CIIP Competitive Industries and Innovation Program Annual Report 2016–17 CIIP Competitive Industries and Innovation Program Financed by in partnership with ©2017 The World Bank Group 1818 H Street NW Washington, DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org All rights reserved. This volume is a product of the staff of the World Bank Group. The World Bank Group refers to the following member institutions: The World Bank (International Bank for Reconstruction and Development); International Finance Corporation (IFC); and Multilateral Investment Guarantee Agency (MIGA), which are separate and distinct legal entities each organized under its respective Articles of Agreement. We encourage use for educational and noncommercial purposes. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Directors or Executive Directors of the respective institutions of the World Bank Group or the governments they represent. The World Bank Group does not guarantee the accuracy of the data included in this work. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The World Bank encourages dissem- ination of its work and will normally grant permission to reproduce portions of the work promptly. All queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202- 522-2422; e-mail: pubrights@worldbank.org. About the Competitive Industries and Innovation Program (CIIP) The CIIP partnership was created to enhance country growth and employment prospects by sup- porting public policies and investments that promote competitiveness and innovation within and across industries. As the Trustee and Administrator for CIIP, the World Bank Group is responsible for program development, implementation, and monitoring and evaluation. For more information, visit www.theciip.org. TAB LE O F CO N T E N T S Abbreviations and Acronyms 5 Foreword: Message from CIIP Partners 6 Introduction: Implementing the Strategy 9 Timeline 11 Results at a Glance 12 Query: Feature story title here is different than on p. 18. Fix to match or ACP Feature Story: Ethiopia 14 keep as is? Non-ACP Feature Story: Albania 16 The CIIP Theory of Change 17 Chapter 1: Global Knowledge, Analysis, and Assessments 21 Chapter 2: Country Operations 25 ACP Project Results: Main Highlights 27 Non-ACP Country Operations 47 Chapter 3: Financial Portfolio and Resource Use through June 2017 67 CIIP Annual Report 2016–17 3 A B B R E V I AT I O N S A N D AC R O N Y M S ACP African, Caribbean, and Pacific Group of States BDI Business Development Investment CGF Caribbean Growth Forum CIIP Competitive Industries and Innovation Program CRI Competitive Reinforcement Initiative DPL Development Policy Loan EGC Economic Growth Council (Jamaica) EU European Union FDI foreign direct investment FITD Fund for Innovation and Technological Development (FYR Macedonia) FY fiscal year GDP gross domestic product ICSCS Investment Climate and Sector Competitiveness Support (Suriname) ICT information and communications technology IDA International Development Association IFC International Finance Corporation IP industrial park IPDC Industrial Parks Development Corporation IZ industrial zone MCI Ministry of Commerce and Industry (Haiti) MDTF Multi-Donor Trust Fund MSME micro, small, and medium enterprise NGO nongovernmental organization OECS Organisation of Eastern Caribbean States PIUTD Project for Integrated Urban and Tourism Development PPD public-private dialogue PPP public-private partnership PVH Phillips-Van Heusen Corporation R&D research and development SAE Enterprise Support Service SDTF Single-Donor Trust Fund SEZ special economic zone SME small and medium enterprise UELDP Upper Egypt Local Development Program UNESCO United Nations Educational, Scientific and Cultural Organization WBG World Bank Group Note: All dollar amounts are U.S. dollars unless otherwise indicated. CIIP Annual Report 2016–17 5 FOREWORD Message from CIIP Partners Anabel González Senior Director Trade & Competitiveness Global Practice, The World Bank Group I am pleased to present the Competitive Industries and Innovation Program Annual Report 2016–17. Economic transformation is a priority for most of our clients, along with the need to reduce inequality by creating more sustainable private sector jobs. Within this context, CIIP is highly relevant to our client countries. In its fourth year, CIIP helped prepare five lending projects, with a value of $1.354 billion, that promote industry development, innovation, and competitiveness. CIIP’s global reach now extends to 23 countries with a work program that has generated $518.5 million in private invest- ment. In addition, CIIP continues to influence policy thinking through a variety of avenues. CIIP developed a database on special economic zones, which is now in use by several client country governments. It has also organized high-level policy events that garnered international interest, such as the September 2017 Symposium on New Technologies, Jobs, Development, and Growth in partnership with the Center for Global Economic Governance and the Growth Dialogue. Demand for CIIP-supported policy advice continues to increase steadily as the roster of client countries grows. Most of our clients find it challenging to respond to new trends concerning private investment, location of firms, and production processes. Support from CIIP can help clients increase their understanding of those trends and develop policy solutions tailored to their particular advantages and country contexts. As we look toward the March 2019 completion of the pilot phase of our CIIP partnership, we hope that the solid results achieved to date and during the 2017 fiscal year covered by this report will form the basis of a stronger partnership. In doing so, we will contribute to the World Bank Group’s core mission of alleviating extreme poverty and boosting shared prosperity. I would like to thank our donor partners for their continued, essential support. Elisabeth Gruber Director, Department for International Financial Institutions Federal Ministry of Finance, Austria Through its participation in and collaboration with international financial institutions, Austria provides multilateral development assistance to developing countries worldwide. The Minis- try of Finance is responsible for representing Austria at multilateral development banks and for supporting Austria’s efforts in attaining the Sustainable Development Goals of the 2030 Agenda for Sustainable Development. The overall goal of this cooperation is to achieve positive development effects in developing and transition countries. One priority is to promote sustain- able private- and financial-sector development in recipient countries with the objectives of fos- tering broad-based economic growth, generating employment, raising incomes, and improve- ing livelihoods on the ground.  Industrial development can be a powerful engine of structural change and economic growth. The private sector is widely recognized as a key driving force and source of entrepreneur- ial spirit, business acumen, and innovative ideas. At the same time, despite remaining quite 6 controversial, new “smart” industrial policies have retaken center stage in economic develop- ment strategies. Whereas Austria has seen most developing countries engaging on that path, it decided to join the CIIP to take a practical and evidence-based approach to support local efforts to spur innovation, productivity, and competitiveness. Encouraging public-private dialogue and supporting firms that want to innovate, to enter new markets, to grow, and to create jobs needs to be done through programs that work and are well implemented. The World Bank team lead- ing CIIP brings Austria those types of programs. CIIP helps us explore, select, test, and evaluate solutions in difficult countries. The effect of this approach goes well beyond specific outcomes, such as the financial leverage achieved or the number of jobs created through specific country projects. It helps influence overall development strategies around private sector development in a novel but measured way, which promises to make the strategies more effective in alleviating poverty through sustainable economic growth and the generation of employment and income opportunities. Liliana de Sà Kirchknopf Head of Division Private Sector Development Federal Department of Economic Affairs, Education, and Research, Switzerland    The partnership of the State Secretariat for Economic Affairs with the World Bank Group on private sector development issues has a long and fruitful history. As we continue to strongly support the development of the Facility for Investment Climate Advisory Services, where our action across the board allows regulatory changes in developing countries, we see CIIP as a more vertical intervention in which we focus on the growth of firms in specific industries or sec- tors. The combination of those two types of interventions is powerful. After only 3 years since CIIP’s founding, we are pleased to see the results that CIIP has obtained. Marianne Damhaug Senior Adviser, Section for Multilateral Development Banks Ministry of Foreign Affairs Our objective, which matches our white paper on private sector development in Norwegian development cooperation, is to identify projects in which the Norwegian development assis- tance funds are used in cooperation with funds from the private sector. We aim to reduce risks but also to increase the effect. CIIP has been using such criteria to select its country operations and is the reason we support this trust fund. Antti Karhunen Head of Unit, Directorate-General for International Development and Cooperation, EuropeAid, European Commission, Belgium The European Commission is keen on engaging in partnerships that seek to provide tailored policy solutions based on dialogue, evidence, and analysis to address the complex challenges faced by many developing economies. With increased focus on African, Caribbean, and Pacific countries, the partnership formed under the CIIP provides an opportunity to work on practical solutions at the country level, aiming to reduce poverty through initiating and sustaining long- term processes of economic growth and jobs creation. The European Commission has recently set out its proposal for the European External Investment Plan, and the CIIP can support this effort to encourage investments in developing countries through evidence-based solutions and by helping to remove obstacles to investment, by providing visibility and technical assistance to investment projects, and by making smarter use of new and existing financial resources. CIIP Annual Report 2016–17 7 INTRODUCTION Implementing the Strategy This is the fourth Annual Report of the Competitive Industries and Innovation Program (CIIP), a multidonor partnership among the World Bank Group (WBG); the European Union (EU); the African, Caribbean, and Pacific Group of States (ACP) Secretariat; and the governments of Austria, Norway, and Switzerland. This report outlines the progress that CIIP has made in implementing the program’s objectives during its fiscal year from June 30, 2016, to June 30, 2017 (FY17). CIIP continues to