Digitalisation of Small and Medium Enterprises (SMEs) in the Mediterranean

29 novembre 2021 | Report | Anglais

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This report was written by Katarzyna W. Sidło, Kateryna Karunska, Claudio Salmeri, Stanislav Bieliei (CASE) and Roger Albinyana (IEMed)

Introduction

Micro, Small and Medium-Sized Enterprises (henceforth: SMEs) are the spine of Euro-Mediterranean economies. In the Southern and Eastern Mediterranean (SEMED) countries, they account for over 90-95% of all firms in absolute figures (OECD, 2018; IMF, 2019), of which the majority are micro enterprises (e.g. in Tunisia, micro enterprises represent 98% of all firms [World Bank, 2014]). Notwithstanding their contribution to private sector development, their role in job creation and upward mobility is much more limited (Ibidem).

Indeed, the growing polarisation of enterprise ecosystems between the very few large enterprises that dominate the market and the majority of weak micro firms that struggle to survive, with a noticeable missing middle, is a factor of utmost concern in the development of vibrant and job-conducive private sectors. Whereas access to adequate funding remains the major impediment for SMEs to take off and grow, SMEs tend to be less productive and innovative than larger firms. Innovative firms are more likely to grow and thus generate long-term employment.

Hence, through thriving innovation, digitalisation and automation, SMEs can reduce production costs and make productivity gains, adapt their business models to a growing globalised competitive environment and increase access to funding. In this context, a number of blocking points for local and regional authorities (LRAs) in the field of SME digitalisation have been identified; they are divided into four areas: institutional and regulatory, human capital formation, use of digital innovation and infrastructure.

Main Blocking Points

Institutional and Regulatory

The overall level of the digital readiness of both the public and private sectors, as well as the societies in the analysed countries, is relatively low. Indeed, the World Economic Forum’s 2019 Network Readiness Index (NRI), which consists of indicators such as speed of internet bandwidth, firm-level technology absorption, the government online services index, the e-government readiness index and the extent of business internet use, ranks almost all non-European Union (EU) Euro-Mediterranean Regional and Local Assembly (ARLEM) members in the bottom half of the ranking, with Israel (ranked 22nd) and Turkey (ranked 51st) being the only exceptions (see Table 1 below as well as the annexes for selected indicator-level data). In comparison, all EU ARLEM member countries rank in the top 50. Another source, the 2019 International Institute for Management Development (IMD) World Digital Competitiveness Ranking, covers only two countries from among those of interest to the study – Israel, which scored ninth among 40 countries in Europe, Middle East and North Africa (MENA) and Africa and Jordan, ranked 35th (for more on measuring digitalisation in the region see, e.g. Mostafa, 2019).

Table 1. Network Readiness Index 2019

Source: Portulans Institute and World Information Technology and Services

The majority of governments in the region lack coherent and clear digitalisation strategies (or, in fact, entrepreneurship development and promotion strategies) and those that do (such as Jordan, where it is realised under the auspices of the Ministry of Digital Economy and Entrepreneurship or Morocco with its Digital Development Agency) struggle to implement them efficiently. A minority have functional e-government platforms, although the situation varies considerably from country to country; while Israel scored 80.77 out of 100 points under the NRI’s Government Online Service Index, Algeria received only 13.08 and BiH – 36.93 (see more in Annex 3) (see solution 1).

As pointed out by all interviewees, LRAs are not included in the planning or implementation of digitalisation activities. Indeed, as some of the non-EU ARLEM members are highly centralised or are going through a decentralisation transition, digitalisation efforts fall outside of sub-national governments’ competencies (Bergh, 2012; CoR, 2016). In the West Bank, the situation is additionally complicated by the fact that Area C (over 60% of its territory) is administered by Israel. In Libya, where the military conflict is ongoing at the time of writing of this report, the officially recognised government controls only a part of the country’s territory (see solution 3).

