MIDDLE EAST & NORTH AFRICA

DEVELOPMENT OF SMES EXPORTS THROUGH VIRTUAL MARKET PLACES

CONCEPT NOTE- OCTOBER 2013 – REVISED VERSION (JANUARY, 2014)

THE WORLD BANKFINANCE AND PRIVATE SECTOR DEVELOPMENT GROUPMIDDLE EAST AND NORTH AFRICA REGION

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TABLE OF CONTENTS

I. INTRODUCTION AND CONTEXT....................................................................................7

A. Regional Context............................................................................................................7

B. Sectoral and Institutional Context..................................................................................8

C. Alignment with Countries National Strategy...............................................................11

D. Alignment with the Transition Fund Objectives..........................................................15

E. Complementarity with other projects..............................................................................17

F. Justification for the World Bank as Executing Agency and Partnership with ITC.........18

II. PROPOSED PDO/RESULTS.........................................................................................20

A. Proposed Development Objective................................................................................20

B. Key Results..................................................................................................................20

III. PROJECT DESCRIPTION.............................................................................................21

A. Project context..............................................................................................................21

B. Project components......................................................................................................29

C. Project Financing.........................................................................................................33

IV. KEY RISKS AND MITIGATION MEASURES............................................................35

V. IMPLEMENTATION......................................................................................................35

A. Institutional and Implementation Arrangements..........................................................35

B. Financial Management, Disbursement and Procurement.............................................37

C. Monitoring and Evaluation of Results.........................................................................38

D. Sustainability................................................................................................................38

VI. TEAM, TIMELINE AND BUDGET..............................................................................39

ANNEX 1: RESULTS FRAMEWORK............................................................................................41

ANNEX II. ECONOMIC VALUE (FOR THE CASE OF TUNISIA)...................................................45

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

Proposal Outline The project aims to increase the volume of exports by exporting and export-ready SMEs through Virtual Market Places and create a business-enabling environment for e-commerce. The project is of multi-country nature and the beneficiary countries are Jordan, Morocco and Tunisia. The project will work with Trade Support Institutions (TSIs) that provide support to enterprises in their export diversification efforts, access to business intelligence on foreign markets, as well as coaching and capacity building of SMEs to use Virtual Market Places (VMPs) to increase their exports using new and innovative export channels.

Implementation Arrangements

The Project will be run as World Bank Executed Project with the technical support of the International Trade Centre (ITC). The implementation arrangements include the involvement of trade support institutions (TSIs), business associations and relevant civil society actors across the three countries.

Program Objective

This is a pilot project which aims at achieving two major objectives:

- Increasing SMEs exports ‘through existing Virtual Market Places;

- Supporting institutional reforms to create an enabling environment for e-commerce.

SMEs from the Arab region are not significantly present and active on existing Virtual Market Places. This is mainly due to (a) lack of export management skills and knowledge of e-commerce potential, (b) insufficient access to business intelligence and trade information, and (c) limited access to financial resources to penetrate and develop new markets.

As the access to internet and new technologies has become more affordable in the region, the project will allow SMEs to benefit from the advantages of electronic platforms to access new markets and thus reduce geographical barriers.

In line with national development priorities, it is expected that growing exports will result in job creation particularly for women and youth. This is supported by the fact that beneficiary countries have seriously engaged in new development policies and programs aiming at diversifying export markets and expanding trade.

The project will also support the policy change to improve the business environment for e-commerce policies and regulations in the region need to be further elaborated and modernized to take full advantage of e-commerce (f.e. e-payments, risk insurance systems, e-customs).

Fit with transition Fund Objectives The higher-level objectives to which the project contributes are aligned with three of the

Transition Fund Objectives: i) Competitiveness and integration by facilitating and reducing trade barriers hindering SMEs access to export markets, and ii) Inclusive development and job creation, by generating new business opportunities which impact SMEs growth and job creation. It is aligned as well with the type of innovative activities the Transition Fund intends to finance.

Timeframe The project will be implemented over a period of 3 years which will result in

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significant change, ensure sustainability and achieve meaningful impact.

Overall Budget The amount requested is US$ 3 million over the 3 year program period. This will be split across the 4 program components and 3 target countries.

Summary Program Components

Component I. Institutional Reform (US$ 0.3 million)The new Export Development Policies being implemented by the beneficiary countries involve the resolution of number of bottlenecks such as access to Virtual Market Places, e-payment, logistics, access to finance and export guarantees, quality control, etc. In order to tackle these issues, the three countries plan to implement inter-ministerial committees. These committees will also tackle the business processes related to the public administration that can be offered online such as e-customs and the submission of digital documentation.

As describe above, the weak presence of SMEs from the Arab region on VMPs is due to the many barriers SMEs are facing in integrating new technologies as a key driver of their business and in transacting business online. Some major impediments relate to inadequate e-payment systems, lack of risk insurance systems, and inefficient trade facilitation processes that result in high transaction costs directly affecting the competitiveness of SMEs.

The project, aims at supporting inter-ministerial committees in each beneficiary country that will lead the transformational reforms to create a conducive environment for e-commerce. The inter-ministerial committees will form a platform for public-private dialog to drive and support policy and institutional change and structural transformation to promote e-commerce The committees will work with TSIs and SMEs to assess what obstacles and difficulties that SMEs are facing in developing their e-commerce activities and design appropriate solutions to alleviate those barriers.

The practical experience and case studies will be used to raise awareness of policy makers towards the critical issues. Working through the required institutional mechanisms, the project will provide technical assistance to change the existing policy framework, eliminate existing administrative barriers, and to institutionalize new processes to support and facilitate e-commerce.

Component II: Capacity building of SMEs (US$ 1.35 million)

Under this component, beneficiary SMEs, that are already exporting or assessed to be export-ready, will benefit from capacity building activities and direct coaching to acquire new skills and competencies in e-commerce. Selected SMEs will be registered in one to three different VMPs, advised on how to make the best use of their presence on these VMPs and coached on how to concretely deal with the inquiries coming from the first potential buyers through the VMPs.

Component III: VMP Partnerships, Business Intelligence and Certification (US$ 1.02 million)

This component will reinforce the capacity of TSIs to provide business intelligence and

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trade information to enable the SMEs to benefit from opportunities offered by the VMPs. TSIs will play a key role in monitoring SMEs’ activity on the VMPs and assessing benefit and impact on export development. To ensure the best use of the VMPs, some high-performing/ firms will be offered premium accounts in VMPs so they gain greater visibility from potential clients and will serve as a role model for others.

Component IV: Project Management (US$ 0.27 million)

This component will finance management and supervision activities at two levels: the Regional Implementing Agency (RIA) and the Project Implementing Units (one by country).

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Executive Summary

Jim Yong Kim’s speech, October 1, 2013: “We will be bold. We will take risks –smart risks. And by that, I mean we will invest in projects that can help transform the development of a country or a region – even if it means we might fail.

[…] We are also expanding our group of partners to include those which are pioneering new business models. In just a few years, Alibaba has fostered the creation of growth of over 6 million small and medium enterprises in China […]. This is an example of a transformational business model.”

In line with this inspiring speech, the MNSFP department has prepared an innovative project aiming at unlocking the so far untapped economic growth potential of regional SMEs. The World Bank found out that i) improving export capacity skills in export-ready SMEs, and ii) actively promoting their products and services through global virtual Market Places such as Alibaba.com would significantly increase their revenues, leading to more job creation, market diversification and increased integration to the global economy. The development objective of this 3-year project is to provide capacity building to approximately 600 SMEs selected in Jordan, Morocco, and Tunisia (200 companies in each country)). It is expected that a relatively high return in terms of economic value will be achieved since one dollar spent would yield a US$ 4.1 return1 in additional revenues for beneficiary SMEs. The project has been designed as a pilot. It can be easily expanded to other beneficiaries (such as West Bank and Gaza or Egypt). Project partners are: the Ministry of Trade of Jordan, the Ministry of Trade of Morocco, the Ministry of Trade of Tunisia, the International Trade Center in Geneva and the World Bank. Advanced discussions on the design of this project have already been held with Alibaba.com. This project has been prepared with the active participation of the beneficiary countries (at the highest Ministerial level). In addition, prior to the project appraisal and during the finalization of the concept note two surveys have been distributed among SMEs with the support of trade authorities, chambers of commerce and sector associations. Almost 300 companies provided feedback.

1 See Annex II.

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I. INTRODUCTION AND CONTEXT

A. REGIONAL CONTEXT

1. The transition countries (Egypt, Jordan, Libya, Morocco, Tunisia, Yemen) in the Middle East and North Africa (MENA) region have been facing similar challenges in terms of economic inclusion and growth, competitiveness, and job creation. These challenges were made even more salient as the Arab Spring unfolded across the MENA region.

2. Growth in the MENA region was affected by the Arab Spring, together with the economic contraction in the Euro-zone (the region’s largest trade partner) and high international food and fuel prices. After having contracted by 2.5 percent in 2011, regional average growth recorded a 3.8 percent recovery in 2012, led by 4.6 percent in oil exporting countries, while oil importers recorded a slower recovery of 2.6 percent. Growth started to slowly recover in 2012 in transition countries, except in Morocco, which was affected by weak agricultural production. As a consequence of slower growth, unemployment rate in most of the transition countries increased further since the beginning of the Arab Spring in December 2010. It is estimated to have reached in 2011, 19 percent in Tunisia and almost 13 percent in Jordan. Unemployment remains the most critical concern, as it constituted a major aspect of social discontent that triggered the Arab Spring.

3. Inflation remained relatively subdued in the MENA region with an average of 4.5 percent CPI increase in 2011. In particular, social tensions forced the transition countries’ governments to maintain high levels of food and fuel subsidies that have relatively limited the pass-through of the international prices on domestic prices. Egypt, Jordan, Morocco and Tunisia, started to raise domestic fuel prices as the subsidies reached unsustainable levels. In addition, most of these countries have put in place large fiscal stimulus packages and social safety net programs to mitigate the effects of lower growth and in an attempt to relax social tensions. Hence, the average fiscal deficit in the region has widened from 1.8 percent of GDP in 2011 to 4.7 percent in 2012, led by higher fiscal deficits in oil importing transition countries. Consequently, public debt in some countries has reached unsustainable levels, with almost 80 percent of GDP in Egypt and about 66 percent in Jordan in 2012. Moreover, high international food and fuel prices and weakening European demand contributed to the deterioration of current account deficits, notably in Jordan, Morocco and Tunisia. On the other hand, oil exporters benefited from high international oil prices, providing them with relatively comfortable external positions, except for the conflict countries.

4. Further, capital and FDI inflows continued to fall since 2011. As a result, many countries continued to draw down their international reserves, such that Tunisia and Egypt are close to the critical level of 3 months of imports. Egypt, Jordan, and to a lesser extent Morocco and Tunisia are expected to use the IMF and donors supports to avoid further decrease of reserves. Relatively sound macroeconomic policies before the Arab Spring in the transition countries provided some room to cope with these challenges over almost two years, but the

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continued tensions on both fiscal and external positions have eroded their margins to maneuver further.