support client countries in transforming their economies. This aid has become increasingly urgent in recent years because developing economies have experienced a steep decline in commodity prices, which leads to slower than expected growth. CIIP provides sup- port to country-level interventions and makes global policy experience in industry competitive- ness and innovation more accessible to policy makers. Using a catalytic approach, CIIP seeks to leverage financing, government, private sector, and WBG investments that address the core constraints that are preventing private sector engagement. During this reporting period, CIIP has contributed to a wide range of interventions, including the development of special economic zone (SEZ) policy and the design and implementation of SEZs in Ethiopia and Jamaica. It has also helped to design activities that enhance the competi- tiveness at the subnational levels in the Arab Republic of Egypt and Nigeria, to create an inves- tor survey that was implemented to support Jordan’s policy initiative of creating jobs for Syrian refugees, and to provide and complete location analyses for SEZs in Timor-Leste. The global policy experience for this year focused on innovation and SEZs. CIIP undertook a diagnostic of innovation activities in developing countries and documented a range of policy solutions that could build innovation capabilities in developing countries. CIIP also assembled a database of 585 SEZs in 53 countries. CIIP used the database to conduct an operational review of SEZ policies across several countries. CIIP’s global reach now totals 23 countries. The 16 country projects active in FY17 are profiled in this report. FY17 CIIP operations leveraged $1.354 billion in public investment. The CIIP grants in Ethiopia and Mauritania contributed to the creation of 6,717 jobs, of which 5,448 were for women in Ethiopia. CIIP operations in Jamaica, the former Yugoslav Republic of Macedonia, Mauritania, Nigeria, and Tunisia contributed to $565.5 million in private sector investments. With CIIP’s support, $18 million of additional sales were facilitated in firms linked to the supported industrial zones in Ethiopia. In Mauritania and Ethiopia, 166 new firms were created with CIIP support. CIIP also helped identify and promote 170 investment opportunities in Jordan. CIIP has been extended until March 31, 2019, and an independent review was completed in October 2017. The review found that the target of 9 out of 13 standard output indicators have already been met and/or exceeded. In summary, CIIP was rated highly satisfactory overall. The most recent call for project proposals was made on March 23, 2017, and CIIP received 26 applications, which are currently under review. CIIP Annual Report 2016–17 9 TIMELINE Partnership Austria and Switzerland create Multi-Donor Trust Funds (MDTF) Original end of New end of European Union joins MDTF disbursement date disbursement date European Union/ACP create Norway joins MDTF Original closing date New closing date Single-Donor Trust Fund Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May 2013 2014 2015 2016 2017 2018 2019 Planning and operations Mid-term review start end Call for proposals Selection process completed 6th annual report 4th annual Selection process completed 1st annual report 2nd annual report 3rd annual report report 5th annual report 2nd call for proposals 3rd call for proposals 4th call for proposals Strategy and Interim Business Plan Innovation Policy Platform ACP Macedonia, FYR Non-ACP Lessons Learned Knowledge Tunisia Implementing Industrial Policy Russian Federation Sierra Leone Côte d’Ivoire Vietnam Kazakhstan I Croatia Ethiopia Georgia Tanzania I Competitive Cities Haiti Industry-Specific Global Value Chains Evidence and Impact Special Economic Zones Tonga Organization of Eastern Caribbean States Jamaica Serbia Mauritania Tunisia Competitiveness Enhancement Unit Timor-Leste Local Competitiveness Strategies Mobilizing Local Knowledge Matching Grants Country Innovation Diagnostics Kazakhstan II Albania Tanzania II Jordan Egypt, Arab Rep. Nigeria Suriname Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May 2013 2014 2015 2016 2017 2018 2019 CIIP Annual Report 2016–17 11 Results at a glance FY17 COUNTRY RESULTS 1.354 billion USD public investment leveraged 6,717 jobs created $71 million in Albania, $500 million in Egypt, $249 million in Jordan, $500 million in Nigeria, and $34 million in Organisation for Eastern Caribbean States 5,580 in Ethiopia, of which 5,448 were for women; 937 in Mauritania; and 200 in Jamaica 518.5 million USD private investment leveraged 18 million USD additional sales value linked to supported industrial zones (IZs) $159 million in Macedonia, FYR; $9 million in Mauritania; $350 million in Nigeria; and $0.5 million in Tunisia Ethiopia 166 new firms 186 investment opportunities identified and promoted 10 in Ethiopia and 156 in Mauritania 16 in Ethiopia and 170 in Jordan 11 laws and regulations approved and enacted or policy reforms implemented 93 small and medium enterprises (SMEs) trained or supported 10 in Nigeria and 1 in Suriname 89 in Jamaica and 4 in Macedonia, FYR During its fifth meeting, CIIP’s steering committee sought to further clarify the definition of reported results to ensure that CIIP’s results are being tracked as accurately as possible. At the outcome and impact level, CIIP will report on results that can be feasibly associated with CIIP-enabled outputs. Reported figures presented by the task teams will be scrutinized by the CIIP secretariat and given to the steering com- mittee only if the information is found to be credibly associated with CIIP’s work. The reported outputs must be attributed to CIIP’s work and inputs (for example, the earmarked public financing will only be attributed to CIIP if it is clearly linked to CIIP-financed inputs). It is important to acknowledge the myriad attribution questions associated with CIIP’s cross-sectoral and policy-based interventions. Therefore, where feasible, country examples will also be used to inform a narrative of different country trajectories for enhancing competitiveness and for creating jobs. Note: All results are preliminary and are pending validation by the project teams. 12 CIIP'S RESOURCE LEVERAGE FY17 FY17 FY13–17 FY13–17 $1.354 billion $1.354 billion $2.27 billion $2.27 billio public investment public investment public investment public invest $4.10 leveraged 5 million CIIP leveraged $22 million leveraged $22 million leveraged 35 CIIP funding 35 CIIP funding FY17 funding grants grants grants RAGE: This Year CIIP LEVERAGE: This Year CIIP LEVERAGE: Since founding CIIP LEVERAGE: Since foun KNOWLEDGE This report provides guidance on how to strengthen institutions for The discussion about the Pacific focused on the competitiveness innovation and how to design a policy mix that can be gradually built of the tourism sector. Tourism is the mainstay of the private sector on as capabilities are accumulated. The report helped ACP countries economy in many Pacific Island countries. Many of the countries avoid two key gaps in innovation policy design: (1) the bias toward offer a pristine environment, a variety of recreational opportunities, research and development (R&D) instruments when capabilities to do and a cultural diversity that differentiates the region from other R&D are absent and (2) the lack of consideration to state capacity to destinations. The key to success is to optimize airport infrastructure, implement innovation policy. To provide a closer link to the operational destination management, marketing, and capacity of firms in the work, two companion reports are currently being completed. The private sector. There is also potential to expand the market for first report will be launched by the end of 2017 and will be a guide domestic products, such as fresh produce and local artwork and on innovation policy instruments for policy makers in ACP countries. handicrafts. The guide covers more than 12 instruments that support business innovation. It describes the nature of the instrument, the market failure to be addressed, the evidence of impact, and the conditions that are necessary for effective implementation. The guide will give policy makers recommendations on specific instruments that can be used to CIIP has assembled a database that covers 585 zones in 53 countries support business innovation. across Sub-Saharan Africa, East Asia and Pacific, Europe and Central Asia, Middle East and North Africa, South Asia, and Latin America and the Caribbean. In many developing countries, the promise of industrialization has A sample of 346 SEZs during 2007–12 was assembled to identify the remained elusive. Indeed, manufacturing employment appears to be drivers of success. As a proxy for SEZ performance, two variations peaking at income levels that are lower than in the past, thus raising of the nightlights indicator, based on satellite images, were the concerns that industry will no longer be an effective means to lift following: (1) the growth rate of the nightlights emitted from the living standards in lower-income countries in Africa and other regions SEZ in the period of analysis and (2) the ratio of the change of the of the world. The rapid spread of new technological advances— nightlight emissions within the zone compared to the change in additive manufacturing, artificial intelligence, and automation— nightlights in the entire country. creates further concerns about the ability of manufacturing to create jobs. CIIP organized a deep dive discussion, “Economic Among the SEZ characteristics driving the economic dynamism Transformation, Diversification, and Industrial Competitiveness,” of specific SEZs were two factors that stand out: zone size and to discuss those issues. The event covered the following: (1) the technological components. Larger zones have performed better importance of industry-specific interventions, (2) the elements than smaller zones. Moreover, and contrary to expectations of policy needed to successfully implement productive development policies, makers and zone designers, lower-tech but labor-intensive zones (3) the key players needed to design and implement industrial have been more economically dynamic than the more high-tech competitiveness policies, (4) the role of diversification in growth and counterparts. development, (5) the interventions necessary to promote industrial competitiveness, and (6) the country perspectives on structural transformation and economic diversification. CIIP Annual Report 2016–17 13 AC P F E AT U R E S T O RY Ethiopia—Jump Starting the Industrialization Program Ethiopia’s industrial policy places a strong emphasis The project did not deliver on its objectives. While the on the role of the state in promoting and facilitating Chinese developer was able to recruit several anchor ten- the country’s industrial development, which intends to ants—Hujian Shoes and Lifan Motors—the occupancy improve the living standards of the Ethiopian people by rate of the zone was still under 50 percent after 4 years, 2025. The domestic private sector is promoted as the which fell short of