LRAs lack not only the prerogatives but also the budgets and capacities to participate in digitalisation efforts. Indeed, many of them are not particularly digitalised themselves. Many representatives of LRAs have low digital literacy skills and suffer from a slow internet connection and outdated computer equipment (see, e.g. Network Readiness Index Annex Table 1, 2, 3; NRI, 2019) (although, as noted by some of the interviewees, the COVID-19 crisis has shown that, when forced, LRAs are capable of holding meetings and arranging things online, which while reassuring, raises the question of the lack of willingness to progress with digitalisation under regular circumstances). In this context, Tunisia can serve an instructive example. Despite the recent government initiatives seeking to promote digitalisation in the private sector, cumbersome administrative requirements, ‘high costs of doing business (…) and rigid labour laws’ still contribute to hobbling SMEs’ development and innovation (World Bank, 2019, p. 87). On top of that, political instability and frequent changes in legislation contribute to an unfavourable business environment, inhibiting SMEs’ ability to develop long-term strategies and effective digitalisation plans (see solutions 2,11 & 16).

Correspondingly, in many countries, there is a lack of an adequate legislative framework protecting the rights of entrepreneurs and supporting their business development. Burdensome regulations, untransparent and time-consuming procedures, red tape and high tax burdens hinder the capacity of SMEs to flourish, grow, access funding and digitalise (see, e.g. Doing Business Report by the World Bank, 2020 or The Economist’s Intelligence Unit Business Environment Ranking, 2019) (see solutions 11 & 16).

At the same time, however, a sub-index of the NRI measuring the legal framework’s adaptability to digital business models confirms the observation of the stakeholders contacted that the governments are slow in adapting legislation for digitalisation processes in the private sector (while Israel, as an outlier was ninth among the 114 countries ranked, next in line Jordan was 41st – see more in Annex 3), which suggests that the changes introduced are implemented without consultation with those to whom they will apply (i.e. entrepreneurs) and, as such, do not address their needs (see solution 1).

Another obstacle, hindering the effective and efficient legislative capacities of national and sub-national authorities alike (as well as international donors), is the lack of publicly available and reliable data on digitalisation in the majority of the countries under study, starting with the lack a definition of an SME. In Algeria and Mauritania, this is part of the broader issue of missing economic data of all kinds, but even in countries that have an efficient national agency responsible for data collection, the information available is oftentimes fragmented and outdated (and hardly ever disaggregated by gender). Without this data, government agencies, LRAs and international donors are unable to properly assess the situation on the ground and plan and implement effective digitalisation strategies (see solution 5).

As pointed out by some of the interviewees, opaque and outdated public procurement procedures in a number of countries in the region are another obstacle hindering the growth of SMEs, as access to public procurement by national and sub-national authorities may be limited either to an unofficial list of preferred entrepreneurs (due to corruption) or only to larger companies capable of delivering large quantities of goods under short notice (as opposed to regular deliveries of smaller quantities over longer periods of time, a scheme much better suited for the capacities of SMEs) (see solution 16).

Moreover, in most of the studied countries, the size of the shadow economy is an important factor inhibiting digitalisation efforts. As pointed out by some interviewees, numerous SMEs, not trusting their state authorities (be it the central or sub-national ones), prefer to remain in the informal sphere so that they do not have to pay taxes and deal with the state bureaucracy (see also, e.g. Benjamin et al., 2014, p.15-19; Gatti et al., 2014). As a consequence, they do not want to go online in any way in order to remain outside of the state’s supervision (see solution 4).

Those SMEs that might wish to digitalise, oftentimes face difficulties accesssing funds (outlined as the main obstacle for entrepreneurs by 42% of those interviewed in the Arab world [WEF, 2018]) due to unfavourable terms of bank credit for SMEs, the rigidity of the banking sector, a lack of diversified financial instruments, high loan collaterals and the risk aversions of investors unwilling to invest money in countries perceived as politically unstable, having a bad business climate and lacking a stable legal environment (UNESCWA, 2017; IMF, 2019). In Israel, in turn, funding is concentrated in high-technology sectors only, and banks offer unfavourable credit terms to SMEs (OECD, 2016) (see solutions 12, 13 & 14).