5. Political uncertainty and social tensions will continue to weigh on economic performance of the transition countries in 2013 and beyond. Growth in the region is projected to slow down to 3.4 percent in 2013, led by lower growth in oil exporting countries. High unemployment will continue to keep high fiscal pressures, which would make harder the trade-off between increasing social demand and fiscal reform (including subsidies) implementation. Delayed reforms, however, would have substantial risks, notably in Jordan and Egypt, by delaying the IMF and consequent donors’ financing supports. Moreover, in addition to the Euro-zone crisis impacts, the US budgetary debate and the largest impacts on the most trade dependent countries, including Egypt, Jordan, and Tunisia. Lower global demand could trigger a decline in oil prices and earnings for oil exporting countries. Similarly, possible continuous food price increases in 2013 could further weaken the MENA countries’ fiscal and external positions.

B. SECTORAL AND INSTITUTIONAL CONTEXT

A lagging integration to the global economy

6. Non-oil exports growth has remained low in the MENA region. Exports from the overall MENA region have increased considerably over the past two decades. The region’s volume of total exports as a share of GDP grew from around 35 percent in 1990 to 39.2 percent in 2000 and to around 53 percent by 2009. At first glance, this represents higher exporting levels than in other regions. However, a closer look reveals the weight of resource-rich countries, which account for almost 85 percent of all MENA exports, and whose exports are mostly hydrocarbons. Manufactured exports are a smaller share of merchandise exports than in any other region. Indeed, growing exports in the MENA region have been driven mostly by hydrocarbons, whereas non-oil exports growth has remained low (Table 1).

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Table 1. Export behavior in the MENA region

A lagging regional integration2

7. In contrast with many regions (East Asia, Eastern Europe, Europe, Latin America), there are relatively few economic links between MENA countries. The share of intra-MENA merchandise exports to GDP varies between 1 percent and 22 percent (for the transition countries, the average is approximately 7 percent). Despite many economic, geographic and cultural features that favor cross-country links, past regional integration attempts failed.3 Reasons of this failure are i) insufficient political commitment, ii) administrative challenges on implementation and nontariff barriers, iii) narrow focus in terms of preferential trade coverage, iv) low complementarity, and v) poor trade logistics.

High firm-level constraints

8. While policy reforms are needed to further expand regional and global integration, promoting new exports is also hampered by some firm-level constraints. In a recent study4, it appears that uncertainty is the major factor constraining the discovery of new export activities. These uncertainties are caused by the lack of information about demand in specific markets and the price that new products or services can command. For SMEs, these uncertainties are all the greater, as they have limited access to finance and limited skills, 2 From “Trade Competitiveness of the Middle East and North Africa – Policies for Export Diversification”, The World Bank 2009.3 There are many regional agreements for the development of trade activity between MENA countries: bilateral preference agreements, the Pan-Arab Free Trade Area, the Arab Maghreb Union and the Agadir Agreement.4 The World Bank, 2009. For an extensive review of MSME in the region and IFI support see “Catalyzing Job Creation and Growth through MSME Development in Deauville Partnership Countries”, AfDB, 2013.

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including export skills. As a result, very few can afford to market their products abroad. In addition, the incentive for first-time exporters to experiment an export activity may be reduced by the possibility that imitators would appropriate part of their returns produced by the new activity.

Large E-Commerce gap

9. MENA firms are almost totally absent from the Virtual Market Places (VMPs). Even though the use of social networks is very common, this is not the case for business transactions. According to the analyst firm eMarketer, the aggregated share of the Middle East and North Africa just made up 1.9% of global B2B e-commerce in 20125. The business and trading culture in the MENA region is still very much focused on personal contacts and less on the use of electronic tools despite their cost effectiveness.

Table 2. E-commerce Index

5 B2B e-commerce statistics are not available.

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10. At a country level, the situations are similar, with some differences related to the geographic location, language and business environment. In Tunisia, the number of merchant websites is about 600; however, there is no merchant website among the top 100 Tunisian websites. Currently, the development of e-commerce is slowed down by several factors: • Lack of confidence in the use of e-commerce by consumers, especially when it comes

to e-payment;• Absence of a specific e-commerce trust label, like in Morocco;• Reluctance of banks to finance e-commerce projects, and • E-logistics are underdeveloped

11. In Morocco, while the business environment for e-commerce has been improving over the last few years and electronic payment methods are being diversified, e-commerce still remains a marginal sales channel. Consumers distrust electronic payment and lack the confidence to buy online, despite attempts to build trust with the eThiqa Trustmark lead by the Confederation générale des entreprises du Maroc (CGEM), the employers’ union. For example, according to the Centre Monétique Interbancaire (CMI), transaction volumes, however, are increasing year by year, with a strong local drive. Moreover, the government has made the development of e-commerce a priority and views the Virtual Market Places for the Development of Export SMEs project as a useful contribution to that end.

12. The situation of e-commerce in Jordan is paradoxical: on the one hand, there is still a widespread reluctance to buy online; the number of e-shops is low. Online payment is poorly trusted; as a result, “cash on delivery” is a successful payment method, as shown by e-retailers like Jumia. Still, many SMEs do not have a website; if they do, it is most of the times not seen as a serious marketing channel. On the other hand, there are national champions, including MarkaVIP, which has spread across the region. The country has been among the first to realize the potential of e-commerce, investing in 2008 into a “national e-commerce strategy”, one of the few of its kind. Austerity measures, unfortunately, have led to the termination of the related e-commerce action plan in 2012.

13. Altogether, key stakeholders in all three countries interviewed clearly perceived the benefits of e-commerce related tools, particularly with a sector approach. Henceforth, the need for a coaching/capacity building exercise that focuses on one-on-one support complemented by broad institutional reforms.

C. ALIGNMENT WITH COUNTRIES NATIONAL STRATEGY

14. Each transition economy of the MENA region aims at supporting the enabling environment to boost private sector development through export promotion.6 Efforts to push the integration of South Mediterranean economies into the global economy but, mainly, with the European Union started in the 1990s and evolved throughout since 2000. It was widely understood that trade liberalization following the signing of free trade agreements

6 Annex III contains a comprehensive institutional mapping per country as well as the country specific institutional set up.

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would not be enough without specific policies and programs aiming at increasing private sector competitiveness in export markets.

15. It is worth mentioning that the targeted countries (Morocco, Tunisia and Jordan) have adopted a series Export Development Policies at each time aiming at i) reducing barriers to trade at institutional and policy level, and ii) reducing barriers to trade at firm level. In particular:

In the mid-90’s, these three countries (and other like Egypt) signed free trade agreements with the EU In this context, they implemented programs which focused on the upgrading of their firms in order to improve their export capabilities.

In early-2000, Morocco, Jordan and Tunisia put the emphasis on the access to foreign markets dimension with the implementation of targeted programs (JUMP in Jordan, FAMEX in Tunisia, Morocco Croissance and Morocco Export Plus in Morocco).

16. The economic downturn resulting from the Arab Spring prompted the Governments of these three countries to deepen their access to market policies and further expand their integration to the global economy. In this context, new programs are being put in place to further i) remove certain constraints that affect the business environment (institutions, regulations, etc.), ii) encourage companies to become more competitive (cost, quality, innovation), and finally, iii) transform export ready SMEs into regular export SMEs.

17. When it comes to e-commerce, governments around the world have recognized the importance of their role in removing barriers and in enabling e-commerce. This is also the case of Tunisia, Jordan and Morocco, where, within the context of modernization and deepening of policies and institutions, specific task forces have been put in place to comprehensively address barriers to e-commerce. This is part of a major effort to increase the international presence of their companies and a pillar of the overall program of trade related reforms.

1995 -2009Production and

Quality Uprgrading Programs

1999-2011Access to MarketEDP I and II (WB Program) 1300

SME’s

A2M++ Access to

VMP

2011

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18.The proposed project will support the current policy change. In particular, it will support their effort i) to promote new exporters (SMEs) through VMPs, as new promotion channel, and ii) to tackle the various issues that impede the deepening of access to foreign markets (through the support to their inter-ministerial committees).

Morocco

19. Key areas of priority on the economic front in Morocco include strengthening the competitiveness of the economy, improving the investment climate, support to SMEs, and encouraging exports. The FY10-13 Country Partnership Strategy (CPS) discussed by the Bank’s Board of Executive Directors in January 2010 focused on three pillars: growth, competitiveness and employment.

20. The on-going World Bank program in support of greater competitiveness is being strengthened: the MSME Development Project and the First Economic Competitiveness Support Program DPL approved by the World Bank Board of Executive Directors on June 28, 2012 and March 12, 2013 respectively, and the Capital Market Development and SME Access (FY14) currently under preparation, will provide a package of support to better target economic governance and improvements to the investment climate and the financial sector that support greater private sector development, innovation, trade and the related job creation that is expected to come about. The international trade agenda is being prioritized, supporting Morocco to take advantage of recent openings to boost trade and integration with its regional neighbors, the EU and USA, as well as deepen its global integration with other regions.

21. From an institutional stand point, the Moroccan Center for Export Promotion (MCEP), a semi-autonomous agency under the authority of the Department of Foreign Trade (Ministry of Industry, Trade and New Technologies). MCEP is responsible for export promotion of industrial products, food, services and all products not covered under a legislative or regulatory provision by other agencies or organizations. It also coordinates the participation of Morocco in international trade events (MCEP counts in its portfolio 5,300 exporters). The Kingdom of Morocco has devised a national strategy for development and export promotion: "Maroc Export Plus", which aims at tripling the volume of exports, increase growth and create 380,000 additional jobs by 2018.

Tunisia

22. The current government has prepared a socio-economic development strategy. The strategy seeks to consolidate the aspirations of the population as expressed in the revolution and pave the way for a stronger economic growth and jobs creation, through reforms to improve competitiveness, export diversification and innovation as Tunisia confronts heightened international competition. It is worth noting that strengthening the business environment and deepening trade integration is one of the four driving objectives of the FY13-14 Interim Strategy Note (ISN) discussed by the Board in July 2012.

23. In practice, Tunisia promoted export activity through two Export Development Projects (EDPs), financed by the World Bank. The first one (2000-2004) addressed two key issues for

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the development of exports: i) the simplification of export procedures and the setting-up of an electronic window for faster processing of trade documents (TTN) and ii) the easing of access to export markets for firms (matching grant scheme and pre-shipment export guarantee). The second EDP (2005-2012) further i) tackled issues of simplification of export procedures, ii) eased the access to export markets for firms (through a revised matching grant and pre-shipment export guarantee) and addressed two new areas, iii) the digitalization of import technical control procedures and iv) the setting up of an information point for Technical Barriers to Trade (TBT) to allow Tunisia to meet WTO requirements. These two Bank projects were implemented under the umbrella of the Center for Export Promotion (CEPEX). 7 Given the success of these two projects, the new Government is contemplating a third EDP (a Competiveness and Export Development Project-CEDP). CEDP will build upon the continuous and strong dialogue on competitiveness and trade integration with the Tunisian authorities and the domestic private sector and takes as a starting point achievements and lessons learned from the previous projects.

24. This operation and CEDP will be complementary as the former will help SME link to the international markets and the latter will build upon and anchor more deeply the reforms started under the previous EDPs with the intention of creating a more favorable export environment and further encouraging competitiveness.

Jordan

25. Jordan’s vision is to pursue a knowledge-based economy leveraging, the country’s strong human capital base and creating jobs. The Government’s Executive Development Program (2011-2013) underscores the importance of exports to Jordan’s economic future and the role of education and skills development in tailoring the country’s human capital to the needs of the private sector. Along these lines, the EDP emphasizes the need for an improved enabling environment for business and investment.