the developer’s commitment to the primary engine of industrial development. However, government. Further, the tenant firms that did enter the the government plays an active role through capacity zone were predominantly Chinese, which was not in line building in select industries, providing tax incentives, with the government’s objective to promote and develop and more. A prime example of the policy approach in the domestic private sector. The Ethiopian government action is the country’s industrial park program, which decided to experiment with a different model of indus- has established seven industrial zones throughout trial park development that would be led by the public the country to date and promotes a select number of sector. export-oriented and labor-intensive industries: textiles and garments, leather products, chemicals and phar- The Bole Lemi industrial park, which occupies 156 hect- maceuticals, metals and engineering, electronic prod- ares of land on the outskirts of Addis Ababa, is wholly ucts, petrochemicals, biotechnology, packaging, and owned and operated by the government. Since the indus- agro-processing. trial park started operations in 2014, all of the 20 factory sheds have been leased to 12 garment and leather com- The Ethiopian government first began experiment- panies. The industrial park employs about 12,000 people, ing with industrial park development through a purely 60 percent of whom are women. The success of the Bole private model. In 2008, Ethiopian authorities signed a Lemi industrial park model has vindicated the govern- memorandum of understanding with a Chinese devel- ment’s belief in the important role of the state in imple- oper to finance, build, and operate an industrial park in menting its broader industrial development strategy. Dukem, a village located 37 kilometers south of Addis Ababa. While the government would provide tax incen- tives to tenant firms, including an income tax holiday CIIP’s Participation in Ethiopia’s Industrial Park and exemptions from import duties, the private devel- Development oper would be responsible for developing the land and Because of its experience with both private and public infrastructure, recruiting investors to create light manu- models of industrial park development, the Ethiopian facturing activities, and providing management services government was interested in developing a more com- to tenant firms once the zone became operational. The prehensive industrial park strategy that would guide the project, which would occupy 5 square kilometers and establishment of additional parks throughout the coun- require $390 million in infrastructure expenditures, was try. The prime minister’s office engaged the World Bank intended to be operational within 5 years and host 80 dif- Group in 2013, and CIIP financing was used to provide ferent industrial manufacturing operations. the technical expertise. 14 When the WBG was first engaged, the government The Impact objective was to expand the number of operational The Ethiopian government, with the help of WBG industrial parks from two (Eastern and Bole Lemi) to six. expertise and CIIP financing, has put in place an indus- CIIP funding provided the technical expertise to conduct trial park program that is attractive to investors. Phil- a review of the Bole Lemi industrial park. Several critical lips-Van Heusen (PVH) Corporation, which is a global shortcomings were identified: (1) the site selection process textiles manufacturer with brands that include Van did not properly evaluate the geotechnical aspects of the Heusen, Calvin Klein, Tommy Hilfiger, and Arrow, was land; (2) the design of leasable plot space was not set to considering several investment locations in the region investor requirements; (3) critical infrastructure needs, and chose Lake Hawassa to develop an industrial park such as a wastewater treatment plant and a reliable sup- focused on textiles and garments. Ethiopia’s industrial ply of electricity, were lacking; and (4) one-stop-shop ser- park program has continued to receive strong interest vices and other streamlined management services were from other multinational manufacturers, including Van- not available to tenant firms. The review helped to iden- ity Fair, H&M, and Dressed by Lauren. The govern- tify areas for improvement in the government’s industrial ment intends to create 2 million manufacturing jobs park strategy. and turn Ethiopia into the “light manufacturing hub” of Africa by 2025. CIIP Annual Report 2016–17 15 N O N - AC P F E AT U R E S T O RY Albania: Tourism Development as an Engine for Reviving Stagnant Rural Economies Just outside Berat, which is a United Nations Educa- growing at more than 12 percent for the past 5 years, tional, Scientific, and Cultural Organization (UNESCO) increased tourism activity is inevitable given its proximity World Heritage town in central Albania and one of the to markets and other well-developed tourist destinations, oldest continuously inhabited towns in the world, grow as well as its natural and cultural asset endowments. some of the best olives in the world. Or so they say. Although the numbers seem impressive, Albania’s tour- Arben, now 72, still harvests the olives from the groves ists are mainly regional and highly seasonal—70 percent that have been in his family for more generations than of tourists visit between June and August and most head he can remember. He tends 100 or so trees and pro- to the Albanian Riviera. CIIP funds supported a baseline duces about 15 kilograms of olives annually from each survey to capture, among other data, the average daily tree. Some are table olives that he sells or barters with spending per tourist, which is about €54. The PIUTD, friends in the town, and some he presses for oil that he through investing in potential activities identified through sells from his small farm house in recycled plastic water tourist product audits conducted with CIIP funds, aims bottles. He gets by, as he always has. to raise this daily spending by 50 percent during the life of the project. The baseline survey also measured the Through a tourism stakeholder gathering that is part length of time tourists stay in each of the PIUTD’s four of a small grant from CIIP that helped to prepare the destination towns (Berat, Gjirokastra, Saranda, and Per- €70 million World Bank–funded Project for Integrated met). The length of stay varied between 1.2 to 2.1 days Urban and Tourism Development (PIUTD), Arben across the destinations, and the project aims to double and his olives are now going to be part of an innova- this time in each destination. tive new product offer for tourists visiting Albania. Some 20 or more olive varieties grow around Berat, and Arben and Ina’s olive experience is one of 16 potential many of the trees are still tended in traditional ways new tourism products identified through CIIP funds. An by Arben and his friends. Arben’s city-dwelling grand- average of four jobs per tourist product is expected to be daughter, Ina, will be designing a tourist package that created and sustained. The PIUTD has targeted a total allows visitors to see the olive trees, explains the history of 20 new products that will be defined and developed. of olive cultivation, and enables visitors to press their CIIP activities also defined the opportunity to develop own olives and to take away their own custom bottle of partnership agreements with Airbnb and TripAdvisor cold-pressed, organically certified extra virgin olive oil. that will support micro, small, and medium enterprises For Arben, this reconnection with Ina and their com- (MSME) training and to raise the destination profiles mon and deeply rooted heritage is something he never through online marketing. thought possible. For Ina, whose tourist company spe- cializes in showcasing traditional Albanian customs and Last, but not least, CIIP funds were used to explore the cuisine, the opportunity to weave her family history into possibility of creating destination management organiza- a product offer is a source of immense pride. tions in the four targeted municipalities. Arben and Ina are among 17 other stakeholders, led by the mayor of In 2016, Albania earned a record €1.5 billion from tour- Berat, who sit on the advisory secretariat group of the ism, which is 13 percent higher than recorded in 2015. Berat destination management organization, and they For Albania, where annual tourist numbers have been will have a voice in reviving and planning tourism growth. 16 The CIIP Theory of Change In a number of countries, policy makers have implemented a series of policy interventions designed to attract private investment, to raise firm-level productivity, to produce higher value- added goods, and ultimately to create more and better-paid jobs. All of this assumes political stability, peace and security, macroeconomic stability, and the basic rule of law in the partner countries. The policy initiatives include developing special economic zones, growth poles, or growth corridors; providing grants to firms to enable innovation, capacity development, and product development; and initiating reforms of the overall regulatory and policy frameworks. The effectiveness of these initiatives has remained debatable largely because of the absence of evidence-based assessments of the interventions. CIIP Annual Report 2016–17 17 Vision and Purpose Analytics to conduct analytical work, such as market assessments, In 2012–13, the WBG, the EU, the ACP Secretariat, and enterprise mapping, or feasibility studies (in the case of the governments of Austria, Norway, and Switzerland the International Finance Corporation operations); to set up a partnership under the umbrella of the CIIP, develop a public-private dialogue; and to design policy which aims to improve the effectiveness of industry com- instruments and impact evaluations. In addition, CIIP petitiveness and policy formation and enforcement. also conducts operation assessments and learning events to act as a repository or resource hub for related policy The purpose of CIIP is to support the creation of pri- interventions, such as SEZs or grants. Also, CIIP aims to vate sector employment by enabling and promoting trigger more development partner collaboration in the firm-level competitiveness across industries. countries where projects have been identified. The level of collaboration can range from involvement in project design to participation in implementing and financing Approach parts of the project. CIIP provides funding at the project preparation stage to shape project design and the early stages of project implementation. CIIP funding is directed at WBG task Theory of Change teams or more broadly government teams that are pre- CIIP’s theory of change underpins the program’s paring projects to be financed primarily by the World overall objectives and, operationally, the causal chain Bank and often in complementarity with other multilat- of objectives for each project. CIIP aims to achieve eral development banks or bilateral institutions. As such, its outcome and impact milestones by supporting CIIP helps leverage a large amount