While international donors, including the EU, contribute to the development and digitalisation of local SMEs, it is essential that foreign support is well structured to contribute to the long-term resilience of firms. Otherwise, as a Tunisian source argued, young enterprises risk becoming too reliant on external economic assistance. At the same time, an interviewee from Jordan confirms that current foreign support, also from the EU, often lacks a long-term strategy, replicating other initiatives and failing to address specific local needs over the short term (see solutions 9 & 10).

Furthermore, whereas the European Commission has been adapting the European SME Index to Mediterranean MENA countries based on the European Small Business Act (see OECD/EU/ETF, 2014 and 2018), there is a need to update the policy framework on SMEs at the level of the Union for the Mediterranean (UfM) so that SME digitalisation in the Maghreb and Mashreq countries becomes a clear priority for EU institutions. In this regard, the last UfM Ministerial Conferences addressing the digital economy and industrial cooperation were held in 2014, six years ago, showing the absence of action at the policy making level in a landscape that is extremely dynamic and evolutive. Updating the policy umbrella should help revamp cooperation between the EU and Maghreb and Mashreq countries to involve more stakeholders from the countries in the region (e.g. through digital innovation hubs) in Euro-Mediterranean initiatives and programmes.

Human Capital Formation

Despite the recent progress made by the LRAs and national institutions in the educational and vocational training sectors, the region still experiences a high level of unemployment among young skilled graduates. In Tunisia, for instance, out of the growing number of Information and Communications Technology (ICT) female and male graduates, many are forced to look for jobs abroad in light of the competitive job market and still slow-growing domestic private sector, leading to brain drain (World Bank, 2019, pg. 30; Sold, 2018). At the same time, the quality of education remains low throughout the region and the skillsets that graduates are equipped with are not applicable in the private sector (de Lima et al., 2016) (see solutions 6 & 18).

This mismatch between the demand and supply of the local skilled workforce could also be at least partly attributed to a lack of partnerships between universities, research centres and the private sector. As interviewees from Mauritania and Tunisia pointed out, few universities enable their students to conduct internships within start-ups or SMEs. Furthermore, the entrepreneurial potential of women is underutilised throughout the region (in the Arab world, for instance, only 14% of SMEs are owned by females, compared to one in three in the world on average [IMF, 2019] ) (see solutions 7, 8 & 18).

Outside of the ICT sector, the owners and staff of more traditional SMEs often do not understand the importance of digitalisation, failing to capitalise on the opportunities it offers. According to a number of interviewees, it is not uncommon for local SMEs to lack a digital strategy, a vision of how to profit from digitalisation. In other words, new firms are often created without a well-thoughtthrough digital business plan that could easily allow them to increase profit by asserting their presence and visibility in the web and open new market opportunities (see solution 7 & 17).

Infrastructure and Use of Digital Innovation

Although the situation on the ground is improving, internet connection in the Mediterranean countries studied remains relatively expensive, slow and/or not always readily available (ITU, 2019). The situation is slightly different in the Balkan countries, where providers can offer affordable and stable Internet, and connection speeds – with the exception of Albania – are decent, with capacity within the range of 10-30 mBit/s (see solution 19).

Spatial inequalities are marked in ICT connectivity with direct effects on territorial innovation, growth and job creation. Divergences in inter-urban connectivity contribute to the concentration and centralisation of growth poles that do not favour harmonious economic development. The measures show that major cities benefit from a better quality of service than secondary ones. This is the case of Morocco, where cities like Rabat and Tangier enjoy better connectivity than others like Meknes or Oujda (World Bank, 2018), even if the population size is similar.

Issues like digital divide and divergences in inter-urban connectivity are equally relevant also for smaller countries like Tunisia or Lebanon, where more evenly distributed populations would benefit from further investments in nationwide connectivity projects.

Access to digital services also impact popular access to financial services. This is particularly true for the Arab world, where, as of 2017, only 37% of those aged 15+ possessed bank accounts (compared to 93% in Israel, 68% in Montenegro or 95% in OECD countries on average). As a result, SME owners in Maghreb and Mashreq do not always feel the need to offer digital payments (World Bank, 2017 and interviews). With the exception of Israel, cash is still a preferred mode of payment throughout the region (also due to the abovementioned prevalence of the informal economy; a similar situation can be found in BiH and Albania). Related to that are the relatively low numbers of SMEs, especially of a more traditional type, which possess websites or Facebook pages – although this has reportedly significantly changed since the outbreak of the COVID-19 pandemic (see more in Box 3) (see solutions 4, 15 & 17).