26. The Ministry of Industry and Trade (MIT) is responsible for trade and industry related issues in the country. One of the main institutions in charge of promoting exports is the Jordan Enterprise Development Corporation (JEDCO) under the leadership of the Ministry of Industry and Trade, the Jordan Federation of Chambers of Commerce, the Jordan Chamber of Commerce and the Amman Chamber of Industry. The board also includes representatives of other public institutions and the private sector. JEDCO is highly respected among trade and industrial partners in the country with many initiatives and partnerships with the private sector as well as international organizations in the trade sector. The private sector is organized through national and regional chambers of commerce. The Jordan Chamber of Commerce (JCC) works with public and private stakeholders providing information, advisory and promotion services. It is the umbrella organization for the 16 local chambers of commerce and it is also a member of regional or international networks and organizations of similar nature.

7 Created in 1973, the CEPEX is a governmental institution operating under the Ministry of Trade and Handicraft. CEPEX largely focuses its activities on country image building and marketing activities Services offered by EPAs usually fall into four broad categories: i) country image building (advertising, promotional events …), ii) export support services (exporter training, technical assistance, capacity building…), iii) marketing (trade fairs, exporter and importer missions…); and iv) market research and publications.

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The different sectors and professions8 are organized in specific associations, some of which are very active in export promotion activities either bilaterally with other countries or through JEDCO.

27. Jordan export promoting policy relies on three main initiatives: the Euro-Jordanian Action for the Development of Enterprises, the National Fund for Enterprise Support and the Jordan Upgrading and Modernization Program. Jordan is preparing a National Exports Strategy that will target certain sectors. It is expected that the project will be aligned with the strategy.

28. Euro-Jordanian Action for the Development of Enterprises (EJADA): This EU funded program intends to facilitate the integration of Jordan in the future Euro-Mediterranean free trade area through modernization and upgrading of Jordan's industry, improving the competitiveness of the SMEs. A wide range of instruments have implemented for this purpose, including components such as training, technical support, financial support, strengthening of SME associations, and export promotion.

29. National Fund for Enterprise Support (NAFES): NAFES was created in 2001, as a joint effort of the Higher Council for Science and Technology, Ministry of Finance, and Japan. The aim is to help SMEs to become more competitive domestically and internationally. Program activities include consultancy for and training in market analysis and sales support.

30. Jordan Upgrading and Modernization Program (JUMP): JUMP is an independent national program managed by a committee headed by the Minister of Industry and Trade, with equal representation from both the Government and the private sector. The objectives include enabling enterprises to face increased national, regional, and international competition, increasing market shares and developing new non-traditional export markets. Among the wide range of services offered, specific trade-related services include assistance to market research, marketing plans, marketing and export promotion. The different programs have been recently merged and will be now administered by the Jordanian Enterprise Development Corporation (JEDCO), which has a predominant role in export promotion and development. The Royal Scientific Society (RSS), the major institution in support of innovation and technological change, continues to offer testing and certification services to private enterprises.

D. ALIGNMENT WITH THE TRANSITION FUND OBJECTIVES

Support to policy, institutional changes and structural transformation

31. The proposed project will support the policy changes that have been adopted in the aftermath of the Arab Spring. Trade and globalization have no doubt resulted in increased jobs and wealth in Tunisia Morocco and Jordan, but up until now it has only been the few 8 Specific associations exist for: agricultural and oil producers, stones and garments and textile exporters. The engineering profession is one of the most relevant and numerous professional associations in the country regulating and monitoring the services delivered by these professionals. Engineering services are often exported to other countries in the region which lack the necessary skills in the sector. In the IT sector, both in providing services and software development is worth mentioning the information and Communications Technology Association of Jordan (INTAJ).

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largest players who have been able to take full advantage of globalization. If a small business wishes to participate in the global economy it is largely relegated to providing an intermediate product to a large multi-national supply process. The three countries intend to create the enabling environment that would put SMEs on a same footing as large companies. Access to VMPs would be one of the pillars of this new strategy to the extent that they are a parallel model for trade as they enable businesses of all sizes to trade directly with buyers around the world. A technology enabled small business can maintain a local presence and contribute to its local economy while increasing its revenue by reaching out to a global customer base. As mentioned in the prior section, Morocco, Jordan and Tunisia engaged in a new Export Development Policies aiming at deepening access to foreign markets for their firms. These policies include new exporters (export-ready SMEs) and new channels (such as Virtual Market Places VMPs) in addition to the traditional trade promotion tools (such as organization of trade fairs).

32. The proposed project will also support the institutional changes that result from the new policies. Because these new policies involves the resolution of number of bottlenecks such as e-payment, logistics, regulatory environment, access to finance and export guarantees, quality control, etc., the three countries plan to implement (or have already implemented in the case of Tunisia) inter-ministerial committees.

33. The project is designed as a pilot aiming at validating the new export development policies9. Approximately 600 SMEs will benefit from this project. The impact of this pilot will be measured through indicators such as percentage of increase of export activities among the beneficiary SMEs. Moreover, the countries will assess the efficiency of each of the components and make adjustments (if needed) before scaling up the project to a wider range of SMEs. SMEs will be selected according to criteria detailed later in the concept note. After the pilot phase, the project can be scaled up following the same process of selection and coaching to satisfy the high demand already identified during field missions organized as part of the preparatory phase. 34. The proposed project will directly support Morocco, Jordan and Tunisia (or one country) new policies. In particular, it will support their effort i) to promote new exporters (SMEs) through VMPs as new exporting channel and ii) to tackle the various issues that impede the deepening of access to foreign markets (through the support to their inter-ministerial committees).

Alignment with fund objectives

35. The higher-level objectives to which the project contributes are aligned with three of the Transition Fund Objectives: i) Competitiveness and integration and ii) Inclusive development and iii) job creation.

9 The project is also aligned with the MENA TF objectives in terms of the type of projects eligible. In particular, -‘the Operations Manual mentions in its paragraph 15 “Eligible technical cooperation can include, inter alia, piloting implementation of key reforms”.

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36. Integration and Competitiveness. E-commerce is a fundamental strategy to fast-track trade integration and VMPs are relevant to integrate SMEs into international markets. In concrete terms, the VMPs will enable beneficiary SMEs to have a business link to buyers from all over the world. In general, the participation in e-commerce has a positive impact in the internal organization, innovation, and business information. Through this project, which focuses on the access to global markets through Virtual Market Places, it is expected that beneficiary SMEs will implement new strategies and adopt new business models which will improve their competitiveness and enable them to penetrate new markets using business intelligence that will be supported by the project as well. (See sub-component 3.2). Recent findings10 show that the potential gains from increasingly moving to online trading world are substantial exporters and importers of all sizes, in particular in developing countries. E-commerce helps sellers and buyers overcome traditional trade impediments and makes distance less relevant for online sellers with a positive impact on trade flows. Integrating SMEs from the MENA region in electronic commerce platforms will increase competitiveness of these companies and generate benefits regardless of their location. In general, new sellers using marketplaces capture market shares faster than in the offline world. Traditional trade patterns, related to geographical closeness, specific trade agreements or colonial heritages are overcome. In terms of integration, online sellers sell to more countries than offline sellers11. This in itself guarantees the sustainability of the project since SMEs will have incentives to either continue using this tool or, in view of other online SMEs success, more firms will innovate and upgrade their skills to enter online trading tools.

37. Inclusive Development and Job Creation. By enabling over a thousand SMEs in transition countries to reach out to buyers worldwide, the project will generate new business opportunities, translating into accelerated growth and further job creation. Beyond the direct impact, job creation will also derive from the development of value-chain businesses that gravitate around exporting SMEs (logistic, shipping, export consultancy, insurance, finance, etc.). Since the project has a special focus on youth and women, through the profiling of SMEs with potential, it will facilitate the access of non-favored segments of the population into international markets. Overall, studies show that the increase digitization of the economy, including indicators such as the ability of users to incorporate digital services into their business, fuels a 0.75 percentage point growth in GDP per capita12. If digitization increases by 10 point, it leads to a 1.02 drop in the unemployment rate (worldwide figures). The effect is larger in emerging markets. In addition, growing trade volumes using online systems reduce transactions costs, increasing net revenues for the sellers and allowing for the allocation of the benefits into the improvement of process, capabilities, and employment at firm level.

E. COMPLEMENTARITY WITH OTHER PROJECTS

38. The complementarity of this project with others is strong. Other projects financed by the Transition Fund and other initiatives such as the IFC-World Bank MSME TA Facility for the MENA region have as objective to support SMEs or MSMEs as well as entrepreneurs mainly through the provision of financing to address firm-level bottlenecks. If the SMEs 10 Olarreaga and Schropp (2013).11 Mayer and Ottaviano (2007).12 World Economic Forum, 2013 “Digitization for Economic Growth and Job Creation”.

18

receiving support to engage in VMPs succeed in conducting e-commerce, they will need additional finance to scale up production and/or upgrade technological or human resources skills at all levels. However, the project differs from others, such as the Jordan’s SME Growth Program on its specific focus on i) upgrading skills to conduct e-commerce and the focus on VMPs, and ii) addressing institutional constraints to create an enabling business environment for e-commerce. Other projects, such as the Morocco Microfinance Development, aim at strengthening microfinance institutions and improving the regulatory environment under which they operate without addressing SMEs development at micro level. Therefore, while not cross-cutting in terms of addressing firm-level constraints but basically focusing on a few, it seeks to enhance expertise to use available technological platforms to expand export markets. The surveys conducted prior and during the design of the project confirm SMEs need and desire to acquire this expertise. This operation will ultimately benefit Micro and Small enterprises.

39. This project will also build on the work undertaken by the ITC in Jordan, Morocco and Tunisia in the framework of Enhancing Arab Capacity for Trade program (EnACT). This program, funded by the Canadian International Development Agency (CIDA), was implemented from 2009 to 2013, and focused on developing the full export potential of five countries: Algeria, Egypt, Jordan, Morocco and Tunisia. The EnACT program assisted SMEs in target industries to export to international markets, and to create employment in the post Arab Spring context. In addition to strengthening TSIs and creating trade intelligence systems, the program strengthened the capability of SMEs to understand and meet the requirements of targeted export markets and built relationships with potential buyers for sustainable exports.

40. While the program focused on four main objectives: i) improving business intelligence, trade policy and export strategy, ii) strengthening the capacity of trade support institutions to promote export competitiveness, iii) developing markets and supporting small and medium-sized private sector companies (particularly in handicraft sector), and iv) creating opportunities for women and young people.41. 42. The EnACT program puts a special emphasis on raising awareness about web marketing and e-commerce solutions as affordable and efficient tools to conduct business particularly for women and youth, and other vulnerable groups. Working in close partnership with TSIs, , ITC, through the EnACT programme, strengthened the capacity of beneficiaries to leverage the Internet to promote, market and sell products and services throughout the region and beyond, with a special focus on social media and free and open source software. ITC has developed a series of web marketing and e-commerce capacity building modules, which are supported by online diagnostic tools.

43. EnACT helped to strengthen the capacities of sector specific TSIs enabling them to offer targeted advice to SMEs. The programme focused on mentoring and coaching approach, aimed to adapt SMEs products to market requirements, improve marketing and promotion strategies, participate effectively in trade missions and exhibitions to meet buyers, and increase their visibility through e-commerce applications. 44. As a result, beneficiaries SMEs were empowered as to access to new sales channels. Examples include a small handicraft company owned by a Tunisian businesswoman, which joined “Dinos”, a Japanese online retailer. EnACT has also enabled Jordanian artisans to be

19

connected to the Louvre Museum in Paris, which resulted in $130,000 of initial orders. This is being maintained to date through regular orders. In Algeria, the Carpet Maker Association of Ghardaia benefited from coaching on social media as a way to reach new clients. 

