A. GENERAL INFORMATION

1. Activity Name

SME development strategy for Libya

2. Requestor Information

Name: Essam GHARBA Title: Head of Technical Cooperation Department

Organisation and Address: Ministry of Planning, Tripoli, Libya

Telephone: +218 21 711 7118 Email: esam@planning.gov.ly; esam_planning@yahoo.com

3. Recipient Entity

Name: Dr Abdelnasr Abouzkeih Title: Director General of Libya Entreprise

Organisation and Address: Libya Enterprise, Gargaresh Road, Hai Andalus, Tripoli, Libya

Telephone: +21891 2226661 Email: buzgaia2006@gmail.com

4. ISA SC Representative

Name: Nicolas PINAUD Title: Head of Sherpa office

Organization and Address: OECD, 2 Rue Andre Pascal, 75016 Paris

Telephone: +(33-1) 45 24 95 76 Email: nicolas.pinaud@oecd.org,

5. Type of Execution (check the applicable box)

√ Type Endorsements Justification

√ One ISA-Execution Written endorsement from designated ISA (OECD).

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 FocusThe Libyan Republic

6. Amount Requested (USD)

Amount Requested for direct Project Activities:

(of which Amount Requested for direct ISA-Executed Project Activities):

$3,042,190 [Original $ 2,440,000; Aditional Funding (AF): $602,190] $3,042,190 for OECD [Original $ 2,440,000; Aditional Funding (AF): $602,190]

Amount Requested for ISA Indirect Costs $ 216,489 for OECD (technical product coordination) [Original $ 176,000; AF: $40,489]

Total Amount Requested: $ 3,258,679 [Original $ 2,616,000; AF: $642,679]

7. Expected Project Start, Closing and Final Disbursement Dates

Start Date:

July 2013 Final Disbursement Date:

30 April 2020 Closing Date: 30 May 2020

8. Pillar(s) to which Activity Responds

Pillar Primary

(One only)

Secondary

(All that apply)

Pillar Pillar Primary

(One only)

Investing in Sustainable Growth. This could include such topics as innovation and technology policy, enhancing the business environment (including for small

Yes Enhancing Economic Governance. This could include areas such as transparency, anti-corruption and accountability policies, asset recovery, public financial management and

Investing in Sustainable Growth. This could include such topics as innovation and technology policy, enhancing the business

Yes

and medium-sized enterprises as well as for local and foreign investment promotion), competition policy, private sector development strategies, access to finance, addressing urban congestion and energy intensity.

oversight, public sector audit and evaluation, integrity, 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.

environment (including for small and medium-sized enterprises as well 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

Yes Competitiveness and Integration. This could include such topics as logistics, behind-the-border regulatory convergence, trade strategy and negotiations, planning and facilitation of cross-border infrastructure,

Inclusive Development and Job Creation. This could include support of policies for integrating lagging regions, skills and labour

labour force participation, integrating people with disabilities, vocational training, pension reform, improving job conditions and regulations, financial inclusion, promoting equitable fiscal policies and social safety net reform.

and promoting and facilitating infrastructure projects, particularly in the areas of urban infrastructure, transport, trade facilitation and private sector development.

market policies, increasing youth employability, enhancing female labour force participation, integrating people with disabilities, vocational training, pension reform, improving job conditions and regulations, financial inclusion, promoting equitable fiscal policies and social safety net reform.

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 Short-term Action Plan for SME development would provide a clear roadmap for such comprehensive measures in the short-term with the final objective of developing a Strategy for SME development. 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 http://www.ajbasweb.com/ajbas/2012/Nov%202012/234-239.pdf 2 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 multi-national 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 establishedby the time this project was launched, together with the Ministry of Economy, take the lead in developing Libya’s general economic development and SME policies . The project will involve close collaboration with those 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

As presented in the attached restructuring memo, some of the project components below

mentioned were restructured in 2016.