Moreover, there are a lack of digital platforms connecting potential entrepreneurs both with potential customers and investors: foreign buyers lack information about SMEs’ trustworthiness, while SMEs have very little information about foreign buyer expectations (see, e.g. Robinson et al., 2019; UNCTAD, 2019; World Bank, 2019b) (NB in an attempt to fight the consequences of the lockdown caused by the COVID-19 pandemic, Jordan attempted to create an online platform of local SMEs in order to match them with clients – see more in Box 3) (see solution 17).

Additionally, most of the countries under study face the problem of the scarce adoption of digital applications related to core business management functions: the share of firms using (functionally important) enterprise resource planning (ERP) and customer relationship management (CRM) software is lower than in several comparable countries (see, e.g. UNESCO, 2017 or Cilasun et al., 2019 for more on Turkey) (see solutions 8 & 18).

Finally, in many countries across the region, the research and innovation ecosystems struggle to fuel the entrepreneurship and SME sector with new ideas and opportunities. As argued by some interviewees, academia is poorly linked with the private sector in Mauritania, Algeria and Tunisia. The latter also suffers from low private sector funding for research and development (R&D), little public incentive to invest in R&D and unfavourable intellectual property policies (World Bank, 2019, pg.12) (see solutions 1, 6, 7 & 18).

Solutions and Policy Recommendations

1. Countries that do not possess digitalisation plans or relevant central-level agencies responsible for the enhancement of digitalisation should develop them, with special units dedicated to SMEs. LRAs should be included in both the creation and implementation of digitalisation strategies to the extent possible in each individual country (see, e.g. European Commission, 2016).

2. Authorities should progress with the introduction of e-government and e-administration services and the digitalisation of public administration, which would help to simplify and increase the transparency of administrative procedures and facilitate access for the populations residing in remote areas or having mobility problems (see, e.g. Augier & Francois, 2019). Those that do not have prior experience with digitalisation processes could seek guidance from authorities that have already been through the process (e.g. via Twinning programmes) or from international institutions.

3. LRAs should be empowered by central governments in their own digitalisation processes, including by providing functional computers and access to the internet as well as by fostering the improvement of the legal ICT environment with regard to e-signatures, privacy and digital security regulations. Representatives of LRAs should be required to attend tailored trainings and pass tests/exams at their end in order to ensure maximum retention. It is important to showcase LRAs the benefits of digitalisation, e.g. how online procedures can ease their work burden while mitigating fears of job loss due to automation or increased labour productivity.

4. Create incentives for SMEs to digitalise, e.g. by moving their invoicing online. This could be done by virtue of the creation of tax incentives (lower tax rates for SMEs going digital) or offering grace periods for previously unregistered SMEs that choose to exit the grey economy and go digital. It is also important to ensure that e-services are easy to use and do not require the purchase of expensive equipment or software.

5. LRAs should be included, alongside central governments and their relevant national agencies, in the creation of more efficient data collection on the SME landscape, monitoring also for new digitalisation opportunities or local necessities. This should encompass the development of detailed digital economy statistics, upon which policy priorities and targets will be based, with a particular focus on the collection of gender-disaggregated data that could later enable the design of female economic empowerment strategies. This could be done, e.g. by virtue of commissioning business surveys among local SMEs.

6. Cooperation over digitalisation should be extended beyond national and sub-national authorities and include other stakeholders such as civil society, private sector representatives, academia and international institutions. Particular attention should be given to the inclusion of representatives of lagging and underserved regions and the population sections particularly excluded from digitalisation processes in order to battle digital divide.