45. The programme was designed as to support national priorities in term of job creation for women and youth. In fact, the programme enabled more than 500 SMEs to benefit from training on social media as affordable and efficient tools to conduct business, from which 200 were women-owned companies. Furthermore and in association with Amadeus Institute, EuroMed Capital Forum and Maroc Export, EnACT granted its first Youth Entrepreneurship Prize in Export to Outsourcia, a Moroccan company.

46. The companies targeted were active in the engineering goods, processed foods, leather products and handicraft sectors. They have been able to penetrate new markets in a sustainable manner in Sub-Saharan Africa (Kenya and Uganda), Asia (Asia and Japan) and the Arab region (Kuwait).

47. The VMP Project will build on this 4 years work, especially on raising awareness of web marketing and e-commerce solutions. It will consolidate and leverage material and knowledge built through the EnACT programme and subsequently extends it to more SMEs as a way to increase their visibility and increase their market share.

F. JUSTIFICATION FOR THE WORLD BANK AS EXECUTING AGENCY AND PARTNERSHIP WITH ITC13

48. The project seeks to increase exports from transition countries. It aims at building capacity of SMEs in Jordan, Morocco and Tunisia on how best to utilize Virtual Market Places, as means to reach new export markets.

49. The implementation of the project requires the engagement and training of SMEs but of and a variety of institutions and organizations, from governmental to civil society and private sector. The goal of the project will be achieved through the targeting of SMEs and the provision of individualized support in their first export transactions through the existing VMPs. Also, the project seeks to have an impact on the behavior and attitudes of SMEs towards e-commerce and, through that, impact SMEs performance in export markets. For the project to succeed, it is fundamental to get close to the small and medium enterprises which can be done much easily through the sector associations and chambers of commerce, depending on the country context. The corresponding government authorities will be involved at two levels: i) in the National Steering Committee, ii) as hosts of the project implementation unit (PIU) as needed.

50. Because of the complexity of legal and implementation arrangements and the variety and number of stakeholders involved, countries agreed on the Bank acting as executing agency. Therefore, there is no requirement to conduct project appraisal.

13 http://www.intracen.org/

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51. The Bank will partner with the International Trade Centre (ITC), a specialized UN Agency, based in Geneva. The objectives of the project are fully in line with ITC mandate which is to enable small business export success in developing and transition-economy countries, by providing, with partners, sustainable and inclusive development solutions to the private sector, trade support institutions and policymakers. ITC capitalizes on strong regional and international networks of policymakers, TSIs and SMEs. ITC work focuses on five strategic objectives among which three are directly relevant for this project, which are: i) Building awareness and improving the availability and use of business intelligence; ii) Enhancing policies for the benefit of exporting enterprises, iii) Building the export capacity of enterprises to respond to market opportunities. ITC’s support to the Arab region increased exponentially over the last three years. The project will benefit from a well-established network of key stakeholders that ITC has been working with over the last five years in Jordan, Morocco and Tunisia.

52. The World Bank has been an important partner for ITC for many years. Over the 3 year period 2008-10, the World Bank’s Development Grant Facility (W2) provided a grant of $1.8 million ($600K per year) to enable ITC’s market analysis tools to be made free of charge to developing and least developed countries. The program was positively independently evaluated in 2012 and found to have achieved the objective of improving the quality and availability of business intelligence for developing countries. In addition, The World Bank provided ITC with a grant in 2009-10 of $400,000 to re-develop its WITS (World Integrated Trade Solution) analysis application in a web environment. ITC completed the work and the platform forms the basis of the now web-based WITS application – see https://wits.worldbank.org. On other areas of collaboration, The World Bank together with ITC, UNCTAD and the African Development Bank came to a collective agreement (an MOU has been in force since October 2011) to collaborate on improving global transparency in trade, share trade related data and reduce redundancies in their work in this area14.

53. ITCs mandate and missions perfectly fit the project development objectives. Moreover, ITC experience and capability was emphasized by all the countries’ counterparts visited by the Bank during the preparation of the project.

II. PROPOSED PDO/RESULTS

A. PROPOSED DEVELOPMENT OBJECTIVE

54. The project’s development objective (PDO): This is a pilot project aimed at increasing SMEs exports on the through Virtual Market Places and supporting institutional reforms to create an enabling environment for e-commerce.

55. Due mainly to their small size, limited resources, and the lack of skills, expertise and support, the vast majority of SMEs are not able to export their products or conduct market research to identify business opportunities. Also, SMEs face severe information

14 Jordan is preparing its National Export Strategy which ITC is supporting.

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asymmetry issues: foreign buyers lack information about SMEs’ trustworthiness while SMEs have very little information about foreign buyers’ expectations. Finally, due to virtually no export activity for SMEs, domestic export-related value-chains (marketing, packaging, advisory services, logistic, insurance, finance, translation, etc.) are under-developed. In addition, the culture of e-commerce is not widely spread out throughout the region partially due to the lack of trust and confidence in electronic platforms to conduct transactions. The project will contribute to the reduction of these constraints to e-commerce, particularly, through the introduction of quality certifications. It is expected a relatively high return in terms of economic value since one dollar spent would yield a 4 dollar return (see annex II) in additional revenues for beneficiary SMEs. The project has been designed as a pilot. It can be easily expanded to other beneficiaries.

B. KEY RESULTS

56. Key indicators are related to Institutional Reform, Outreach, Training and VMP access:

a) Institutional Reform Advisory services to set up effective mechanisms to create an enabling environment

for e-commerce

b) Exports Markets Accessed through VMPs Training and advisory of country partners and TSIs Training and certification of Export Advisors Actual export transactions in VMPs.

c) Partnerships, Certification and Business Intelligence SMEs capacitated to trade on VMPS and awarded with premium accounts on

VMPs. Effective roll out of a Business Intelligence Mechanism (Trade and Market

information provided to countries) National institution to serve as certification agency assessing SMEs compliance

with e-commerce requirements.

III. PROJECT DESCRIPTION

A. PROJECT CONTEXT

57. Internationalization of SMEs in the MENA region faces common challenges to those identified in other parts of the world. Some of the barriers are policy related while others are very much firm specific and refer to lack of skills, lack of business intelligence and limited ability to reach overseas customers. In addition, the firm-specific barriers are common to SMEs across sectors. When it comes to the use of e-commerce tools, some of these barriers are related to cognitive/perceptions regarding e-commerce which can be partially addressed through the coaching of SMEs. Another set of difficulties are more related to the enabling environment to conduct e-commerce and therefore, surpass firm-specific constraints. The

22

project will address both, firm-specific and institutional bottlenecks that hamper SMEs internationalization through e-commerce and, more specifically, through trading on VMPs.

Table 3. Benefits of E-commerce

Direct Benefits from e-commerce ExampleOnline platforms (f.e. EBAY) Close to 100% export – While around 40%

offline business from the same country of origin include in Ebay export

Competitiveness (large vs. small firms) Small and large sellers are almost equally likely to export (offline SMEs are less likely to export)

Increase in ExportsGains from opening up to online trade The largest actual welfare gains from lower

trade costs occur outside developed countries since online costs are close to equal.

Indirect benefits from the Internet EconomyJobs15 (MENA) 377,772 jobsGDP16 (MENA) 16.5 (US$billions)

58. Hundreds of VMPs are already operating in the world. Some have been in operation for years, other have started more recently. The most successful one is www.alibaba.com, launched by a private firm in China in 1999. Today, this B2B website serves a business community of more than 35 million registered users and the company's shares are publicly traded. Other cross sector, global virtual market places such as globalsources.com, ecplaza.net, and tradekey.com, are also noticeable. The project will select between 15 to 20 VMPs according to their capability to maximize beneficiary SMEs’ export activity.

59. Trade over Internet enabled marketplaces, such as eBay or Alibaba, to be less affected by geographical distances. Research shows that a 10 per cent increase in distance reduces trade in eBay, for example, by only around 3 per cent, whereas it reduces traditional exports by 18 per cent. The impact of technology is even more pronounced in the case of trade from developing countries. A 10 per cent increase in distance results in no more than a 1 per cent decrease in technology enabled trade from developing countries17. Put it differently, the objectives, behavior and success of firms online brings different results and patterns from those using more traditional trading channels.

Table 4. Volume of exports and number of markets (Offline vs. Online Sellers)

Chile Indonesia India Jordan Peru Thailand Ukraine South AfricaShare of Sellers

15 Booz and Company, 2011. 16 Idem. 17 Olarreaga and Schropp, 2013 “Commerce 3.0 for Development”, Geneva.

23

ExportingTechnology-enabled business (%)Traditional firms (%)

100

15

100

5

97

12

100

25

100

14

100

75

100

12

100

19

Number of export Destinations18

Technology-enabled businessTraditional firms

29

4

36

n.a.

31

n.a.

27

4

25

3

42

n.a.

36

n.a.

30

4

60. In general, technology-enabled businesses are mostly exporting companies while traditional firms are not. Therefore, using the Internet and new technologies for business transactions is seen as an effective tool for exporting.

Table 5. Good Practices

Chile - Free Trade Agreement with US – Removing barriers for SMEs and e-commerce. Chile - Minimum threshold to have tax exemption from customs duties and paperwork

requirement: set at only USD100 minimum. Peru – Exporters reach 25 markets online vs. only 3 markets are reached by offline

businesses Peru – Minimum threshold set at USD200. Australia – Minimum threshold for payment of customs duties set at USD 1,000. Ukraine – Commercial sellers reach 37 different markets on average. Ukraine – Law on Electronic Documents – Electronic Declaration Forms. Ukraine – Modernization of Postal Service – top 25 countries en e-postal service

development. South Africa – Online sellers reach 30 markets vs. 5 offline sellers. Newcomers account for

27 per cent of sales on eBay. Thailand – online sellers reach 43 different countries. Overall – Small business tend to enter the global market by becoming a part of the

production process of a much larger firm or sell directly to customers.Source: Olarreaga and Schropp (2013)

61. Currently, MENA firms are largely absent from these platforms and not visible for the millions of e-buyers around the world. The number one VMP, alibaba.com, records over 9 million buyers (from USA -28%, Europe -21%, Asia -31%, Middle East -8%, and Africa -

18 Idem. Data based on commercial sellers (annual exports>USD10,000) in 2012. Source for “traditional exporters” World Bank EDD database (data not available for Indonesia, India, Thailand and the Ukraine).

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8%).19 The reasons (similar/different) refer to: i) production/trade capacity/competitiveness of the countries, and ii) lack of culture of e-commerce, insufficient understanding of how markets operate through e-commerce, access to business intelligence and exports and marketing strategies, and iii) Logistics, customer relation knowledge, quality control and payments constraints.

62. In addition, the absence of MENA firms in the VMPs, prevent them from having critical market information on the nature and origin of the demand. Therefore, up to 40% of the companies surveyed confirmed their need in obtaining information about business opportunities and technical requirements and standards in the exporting markets as a priority to succeed. Using VMPs statistics would be extremely useful to inform Ministries of Trade. In the framework of this project, Alibaba kindly shared some enquiries statistics that shows that China conducts the most enquiries for Jordan, Moroccan and Tunisian products reaching between 7.5 to 11.5 per cent of enquiries. In Jordan, China is followed by India, United States, Nigeria, UK and Egypt (between 8.7 to 3.7 per cent). In Morocco, US, Spain, UK and France follow (between 7.4 to 3.8 per cent). In Tunisia, China is followed by Italy, Egypt, Turkey, France and India (between 6.2 to 4.5%). When it comes to the products, potential e-buyers show more interest in agriculture and food and beverage for the three countries with minerals and metallurgy ranking also among the top five for Morocco and Jordan. These preliminary 19 Alibaba Page Views: 7 million per day.