The project will have five components, each with a number of related activities. Scheduled to run over 7 years, 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 Short-term Action Plan for SME Policies. 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 OECD will also ensure support in monitoring the implementation of the Short Term Action Plan. The OECD will also support Libya Enterprise in improving the management and upgrading the services provided by its business centres and technology incubators. Component 5 provides a comprehensive programme to improve access to finance for SME’s and start-ups. Component 6 aims to strengthen the country’s private sector organisations, targeting in particular organisations that support economic empowerment of women and promoting public-private-dialogue

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, the Short-term Action Plan for SME Policies ($ 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 ($ 984,106 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 so-called 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 is 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.

Activity 4.6: Implementation of the Short-term Action Plan ($230,000 from TF). This activity will be executed by the OECD with the assistance of Libya Enterprise. The work will ensure the necessary assistance in monitoring the implementation of the Short-term Action Plan in order to guarantee its sustainability and local ownership. To achieve this goal the OECD will support Libya Enterprise in its role of general coordinator of the Short-term Action Plan by organising capacity building workshops and supporting administratively and technically the Short-term Action Plan steering committee. The OECD will continue the development of a solid monitoring mechanism based on impact evaluation and clear indicators covering the wide range of stakeholders involved in the plan’s implementation. The OECD will assist Libya Enterprise in the production of monitoring reports and gathering data. The OECD will continue to involve national and international organisations in the regular monitoring meetings of the Short-term Action Plan. Subject to security and travel restrictions, the OECD plans to organise at least one main event of the Short-term Action Plan in Tripoli.

Activity 4.7: Supporting Libya Enterprise’s business centres and technology incubators ($179,106 from TF). This will involve two complementary actions:

a Produce guidelines for the development and operation of Libya Enterprise’s business centres and technology incubators to support the upgrading of their services and processes and ensure continuity even with changes in staff. The guidelines will include sections on the appropriate scale and differentiation of the support system, the set of services to offer, the methods of delivering services to clients, and ensuring quality of services.

The OECD will draft the guidelines following an assessment of conditions in Libya based on the country diagnostic produced for the project and published in 2016, and the discussions in the first workshop, as well as an assessment of the international best practices with strong relevance for Libya.

b Provide training to managers, staff and consultants of the Libya Enterprise business centres and technology incubators. The training will build their skills and knowledge on developing a differentiated and coherent set of centres and incubators, effective internal management processes, effective outreach to and further effective tailoring and targeting measures to different firm needs, designing appropriate information, advice, consultancy and mentoring services, referring firms to other services, and developing indicators and systems to monitor the impact of services provided.

The OECD will organise two capacity-building workshops with OECD and external experts for key Libyan stakeholders. The first workshop will present international good practices in business centre and technology incubator activities and management, including principles and specific examples of good practice business centre and incubator activities, and discuss the areas for further development in Libya. The second

workshop will present and explain the guidelines for the development and operation of Libya Enterprise’s business centres and technology incubators.

This activity will build on the OECD’s previous expertise reviewing business centres and technology incubator programmes and approaches in many countries as part of its series of country reviews of SME and entrepreneurship policies. These reviews have covered business centre and technology incubator programmes in countries such as Kazakhstan, Indonesia, Canada, Israel, Italy, Thailand, Poland, and the Russian Federation. It has produced an assessment of the international evolution of business development services, including building demand from SMEs for services, using digital technologies for business development services, and differentiating support across different types of firms, including international workshops and reports. The OECD has also produced an international benchmarking assessment of policies and programmes to support high-growth firms at local and national levels,3 as well as various reports and policy briefs on business incubator and accelerator services for specific social target groups including women and youth entrepreneurs.4 The OECD has an international network of government representatives, SME agency representatives and experts.

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

3 OECD (2013). An International Benchmarking Analysis of Public Programmes for High-Growth Firms. https://www.oecd.org/cfe/leed/OECD-DBA%20HGF%20PROGRAMME%20REPORT_SECOND%20FINAL%20DRAFT%20(2).pdf4 http://www.oecd.org/cfe/leed/businessincubationinternationalcasestudies.htm

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”5. 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 sixth component, Strengthening Libya’s private sector organisations, will be implemented by the OECD ($193,084). This component will provide capacity building to Libya’s private sector organisations and will deliver dedicated support to women’s organisations.

a Increasing the capacity of private sector organisations will require undertaking a mapping of existing private sector organisations. The OECD will then use this

