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SME growth in Arab democracies

EBRD advice and investment – a winning combination to drive job-creating SME growth in emerging Arab democracies

The headline figure for investments by the European Bank for Reconstruction and Development in emerging Arab democracies is up to €2.5 billion a year by 2015.

But just as important as the financial flows to the countries of the Arab Spring are the policies that the EBRD will help put in place in order to create the right conditions for sustainable economic growth.

The EBRD was called upon by the international community to play a role in the economic development of emerging Arab democracies precisely because of its 20 years’ experience in supporting the transition process to market economies in the former communist east.

The EBRD has played a pivotal role over the last two decades in helping to draft legislation and to create institutions that support the free market.  It has brought much-needed advice to the transition process.

One key plank during these years of economic transformation and modernisation has been the development of small and medium-sized enterprises (SMEs). SMEs form the backbone of economies and it is this sector that is best placed to provide employment opportunities to societies seeking a more prosperous economic future.

And job creation is desperately needed in the southern and eastern Mediterranean (SEMED), region, where especially youth unemployment is a major social problem. The EBRD has started investing in Jordan, Morocco and Tunisia – with Egypt to follow shortly.

At a conference at the EBRD’s headquarters in London on 1 November, the EBRD, along with other multilateral development banks, outlined plans to support the development of SMEs in Arab transition countries.

The meeting brought together the transition countries of the Deauville Partnership – Egypt, Jordan, Morocco, Tunisia, Libya and Yemen – with the G8 nations, international financial institutions, including the EBRD, and other financial and economic organisations. In his opening remarks to the conference, EBRD President Sir Suma Chakrabarti underscored the importance of the SME sector in the SEMED region and role the EBRD could play in its development.

“We will certainly work on providing better access to finance to SMEs through the traditional channels of direct debt and equity financing, indirect credit lines via partner banks or investments in equity funds focused on SMEs. But we will also do our best – in our advisory capacity – to help the partner governments establish the most appropriate frameworks to release the fantastic growth potential of SMEs,” he said.

The Deauville Partnership was established in 2011 under the auspices of the Group of Eight (G-8) as a response by the international community to political changes in some countries in the Middle East and North Africa.

The   meeting in London was convened by the US as G-8 chair  and co-chaired by Under Secretary of State for Economic Growth, Energy and the Environment Robert Hormats and Special Assistant to the President for International Economic Affairs Caroline Atkinson. The transition countries, together with the Organisation for Economic Cooperation and Development (OECD), have drawn up a list of key near-term actions that need to be taken in order to stimulate growth of SMEs.

Those actions cover areas such as strengthening access to finance, reducing the administrative burden and simplifying the regulatory environment for SMEs; facilitating public contracting, improving entrepreneurship policies, including for women in business; and helping SMEs to integrate into global value chains and developing the capacity for best practices in SME management.

The multilateral development banks offered concrete and coordinated support. They stand ready to start discussing the implementation of some of those actions with the transition countries.

Specifically the EBRD expressed interest in starting the discussion on a series of  activities, including facilitating coaching for young women entrepreneurs in Tunisia; enhancing regulatory monitoring and evaluation mechanisms in Egypt; further activating public-private equity funds in Morocco; or supporting the implementation and good governance of the Credit Bureau in Jordan.

These initiatives will complement the investments that the EBRD has already begun in the SEMED region.

In its early engagement in SEMED, the EBRD moved quickly to provide assistance with its Small Business Support (SBS) operations, which advise companies on managerial and structural change issues and provide consultancy services for small enterprises.

The EBRD also extended to the SEMED region its Local Enterprise Facility, a €400 million investment vehicle that had previously successfully provided tailor-made financing instruments for SMEs in the Balkans and Turkey.

Last updated 1 November 2012


US Undersecretary of State: Arab spring SMEs mean jobs and growth

The World Bank and US Treasury recently launched the Deauville Partnership Transition Fund for technical assistance at EBRD.

EBRD will support SMEs in Arab Spring countries

EBRD President Sir Suma Chakrabarti comments on the Deauville Partnership meeting at the EBRD to discuss action plans to help small and medium businesses.

  • The EBRD in SEMED

    The southern and eastern Mediterranean is the latest region in which the Bank is working to boost economic and democratic change.