Local, all sectors

International e-shopInternational, sector-

Local, sector-focusRegional, sector-focus

International, sector-

International, all

International, sector-

International, all

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statistics show that the potential export markets when it comes to VMPs are not mainly concentrated in Europe and therefore, it is possible to increase market presence in new markets using e-trade and, particularly, VMPs. One of the components of the project aims at having wider access to this international market data.

63. The World Bank has designed and sent out a questionnaire to 60 institutions in the MENA region. The recipients included Ministries of Economy, Industry and Trade, Export Promotion Agencies and Chambers of Commerce. The survey was designed around twelve questions aiming at assessing the respondents’ familiarity with the VMP concept (originally to be created in the MENA region, for the countries of the MENA region) as well as the kind of services (training, financial services, translation, business development coaching, etc.) needed to facilitate the participation of the SMEs in a regional VMP20.

64. The majority of the respondents, 88 percent, were familiar with the VMP concept. All the respondents claimed that VMPs would be useful to businesses in their countries for their export activities. They were quite unanimous about the type of impact VMPs could have: regional integration, outreach of products beyond the region and competitiveness effects. In a second survey21 conducted in the participating countries of this project, between August and September 2013, SMEs in the three countries confirmed their interested in selling online but cited lack of sufficient knowledge to maximize the use of this platforms. The SMEs surveyed also emphasized the urgency of addressing business environment issues related to e-commerce such as: security of payments or logistics. They see considerable value in obtaining VMP trust labels as well as business intelligence support analytics to better target markets.

65. The project aims i) to work with Trade Support Institutions (TSIs) that support enterprises in their export diversification efforts, access to business intelligence on foreign markets and that can have strong multiplier effects, and ii) to create capacity and skills within SMEs to increase their exports by using existing VMPs22.

66. The project will support the integration of approximately 600 SMEs from Morocco, Tunisia and Jordan into several well-targeted VMPs23.

67. The project will target exporting companies and export-ready ones in order to ensure that it will fully benefit selected SMEs and that they will be able to successfully engage and conclude business transactions with leads through the virtual marketplaces.

20 Among the 60 targeted institutions in the region and beyond, 17 provided us with their feedback (i.e. a 28 percent response rate). This figure does not allow us to draw conclusions that are rigorously statistically significant. However, we can consider this exercise as a focus group with targeted stakeholders and we will analyze their feedback as such.21 Almost 200 SMEs at the time of finalizing this document had answered the survey. To conduct the survey, the Trade authorities as well as private sector associations and chambers of commerce, had been very collaborative and have distributed the survey among members and key partners. 22 See Chauffour, Jean Pierre. 2013. From Political to Economic Awakening in the Arab World. Washington, DC: World Bank. The report emphasizes the role of the knowledge economy and how knowledge and innovation strategies increase export competitiveness. It also signals the potential of trade in services in the region.23 As an example, in Colombia, after 5 years, new sellers online have a much higher combined market share (22%) than offline firms (13%). Overall, the capturing of market shares is faster in the online world.

26

Exporting companies refers to those who regularly exported over the last three years (products), or at least during the last year (services). Export-ready companies are companies that have either been exporting occasionally or have been identified by partner TSIs as being able to do so in the near future. A target number of 200 SMEs per country will be selected through an exclusively online expression-of-interest (EOI) form disseminated with the support of partner trade-support institutions. This will be a first step to ensure a first-level of IT literacy.

Overall Selection criteria include:

Company profile (start date, size, turn over, number of jobs (segregated by gender), product/services provided, financial situation, etc…);

At least 20% of selected companies selected in each country will be owned by women or young entrepreneurs;

References of export clients available upon request; List of current export markets and export value in % of total sales; Brief summary of the companies’ export strategy (box); English-language skills available inside the company, and Availability of an export focal point inside the company

Further related questions will assess the “e-readiness” of candidates, including:

Existence of a website or web presence through social media; Usage of the web to identify new export markets and export leads; Awareness of virtual marketplaces (checklist of VMPs), and Past experience with B2C or B2N e-commerce and/or virtual market places

The definition of criteria as well as the EOI process and the selection process will be conducted closely with the partner TSI. The selection process will be flexible, while the selection criteria will be carefully considered to ensure that the most promising SMEs are identified and are strongly motivated to join. The process will ensure that the selected group is balanced in terms of company size, gender, products/services, and distribution across different regions in the country.

The selected companies are the direct beneficiaries of the capacity-building and business-development support that will be provided through the VMP. As part of this process, some of the SMEs will get access to premium accounts on specific marketplaces. In return, beneficiary companies are expected to actively take part and perform according to specific success indicators as defined in the logical framework of the project. At the end of the first year implementation, each company performance will be assessed in close collaboration with the partner TSI.

In order to ensure a strong commitment from the participants, the companies that will achieve poor performance will be taken out of the beneficiaries list and replaced with a new selected group of applicants.

Youth/gender:

27

The project aims to support women and youth entrepreneurship in integrating into and benefitting fully from the potential of existing Virtual Market Places, which is essential in a region with a large young population and high unemployment rates of youth and women in particular.

Knowing that in 2011, 87% of young Arabs gained more access to information technology and communication compared with 79% in 200924, the project, by using new technologies, open sustainable doors to job opportunities for young Arabs. Indeed, entrepreneurship can offer new opportunities for women and youth to generate their own income, and help others as they do it. The project will work directly with women-owned and youth entrepreneurs and ensure that the benefits of the project accrue to them. The baseline will be confirmed at the beginning of the project.

68. Alibaba is a global VMP which does not target a particular sector while other VMPs are more specialized and constitute trade platforms which in some cases focus in one product. Therefore, there are advantages in registering SMEs in both types of platforms. The project could help by-pass barriers to inter and intra-regional trade such as: i) the non-tariff and other policy barriers, including in some cases physical border closures, and ii) the personalization of trade and related lack of trust and confidence in depersonalized exchanges.

During the missions carried out in the beneficiary countries, stakeholders recommended to focus on certain sectors25, namely:

Agriculture and processed food, in particular in the halal and organics segments; Services, in particular ITO/BPO and other business services; Handicrafts.

69. In specific cases, the sectors may increase to respond to national trade strategies provided the specific sector has potential from an e-commerce perspective.

70. From a development outcome perspective, and in view of the countries' demographics and business structure, the project will engage a large number of young entrepreneurs and special attention will be given to women-led companies, reaching out to SMEs across regions while taking into account disparity issues. The project focuses on a quality approach through individual support and coaching to SMEs to ensure success.

71. The project will create expertise on VMPs and an enhanced access to business intelligence about foreign markets through experts who will train in country export specialists as well as local institutions, which, later on, will train SMEs. By introducing this approach it ensures that knowledge is transferred, used and evaluated throughout the life of the project and capacity remains once the project closes.

72. In each country, a small project implementation unit –PIU-, located in the main TSI, will coordinate the project at country level and provide support to the International Trade Center (ITC) which is the main partner of the WB for this project. Depending on the countries, the 24 Source: The Silatech index: Voices of Young Arabs, April 201125 The potential of some of these sectors has been emphasized during the missions. See also AfDB, 2013.

28

project will also involve government agencies, chambers of commerce, business associations and specific civil society organizations26 in order to ensure full outreach toward the beneficiary SMEs. This public-private partnership approach is fundamental in ensuring the success of the project as well as its sustainability once the project is completed. TSIs will allocate staff to be trained as well as to, later on, engage them on coaching and registering SMEs with EAs support27. ITC, in cooperation with the TSI, will instruct PIU on the criteria to select potential SMEs and monitor their performance throughout the project to make sure they actually engage in concrete business transactions. ITC will also engage with the TSIs in order to build their capacities on how to better track information and alerts SMEs about markets, opportunities, competitors, trends, risks and other key intelligence topics. This service will be offered as part of TSIs portfolio. The information tracking will be made on the VMPs and complemented by other relevant sources of information.

73. The project will hire Export Advisors (EAs) already trained through various programs in Tunisia, Jordan and Morocco28. The recruited EAs will receive specialized training on VMPs. EAs will be recruited through existing networks or by contracting a firm to conduct the hiring29.

74. The project also envisages tackling the enabling environment for e-commerce by addressing institutional constraints to help beneficiary SMEs better perform on VMPs. For SMEs to profit from e-commerce, several institutional and regulatory aspects require attention. These factors are, broadly: legislation (regulatory environment), e-payment/banking facilities and support, software services (security), telecommunications, delivery services (postal services or alternatives) and traffic infrastructure. Barriers in one or more of these areas can hamper the success of e-commerce efforts in general and online trade through VMPs in particular and need to be addressed jointly. In Tunisia, Morocco and Jordan institutional-related barriers identified which affect low volume exporters or potential exporters using e-commerce platforms and channels are:

• Branding and Trust• Logistical networks for the prompt and reliable delivery of products• Lack of a supportive legal and regulatory environment• Electronic payments and currency issues• Insurance systems• Connectivity (quality, speed, cost)

75. In addition, complying with high standards in many of those areas will facilitate the granting of trust labels to companies based on international standards and the implementation of quality procedures associated to the use of the VMP label. This requires the implication of the national institutions responsible for VMPs standards and assessments and the creation of

26 For a detailed description see Annex 3 – Institutional Mapping. 27 For example, the Association of Women Entrepreneurs in Morocco (AFEM), one of the few initiatives in Morocco focusing on the development for women’s entrepreneurship, has manifested its interested in having one staff trained and engage in the project for the outreach of women entrepreneurs. In Jordan and Tunisia, other associations have shown great interest in participating actively in the project. 28 However, none of the IFIs of the Deauville partnerships have projects on SMEs and trade in Morocco. 29 This could be the case of Jordan – The HR Company would not have any managerial or project implementation responsibilities.

29

capacity within them. The capacity of national institutions responsible for standards and assessments will be strengthened to understand VMP standards and assists SME’s to understand and be aligned with VMP classical specifications.

76. The scalability and sustainability of the project will be ensured through the good selection of TSIs, advisors and SMEs and regular monitoring of the performance of each key player. The project follows a “learning by doing” approach. The successful implementation of the project directly depend on the selection of the appropriate trade support institutions, the competent trade advisors and motivated SMEs that have the capacity to export. Therefore, the selection process will be managed in a rigorous and systematic way. The project will be implemented through the direct involvement of the TSIs; the hands on experience will reinforce the competencies and capacity of TSIs to provide more effective support services to promote e-commerce. As part of the implementation process, the methodological approach and processes will be integrated as part of the services portfolio of TSIs. The TSIs will have a multiplier effect reaching out to a wider group of SMEs and capacitating them to enter into e-commerce. As demand for such services increase, the TSIs will be able to customize its services, to upgrade them and introduce a fee-based approach.

77. Through the “learning by doing” approach, the TSIs will have access to a core group of advisors that will be available as local experts to continue to support a larger group of SMEs. The core group of advisors will be able to train other advisors and to support the TSIs in providing high quality services to SMEs. The local experts will be engaged with ITC through a process of continuous improvement. They will be certified through their involvement in the project and by successfully completing all the steps of the training provided by ITC.