of aid funding. The the design and early implementation phase of inter- funding provides project teams with the opportunity to ventions, which support the removal of the systemic learn from policy initiatives that have already been tested; 18 constraints hindering firm competitiveness. These Key assumptions underpinning the theory of change are interventions aim to deliver systemic changes—for as follows: instance, policy reforms that shape the way markets perform and that change the way firms participate in 1. That CIIP enables the identification of core con- and access those markets. This work, in turn, will lead straints in selected markets and industries that are to better functioning markets (industry output level) preventing effective private sector engagement and to improved firm performance among target ben- eficiaries (outcome level), which is measured through 2. That the firm-level improvements facilitated by CIIP improved business practices, sales, and increased pro- project interventions will encourage additional firms as ductivity and profitability. The result is increased addi- suppliers, distributors, and competitors, as well as raise tional net income and employment for poor women their standards and improve their competitiveness and men, ultimately contributing to a reduction in poverty and shared prosperity. The fifth meeting of 3. That the network of more productive firms ultimately CIIP’s steering committee sought to further clarify create growth in employment and income-generating the definition of reported results to ensure that CIIP’s opportunities for the poor results are being tracked as accurately as possible. At 4. That CIIP is able to identify project teams and proj- the outcome and impact level, CIIP will report on what ect ideas that effectively address the constraints that can be feasibly associated with CIIP-enabled outputs. have been identified Reported figures presented by the task teams will be scrutinized by the CIIP secretariat and reported to 5. That the government is willing to take up a project the steering committee only if the findings are cred- financed by the International Development Associa- ibly associated with CIIP’s work. The reported out- tion (IDA) or a project financed by any of the donor puts must be attributed to CIIP’s work and inputs. For partners to support the implementation of project example, the earmarked public financing will only design be attributed to CIIP if it is clearly linked to CIIP- financed inputs. It is important to acknowledge the 6. That there are no external shocks that prevent mar- myriad attribution questions associated with CIIP’s ket players acting as visionaries, including conflict- cross-sectoral and policy-based interventions. There- and environmental-related shocks fore, where feasible, country examples will also be used to inform a narrative of different country trajectories 7. That there will be a net crowding of employment by for enhancing competitiveness and for creating jobs. competitive firms This program logic is depicted in the following figure. Impact: Improvements in firm performance result in job growth, net Poverty reduction income growth, and poverty reduction, which CIIP-enabled operations contribute to. Outcome: Improved firm-level performance lead to growth in firm-level Enterprise performance productivity and to growth in value addition and employment (and eventually to crowding in of suppliers and competitors). Outputs: Sustainable changes result in the way the market system Systemic change operates, such as through improved policies and growth in public and private investment. Activities: Program interventions target the underlying systemic constraints within selected markets and industries in a sustainable way. Intervention CIIP Annual Report 2016–17 19 CHAPTER 1 Global Knowledge, Analysis, and Assessments CIIP Annual Report 2016–17 21 Dissemination global value chains have allowed some countries to tap CIIP organizes round tables as way of disseminating manufacturing activities as a ladder for development. CIIP operational knowledge. In 2017, the country-led In many developing countries, however, the promise of dialogues were conducted in the Pacific Islands and industrialization has remained elusive. Indeed, manu- Uganda. Another round table will be organized in the facturing employment appears to be peaking at income Caribbean in December 2017. The objective of the levels that are lower than in the past, thus raising con- round tables is to share experience and to provide clients cerns that industry will no longer be an effective means with a better understanding of industry competitiveness. to lift living standards in lower-income countries in Africa and other regions of the world. The rapid spread In the Pacific, the discussion focused on the competi- of new technological advances—additive manufactur- tiveness of the tourism sector and start-up financing. ing, artificial intelligence, and automation—create fur- Tourism is the mainstay of the private sector economy ther concerns about the ability of manufacturing to be in many of the Pacific Island countries. Many of the an engine for job creation. countries offer a pristine environment, a variety of rec- reational opportunities, and a cultural diversity that dif- CIIP organized a deep dive discussion, “Economic ferentiates the region from other destinations. The dis- Transformation, Diversification, and Industrial Com- cussion included private investors and officials from the petitiveness,” to discuss the latest thinking around eco- ministries of tourism and industry associations. They nomic transformation and diversification as the basis for discussed the key constraints facing the industry, airport raising industrial competitiveness and to consider how to infrastructure, destination management, marketing, and translate ideas into effective policy advice to client coun- the capacity of firms in the sector. Tourism stimulates tries. The event covered the following: (1) the impor- the demand for the domestic supply of fresh produce tance of industry-specific interventions, (2) the elements and local artwork and handicrafts. In this context, CIIP need to successfully implement productive development provided lessons learned from a random control trial of policies, (3) the key players needed to design and imple- a competitive business plan from Nigeria. mentindustrial competitiveness policies, (4) the role of diversification in growth and development, (5) the key In Uganda, the work on SEZs and innovation in devel- interventions necessary to promote industrial competi- oping countries funded by CIIP was presented to stake- tiveness, and (6) the country perspectives on structural holders (Ministry of Finance officials, government agen- transformation and economic diversification. cies, and other development partners). The presentation on SEZs led to a discussion of tax incentives intended to stimulate the success of SEZs. The CIIP operational How to Make Grants a Better Match for Private review did not identify tax incentives as a driver of SEZ Sector Development success. The presentation on innovation highlighted the Since the last annual report, CIIP has been active at sev- policy makers’ interest in building innovation support eral dissemination activities. In May 2017, the team pre- policies. How to connect research institutions to private sented at the annual conference of the Results Measure- sector firms, to enhance collaboration, and to make pub- ments and Evidence Stream, the network of monitoring lic spending more relevant for firm-level innovation was and evaluation professionals at WBG. The conference the main issue discussed. There was general agreement addressed the challenges and opportunities of results that innovation policy in Uganda should have a strong measurement and impact evaluation of matching grant private sector link if it is to be successful. schemes. In June 2017, the team presented examples from at an Africa event, which sought to engage WBG colleagues working on programs that support the accel- Economic Transformation, Diversification, and eration of small and medium enterprise (SME) growth Industrial Competitiveness and entrepreneurial innovation in Sub-Saharan Africa. Over the past two centuries, industrialization has been a major driver of economic development. Manufacturing The CIIP report has become the go-to resource in industries have been a source of innovation and tech- understanding this widely used intervention and an nological diffusion by helping to create more and better important input into the design and implementation jobs and, in the process, by absorbing labor displaced of WBG matching grant projects. Further evidence because of productivity gains in agriculture. More of the report’s success includes being featured in this recently, the emergence of production networks and year’s Knowledge in Action: Trade & Competitiveness 22 Publications Update, which highlights key publications The research is not without limitations. The findings, authored by WBG staff members throughout the year. while expanding the existing research considerably, rely on what remains a relatively small sample and are highly dependent on data availability in some countries in some Operational Review of Special Economic Zones specific geographical areas of the world (for example, SEZs have become an increasingly popular instrument East Asia versus Africa). The use of the nightlights data for the promotion of economic development. SEZs have to determine the success of a zone prevents the use of proliferated in emerging and transition countries during both small and very large zones. Zones that did not take the past two decades. The aim of the operational review off are excluded from the sample, as well as zones that is to address this gap in our knowledge by exploring the became operational after 2007, thereby limiting our drivers of SEZ success. interpretation of the results. CIIP assembled a database that covers 585 zones in 53 countries worldwide. From the database, a sample of Country Innovation Diagnostic for Global Knowledge, Analysis, and Assessments 346 zones was assembled and analyzed to identify the Competitiveness and Employment Creation in ACP reasons for success. Several factors, such as geography, During the course of the past year, the CIIP project made income levels, and maturity of zone programs were con- progress in three key outputs to shape the approach to sidered in the sample to allow for a considerable varia- innovation policy. The first output, the innovation policy tion in SEZ experiences. As an SEZ performance proxy, report titled “Developing Country Capabilities and the two variations of the nightlights indicator are used: Unrealized Promise of Technological Catch-up” will be (1) the growth rate of the nightlights emitted from the launched in October 2018. The report contains both SEZ in the period of analysis and (2) the ratio of the a diagnostic of the nature of innovation activities and change of the nightlight emissions within the zone com- policy solutions to build innovation policy strategies in pared