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SME development strategy in Libya

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Presented at the Project Steering Committee Meeting, jointly organised by the OECD-MENA Investment Programme and Libya Entreprise. Tripoli, Libya, 9 September 2013

Presented at the Project Steering Committee Meeting, jointly organised by the OECD-MENA Investment Programme and Libya Entreprise. Tripoli, Libya, 9 September 2013


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  • 1. SME Development Strategy in Libya A project funded by the Deauville Partnership MENA Transition Fund Project Steering Committee meeting Tripoli, Libya -9 September 2013
  • 2. Agenda 1 Why Libya needs an SME development strategy 2 What would the strategy and the project achieve? 3 Project structure: 5 components over 3 years 4 Project milestones 5 First steps: diagnostic studies
  • 3. I- Why Libya needs an SME Development Strategy Enterprise development is key to economic diversification and growth in non-oil sectors  Libya faces an uncertain future as oil production falls behind population growth, resulting in increasing poverty and high unemployment (13.5 % in 2010, with youth unemployment: 25%‒30%)  Extreme dependence on oil - the oil and gas sector contribute up to: 70% to GDP 90% to Government revenues 95% to export earnings 5% to employment
  • 4. SMEs face a number of challenges to growth: Lacking and insufficient hard infrastructure Obstacles to trade Limited access to financial services and high cost of finance Challenges facing SMEs Lack of legal infrastructure (property and intellectual rights) Regulatory obstacles and uncertainties Lack of management and engineering skills Lack of access to technology Although 96% of enterprises in Libya are SMEs, their contribution to GDP is only 4%
  • 5. The private sector is dominated by trade and other, low-value added services. Libyan businesses, by sector (World Bank, 2006) 16% Trade/Commerce 14% Services Manufacturing 70%  Agriculture contributes a minimal share of GDP and employment  Many micro and small distributors and retailers: huge informal sector  Little to no export and „comparative advantage“ developed
  • 6. Agenda 1 Why Libya needs an SME development strategy 2 What would the strategy and the project achieve? 3 Project structure: 5 components over 3 years 4 Project milestones 5 First steps: diagnostic studies
  • 7. The project contributes to the priorities of the Deauville Partnership Transition Fund. Invest in sustainable growth Contribute to employment Enhance economic governance Increase competitiveness • Address the business climate and innovation by setting clear priorities for the promotion of high-growth enterprises and start-ups. • Promote foreign direct investment and linkages between SMEs and multi-national enterprises. • Promote innovation and sustainability. • Contribution to employment in particular among the young • Stimulate enterprises with high growth potential. • Increase productivity of SMEs in services and light manufacturing by improving and branding their products, or streamlining the production, or both • Short term: import substitution. Long term: development of comparative advantage. • Set 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. • Complement Libyan plans to set up Special Economic Zones and incubators throughout the country. • Reinforce Libya’s integration into the rest of the region and world. • Create net exporting sectors outside of hydrocarbons, while value-chain initiatives would increase productivity and promote integration with multi-national enterprises operating in the country.
  • 8. The formal objectives of the project. • 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.
  • 9. Agenda 1 Why Libya needs an SME development strategy 2 What would the strategy and the project achieve? 3 Project structure: 5 components over 3 years 4 Project milestones 5 First steps: diagnostic studies
  • 10. Five components over three years ensure both analysis, strategy development, and implementation assistance. Component 1 Diagnostic study Component 2 SME development strategy Component 3 Legal framework for enterprise creation and growth Component 4 Assistance in the implementation Component 5 Access to finance for SMEs