78. The success of SMEs in generating new business transactions through VMPs will build interest within the business community. The project will invest in communication and create visibility with regard to all positive results and changes generated by the development of e-commerce. Information sessions and awareness sessions will be organized by the TSIs to mobilize more SMEs and encourage them to integrate e-commerce as new export channel.

79. The project will build capacities of TSIs to ensure its sustainability. VMP trainings will be organized through partner TSI and the latter will be equipped with a toolkit to advise SMEs on how to use VMP for export diversification. Standardized training packages and methodologies with an emphasis on local capacity building will ensure scalability and faster deployments in other countries.

B. PROJECT COMPONENTS

80. The project is articulated around four components: i) a support to the Institutional Reform, ii) a support to a comprehensive and well-targeted capacity building program for country partners and outreach; iii) the implementation of VMPs’ partnerships and business intelligence; and iv) Management Support.

Component I. Institutional Reform (US$ 0.3 million)

30

It is important that governments adopt policies, laws, and incentives that focus on promoting trust and confidence among e-commerce participants and developing a national framework that is compatible with international norms on e-commerce. This component aims at supporting current discussions and to introduce policy and regulatory changes. This component will support the creation of an inter-ministerial committee with private sector participations, analytical and diagnostic studies with the objective of concretizing reforms in the enabling environment for e-commerce. The objective of this component is to set up a framework is to increase security and trust in online environments for e-commerce, which is fundamental for the creation of the Internet economy with significant positive spillovers in other sectors. It includes tackling the following aspects: e-payment, logistics, intellectual property, access to finance and export guarantees, quality control, minimum thresholds for export duties and paperwork requirements In order to tackle these issues, the three countries plan to implement inter-ministerial committees. These committees will also tackle the business processes related to the public administration that can be offered online such as e-customs and the submission of digital documentation. Countries such as Jordan or Tunisia are more advance. Jordan has drafted an e-commerce strategy highlighting the shortcomings in Jordan´s current regulatory regime. This component will support the ongoing efforts to eliminate bottlenecks. These reforms have already been implemented in OECD countries and need to be expanded beyond30.

81. The committees will include31: •Ministry of Finance, Ministry of Trade, Ministry of IT or related; •The Public Financial sector (banks), electronic payment and e-banking authorities

(Société Monétique), postal services (public and/or private) and the central banks of each of the countries;

•Private sector associations, chambers of commerce and other key stakeholders such as representatives of commercial banks, and

•The Service Providers: Consulting and developers of E-Commerce Website.

82. The budget will cover the expenses for:•Analytical work to be conducted to better understand the constraints and propose

action plan;•The organization of one knowledge sharing workshop (between the beneficiary

countries or/and with the participation of other countries);•For Tunisia and Morocco (if multi-country), the component will support the design

and support the creation of an observatory of e-commerce to track and support SMEs integration in international markets using the Internet.

Component II: Capacity Building Program (US$ 1.35 million)

Sub-component 2.1: Capacity Building Program (US$ 0.1million)

30 OECD, 2013 “The Seoul Declaration An overview of Progress made and recommendations” on “Internet on the Rise”. 31 The composition will vary from country to country as the corresponding authorities proceed with the identification of actors.

31

83. The creation of capacity at institutional level is critical to the extent that it will i) increase Trade Support Institutions (TSI) buy in and ii) contribute to the institutional sustainability of the project. ITC and World Bank will identify international VMP experts to design and train the Project Implementation Unit (PIU) team and the country partners (Trade Support Institutions, Civil Society Organizations and private sector association/federation). The sub-component will cover the cost of the design and the delivery of a training program that would enable country partners to fully understand the methods, techniques and dynamics of VMPs to maximize the opportunities they offer to increase export and diversify markets.

84. A group of national Export Advisors (EAs) will be recruited by the PIUs in each country from the start of the project. Pre-identified existing networks of EAs will be utilized for the recruitment. The selection process will guarantee that the EA teams include experts on specific markets and products to ensure the maximum quality in their service to the SMEs. The EAs will be selected according to the geographic distribution of the beneficiary SMEs. They will be trained by the VMP experts (mainly on how SMEs can maximize their participation in VMPs). Upon completion of the program, successful participants will be certified as VMP Export Management Development Adviser.

85. Regarding outreach, the component will support project country-based promotion plans through media campaigns to present the project and, later on, to showcase successful projects. In addition to this, special in-country networking activities will take place through federations, chambers of commerce and professional associations to market the project and expand the program.

Sub-Component 2.2: Registration and coaching of SMEs (US$ 1.25 million)

86. Along with the outreach phase of the project, beneficiary SMEs will be registered in one to three different VMPs, coached on how to make the best use of their presence on these VMPs and coached on how to concretely deal with the inquiries coming from the first potential buyers through the VMPs.

87. Under this sub-component, the Export Advisors will play a fundamental role. The will be responsible to:

Match SMEs with one to three VMPs and register them; Suggest to the PIU SMEs which could benefit from VMPs’ premium accounts (see also

sub-component 3.1); Assist SMEs in the elaboration and the posting of the information (photos,

products/firm description, delivery, etc. in several languages); Monitor the activity of the SMEs on the VMPs (e.g. make sure that all buyers’ inquiries

are adequately and timely answered by the beneficiary SMEs); Coach the beneficiary SMEs in their first export transactions; Enable SMEs to manage the after sales service issues (theoretical side); Monitor on a regular basis and update the information made available on the VMPs by

the beneficiary SMEs;

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Use competitive/business intelligence provided ITC.

Component III: VMP Partnerships, Business Intelligence and Certification (US$ 1.02 million)

Sub-component 3.1: Partnerships with Virtual Market Places (US$ 1.07 million)

88. To ensure the best use of the VMPs, certain high-performing/potential firms will be awarded premium accounts in VMPs so they gain greater visibility from potential clients. This sub-component will cover the expenses related to the subscription of these premium accounts. ITC will enter into partnership/agreement with VMPs in order to benefit from preferential rates for Premium accounts.

89. Also, the partnership/agreement with VMPs will allow the EAs, PIUs and ITC project managers to have i) direct access in real time to the flow of information exchanged between the potential buyers and the beneficiary SMEs32 and ii) direct access to data related to the visits on the profiles and product pages of the project’s beneficiary SMEs, per country.

Sub-component 3.2: Business Intelligence Development (US$ 0.2 million)

90. The VMPs are a unique source of data. They can inform on market trends, number of visitors, keywords searches, categories browsed, buyers’ origin, preferences, number of inquiries by sector, etc. ITC will collect this data and integrate it with additional trade and commercial data. This information will be disseminated quarterly to the WB, the TSIs, the PIUs and the EAs. This subcomponent will cover the cost ITC’s staff and experts in charge of this activity.

Sub-component 3.3: Certification (US$ 0.12 million)

91. This component will cover the cost of one consultancy firm supporting one national institution per country become an international certified agency legitimized to certify companies systems and processes. Development of trust is essential in order to boost SME trade operations. In each participating country, one partner institution will be selected and trained according to relevant standards (i.e. ISO) to deliver certifications to companies of the type of the “gold supplier” in certain platforms such as Alibaba.com. Conformity assessment procedures recognized at national and eventually at international level will be put in place to evaluate the compliance of the SMEs interested in using the label. This and other related certifications will provide a stamp of quality and it will increase the confidence of potential buyers regarding the particular SME products (quality of product) and processes (delivery time, customer response, etc.). The partnership with VMPs (with Alibaba and others) will also contribute to the creation of capacity of country institutional partners through the selection of one country organization which can become the one single verification partner for VMPs.

32 This is more efficient than the EA supervising each account directly while at the same time allows for supervision and monitoring of SMEs behavior in the platforms similar to “hidden” customer techniques to asses client customer orientation used in different sectors and industries.

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Component IV: Project Management (US$ 0.12 million)

Sub-Component 4.1: Project Management (US$ 0.024 million)

92. To ensure a swift and coherent implementation across the transition countries, ITC will rely on PIUs (one in each of the beneficiary countries) that will be established and hosted by the lead TSIs (one in each of the countries). This component finances management and supervision at two levels: ITC and the PIUs.

93. Under this sub-component, ITC will be tasked with management activities such as ensuring the communication of results at project level and aggregates monitoring reports for the Bank, organizing yearly regional meetings between TSIs and PIUs, preparing procurement plans in coordination with the World Bank and conducts procurement and financial reporting with support from the PIUs. ITC will coordinate with a Project Adviser (PA) based in headquarter responsible for the day-to-day management of the project, coordination of ITC inputs, advice and support to the PIU and main project stakeholders.

94. The cost of the PIU will include the staff only, rental and essential office equipment will be provided by the TSIs.

Sub-Component 4.2: Impact and Evaluation Assessment (US$ 0.03 million)

95. This sub-component will cover the cost of an Impact and Evaluation Assessment. It will take place at the end of the project to assess the export performance of companies within VMPs vs. a sample of similar ones which have not joined the program.

C. PROJECT FINANCING

96. The proposed Project is a grant financed by the MENA Transition Fund established by the Deauville partnership for transition countries of the MENA region in the amount of US$ 3 million. The partner agencies (TSIs) will provide in kind support, mainly the provision of office space and logistics.

97. The Grant will be entirely managed by ITC without prior allocation to TSIs. The RIA will be responsible for managing the Project funds and all related financial transactions. Payments will be processed by ITC.

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Cost by Component / over 3 years Transition Fund

(USD) –Initial

Proposal

Transition Fund (USD)

Revised Proposal

Country Co-Financing

(USD)

Component 1. Institutional reform(a) Morocco(b) Tunisia(c) Jordan

300,000100,000100,000100,000

300,000100,000100,000100,000

Component 2: Export markets accessed through VMPs by SMEsSub-component 2.1- Capacity building and outreachSub-component 2.2 Registration and coaching of SMEs

3,100,000

200,000

2,500,000

1,335,000

100,000

1,235,000

In kind- to be estimated

Component 3:a) Sub-component 3.1: VMP

Partnershipsb) Sub-component 3.2. Business

Intelligence Developmentc) Sub-component 3.3.

Certification

1,820,0001,500,000

200,000

120,000

1,020,000700,000

200,000

120,000

In-kind support from

VMP providers

Component 4. Project Management and EvaluationSub-Component 4.1. Project ManagementSub-Component 4.2. Impact and evaluation assessment

540,000

510,00030,000

270,000

240,00030,000

In-kind TBD

Bank supervision costs 200,000 42,000 n.a.Miscellaneous Expenses 100,000 n.a.Total Project Cost 5,760,000 2,989,000

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IV. KEY RISKS AND MITIGATION MEASURES

A. Risk Ratings Summary Table

Stakeholder Risk Moderate

Regional Implementing Agency Risk

- Capacity Low

- Governance Low

Project Risk

- Design Moderate

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- Social and Environmental Low

- Program and Donor Low

- Delivery Monitoring and Sustainability Moderate

- Other (Optional)

Overall Implementation Risk Substantial

B. Overall Risk Rating Explanation

98. The overall risk for this operation is substantial due mostly to transition countries context and the volatility of the political, security, and governance environment. However, unless major turmoil occurs, it is not expected that changes in institutions/government reshuffling will affect the project once launched.

C. Risk Mitigation

99. The project’s approach, mainly working through networks at country level, facilitates its implementation even in the event of changes at government level. The moderate risk at project design level will be mitigated by the partnerships with ITC and its presence and knowledge in the three countries of both, trade institutions, and private sector associations.