7. LRAs and central governments in the countries under research should cooperate with LRAs, SME associations, innovation hubs and NGOs in the EU ARLEM states which have successfully implemented or are currently implementing strategies in support of the digitalisation of SMEs in their constituencies. One outcome of such cooperation could be, e.g. a database of good examples and testimonies from companies that benefited from digitalisation of their activities. An example of such work is the EU-funded project DigitaliseSMEs which, among others, prepared a series of videos on the benefits of creating a digital database of clients for company growth and of examples of digital optimisation in manufacturing and services. Tailored training, mentoring and coaching could be provided within such cooperation schemes as well.

8. Pan-ARLEM database of good practices and lessons learnt could be created under the auspices of the CoR. A number of interviewees pointed out the force of a good example; both national-level and LRA representatives who were initially reluctant to have sub-national authorities involved in digitalisation (or other) projects were more open upon learning about successful activities involving other LRAs. Related to that is a need to give examples of processes within which LRAs can be involved within existing legislation (see two examples of case studies in Box 1 and Box 2).

9. International donors (including the EU) should carefully tailor the assistance they provide to SMEs and national and sub-national governments to country and region-specific needs, conducting due diligence in terms of what has already been done by others and promoting and providing training on the methodology of impact assessments of all actions.

10. While working with central governments on digitalisation-related projects, international donors should promote the inclusion of LRAs, e.g. by virtue of conducting pilots on governorate or municipality levels in coordination with relevant sub-national authorities. All activities should be first consulted and agreed on with the LRAs in order to create a sense of local ownership and agency. As pointed out by the interviewees, LRAs are more likely to know better than the central governments what the needs of their constituencies are. An example of a project implemented in such a way was within a framework of cooperation between Governorate Councils in Jordan and GPG Associates whereby LRA representatives were assisted in selecting their own perceived comparative advantages and subsequently in developing reports on best strategies for development within the selected fields in an exercise in evidence-based policy making. Another example is the project ‘Innovation and digitalization in small and medium enterprises in BiH’ implemented by GIZ (Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH) between 2019-2021 in cooperation with the Chamber of Commerce of the Federation of BiH, as well as other local partner institutions.

11. Governments should facilitate the process of establishing new SMEs, as well as creating or strengthening adequate social and regulatory protections for workers engaged in non-standard work practices based on digital technologies. An example of legislation being formed in the right direction (albeit still in need of improvement to better address the needs of entrepreneurs) are efforts in Jordan, where in 2016 the Ministry of Industry, Trade and Supply, the Companies Control Department and the USAID Jordan Local Enterprise Support Project (LENS) produced guides to registering and licensing small businesses (including one-person businesses) in the country. The beneficiaries of the new legislation include micro-entrepreneurs such as women selling their home-made meals via online platforms (such as Bilforon) or maintenance service providers advertising to clients on dedicated online platforms (such as Aoun Services).

12. Governments should help to improve access to credit for young and innovative entrepreneurs (not forgetting about female ones). As an example, central governments could incentivise and/or assist local financial intermediaries to enter Credit Guarantee Schemes or to enhance their credit reporting activities, increasing the risk tolerance of local creditors (see, e.g. Fouejieu & Sydorenko, 2020; Saleem, 2018). Public authorities should particularly encourage the development of the new fintech industry, which is estimated to be ‘the biggest growth avenue for SMEs in SEMED countries’ (World Bank, 2019, pg.15).

13. Create digital solutions and matchmaking platforms to track new ideas and connect entrepreneurs with available financial opportunities (investors or loan providers), business development services (provided by the government, private sector or development partners), mentors and coaches, and other entrepreneurs for peer learning and tracking job opportunities. Digital platforms can provide a gateway not only to financial services but also links to other actors in the ecosystem that provide support to entrepreneurs.

14. LRAs can support the digitalisation of SMEs in their constituencies by providing information on funding schemes from the EU or other donors via their local platforms. Dedicated counselling hours could be assigned during which a trained LRA representative could advise entrepreneurs and help them to prepare funding applications. A selection of funding opportunities available to SMEs to assist their digitalisation is provided in Annex 2.

15. Contribute to/incentivise the development of e-commerce and virtual marketplaces (VMPs) to open local businesses to wider global markets and reduce transaction and search costs. The emergence of e-commerce platforms has helped SMEs in developing countries to expand their customer base with no need for a storefront presence (Robinson et al., 2019).