  • 11. Each component has a clear objective and a number of activities. 1. 2. 3. 4. 5. Macro-economic study Business Climate Study SME Policy assessment Sector competitiveness study Knowledge and policy forum C2 Development and drafting of the actual strategy, which would be accepted by the Project steering committee and officially adopted by the Government of Libya. 1. 2. 3. 4. Development of horizontal policies Development of vertical policies Development of an institutional framework Preparation of the strategy to the Government of Libya C3 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. 1. 2. 3. Broad consultation of stakeholders and good practices Gap analysis Developing complementary legal acts Achieve considerable progress in the implementation of the strategy and target areas that the Government consider strategic. Institutionalise and align initiatives, such as the Enterprise Development Centres. 1. 2. 3. 4. 5. Establishment of the institutional structure Development of regional business centres Development of a network of incubators Advisory competitiveness council Implementation of the legal framework Complement the planned project of the Islamic Development Bank to set up an SME development fund. 1. Assessment and assistance for the establishment of venture capital fund for SME projects and start-ups Assessment and assistance for a debt mechanism for SME financing C1 Deepen the common understanding among project stakeholders as to the priorities for SME development in Libya. C4 Activities C5 Objective 2.
  • 12. Agenda 1 Why Libya needs an SME development strategy 2 What would the strategy and the project achieve? 3 Project structure: 5 components over 3 years 4 Project milestones 5 First steps: diagnostic studies
  • 13. Milestones – Components 1 - 2 Q1 79.13 Q2 1012.13 Q3 13.14 Q4 46.14 Q5 79.14 Q6 1012.14 Q7 13.15 Component 1: Diagnostic study Macro study Business climate study SME policy assessment Sector competitiveness study Knowledge and policy forum Component 2: SME development strategy Horizontal policies Vertical policies Institutional framework Presentation of the strategy Q8 46.15 Q9 79.15 Q10 1012.15 Q11 13.16 Q12 46.16
  • 14. Q1 79.13 Q2 1012.13 Q3 13.14 Q4 46.14 Q5 79.14 Q6 1012.14 Q7 13.15 Q8 46.15 Component 3: Legal framework Broad consultation of stakeholders and good practices Gap analysis Complementary legal acts Component 4: Assistance in the implementation Establishment of the institutional structure Regional business centers Network of incubators National competitiveness council Assistance in the implementation of a legal framework Component 5: Access to finance for SMEs Venture capital fund for SME projects and startups Debt mechanisms for Q9 79.15 Q10 1012.15 Q11 1-3.16 Q12 4-6.16
  • 15. Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Component 1: Diagnostic study Component 2: SME development strategy Component 3: Legal framework Component 4: Assistance in the implementation Component 5: Access to finance for SMEs Q11 Q12
  • 16. Agenda 1 Why Libya needs an SME development strategy 2 What would the strategy and the project achieve? 3 Project structure: 5 components over 3 years 4 Project milestones 5 First steps: diagnostic studies
  • 17. September mission: several activities kicked off. Project steering committee meeting Sector competitiveness workshop SME Policy Index meeting Training on credit guarantee schemes • Launch the SME development strategy in Libya • Discuss involvement of stakeholders and next steps • Present the sector competitiveness methodology as a tool to assess sector diversification and development in Libya • Present the SME Policy Index • Discuss preliminary findings of selected dimensions • Present how credit guarantee schemes can improve SMEs access to finance • Discuss previous success stories and how this could be applied to Libya
  • 18. December mission: several activities kicked off. Coordination meeting • Launch the SME development strategy in Libya • Discuss involvement of stakeholders and next steps SME Policy Index meeting • Present the sector competitiveness methodology as a tool to assess sector diversification and development in Libya
  • 19. For financial and logistical reasons, we would like to suggest the following alterations in the inception report (for November) Activities Changes proposed Reason 1.2 and 1.3 Merge the Business Climate Study and the SME Policy Index into one study There is substantial overlap of ground covered. The Policy Index will be done in full, complemented with peripheral aspects from the BCDS, such as business integrity. 4.2-4.4 and C2 Reallocate resources from C4 to produce sector development plans. Detailed plans about the identified priority sectors would be an important complement to the SME strategy, as our preliminary research shows that the GoL needs to take concerted steps to promoting individual projects. 4.5 Reallocate 4.5 resources on legal assistance to the strategy development process. OECD contribution would be more helpful, as OECD experts would not be best placed to navigate suggested changes through the legislative process.
  • 20. Please feel free to contact us at any time! Mr. Alexander Böhmer Mr. Anders Jönsson Head MENA-OECD Investment Programme OECD alexander.boehmer@oecd.org Project Co-ordinator MENA-OECD Investment Programme OECD anders.jonsson@oecd.org Mr. Fares Al Hussami Mr. Rayann Koudaih Junior Policy Analyst MENA-OECD Investment Programme OECD fares.alhussami@oecd.org Consultant MENA-OECD Investment Programme OECD rayann.koudaih@oecd.org