V. IMPLEMENTATION

A. INSTITUTIONAL AND IMPLEMENTATION ARRANGEMENTS

100. The Project will be implemented by a Regional Implementing Agency (RIA), the International Trade Center (ITC), and Project Implementation Units (PIUs) to be set up in each country and hosted by the main Trade Support Institutions (TSIs). The World Bank will carry out the overall supervision of the Project.

101. The institutional focal point for the project per country will be: Jordan – Ministry of Industry and Trade Morocco – Department of International Relations (DRCI) Ministry of Industry,

Commerce, Investment, Digital Economy – Delegated Minister for International Trade Tunisia – General Directorate for E-Commerce – Ministry of Trade and Handicrafts

102. The project will be implemented in collaboration with the lead partner agency and partner institutions in the participating transition countries. Since national TSIs have been part of most countries national export strategy for a long time, the team deems that these would be the most obvious partners for ITC in the implementation of the project. At country level, the project will be under the oversight of an Oversight Committee (OC) to ensure the good governance, timely delivery and provide the adequate reporting to the concerned government agencies, the WB and the ITC.

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Role of ITC

ITC will manage all funds and procurement for activities open a Designated Account into which funds from the World Bank will be deposited organize regular steering committee meetings to provide operational guidance appoint staff and recruit consultants where necessary for project implementation (PIU) ,

Virtual Market Places experts, Export Advisors ITC will coordinate the communication campaign and outreach maintain and, where necessary, update the Operations Manual monitor implementation with the support of the PIU responsible for all the financial aspects of the project ensure proper financial management of funds and compliance with World Bank’s

requirements when applicable; ensure proper and appropriate procurement procedures submit regular reports and disseminate findings organize workshops provide business intelligence Set up partnerships with VMPs with the participation of the WB.

Role of the Oversight Committees

103. The role of the OCs consists of i) oversight and approve major directions and changes in the program, ii) discuss and decide on any proposal/issues raised by the WB, ITC and/or PIU, iii) facilitate the dialogue across institutions and organizations, iv) support the PIU in the dissemination, communication and outreach of the project, v) jointly develop a scorecard to monitor project implementation and results, and vi) support the inter-ministerial committee on institutional reform by providing analysis and information on VMP and related overall e-commerce regulatory and institutional bottleneck.

104. Members of the OC are i) representatives from: Government (Ministry of Planning, Ministry of Trade, Ministry of Finance, and Information Technologies), ii) representatives from WB and ITC, iii) representatives of the TSI, iv) representatives of business associations and sectors, vi) representatives from women and youth business associations, and vii) heads of the PIUs.

Role of the PIUs

105. The PIUs will be a light structured support team at country level responsible for in-country project implementation and day to day management. Each PIU will be headed by a Project Coordinator (PC), to be recruited by ITC and one assistant.

106. The PIUs will be hosted by the lead TSIs:

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Jordan – Jordan Enterprise Development Corporation (JEDCO) – Ministry of Industry and Trade.

Morocco – Department of International Trade Relations (DRCI) - Ministry of Industry, Commerce, Investment, Digital Economy – Delegated Minister for International Trade

Tunisia – Center for Export Promotion (CEPEX) – Ministry of Trade and Handicrafts

107. It is expected that the project counterpart institutions will provide in-kind contributions, such as office facilities, support to the organization of workshops, and dissemination of reports to concerned entities. The concrete in-kind contributions will be agreed during the inception phase of the project. The main responsibilities of the PIU are:

selection and coordination of the EAs outreach and communication campaign monitor and make the final decision on the selection of SMEs that may qualify for

premium accounts overall in-country M & E and reporting to the Oversight Committee conduct day-to-day dialogue with country partners, and Report to ITC.

B. FINANCIAL MANAGEMENT, DISBURSEMENT AND PROCUREMENT

108. In accordance with the United Nations Financial Regulations and Rules, the project will comply with ITC internal and external auditing, accounting and inspection requirements within the framework of the current WB-UN agencies standard arrangements33. The arrangement between the WB and ITC will be similar to that envisaged under Special Conditions for UNDP contracts (Supplements and amendments to the General Terms and Conditions of Contract for Operational Consulting Services (03/2008)).

109. Financial Assessment. A financial assessment because UN financial management procedures are considered acceptable to the Bank.

110. Financial reporting. The FM Section at ITC will use the institutional accounting system, to prepare consolidated semi-annual unaudited Project Interim Financial Reports (IFRs) and the annual audited project financial statements. These reports will be prepared on a cash basis, in US dollars, using the standard formats that will be agreed between ITC and the Bank. ITC will also provide any additional reporting required by the Coordination Unit of the Transition Fund.

C. MONITORING AND EVALUATION OF RESULTS

111. A monitoring and evaluation (M&E) framework is detailed in the Annex I of this concept note. The framework is centered on the PDO and includes indicators to assess accomplishment against it. Primary responsibility for results monitoring will fall on the RIA with continuous follow up from the Bank. ITC will present an M&E report to the Oversight

33 See Operations Manual.

39

Committees and to the World Bank on a semiannual basis and during regular implementation support missions. The M&E will be disaggregated to account for country results.

112. A mid-term review will be carried out to assess, draw lessons from the project and provide an opportunity to adopt any corrective action that may be required to ensure that the project meets its development requirements. The M&E framework controls for all the key indicators to assess the success or failure of the project. Through the regular monitoring based on the feedback from export advisors, the PIU and ITC will be in a position to introduce changes during the implementation phase. The assessment on the success or failure of the project will be done on the basis of the indicators, mainly, SMEs in VMP, volume and value of transactions as well as achievements on institutional reform component.

113. It is proposed to conduct an impact assessment at the end of the project. The impact assessment would aim at assessing the impact on SMEs as member of the VMPs. Selected beneficiary SMEs would be asked to provide data on i) the number of export transactions, and ii) their turnover, to be compared with similar SMEs (in size, sector, etc.) that did not joined the VMPs. The selection criteria to identify the “comparable” test group would be detailed in the terms of reference for the impact evaluation 34. The cost of the project includes an impact evaluation subcomponent and it is expected to involve DECTI.

D. SUSTAINABILITY

114. It is expected that SMEs may want to continue getting support from the EAs for specific exports transactions on a regular or more punctual manner. The impact evaluation outcomes will allow each CP to decide whether the support to the SMEs should continue on a reimbursable mode (SMEs will pay the EAs directly for their services provided) or if EAs services must continue to be partly of fully subsidized. In addition, sustainability will also be granted through the training of specific staff in chambers of commerce and sector associations. This was specifically requested by many organizations during the preparation phase of the project.

VI. TEAM, TIMELINE AND BUDGET

Preparation Schedule and Resources

.

Preparation Schedule

Milestone Basic Forecast Actual

AIS Release 11/25/2012

Concept Review 12/20/2012 12/20/2012

34 For more details on the methodology see Annex 2 – Development Economics and Trade Integration Department (DECTI), World Bank, June 2013.

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Auth Appr/Negs (in principle)

Bank Approval date of RVP approval

.

Sector Unit Estimate of Resources Required from Preparation through Approval

Source of FundsPreparation Expenses to Date (USD)

Estimate of Resource Requirements (USD)

Fixed Variable

Bank Budget

Trust Funds 100,000 100,000.

Team Composition

Bank Staff

Name Title Specialization Unit UPI

Laurent Gonnet (TTL)

Senior Financial Sector Specialist

Financial Sector MNSFP 319004

Natsuko Obayashi Consultant MNSED

Djibrilla Issa Private Sector Development Specialist

Private Sector Development

MNSFP

Hassine Hedda Finance Officer

Steve Yu Wan Operations Analyst

Marjorie Espiritu Program Assistant

Syed I. Ahmed Lead Legal Counsel Legal LEGAM

Non-Bank Staff

Name Title Office Phone City

Faouzi el Mufti Consultant Tunisia

Sonia Sanchez Quintela

Consultant Tunisia

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ANNEX 1: RESULTS FRAMEWORK

Indicators by Component

Unit Baseline Cumulative Target Values Frequency Data Source/Methodology

Responsibility for Data

Collection

Description (Indicator

Definition, etc)2014 2015 2016

PDO LEVEL RESULTS INDICATORS:

The proposed project development objective (PDO) is to (i) increase SMEs access and exports via Virtual Market Places, and (ii) support institutional reforms to create an enabling environment for e-commerce in targeted countries.

Indicator 1: Registered SMEs with at least one export transaction completed via VMPs

Number0 120 200 300 Quarterly Statistics VMP

platforms/Feedback from surveys/M&E

Database

PIU Number of transactions

conducted by SMEs registered

Value of Exports increase since VMP

accessIndicator 2. Roadmap for the reform of the enabling business environment for e-commerce in each participating country and integrated in national commerce strategies

Yes/No No No Yes Bi-annual Reporting by the Oversight Committee; Ministries of

Trade

PIU - ITC Roadmap document endorsed by the OC

Indicator 3. SMEs registered in VMPs Number

0 300 600 Quarterly Captured by EAs and

monitored through M&E

Database

PIU-ITC Registration involves opening of a VMP

account and uploading of product and contact

information.

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INTERMEDIATE OUTCOMES

COMPONENT I. INSTITUTIONAL REFORM

Indicators by Component

Unit Baseline Cumulative Target Values Frequency Data Source/Methodology

Responsibility for Data

Collection

Description (Indicator

Definition, etc)2014 2015 2016

Workshops conducted Number 0 1 2 3 Bi-annual Reporting PIU-ITC

PIU-ITC Output Delivered – Workshop report

Analytical Work delivered on key e-commerce topics

Number 0 2 3 4 Bi-annual Reporting PIU – ITC

PIU-ITC Output delivered – Workshop Report

COMPONENT II. EXPORT MARKETS ACCESSED THROUGH VMPS

Indicators by Component

Unit Baseline Cumulative Target Values Frequency Data Source/Methodology

Responsibility for Data Collection

Description (Indicator Definition, etc)2014 2015 2016

Export Advisors Trained Number 0 50 75 0 Bi-annual Reporting PIU-ITC

PIU/ITC Captures number of EAs trained on VMPs

Export Advisors Certified Percent 0 50% 90% 0 Quarterly Training provider assesses

performance

PIU-ITC Percent of EAs who receive certification, out of total number of trained EAs; Not all EAs may end up qualifying; target

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for 2016 expects 90% to obtain it.

Indicators by Component

Unit Baseline Cumulative Target Values Frequency Data Source/Methodology

Responsibility for Data

Collection

Description (Indicator

Definition, etc)2014 2015 2016

Training program for TSIs delivered (# activities)

Number 0 1 2 3 Quarterly M&E Database PIU-ITC # Training sessionsReport disseminated and workshops evaluations# Number of advisory services provided#SMEs satisfaction with TSIs service delivery

COMPONENT III. VMP PARTNERSHIPS, CERTIFICATION AND BUSINESS INTELLIGENCE

Indicators by Component

Unit Baseline Cumulative Target Values Frequency Data Source/Methodology

Responsibility for Data

Collection

Description (Indicator

Definition, etc)2014 2015 2016

Collaborative partnerships with VMPs Number

0 2 4 4 Quarterly Project implementation

reports

PIU MoU, Letter of Intent or other agreement-related documentation.

