the project
Considerable
progress in the
implementation
of the SME
development
strategy.
TBC7
TBC
Details will be elaborated in the inception phase of the project, as a function of the precise and immediate needs
of Libya Enterprise and other key Government agencies. The OECD has considerable capacity to mobilise expertise
in a range of different areas related to SME development in particular and economic governance in general.
Components and activities
Deliverables
Deadline
Intermediate
results
Direct result
Seminar with
experts from the
OECD and the
MENA region
4.3 Development of a network of
incubators
Targeted
consulting
Q10 of the project
TBC
Q12 of the project
TBC
Q10 of the project
TBC
Seminar with
experts from the
OECD and the
MENA region
4.4 Establishment of an advisory
competitiveness council
Analysis based
on existing
councils and
institutions as
well as good
practices
Draft bylaws of
the
competitiveness
council
Support for the
secretariat of the
council
4.6 Assistance in the
implementation of the legal
framework
Targeted
consulting
Seminar with
experts from the
OECD and the
MENA region
Component 5 – SME’s access to finance
5.1 Assessment and assistance to
the establishment of venture
capital fund
Report and
Handbook
Q9 of the project
Seminar with
experts from the
OECD and the
MENA region
5.2 Assessment and assistance to
the establishment of an SME
financing bank
Feasibility study
– report
Seminar with
experts from the
OECD, IDB, and
the MENA region
Q9 of the project
INTEGRATION WITH REGIONAL OECD INITIATIVES
The OECD has extensive experience supporting developed and emerging economies
identify barriers to competitiveness and improve the business climate. The OECD has
conducted business climate development strategies and reviews in several countries in
the MENA region to increase foreign and domestic investment. The activity will build on
the results of that review, a subsequent update, and on other tools for improving
competitiveness.
More specifically, the OECD has far-reaching experience in SME policy and development.
Currently underway is a MENA-wide project to develop an SME policy index,
benchmarking individual countries against one another. Libya will be included, with cofunding from this project. The OECD Centre for Entrepreneurship, SME’s, and Local
Development co-ordinates an OECD-wide process to improve SME and entrepreneurship
policies, and undertakes a series of regular research reports – such as the annual survey on
Financing SMEs and Entrepreneurs – A Scoreboard.
The MENA-OECD Investment Programme also co-ordinates several regional Working
Groups on issues such as SME development and competitiveness. This project will use
those working groups to discuss issues of concern for the economic development of the
country and to foment appropriate linkages.
The SME Policy Index
Benchmark exercises and assessments are valuable tools for governments, the private
sector and other actors to evaluate policy effectiveness and strengths and identify needs for
improvement. The SME Policy Index is an assessment and benchmarking tool to tap the full
potential of SMEs and entrepreneurs as drivers for job creation and economic growth. The
index builds on internationally accepted instruments for SME policy development, such as
the Euro-Mediterranean Charter for Enterprise Development and the Small Business Act
for Europe (SBA).
The SME Policy Index has been applied in selected countries in the MENA region, the
Western Balkans and Turkey, and in Eastern Partnership countries. Those assessments are
undertaken by international institutions with expertise in different areas relevant for
enterprise development, namely the OECD, the European Commission (EC), the European
Training Foundation (ETF), the European Investment Bank (EIB) and the European Bank
for Reconstruction and Development (EBRD). Governments, private sector associations and
relevant research institutes in participant countries are also actively engaged in the
assessments.
A new assessment process for southern Mediterranean neighbourhood countries has been
launched and will be completed over the course of 2013. The assessment is based on the
ten principles of the SBA, which cover areas of key importance for enterprise development
throughout the business life cycle, specifically:
1) Foster entrepreneurial learning and culture
2) Enhance bankruptcy procedures
3) Take into consideration SMEs’ needs and characteristics when designing
rules
4) Make public administration responsive to SMEs through simpler
administrative procedures
5) Adapt public policy tools to SME needs (e.g. better access to public
procurement)
6) Facilitate access to finance
7) Facilitate access to markets
8) Support in business innovation and enterprise skills
9) Promote environmentally friendly businesses
10)Support in export promotion
Proposal for Libya
In parallel to the assessment being prepared in the southern Mediterranean
neighbourhood countries, it is proposed that the OECD and other relevant organisations
undertake an assessment of Libyan policies and needs. This will provide a valuable,
comprehensive tool to benchmark and monitor Libya’s position compared to the region
and beyond.
The assessment would be structured as follows: overview of the situation of SMEs in the
country in terms of each of the principles or dimensions mentioned above. It would also
evaluate Libyan policies and programmes with respect to those dimensions and will
compare them to international good practice. The results will also provide
recommendations for improvement and options for the implementation of specific policies
and programmes if they do not yet exist in Libya.
This report will:

Provide an overview of Libya’s performance in SME development, particularly in
terms of each of the principles or dimensions mentioned above;

Benchmark performance to international good practice and to peers in the region;

Establish a benchmark for measuring progress and a process for updating the
assessment regularly;