to the change in nightlights in the entire country. developing countries. It describes the nature of innova- tion in developing countries and identifies the capabili- Among the characteristics driving the economic dyna- ties required to innovate and the necessary complemen- mism of specific SEZs, two factors stand out: zone size tary factors. It also focuses on a key but often overlooked and technological components. Larger zones have per- capability for innovation—managerial and organi- formed better than smaller zones. Moreover, and con- zational potental. In doing so, the report provides an trary to expectations of policy makers and zone design- anchor for innovation policies in countries farthest from ers, lower-tech but labor-intensive zones have been the technological frontier to build qualifications through more economically dynamic than the more high-tech the capabilities “escalator.” The objective and composi- counterparts. tion of innovation policy focuses first on key managerial and organizational capabilities for innovation that then The performance of SEZs in emerging countries has moves gradually to building more complex technologi- been first and foremost affected by the country- and cal capabilities. regional-specific context in which they are located. Costs, industry structure, and proximity to large markets The report provides a set of principles to support the have played a relevant role for SEZ dynamism. Large design and implementation of innovation policies. It zones in relatively poor areas, not too far from the largest also discusses the instruments necessary to support the city, in countries with a previous history of industrializa- capabilities escalator by focusing first on basic man- tion, and with relatively easy access to developed coun- agement extension and business advisory and then on try markets have generally performed best. technology and R&D centers to carry out more sophis- ticated innovation projects. The report emphasizes the Finally, despite not displaying exceptional economic large innovation policy challenge found in developing trajectories, SEZs have positively affected the economic countries. Such countries have lower capabilities in the performance of surrounding areas. Areas in the immedi- private sector and more scarcity of complementary fac- ate vicinity of SEZs have benefited from spillovers ema- tors because capabilities of state and institutions are low, nating from the zone. However, this positive effect on thus designing and implementing innovation policy is neighboring areas suffers from a steep distance decay. It more challenging. The report provides guidance on how declines sharply beyond 20 kilometers and is barely evi- to strengthen institutions for innovation and to design dent beyond 50 kilometers from the center of the zone. a policy mix that can be gradually built on as capabili- CIIP Annual Report 2016–17 23 ties are accumulated. The findings help ACP countries the conditions that are necessary for effective implemen- avoid two key gaps in innovation policy design: (1) the tation. The guide will give policy makers recommenda- bias toward R&D instruments when capabilities to do tions on specific instruments that can be used to support R&D are absent and (2) the lack of consideration to state business innovation. capacity to implement innovation policy. The last output focuses on the design of innovation To provide a closer link to the operational work, CIIP agencies. It contains case studies of existing innovation is completing two companion reports. The first report, policy agencies in middle-income countries and provides which is the second output, will be launched by the end guidelines on how to design and improve the mission of 2017 and is a guide on innovation policy instruments and services they provide. for policy makers in ACP countries. The guide covers more than 12 instruments to support business innova- These guides aim to enhance the efficiency of innova- tion. It describes the nature of the instruments, the mar- tion policies in ACP countries by providing more guid- ket failure to be addressed, the evidence of impact, and ance and clarity on how to design and implement those policies.  24 CHAPTER 2 Country Operations CIIP Annual Report 2016–17 25 ACP Project Results: Main Highlights FY17 COUNTRY RESULTS 534 million USD public investment leveraged Country Operations 6,717 jobs created $500 million in Nigeria and $34 million in Organisation for Eastern Caribbean States 5,580 in Ethiopia, of which 5,448 were for women; 937 in Mauritania; and 200 in Jamaica 406 million USD private investment leveraged 18 million USD additional sales value linked to supported IZs $9 million in Mauritania, $47 million in Jamaica, and $350 million in Nigeria Ethiopia 166 new firms 16 investment opportunities identified and promoted 10 in Ethiopia and 156 in Mauritania Ethiopia 11 laws and regulations approved and enacted or policy reforms implemented 89 SMEs trained or supported 10 in Nigeria and 1 in Suriname Jamaica Timeline 2013 2014 2015 2016 2017 2018 2019 Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Sierra Leone Côte d’Ivoire Ethiopia Tanzania I Haiti Tonga Organization of Eastern Caribbean States Jamaica Mauritania Timor-Leste Tanzania II Nigeria Suriname CIIP Annual Report 2016–17 27 OECS Strengthening Clusters through Regional Approach: Stimulating Investment and Jobs through Tourism and Agribusiness Clusters Leverage 2017 Regional Tourism Competitiveness ($26 million) and Agriculture Competitiveness ($8 million) Partner coordination European Union Delegation, possibly others eventually Grant amount $500,000 Background The CIIP is supporting the local and regional tourism links in the Organization of Eastern Caribbean States (OECS) in Grenada and St. Lucia. This support complements a $26 million Regional Tourism Competitiveness lending op- eration that aims to strengthen the competitiveness of the tourism sector in the OECS region and a $6 million OECS Agriculture Competitiveness lending operation that focuses on enhancing the competitiveness of the agriculture sec- tor through links with the tourism sector. The CIIP funds have been used to identify investment opportunities and to provide support for improving the quality of tourism products. To identify these opportunities, the WBG has developed and implemented a very successful, bottom-up, collaborative, and community-level building methodology to support both the tourism and agriculture cluster in the region. The first year of the project focused on mobilizating stakeholder and conducting market research to prepare action plans. The action plans set out to increase investment; to build capacity; to improve access to finance; to enhance environmental sustainability; and to boost product development, packaging, promotion, and distribution. Key Activities For the Grenada tourism industry, CIIP helped by testing the demand for tours through conducting surveys of local tour operator and by developing the first pilot tour. The “Beach and Basket” pilot tour engaged a variety of stake- holders, including 100 fishermen from the fish market, a small beekeeping farm, 10 cooking assistants, a small restau- rant, 100 young farmers from the Mirabeau Experimental Farming School, a small group of drummers, a small ag- roprocessing business, at least 5 transportation providers, and various guides and artisans. The CIIP team helped the agriculture cluster prepare a plan to develop the pilot tour and provided hands-on training on developing farm-based tourism products, including how to package, price, develop, and market tours that are attractive to independent 28 adventure travelers. The team also supported the cluster by preparing a detailed assessment Several Tour Packages Were Formulated and Tested of investment needs to develop the remaining six tours (see box). Finally, the team supported The Chocolate Tour will provide visitors with a hands-on “tree a grassroots awareness campaign in the re- to bar” chocolate experience, which involve several firms (that gion, reaching out to more than 5,000 people is, Grenada Chocolate Factory, L’Esterre Estate, Women Group and mapping tourism assets with GPS data. from Hermitage, and others). The Adventure Cook-Up Tour is designed to provide visitors with a combination of adventure CIIP also helped establish a destination man- and culture. The Historic Estate and Amerindian Tour will agement organization by supporting the introduce visitors to the rich culture of Grenada’s aboriginal peo- preparation of draft bylaws and articles of ples, including the Caribs, Amerindians, and Kalinago Indians. Country Operations association to register the North-East cluster The Hiking Tour of Mount St. Catherine will guide visitors as a nongovernmental organization (NGO). to the summit, the highest peak in Grenada, where they will be The team also helped formalize the public- able to enjoy panoramic views of the northern, western, and east- private dialogue (PPD) framework, including ern mountains, as well as Grenada’s coastlines. The Sky to Sea the election of the initial board of directors. Snorkeling Tour will take visitors from the towering summits of the Grand Etang National Park Forest Reserve to an ocean that The Caribbean Growth Forum, supported teems with fish and other sea life. Visitors will hike through Grand by CIIP in the first year, has launched a sec- Etang’s rainforest where they will learn about various medicinal ond phase funded under other projects. The and edible plants. The Sulphur Springs Tour will allow visitors launch took place in St. Lucia in January 2017 to bathe in the natural beauty and therapeutic benefits of Gre- and in Grenada in April 2017. The CIIP nada’s sulphur springs, which were formed millions of years ago helped ensure that cluster members partici- from the volcanic activity that gave birth to the island. pated in the discussions and that community- based tourism remained a government prior- ity. The CIIP project made certain that the community action plans of the clusters and the forum reform dashboards vetted by governments complement each other. Results Chain Input Output Outcome Basic Elements Instruments Menu of 2 strategy and 500 MSMEs Integrated Solutions reforms programs participating in Analytics Value chains designed cluster programs Business environment Public-private $18.5 million 1 package tour Institutional dialogue committed for piloted and 6 more strengthening Technical infrastructure in the pipeline assistance Clusters investment Public finance Infrastructure Catalytic support 3 PPDs set up 2 reforms enacted for firms through PPD Evaluation and feedback 60 cluster members trained Improved effectiveness of institutions Cluster registration as NGO 5,000 people Industries reached through Agribusiness Tourism info campaigns CIIP Annual Report 2016–17 29 ETHIOPIA Competitiveness and Job Creation Leverage Competitiveness and Job Creation Project ($270 million) Partner coordination UK Department for International Development, US Agency for International Development, European Commission Grant amount $1,365,000 Background