Newsletters published by TSIs to roll out the Business Intelligence Mechanism

Number0 10 25 50 Quarterly PIU and RIA PIU and EA # product

(newsletter) delivery by TSI main partner

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Indicators by Component

Unit Baseline Cumulative Target Values Frequency Data Source/Methodology

Responsibility for Data

Collection

Description (Indicator

Definition, etc)2014 2015 2016

Premium Accounts awarded – Certifications Number

0 30 40 50 Quarterly Project Implementation

ReportsM&E Database

and VMPs

ITC/PIU Trust label certificates

Assessment body created and operational Yes/No

No No No Yes Quarterly Project Implementation

Reports

WB/ITC/PIU Creation of Conformity

Assessment body

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ANNEX II. ECONOMIC VALUE (FOR THE CASE OF TUNISIA)

M-1 M M+1 M+2 M+3 M+4 M+5 M+6 M+7 M+8 M+9 M+10 M+11 M+12 M+13 M+14 M+15 M+16 M+17 M+18 M+19 M+20 M+21 M+22 M+23 M+24 M+25 M+26 M+27 M+28 M+29 M+30 M+31 M+32 M+33 M+34 M+35

Nati ona l Project Ove rs ight Committe eProject Se minar

ITCTraini ng of trai ners

Fe derati ons / Ass ocia tions

Trainers (hi red by ITC)

Trade Support Ins titution (des igna te d by the NPSC)

Indentificati on & Se letion of the El igibl e SMEs

SMEs wi th the support of Export Consultants

VMP integration of the El igi bl e SMEs

Export Consul tants Coaching

Communication Agency (hi re d by ITC) Media promotion ca mpaign

Ce rtifying Agency Trai ning Del ivery of certifi cates

As sumptions

Project Activity Indicators Annua l Net Econ Value% SME recording 100% 20% 15% 15% 10% 10% 10% 10% 5% 5%New SMEs in VMPs # 300 60 45 45 30 30 30 30 15 15 0 0 0 15%SMEs in VMPs (cumula ted) 60 105 150 180 210 240 270 285 300 300 300 300 300 300 300 300 300 300 300 300 300 300 300 300 300 300 300 300 300 300 300 300 300 300 300SME i n need of coachi ng (cumulated) 50% 30 52.5 75 90 105 120 135 142.5 150 150 150 150 150 150 150 150 150 150 150 150 150 150 150 150 150 150 150 150 150 150 150 150 150 150 150Export Consul tants 0.2 15 18 21 24 27 28.5 30 30 30 30 30 30 30 30 30 30 30 30 30 30 30 30 30 30 30 30 30 30 30 30 30 30 30Export Consulant deeds (coa ching) # 3 450 540 630 720 810 855 900 900 900 900 900 900 900 900 900 900 900 900 900 900 900 900 900 900 900 900 900 900 900 900 900 900 900Wage / cons ul ta nt / month $ control 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 Add. VMP gen. revenus % 0.0% 0.0% 0.0% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 1.0% 1.0% 1.0% 1.5% 1.5% 1.5% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%SMEs revenus (cumula ted) $ 35,000.00 2,100,000 3,675,000 5,250,000 6,300,000 7,350,000 8,400,000 9,450,000 9,975,000 10,500,000 10,500,000 10,500,000 10,500,000 10,500,000 10,500,000 10,500,000 10,500,000 10,500,000 10,500,000 10,500,000 10,500,000 10,500,000 10,500,000 10,500,000 10,500,000 10,500,000 10,500,000 10,500,000 10,500,000 10,500,000 10,500,000 10,500,000 10,500,000 10,500,000 10,500,000 10,500,000

Revenus - - - - - - 42,000 47,250 49,875 52,500 52,500 52,500 52,500 105,000 105,000 105,000 157,500 157,500 157,500 210,000 210,000 210,000 210,000 210,000 210,000 210,000 210,000 210,000 210,000 210,000 210,000 210,000 210,000 210,000 210,000 210,000 VMP revenus gene ra te d % - - - - - 42,000 47,250 49,875 52,500 52,500 52,500 52,500 105,000 105,000 105,000 157,500 157,500 157,500 210,000 210,000 210,000 210,000 210,000 210,000 210,000 210,000 210,000 210,000 210,000 210,000 210,000 210,000 210,000 210,000 210,000 1,890,000 12,600,000

Costs 26,000 151,000 121,000 118,500 113,000 117,500 122,000 126,500 98,750 101,000 71,000 71,000 71,000 141,000 118,500 118,500 96,000 96,000 96,000 96,000 73,500 73,500 51,000 51,000 51,000 141,000 118,500 118,500 96,000 96,000 96,000 96,000 73,500 73,500 51,000 51,000 PIU $ 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 ToT $ 20,000 Training 25,000 25,000 Promotion campaign $ 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 Gold me mbership % 50.00% 90,000 67,500 67,500 45,000 45,000 45,000 45,000 22,500 22,500 - - - 90,000 67,500 67,500 45,000 45,000 45,000 45,000 22,500 22,500 - - - 90,000 67,500 67,500 45,000 45,000 45,000 45,000 22,500 22,500 - - Inte gration cost $ 500 30,000 22,500 22,500 15,000 15,000 15,000 15,000 7,500 7,500 - - - - - - - - - Export Consulant deeds $ 50 - - 22,500 27,000 31,500 36,000 40,500 42,750 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000

Total revenu (36 months) 4,706,625 Indus try 50% 700,000 350,000 Total future revenus 12,600,000 Se rvice 30% 200,000 60,000 Launching costs (36 months) 250,000 Handicraft 20% 50,000 10,000 Reccurent costs (36 months) 3,131,250 Tota l 100% 420,000 Reccurent future costs (coatching only) -

Econ Val ue of the project 13,925,375 Costs 3,381,250 1 USD spent give a return (re ve nu) of 4.1 USD

SME/EC/instituti on Tra ining

Rea ch out to federation / as sociation members

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46

ANNEX III. WORKFLOW AND ACTORS

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47

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ANNEX 3: IMPLEMENTATION ARRANGEMENTS

Jordan, Morocco, Tunisia: Export Development through Virtual Market Places

A. Project Institutional and Implementation Arrangements

1. ITC will implement directly and with the support of country PIUs project activities with oversight provided by the Oversight Committee and the World Bank. The selected Regional Implementation Agency is the International Trade Center, a specialized trade agency of the United Nations (ITC). ITC will be hired following WB processes on a single source basis given their expertise. ITC strategic objectives are:

Building awareness and improving the availability and use of trade intelligence Strengthening TSIs Enhancing policies for the benefit of exporting enterprises Building the export capacity of enterprises to respond to market opportunities Mainstream inclusiveness and sustainability into trade promotion and export

development policies.

In addition to the complementarities with the WB work, ITC has also a broad knowledge and experience of Morocco, Tunisia and Libya and have already designed and implemented projects with the stakeholders that the projects is engaging.

ITC is in an ideal position to support project’s implementation.

ITC will: manage all funds and procurement for activities open a Designated Account into which funds from the World Bank will be deposited organize regular steering committee meetings to provide operational guidance appoint staff and recruit consultants where necessary for project implementation

(PIU) , Virtual Market Places experts, Export Advisors ITC will coordinate the communication campaign and outreach maintain and, where necessary, update the Operations Manual monitor implementation with the support of the PIU responsible for all the financial aspects of the project ensure proper financial management of funds and compliance with World Bank’s

requirements when applicable; ensure proper and appropriate procurement procedures submit regular reports and disseminate findings organize workshops provide business intelligence set up partnerships with VMPs with the participation of the WB.

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2. The Oversight Committee (OC) will ensure the good governance, timely delivery and provide the adequate reporting to the concerned government agencies, the WB and the RIA. The role of the OCs consists of:

oversight and approve major directions and changes in the program discuss and decide on any proposal/issues raised by the PIU facilitate the dialogue across institutions and organizations. support the PIU in the dissemination, communication and outreach of the project. jointly develop a scorecard to monitor project implementation and results. support the inter-ministerial committee on institutional reform by providing analysis

and information on VMP and related overall e-commerce regulatory and institutional bottleneck and,

other relevant aspects of the project.

Members of the OC are:

representatives from: Government (Ministry of Planning, Ministry of Trade, Ministry of Finance, Information Technologies).

representatives from WB and ITC. representatives of the TSI. representatives of business associations and sectors. representatives from women and youth business associations. project Coordinator (Country PIU).

The PIU will be a light structure (1 person paid by the project, the assistant to be provided by the host institution) hosted by the designated agency in each of the countries. The PIU will coordinate level the implementation of the project on a day-to-day basis under the regular supervision of ITC. The PIU will be composed of one senior and one junior staff whose main task will be to liaise with EAs, OC and ITC.

The responsibilities of the PIU are:

monitor the work of the Export Advisors organize the outreach campaign ensure adequate communication between EAs and SMEs provide support to Chambers of Commerce, sector associations and civil society

organizations engaged in the project report to ITC fill the M&E framework and monitor the evolution on a quarterly basis ensure that all financial aspects (payments, expenses) are adequately reported to ITC

to ensure timely payment of consultants and services by ITC make the necessary logistical arrangements for the training events

B. Experts

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Two main types of experts will be recruited by the project.

An expert on Virtual Market Places – Responsible for the delivering of training to the main counterparts, export advisors and partners: TSI, chambers of commerce and sectors associations and consultants.

Export Advisors – EAs will be hired using current networks of export advisors already trained under previous technical assistance activities provided by donors. Their role is fundamental in coaching the SMEs throughout the process from entering to VMPs to transactions. The relation between the EA and the SMEs is fundamental for the success of the project. An adequate incentive mechanism is been put in place which will reward EAs based on performance. EAs will be assigned taking into consideration sector expertise. The PIU will organize regular meetings of the EAs to assess the progress in their activities.

C. Trade Support Institutions

The project will engage different types of country partners with the support of the PIU and Export Advisors. The engagement of these TSIs will be done in a systematic manner and they will be regularly informed of activities, training and workshops. The mission team met with many of these organizations which show high engagement with the objectives of the project.

Main Trade Support Institution Partner – Public Institution per country responsible for of trade and trade promotion. The PIU is based in the main TSI.

Other TSIs: Other TSIs include chambers of commerce, professional and business associations including sector and even product specialized organizations. All these organizations support very actively their members providing export support services and information as well as a platform to engage in dialogue with the authorities. Using these networks will facilitate the dissemination of information, the access to SMEs in remote areas and a better qualitative understanding of the potential of SMEs in each of the sectors. Besides the main partner institution, where the PIU will be hosted, the project will benefit from the engagement with chambers of commerce, business and professional associations, universities, business incubators and others. By doing so it will indirectly foster the introduction of e-commerce and IT-related matters upstream in the educational curricula. Many of them were engaged during the mission. This bottom-up approach will also facilitate the dialogue with the country task forces in charge of the policy reform component.

Civil Society Organizations: CSOs around women, young entrepreneurs are also part of network of actors that will be engaged in and support the project.

D. Partnership Arrangements: Virtual Market Places companies

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The project envisages awarding certain SMEs premium accounts in a limited number of VMPs. It also envisages the access to data regarding the dynamics of SMEs per sector and country within VMPs. Therefore, the WB and RIA have engaged in dialogue with some VMPs to engage them throughout the process and obtain some partial sponsorship of the premium accounts for SMEs with high export potential.

E. Operations Manual

The Operations Manual of the project describes the guidelines for implementing project components and has been adopted by ITC and will be adopted by the PIUs once they are created. The OM specifies guidelines for: (i) roles and responsibilities of ITC and the PIU, including supervision and reporting arrangements; (ii) role of the Oversight Committee (iii) procurement; (iv) financial management: and (v) project monitoring and evaluation.

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