5 The annual report of the National Programme for small and medium enterprises in Libya 2010. Unpublished.

mapping for delivering capacity building at two national seminars for business organisations. These events will seek to upgrade their advocacy, organizational and strategic skills. To strengthen the PPD dimension, the OECD will integrate selected Libyan private sector organisations in regional capacity-building and high level policy dialogue activities focused on public-private dialogue meetings of the MENA-OECD Business Advisory Board (BAB).

b Strengthening the role of associations of women in business This action is motivated by the potential role Libyan women must play in the country’s economic recovery. The OECD acknowledges the importance that targeted actions seeking to empower women have towards fulfilling Libya’s social and economic reconstruction and its development in a post-conflict scenario. Despite the conflict, the country leads the region’s female labour force participation rate. Building on the mapping conducted under point a, the OECD will produce a diagnostic of organisations working on women economic empowerment in Libya, including NGOs and business organisations. In addition to the two national seminars, the OECD will conduct two dedicated seminars addressed to the specific needs and challenges identified on associations of women in business. The OECD will also connect Libyan organisations of women in business with peer organisations from the region and other countries through the MENA-OECD Women Economic Empowerment Forum (WEEF).

14. Key Indicators Linked to Objectives PDO indicators were revised when the project was restructured in 2016. PDO indicators were established following the 2014 guidelines on the “Design and operationalization of the "enhanced status quo" results framework for the Middle East North Africa (MENA) Transition Fund”.

Indicators used to measure this objective are listed below: Indicator One: Improved SME and entrepreneurship policies and better coordination Indicator Two: Documents produced and endorsed Indicator Three: Number of consultation meetings and workshops Indicator Four: Improved capacity of Libyan institutions Indicator Five: Staff trained Indicator Six: Improved dialogue between institutions and with international

organisations (number of people participated)

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).

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.

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 relevant donor-funded projects. A number of projects are also being conducted by the European Commission to support Libya.

17. Institutional and Implementation Arrangements

The MENA-OECD Competitiveness Programme will have the major responsibility for implementation, with the assistance of 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, 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. S/he will be responsible for overall project co-ordination, 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.

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.

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 resultsThe 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 Costs6)

The estimated project budget is $$ 3,902,190 (excluding ISA Indirect Costs) [Original: 3,300,000; AF: $ 602,190]. 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 $3,258,679 [Original $ 2,616,000; AF: $ 642,679].

6 ISA direct costs are those costs related to the ISA’s direct provision of technical assistance within the project.

The budget per component is provided in the tables below.

Table 1: Financing by component

Cost by ComponentTransition Fund (USD)

Total (USD)Original Amount

Additional Financing

Component 1: Diagnostic study1.1 Macro-Study 1.2 Business climate study 1.3 SME policy assessment in Libya based on a follow-up of the SME Policy Index 1.5 Sector study 1.6 Knowledge and policy forum

$790,000$100,000$300,000$140,000$200,000

$50,000

$790,000$100,000$300,000$140,000$200,000

$50,000Component 2: The Libyan SME development strategy2.1 Development of horizontal policies – improving the business climate2.2 Development of vertical policies – promoting sectors2.3 Development of an institutional framework for implementing the strategy2.4 Broad consultation and co-ordination mechanisms for the SME development strategy

$500,000$150,000$150,000$150,000

$50,000

$500,000$150,000$150,000$150,000

$50,000Component 3: A legal framework for enterprise3.1 Broad consultation of stakeholders and good practices3.2 Gap analysis3.3 Developing complementary legal acts

$275,000 $75,000$75,000

$125,000Component 4: Assistance in the implementation of the SME development strategy4.1 Development and strengthening of the institutional structure4.2 Development of regional business centers4.3 Development of a network of incubators4.4 Establishment of an advisory competitiveness council4.5 Assistance in the implementation of the legal framework4.6 Monitor Short-term Action Plan4.7 Support BDS

$575,000$100,000$125,000$150,000$100,000$100,000

409,106

$230,000$179,106

$984,106 $100,000$125,000$150,000$100,000$100,000$230,000$179,106

Component 5: SME access to finance 5.1 Assessment and assistance to the establishment of venture capital fund for SMEs and start-ups5.2 Assessment and assistance for the establishment of an SME financing bank

$300,000 $150,000$150,000

Component 6: Support to private sector organisations 0 $193,084 $193,083Total direct Project Cost $2,440,000 $602,190 $3,042,190

The project will be carried out in co-operation among the OECD and Libya Enterprise. The division of the budget is estimated in the table below.