CIIP engagement in Ethiopia started in 2013 in response to the government’s request to the WBG to support its efforts to attract domestic and foreign direct investment through industrial parks or economic zones. The project development objective is to contribute to job creation by attracting investments and by improving enterprise com- petitiveness in targeted industrial parks. This objective will be achieved (1) by strengthening the institutional and regulatory framework for industrial zone development and capacity building in related institutions, (2) by supporting industrial infrastructure development of two industrial parks, and (3) by enhancing industrial park links to SMEs through targeted interventions. Toward the end of the last CIIP reporting period (June 2016), the industrial infrastructure development and link components faced unanticipated procurement and implementation issues. The design of the two large industrial parks (Bole Lemi II and Kilinto) closest to Addis Ababa faced delays because of capacity constraints within the cli- ent’s design consultant, which also led to delays with the start of construction. Project Results With the support of CIIP, the team conducted an extensive design review and helped develop the bidding documents for the construction of the Bole Lemi II and Kilinto industrial parks. Both have now been successfully completed, and the contracts for the development of the two parks were signed in February 2017. Construction is due to be completed by June 2018. In addition, a branding strategy and a value proposition was developed to attract potential investors. The sectors targeted are garments and textiles for Bole Lemi II and pharmaceutical manufacturing for Kilinto. When the two industrial parks become fully operational, they are expected to create at least 32,000 jobs, to generate $280 million in export value, and to make the IPDC $10 million in total revenue. CIIP has also supported analytical work on the potential of the electronics and information and communications tech- nology (ICT) sectors. The study included analysis of the global electronics industry structure, trends and opportunities to as- sess Ethiopia’s potential participation in production and distribution networks, and challenges and risks that need to be addressed to foster growth in those seg- ments. The analysis was highly endorsed by the government. The analysis showed that the electronics and ICT industry play only a modest role in the Ethiopian economy, with a rela- tively limited number of companies and commercial activity. The current elec- 30 tronics industry is focused on the domestic market and assembly activities, with a limited presence of component manufacturing. Similarly, the ICT services industry in Ethiopia is in its infancy and is primarily focused on infor- mation technology services for the domestic market. However, the analysis suggests that it is possible to prioritize different segments of the ICT and electronics sectors in a future sector development strategy. The opportunities are linked to the sector’s high overall supply-chain modularity, cost-driven nature of investment, job-generating capac- ity, and potential for productivity spillover effects to other sectors. The analysis has provided the government with a solid evidence base for guiding the development of the sector and specifically for drafting a detailed action plan to implement the sectoral strategy. In March 2017, the CIIP supported a seminar on green industrialization to provide the government guidance in developing a socially and environmentally sustainable approach to its industrialization plans. As the industrial park Country Operations program expands, the government is concerned with maintaining a balance between growth and sustainability. The workshop was designed to help the government create capacity and understanding for the next generation of indus- trial parks on sustainability issues, such as green industrialization, efficient and effective resource use, renewable and alternative energy sources, and effective waste management and treatment strategies. During the workshop, the first of its kind in Ethiopia, the WBG shared learning from global initiatives on green industrialization with a focus on the constraints and issues in the textile and footwear industries. Ethiopia has an opportunity to preempt negative effects as it starts its growth in those sectors by designing smart policies. The work to date has enabled the government to reassure investors that the industrial park plan has the highest level of government ownership and commitment. For example, one key investment group that was convinced of this com- mitment and made the decision to invest in Ethiopia is the PVH Corporation, which owns the brands Calvin Klein and Tommy Hilfiger. The PVH Corporation has set up production facilities, along with its suppliers, in the Hawassa Industrial Park. CIIP supported the early stage assessments and planning of the park. The lease area of Hawassa has been fully committed to 25 investors. Results Chain Input Output Outcome Impact Basic Elements Instruments Menu of Integrated Solutions Analytics SEZ law adopted 86 pipeline investors Private Business environment (target: 200 beyond investment by IZ regulatory Public-private function FY18) firms in IZs Institutional Labor dialogue (target: $28 strengthening and skills Technical Economic Master plans Serviced land in assistance zones million beyond License issued for IZ zones (target: 150 FY18) Evaluation and Infrastructure Access feedback management hectares beyond to finance FY18) Leased land in zones $38.5 million sale (target: 32 hectares beyond FY18) value of goods 35 people trained and services (target: 4,000 beyond Improved access (target: $280 FY18) to skills million beyond FY18) Industries Staff trained in IPDC Improved and regulator effectiveness of Pharmaceuticals Leather goods Textile/garment One-stop shop in institutions 11,911 jobs, of environmental impact which 10,646 assessment and zones are for women # of local suppliers (target: 32,000 # of visitors to working with firms beyond FY18) business-to-business links platform in zones (target: 25 beyond FY18) # of firms supported links fund $ contract value CIIP Annual Report 2016–17 31 HAITI Strengthening Competitiveness Implementation Capacities Leverage Business Development and Investment Project ($20 million) Partner coordination US Agency for International Development, Inter-American Development Bank, European Commission Grant amount $1,875,000 Background The December 2013 CIIP grant provided direct support to the $20 million IDA-financed Business Development and Investment (BDI) project to improve the conditions for private sector investment and inclusive growth. The CIIP grant helped the project team to redesign the BDI project at the request of the Haitian Ministry of Commerce and Industry (MCI) and to shift the focus of the project from the development of economic zones to the development of value chains (that is, agribusiness, manufacturing, and tourism) and public capacity to support and stimulate local competitiveness. Furthermore, over the years, CIIP has instilled the capability to implement this value-chain ap- proach in several markets, including the coffee market. Project Results One of the 90 coffee producers identified and participating in the Competitive Reinforcement Initiative (CRI) of the MCI in the southeast produces 130 pounds of coffee annually, which she sells for $1.66 per pound to her local cooperative. Her annual income was $635 in 2016, which places her below the average gross national income per capita ($810 in 2015). On the basis of the analysis and awareness activities conducted by the Enterprise Support Service (SAE) team in the southeast on the coffee value chain, she now understands that while she currently sells in the commercial coffee segment (nonexport or for local consumption), she could make more money selling her coffee in the specialty coffee segment (for export to the United States). By moving to the specialty coffee strategic segment, she could make an average of $4.10 per pound instead. To help her add more value to her coffee, she needs access to coffee cupping (to grade her coffee according to the Specialty Coffee Association of America’s Q Grading Stan- dards), proper post-harvest conditioning of her coffee to ensure its quality, and a reliable traceability system, which will be provided by the IDA-financed BDI project. The BDI project will procure the common services currently missing in the selected value chains, such as the training of coffee cuppers and provisioning services through a cof- fee center that would ensure quality control, washing, fermenting, dry- ing, hulling, tasting, packing, storing, transporting to the United States, and selling. The BDI project will use matching grants to subsidize the en- trepreneurs on the basis of eligibility criteria. That entrepreneur is only one of 650 identified by the SAE teams during the first round of their CRIs. However, once the services are in place, they will be open to any en- trepreneur. In April 2017, the MCI 32 began its second cycle of CRIs. By July 2017, the SAE agents had identified and gathered data for 403 entrepreneurs in the new value chains and will continue to add to their database over the next months. In FY17, CIIP supported efforts to attract investors to provide critical services to the value chain (as in the coffee case). With the support of CIIP, the team supports roadshows in US cities with a critical mass of potential suppliers. The first roadshow took place in Los Angeles in April 2017, and as a result, six apparel finishing firms indicated in- terest in bidding for the upcoming proposal for the “fast-fashion” logistics hub. The client will continue to undertake roadshows in the coming months. Furthermore, the CIIP grant has contributed to the design of a more innovative approach for the use of BDI’s matching grants. The matching grants will lessen the risk for service providers by guaranteeing a minimum purchase Country Operations price for the provision of services. As the Haiti CIIP project moved into its final implementation phase in FY17, the focus ensured that the client could continue to implement the activities independent of CIIP support. However, this fiscal year saw delays in implemen- tation mainly because of Hurricane Matthew, which considerably slowed down the project progress. The project implementation unit is currently tendering four lots of services for apparel, cold chain, nonperishable products, and a payment and traceability system. The various service providers are expected to be in place starting in 2018. The United States was identified as the most attractive export market for all of the value chains in the first round of CRIs. Results Chain Input Output Outcome Basic Elements Instruments Menu of Integrated Solutions 4 training modules MCI strategy completed Analytics Business environment Value chains Cluster and value Public-private chain policy strategy 30 enterprise Institutional Labor dialogue strengthening a Technical competitiveness Matching grants