Set clear priorities for improving and provide options for designing and
implementing policies and programmes in missing areas.
The Business Climate Development Review and strategy
The Business Climate Development Strategy (BCDS) supports governments to develop a
strategy where and how to improve business climate and country competitiveness and
provides targeted assistance in design and implementation of reform. It is a collaborative
process which involves governments, private sector representatives and other
stakeholders. It follows three steps, as shown in the figure below:
Figure 1: Three-step approach of the BCDS
In contrast to multi-national quantitative indices and reports, the BCDS is a methodology to
frame, prioritise and monitor a concerted effort to improve the business environment. It is
based on the Government of Libya’s own evaluation, rather than externally determined by
quantitative means.
This standardised methodology could be brought to bear in the context of the preparation
and implementation of the SME development strategy. It will provide a framework for
Component 1 as well as for Component 4. It will provide a set of baselines and targets for
the monitoring and evaluation process – an essential part of the SME development strategy.
The BCDS covers two dimensions – the horizontal and vertical. The horizontal dimension
examines 242 indicators related to the business environment, organised under 12 headings
in three groups. This is depicted in the figure below:
Figure 2: Pillars and headings of the BCDS
Each of the 242 indicators are broken down into five different levels of performance – from
virtual non-existence to world class fulfillment. This is shown in the figure below:
Figure 3: BCDS indicators - steps of evaluation
The second dimension, vertical policies, allows a more in-depth analysis of specific sectors.
It provides a methodology for surveying, evaluating, and determining priority sectors for
the economy – the ones with the most promise, based on input from a wide variety of
stakeholders as well as quantitative data. The information gathered is also used to develop
policy recommendations for the improvement and promotion of the sector.
Figure 4: Sector targeting model
The Arab World Competitiveness Report
The Arab World Competitiveness Report is a joint product by the World Economic Forum,
the organisation behind the Global Competitiveness Report, and the OECD, available at:
http://www3.weforum.org/docs/WEF_AWC_Report_2011-12.pdf
The report uses the data behind the World Economic Forum Global Competitiveness
Report to analyse the level of competitiveness of the region and the individual countries
and provide policy recommendations for the future. This report will be an essential tool in
the diagnostic phase of the proposed project.
CONTENT OF AN SME DEVELOPMENT STRATEGY
The actual content of SME development strategies varies widely from one country to
another. The actual content will be the result of a dialogue process that the project will coordinate. The table below, however, is an indication of the kinds of areas such a strategy
would typically address.
Table 5: Typical content of an SME development strategy
Component
Sub-component
Description
Comment
Component
Sub-component
Description
Comment
Vision and strategic
objectives
Vision
A vision is a long-term objective for the
economy as a whole, that enjoys broad
political and public support.
The vision statement should
be simple, clear, and address
key aspects of change that
needs to happen – such as
diversification and
improvement of innovation.
Strategic objectives
The strategic objectives break the vision
down into smaller, manageable parts.
These can then serve as a basis for the
structure of the SME development
strategy itself.
Examples may be:
The strategic objectives should also
enjoy broad support, and the
contribution they make to the vision
should be clearly stated and explained.
Improve the business
environment
Ensure access to finance for
SME’s
Promote start-up’s and
entrepreneurship
While the objectives will be defined
here, they will be elaborated, explained,
and quantified in a separate chapter.
Situational analysis
Strategic directions
Quantitative
objectives
The quantitative objectives, or results,
provide clear goals, often directly
related to the strategic objectives.
For example, the result
attached to “Improve the
business environment” may
be “Increase performance in
the Doing Business Index by
50 places by 2020”
Macroeconomic
climate
This section, which we would derive
from the work in Component 1 of the
proposed project, describes the overall
development of the Libyan economy and
highlights problems at the macro level.
The analysis should serve to
justify the strategic
objectives.
SME development
This section takes a closer looks at
SME’s – their numbers, their role in the
economy, their development over the
past decade, and their capacities. It
could also look into the policy
framework and institutions that support
them.
Much of the work necessary
will be completed in the SME
Policy Index work.
Business climate
This section looks at the business
climate more broadly, using not only
objective data, but surveys among
SME’s.
Major sources include the
Global Competitiveness
Report, the Executive
Opinion Survey, and the IMD
Competitiveness Report.
Strategic objectives
This section provides a detailed analysis
of the strategic objectives. It provides
the necessary background, sets
priorities, and defines “operational
goals” for the short and medium term.
This is the core of the SME
development strategy.
These goals and proposed policies
Component
Sub-component
Description
should be both horizontal and vertical in
nature. Horizontal policies address the
overall business environment. Vertical
policies seek to promote targeted
sectors to diversify the economy. They
range from initiatives to improve sectorspecific regulation over subsidised
access to finance to schemes where the
Government of Libya, often through a
for-profit institution with a clear public
mandate, takes equity stakes in
promising start-ups or engages in joint
ventures with foreign investors.
Realisation of the
strategy
Co-ordination
This section explains the mechanisms
for co-ordinating the implementation of
the strategy, which will necessarily
involve a range of institutions.
Institutional
framework
This section describes the core
institutions involved, how they interact,
and what capacities they need.
The section addresses both
the current status and major
changes that need to take
place.
Monitoring and
evaluation
This section details the process and
methodology for monitoring and
evaluating the implementation of the
strategy.
There are two different
challenges – monitoring the
project itself, and monitoring
SME’s. Sometimes, these
tasks should be handled by
different institutions.
Log frame
This section is often designed as a log
frame that defines a range of short and
medium term tasks tied to the
“operational goals” specified in the
chapter on strategic objectives.
The log frame should specify
activities, results,
responsibility, budget, and
time frame.
Implementation plan
Comment