16. Bolster patent protection and effective competition law, which are needed to protect and reward inventors and to avoid abuse of monopoly situations (see, e.g. Faghih & Zali, 2018). Ensure the transparency and pertinence of the public procurement laws.

17. Push for the digitalisation of the banking sector and work towards a more widespread financial inclusion of the population, including the sectors residing outside urban areas.

18. Intervene in the local educational system: update educational programmes or provide specific training on subjects like communication, critical thinking, customer service, STEM (Science, Technology, Engineering and Mathematics) and coding.

19. Improve connectivity and access to fast, reliable and affordable broadband in the country, including in rural areas and other regions and municipalities with a non-existent or slow broadband connection. Moreover, the processes of obtaining licences by new broadband operators should be made less complicated and more transparent; investment in digital infrastructure should also be encouraged (Arabnet, 2019; Augier & Francois, 2019).

Funding Possibilities Available to LRAs

Name of the funding scheme: The FEMIP Trust Fund

Funding body: European Investment Bank (EIB)

Geographical scope: Mediterranean Region

Description and other relevant info: The Facility for Euro-Mediterranean Investment and Partnership (FEMIP) brings together under one roof the whole range of instruments implemented by the European Investment Bank in support of economic development in the Mediterranean partner countries. Whether for public or private project promoters, the FEMIP can co-finance up to 50% of the total cost via individual loans. Priority is given to projects aiming at expanding the private sector and creating a business-friendly environment. Project promoters can apply for both financial and technical assistance. Specific instructions on the application procedure are available on the dedicated page (link provided below). Links: Application procedure and informative brochure

Name of the funding scheme: Neighbourhood Investment Facility

Funding body: European Commission

Geographical scope: Mediterranean Region

Description and other relevant info: Officially launched in May 2008, the Neighbourhood Investment Facility is an innovative financial instrument of the European Neighbourhood Policy (ENP), whose primary objective is to finance with a mix of grants and loans key infrastructure projects in the transport, energy, social and environment sectors, as well as to support private sector development (in particular SMEs) in the Neighbourhood Region. Grants and loans are available to both private and public actors, provided that it is financed by an eligible European Finance Institution.

Name of the funding scheme: ENI CBC MED

Funding body: European Union Investment Instrument

Geographical scope: The Programme area comprises 14 countries which includes 112 territories

Description and other relevant info: The programme engages in multiple activities aimed at fostering more inclusive cooperation in the Mediterranean. ‘SMEs and business development’ is one of the main thematic areas. Calls for both private and public organisations are posted periodically and are of three main types: Strategic, Standard and Capitalisation. The Programme contributes up to a maximum of 90% of the total eligible budget costs of the projects, while a cofinancing of a minimum of 10% must be provided at the project level. The Programme does not foresee any pre-allocation of funds by country, meaning that projects are selected only on the basis of their quality.

Name of the funding scheme: MENA-OECD Initiative on Governance and Competitiveness for Development

Funding body: OECD

Geographical scope: Algeria, Bahrain, Djibouti, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Mauritania, Morocco, Oman, Palestinian Authority, Qatar, Saudi Arabia, Syria, Tunisia, United Arab Emirates and Yemen

Description and other relevant info: This initiative provides a know-how exchange platform between the Organisation for Economic Co-operation and Development (OECD) and the Middle East and North Africa (MENA) countries to stimulate sustainable and inclusive growth across the region. The MENAOECD Governance Programme component offers support to LRAs in becoming ‘transparent, accountable, and accessible’ and empowering them for the benefit of their local communities. The programme currently manages the Middle East and North Africa Transition Fund, which directs funding to designated national ministries.

Link: Middle East and North Africa Transition Fund.

Name of the funding scheme: Canada Fund for Local Initiatives (CFLI)

Funding body: Government of Canada

Geographical scope: Algeria, Jordan, Lebanon, Morocco, Mauritania, Palestine, Turkey and Bosnia and Herzegovina

Description and other relevant info: The fund provides small-scale funding (about USD 25,000 on average) to support local initiatives and innovative projects focused on, inter alia, economic growth and women’s empowerment. While the majority of the projects are attributed to local civil society organisations, LRAs are eligible to apply for funding if they cooperate with local civil society organisations in the implementation of the projects.