assistance agents established program designed Clusters 20 cluster initiatives Public sector supported capacity increased 1,050 entrepreneurs Investor queries mobilized Roadshows Industries Tourism Agribusiness Light Manufacturing CIIP Annual Report 2016–17 33 JAMAICA Support of Competitive Industries in Jamaica Leverage International Bank for Reconstruction and Development’s Foundation for Competitiveness and Growth Project ($50 million), World Bank’s First and Second Development Policy Loans ($205 million), European Union–funded International Finance Corporation’s Food SME Project (€3 million) Partner coordination European Union and others Grant amount $525,000 Background Jamaica has seen decades-long declines in production, trade, and competitiveness. Key goals of Jamaica’s Vision 2030 National Development Plan are improving competitiveness and creating jobs. The government has used the World Bank CIIP grant as part of its efforts to catalyze sustainable economic growth. The specific objective of the CIIP grant, which was established in November 2014, is to contribute to job creation by attracting investment. The CIIP-funded program has two overarching components: (1) supporting industry planning and sector support to SMEs and (2) improv- ing the environment for competitive industries. CIIP funding has enabled WBG expertise in competitive industries to support the government’s implementation of the Foundations for Competitiveness and Growth Project. CIIP Jamaica continues to leverage significant WBG resources in key areas, such as business regulations, industrial development, and value chains identification. Project Results The CIIP fund and its provision of technical assistance continue to be an important part of ongoing work programs. For example, the Logistics Hub Initiative Master Plan seeks to increase competitiveness in the agriculture, manufac- turing, and tourism industries by attracting large investors. The team has helped develop the 1,500-acre Caymanas SEZ, which is expected to begin construction in early- to mid-2018. It will provide a junction for industrial develop- ment and logistics services while increasing SME participation in exports. The new CIIP-supported Jamaica SEZ law was enacted in October 2016, and private firms in the light manufactur- ing and agribusiness industries have benefited from it. In addition, CIIP funding has supported the new Jamaica SEZ Authority through a range of assistance including advice on procedures, organization development, and how to work effectively with the private sector. The CIIP team is currently working to link the tourism and agribusiness sectors to build their growth potential. In this regard, six value chains have been identified: sauces and spices, coffee, ackees (a tropical fruit), cassava (a tuberous root), seafood, and dairy. These value chains were selected according to criteria that focused on potential economic impact and ease of enacting change. The total export value of the six value chains is more than $181 million annually. The value chains sell to offshore markets, thereby reducing Jamaica’s cur- rent trade deficit. The CIIP project has helped fill numerous gaps in the Economic Growth Council (EGC) Secretariat. The govern- ment asked the EGC Secretariat to be the driving force behind the jobs and growth agenda; it is chaired by Michael Lee-Chin, comprises 10 leaders in Jamaica’s public and private sectors, and is supported by an executive director. The CIIP supported three specific areas of the EGC: (1) the hiring of a three-month lead consultant in September 2016 to help draft the EGC’s Call to Action, which is a master plan that outlines the context of Jamaica’s economic growth and how to implement growth stimulation programs; (2) the initial design and function of the EGC; and (3) the identification of the first round of growth initiatives of the EGC. The initiatives are eight recommendations to the Cabinet of Jamaican on how economic growth can be achieved, including improving citizen security and public safety, pursuing bureaucratic reform to improve the business environment, harnessing the power of the diaspora, and others. The EGC continues to receive technical support using CIIP funding. Finally, with CIIP support, the EGC is driving an ambitious but attainable gross domestic product (GDP) growth of 5 percent in 4 years. Although Jamaica has experienced the lowest GDP growth in the past 30 years in the Western 34 Hemisphere, the economy achieved 2 percent GDP growth just last year, surpassing expectations and outstripping the flat-line 0 percent average. CIIP-funded activities have laid the foundations to meet yearly job creation targets and have exceeded foreign direct investment (FDI) targets. Jamaica’s Investment Promotion Agency has stated that the FY16/17 FDI estimates of $50 million were exceeded, bringing $700 million FDI into the country (up from $100 million in FY15/16). The CIIP Trust Fund and the Jamaica Foundations for Competitiveness and Growth Project are estimated to have directly ac- counted for $82 million of annual FDI. Results Chain Country Operations Input Output Outcome Impact Basic Elements Instruments Menu of Integrated Solutions Analytics Value chains Regulations and Reduction in time to $82 million Business environment policy reforms obtain construction in private Public-private investments dialogue Economic SEZ law permits Institutional zones strengthening Technical assistance 4 PPDs established PPD impact on 200 jobs created Public finance reform process (target: 8,000 by Catalytic support SEZ authority FY19) for firms created Effectiveness of Evaluation and institutions feedback 4 subsectors informed 115 SMEs trained for SME support or supported programs Industries 6 value chains Agribusiness Manufacturing Logistics Tourism analyzed CIIP Annual Report 2016–17 35 MAURITANIA Nouadhibou Eco-Seafood Cluster Leverage Spanish Agency for International Development (€10 million), Deutsche Gesellschaft für Internationale Zusammenarbeit– International Labour Organization (€14 million), and World Bank Group (additional financing of $8 million) Partner coordination French Development Agency, European Investment Bank, Islamic Corporation for the Development of the Private Sector of Islamic Development Bank, and European Union Delegation Grant amount $420,000 Background The objective of this CIIP project is to attract private investments and to create jobs by establishing a competitive Nouadhibou Eco-Seafood Cluster and by supporting the MSMEs servicing it. This goal will be achieved by provid- ing technical assistance for creating a privately operated eco-seafood competitive cluster in Nouadhibou bay with the required amount of public-private partnerships (PPPs); by offering support to firms and particularly to youth- and women-led local MSMEs with targeted business development services, technical trainings, and assistance to an MSMEs program design; and by helping establish strong and sustained competitive industries PPDs in Mauritania at the local and industry levels. The fisheries sector plays an important socioeconomic role in Mauritania, accounting for 16 percent of GDP, 25 percent of government revenue, and 40 percent of foreign revenue, as well as providing jobs to approximately 40,000 people. The sector is particularly important in Nouadhibou where almost the entire population relies on this activity. However, this natural resource is underused in that little value added is currently being created. This particular op- portunity for Nouadhibou will help transform the fish industry and uplift its value chains by leveraging opportunities in the fresh segments. Project Results In 2015, the government of Mauritania decided to create the Nouadhibou Eco-Seafood Cluster and the CIIP suc- cessfully helped prepare the project, which was signed April 13, 2016. CIIP was showcased and presented during Europe Day on May 9, 2017, in Nouakchott by the project coordinator, Mohamed Lemine Hamady. Seafood is one of the country’s top priorities, and implementation of the grant has progressed well and has helped to catalyze additional financial resources for the fishery sector. In addition, the key stakeholders are supportive and the context is favorable. There have been 12 Doing Business reforms achieved in the past 3 years, and the first PPP law was approved in January 2017. Technical assistance has helped Nouadhibou Free Zone define cluster parameters through the approval of the Seafood Cluster Strategy in July 2017 and inform public financing for infrastructure undertakings (including a wastewater treatment plant, deep sea port, desalinization plant, and cold storage zone). The team also contributed to the first PPD platform in Mauritania in more than 10 years—the Seafood Task Force. Furthermore, women entrepreneurship has become an important focus for both the private sector and the govern- ment. CIIP has contributed to stronger engagement of women with the Nouadhibou Free Zone by bringing their issues to the forefront of policy dialogues and by developing tailored initiatives to enable women economic activities. Those initiatives include improving women’s organizations and supporting their acquisition of market-relevant skills, and they were based on successful impact evaluations on entrepreneurship training in Togo (personal initiative train- ing) led by Trade & Competitiveness Global Practice, Gender Innovation Lab, and Development Economics Group. As of June 2017, the project has generated $37 million in private investments in Nouadhibou, with those investments linked to creating 937 stable jobs predominately on the processing side of the industry. In total, 314 new firms were created through the Nouadhibou Free Zone one-stop shop. CIIP has helped supervise or provide 300 days of train- ing and technical assistance workshops that have benefited 416 people and has delivered several strategic documents to guide Nouadhibou Free Zone Authority decisions particularly on the inclusion agenda. 