Table 5: Division of tasks between project partners

Organisation Role Resources Estimated value

MENA-OECD Competitiveness Programme

Project co-ordination, expertise

Project co-ordination, short-term experts, policy analysts

$3,202,190 ($3,042,190 from the TF [Original $2,600,000; AF: $ 602,190] and $160,000 of co-financing from the OECD)

Libya Enterprise Project co-ordination, expertise

Logistical support, local travel, office space

Short-term experts (local and international)

(in-kind contribution from Libya Enterprise)

20. Budget Breakdown of Indirect Costs Requested (USD) Description Amount (USD)

OECD: for grant administration $216,489 [Original: 176,000; AF: $40,489]

Results Framework and Monitoring – NOTE: The table was updated during the project restructuring in 2016. The below table is based on the 2016 framework, with the new indicators and metrics for the project extension.

Project Development Objective (PDO): To develop and strengthen the overall legal and institutional framework for promoting entrepreneurship and high-potential SME’s in Libya.

PDO Level Results Indicators

Unit of Measure

Baseline

Cumulative Target Values

FrequencyData Source/Methodology

Resp. for Data

Collection

Description (indicator definition

etc.)

Jul 2013 –

Jun 2014

A

Jul 2014 – Jun 2015

A

Jul 2015 – Jun 2016

A

Jul 2016 – Jun 2017

A

Jul 2017–

Sep 2018A/ (F)

Sep 2018 – Sep 2019

A / (F)

Sep 2019 –Mar 2020

A / (F)

Indicator One: Improved SME and entrepreneurship policies and better coordination

QualitativeLimited

coordinationN/A N/A N/A N/A

Improved

effectiveness

Improved

effectiveness

Improved

effectiveness

AnnuallyProgress

reportOECD

Qualitative assessment of the impact of Project activities on government and international institutions coordination

Indicator Two: Documents produced and endorsed

Quantitative 0 0 0 0 2 4 7 7 AnnuallyProgress

reportOECD

Number of strategies, action plans, studies and reports produced and endorsed by the Libyan government

Indicator Three: Number of consultation meetings and workshops

Quantitative 0 2 3 4 2532

(34)(40) (43) Annually

Progress report

OECDNumber of consultation meetings and workshops

Indicator Four: Improved capacity of Libyan institutions

QualitativeLimited capacity

N/A N/A N/A N/A

Improved

capacity

Improved

capacity

Improved

capacityAnnually

Progress report

OECD

Qualitative assessment of the impact of Project activities on government capacity

Indicator Five: Staff trained

Quantitative 0 33 37 39 82 100 (170) (200) AnnuallyProgress

reportOECD

Public sector staff received training in SME development topics

Indicator Six: Improved dialogue between institutions and with international organisations (number of people participated)

Quantitative 0 32 67 108 274383

(423)(478) (523) Annually

Progress report

OECD

Government officials, private sector representatives, and international organisations and experts participated in workshops

INTERMEDIATE RESULTS

Intermediate Result (Component One): Deepened common understanding among stakeholders as to the priorities for SME development in Libya.

ResultsUnit of

measureBaseline YR1 YR2 YR3 YR4 YR5 YR6 YR7 Frequency Data Source Responsibility Description

1.1 Publication of Diagnostic Study

Number 0 0 0 0 1 1 1 1 Once Diagnostic Study MENA-OECD Report published.

1.2 Number of consultation workshops to validate and present the Diagnostic Study

Number 0 2 3 4 6 6 6 6 Annual Progress report MENA-OECDLaunch event (Oct 2016) and PSC meeting (Dec. 2016).

Intermediate Result (Component Two): Development and acceptance of the Short-Term Action Plan to support SMEs.