Name of the funding scheme: Municipal Development and Lending

Fund Funding body: Palestinian Government

Geographical scope: Palestine

Description and other relevant info: The fund aims to promote empowerment of the Palestinian LRAs via grants and loans dedicated to, among others, the implementation of the LRAs projects, local services and infrastructure improvement, local and regional cooperation, innovation, and local economic development.

Name of the funding scheme: Municipal Performance Program

Funding body: The World Bank

Geographical scope: Morocco

Description and other relevant info: The project is aligned with the dedicated Government programme and provides support to the municipalities in the selected regions (i.e. Tanger-Tétouan-Al Hoceima, l’Oriental, Fès-Meknès, Rabat-Salé- Kénitra, Béni-Mellal-Khénifra, Casablanca-Settat, Marrakech-Safi, Draâ- Tafilalet and Souss-Massa). Target areas include improvement of the institutional performance, business environment and investment capacities of LRAs, local infrastructure development and capacity building of LRAs, and improvement of local services and strengthening of inter-municipal cooperation. The programme is implemented via technical assistance to LRAs as well as targeted investments and grant-based transfers to selected municipalities. Therefore, while LRAs could not apply for the fund from the World Bank directly, they could benefit from grants and financial assistance provided nationally throughout the project’s implementation period from 2019 to 2023.

Name of the funding scheme: National Multi-City Regional and Local Development Programme

Funding body: Urban Projects Finance Initiative

Geographical scope: Jordan

Description and other relevant info: The project aims to strengthen the technical and financial capacities of Jordanian municipalities. The main pillars include improvement of local infrastructure, services, implementation and management of local investment programmes and local economic development projects, in particular those aimed at women. While the list of the targeted municipalities has already been identified at the first stage of the project (Jerash, Ajloun, Madaba, Salt, Kerak, Irbid, Zarqa and Um-Rassas), the financing and implementation of the dedicated local projects will occur over the next few years.

Name of the funding scheme: Upper Egypt Local Development Program for- Results Project

Funding body: The World Bank (International Bank for Reconstruction and Development)

Geographical scope: Egypt

Description and other relevant info: The project is aligned with the relevant government programme and is to be implemented in two governorates (Qena and Sohag). It aims to strengthen local infrastructure and improve local service provision and the business environment. The focus areas, therefore, include the improved competitiveness of economic sectors and subnational capacity-building reforms, which would support local digitalisation and the development of ICT platforms for business. The project is set to run until the end of 2021 and LRAs are expected to benefit from 30% of the total funding within the project (USD 500 million). Hence, while there is no possibility to apply for funding from the World Bank directly, LRAs could benefit from the ongoing project to finance local initiatives.

Name of the funding scheme: Economic Governance for Growth

Funding body: Government of Norway, Government of Bosnia and Herzegovina, United Nations Children’s Fund

Geographical scope: Bosnia and Herzegovina

Description and other relevant info: The project covers LRAs and educational and private institutions in three cantons (Posavina, Zenica-Doboj and Tuzla or Sarajevo) and 10 local government units (Banja Luka, Doboj, Gradačac, Gradiška, Mostar, Modriča, Orašje, Prijedor, Sarajevo and Tuzla). The priority areas of action include enhancing SME competitiveness and the business environment throughout digitalisation and entrepreneurship support schemes; establishing and expanding entrepreneurship, innovation and LRA networks; identifying and addressing institutional blocking points to entrepreneurship; and developing digital and entrepreneurial skills among youth. In addition, one action pillar includes incentive grants to the top three performing LRAs to co-fund local economic infrastructure projects. Thus, as the project is at the implementation stage, LRAs could not apply to join. The selected LRAs, however, could benefit from financial and technical assistance to improve the local business environment and support SMEs and entrepreneurship throughout the project lifeline – until the end of 2021.

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