ResultsUnit of

measureBaseline YR1 YR2 YR3 YR4 YR5 YR6 YR7 Frequency Data Source Responsibility Description

2.1 Production of Short-Term Action Plan

Number 0 0 0 0 0 1 1 1 OnceShort-Term Action

PlanMENA-OECD N/A

2.2 Consultation and validation workshops

Number 0 0 0 0

19 (actua

l; origin

al target:

3)

20 20 20 Annual Progress report MENA-OECDProcess to develop and validate Short Term Action Plan

Intermediate Result (Component Three): Adoption of complementary legal acts.

ResultsUnit of

measureBaseline YR1 YR2 YR3 YR4 YR5 YR6 YR7 Frequency Data Source Responsibility Description

3.1 Workshops addressing legal framework

Number 0 0 0 0* 0* 1 1 1 Annual Progress report MENA-OECD

*Istanbul Forum covered legal review. December 2016 kick-off workshop covered presentation of new initiative to have an SME law. December 2017 validation workshop included a full session for the discussion of the content of the draft SME law and the comments provided by the OECD team and SME expert.

3.2 Legal review of SME law

Number 0 0 0 0 1 2 2 2 Annual Progress report MENA-OECDCompared country cases, early 2017. Review of law, August 2017.

Intermediate Result (Component Four): Strengthened institutions and increased capacity.

ResultsUnit of

measureBaseline YR1 YR2 YR3 YR4 YR5 YR6 YR7 Frequency Data Source Responsibility Description

4.1 Number of people participating in project specific workshops (linked to 1.2, 2.2, 3.1 and 5.1)

Number 0 32 62 101

267 (actua

l; origin

al target: 167)

346 (339

actual; 346

forecast)

(411)

(466)

Annual Progress report MENA-OECD

Experts meeting, Tunis, 2013; PSC meeting, Tripoli, 2013; Consultative meeting Paris, September 2014; Knowledge and Policy Forum, Istanbul, July 2015. Local consultations sessions for Component 2 included 100 stakeholders. Validation workshop December 2017. First Quarterly Monitoring meeting May 2018. Staff trained

on international best practices and structural aspects of the supply of BDS.

4.2 Number of Libyan officials participating in regional policy dialogue meetings

Number 0 2 5 2 2 2 (24) (29) Annual Progress report MENA-OECDParticipation in yearly regional meetings of MENA-OECD Programme such as the BAB meetings.

4.3 Number of staff trained

Number 0 31 36 38

81 (actua

l; origin

al target:

41)

89 (93) (97) Annual Progress report MENA-OECD

Participation in project specific trainings and Kuwait IMF Center training courses. Staff trained to conduct local consultations. Capacity building workshop for Steering Group, February 2018.

4.4 Production of guidelines on supply BDS

Number 0 0 0 0 0 0 1 1 Once Guidelines OECD Guidelines published

Intermediate Result (Component Five): Considerable improvement in access to finance for Libyan SMEs.

ResultsUnit of

measureBaseline YR1 YR2 YR3 YR4 YR5 YR6 YR7 Frequency Data Source Responsibility Description

5.1 Participation in dialogue platform workshops

Number 0 0 0 0 2 3 3 3 Annual Progress report MENA-OECDExpertise France SME financing dialogue platform workshops (Oct. 2016 & Feb. 2017)

5.2 Production of report assessing SME funding mechanisms

Number 0 0 0 0 0 0 0 0 Once Assessment MENA-OECDRevised activities with counterpart and will not develop this report. Covered by the project by Expertise.

Intermediate Result (Component Six): Strengthening the capacity and presence of private sector organisations in Libya.

Results Unit Baseline YR1 YR2 YR3 YR4 YR5 YR6 YR7 Frequency Data Source Resp. Description

6.1 Production of a mapping on Libya’s private sector organisations in Libya

Number 0 0 0 0 0 0 2 0 Once Mapping OECDMapping created, including the diagnostic of women organisations.

6.2 Number of workshops

Number 0 0 0 0 0 0 2 4 Annual Progress report OECD

Dedicated workshops addressing private sector organisations (including back-to-back workshops for organisations of women in business).

6.3 Number of workshop participants

Number 0 0 0 0 0 0 20 40 Annual Progress report OECDParticipation of Libyan private sector organisations in capacity building meetings, including women.