36 Results Chain Input Output Outcome Impact Basic Elements Instruments Menu of Integrated Solutions Country Operations Business environment Analytics Value chains Strategy and reform Improved access to $37 million programs designed markets of private Public-private dialogue Economic investments Institutional zones strengthening Technical (target: $60 million assistance 401 people trained Clusters beyond FY18) Public finance or certified Infrastructure Catalytic support Cities PPD created 3 reforms enacted for firms 156 new firms through PPD Evaluation and Growth poles (target: 2,000 and corridors (target: 19 beyond feedback beyond FY18) FY18) Institutional Effectiveness of capacity building institutions 937 jobs created (target: 10,000 Industries beyond FY18) SME support SMEs trained or Fisheries Mining Logistics program designed supported CIIP Annual Report 2016–17 37 NIGERIA Competitiveness Support Leverage 2017 Nigeria Mineral Sector Support for Economic Diversification Project ($150 million), Kaduna State Economic Transformation Program-for-Result ($350 million) Partner coordination UK Department for International Development Grant amount $1,400,000 Background Nigeria has experienced a dramatic slowdown in economic growth since the country’s oil boom in the mid-2000s and the subsequent fall of oil prices. Oil accounts for only 8.4 percent of annual GDP, but it has major implications on government revenues, scarcity of foreign exchange, domestic demand, and overall growth. Compounding this slow growth is Nigeria’s high birth rate and shortage of productive jobs. These issues have led to a saturated labor market and high youth unemployment. Underlying many of the economic problems is that Nigeria’s economy needs to accelerate its diversification efforts and to address its lack of competitiveness in agriculture and manufacturing sec- tors. Thus, the CIIP team has supported the government of Nigeria to improve four primary areas of its economy: sectoral competitiveness of minerals and agribusiness in northern Nigeria, overall business environment, access to finance, and evidence base for developing policy to support MSME competitiveness. Project Results Since grant implementation began in September 2016, CIIP has been integral in supporting the design of projects approved or soon-to-be approved in Nigeria. The team has supported the $150 million Nigeria Mineral Sector Sup- port for Economic Diversification Project (approved in April 2017), which provides technical assistance at the federal and state levels to increase private investments in the mining sector. During project preparation, CIIP provided inputs on high-potential mineral value chains and on avenues to maximize benefits shared through opportunities for SMEs and workers along the value chain. Moving forward, CIIP funds will support the development of one particularly high-potential value chain: limestone. CIIP has also facilitated the preparation of the $350 million Kaduna State Economic Transformation Program-for- Result (approved in June 2017), which focuses on sustainable land management. Kaduna is a key northern state that lies in an economic corridor between Nigeria’s two most populous cities: Lagos and Kano. It has the potential to be the growth engine of northern Nigeria and to serve as an example to its northern neighbors. Under the ongoing World Bank–funded Growth and Employment Project, some 60,000 SMEs have registered on the project’s business platform, and the program is disbursing grants to some 1,800 SMEs. The grants provide im- portant business development support to smaller SMEs and start-ups. Regarding the project, CIIP is supporting the development of a public-private engagement platform called P3 that will help identify reforms to increase the competitiveness of high-priority sectors in Nigeria. Initiated in May 2017, P3 has three objectives: to use innovative data collection on formal and informal firms; to provide a better analysis of the sectors than industrial cluster groups (representative sample of the sector) or enterprise surveys (usually sampled from a list of formal firms); and to use social media and new communication methods to create a space for discussion where firms can interact, vote for their priority recommendations, and contribute to the proposed activities for their sector. The number of registrations and respondents’ trust are key to P3’s viability. This past year, CIIP has supported building blocks to improve access to financing for firms. First, it supported an assessment of banking sector vulnerabilities. This assessment included an analysis of a forward-looking scenario based on publicly available information to identify vulnerability risks in the banking sector and possible mitigation measures. In April 2017, CIIP facilitated the development of a concept note for an SME investment fund that seeks to stimulate sustainable growth in the SME sector through CIIP and Growth and Employment Project financing. It is expected that $30 million to $50 million from the project will be allocated to the SME investment fund. 38 Building Entrepreneurship Knowledge CIIP funding is building knowledge on entrepreneurship. First, it supports the impact evaluation for the Growth and Employment Project that compares different firm-level interventions, namely consulting, training, and in- sourcing of workers, as well as outsourcing of consulting services firms and grants. Second, it identifies high- growth firms and high-potential entrepreneurs. This task started with a literature review that compiled evidence on variables to be considered for entrepreneurship, high-growth entrepreneurs, and high-impact entrepreneurs. The literature review identified four categories of variables: firm characteristics, business practices, entrepre- neur’s background, and entrepreneur’s cognitive and noncognitive variables. The review is in the process of being completed and will be sent to peer review as part of the “High-Growth Firms” report (Innovation and Entrepreneurship unit flagship report). Although firm characteristics, business practices, and entrepreneur’s background are easily captured through a questionnaire, cognitive and noncognitive variables are more difficult to measure. For this reason, CIIP is supporting the development of a computer-based game that will collect Country Operations information on personality traits, preferences, and strategic behavior of the project participants. The ultimate objective is to compute an algorithm using the four categories of variables to better predict chances of success of entrepreneurs or existing firms. Results Chain Input Output Outcome Impact Menu of Basic Elements Instruments Integrated Solutions Value chains Reforms designed 3 reforms $350 million Analytics Business environment implemented private Public-private investment by Institutional dialogue firms in IZs strengthening Technical assistance $ committed Cost to get to Access to and approved market (target: Infrastructure Access Public finance for infrastructure 10% reduction) finance to finance Evaluation and investment (target: Gross number feedback Growth poles $200 million beyond of jobs (target: and corridors FY18) +20% from baseline beyond Institutional Improved FY18) mechanism design implementation capacity Industries Agrifinance study New agriculture Agribusiness Minerals and assessment of loans financed by banking sector institutions CIIP Annual Report 2016–17 39 SURINAME Investment Climate and Sector Competitiveness Support Leverage: 0 Partner Coordination: Inter-American Development Bank and the European Union Grant amount $695,000 Background The Suriname Investment Climate and Sector Competitiveness Support (ICSCS) project was established in October 2016 with a CIIP grant to facilitate new investments especially in the agribusiness sector. The project informs the policy dialogue and reform program planned under the WBG’s Fiscal Management and Economic Competitiveness Development Policy Loan (DPL). Specific project activities under way include sector competitiveness analysis of agribusiness and extractives, agroindustry prioritization and value chain work, and business licensing reform support. Project Results To strengthen the analytical base for industry competitiveness work, CIIP supported a sector competitiveness analysis of the agribusiness and extractives sectors to identify investment opportunities and constraints and to inform poli- cies to diversify the economy.1 The agribusiness analysis consisted of a sector scan to identify subsectors with a high potential for investment attraction. Considering the potential commercial value to new investors (such as export potential to the Caribbean Community, EU, and US markets) and the development impact on Suriname (such as improving balance of trade and the potential for outgrower links), the analysis identified fruits, vegetables, cereals and animal feed, pork, and aquaculture as high- potential subsectors. In the extractives sector, key reforms to improve the enabling environment for new private investment include reforming min- ing law, separating government regulatory and operational functions in the oil sector, advancing the Extractive Industries Transparency Initiative; and establishing a geological data program. The recommendation to apply for initiative member- ship was included as a DPL prior action, which the government completed in March 2017. In the agribusiness sector, the analysis identified a lack of government systems to coordinate industry competitiveness work across ministries, and it rec- ommended establishing a multiministerial agri- business investment task force to lead subsector reform and promotion work. With CIIP-​ funded support, this task force was established and chaired by the Ministry of Trade, Industry, and Tourism. The ICSCS project then supported the task force in conducting deep dives into the five high-poten- tial subsectors identified by the analysis. Based on the potential export opportunities, attractive op- portunities for local farmers, and lack of short- term constraints, this deep dive recommended focusing on investing in the fruit and vegetable 1. World Bank Group. 2017. Suriname Sector Competitiveness Analysis: Identifying Opportunities and Constraints to Investment and Diversification in the Agribusiness and Extractives Sectors. https://openknowledge.worldbank.org/handle/10986/26205. 40 subsectors first, including high-value tropical horticulture products and superfood fruits and berries (both fresh and processed). The task force endorsed this recommended focus and began developing subsector reform and promotion plans. With CIIP funding, the ICSCS project has helped the task force coordinate with government and private sec- tor stakeholders to identify value chain constraints in the subsectors. Preliminary findings include airport handling and cold storage inefficiencies, logistics of phytosanitary certificate issuance, and improper value-added tax treat- ment of exports. In the coming year, it is expected that follow-up value chain competitiveness support will achieve reforms in several of those areas. ICSCS has also helped the task force build the value proposition for new investment in the subsectors to facilitate investor leads. Another significant reform was achieved when the government completed a DPL prior action by passing a new business and professions licensing law. The previous licensing regime relied heavily on unnecessary licensing require- Country Operations ments that did not match policy goals and was identified as a constraint by 47 percent of private firms. The new law simplifies the regime by establishing that all business activity may be conducted freely unless a license is specifically required and by decreasing discretion by establishing standardized appeal procedures. ICSCS analytical support has informed the reform process with an initial analysis of the legality, necessity, and band business–friendliness of approximately 40 licenses currently required by the Ministry of Trade, Industry, and Tourism. Follow-up analytical support from ICSCS is helping to implement regulations under the law, including focusing on specific licensing needs related to fruit and fish processing, thereby improving a horizontal constraint affecting new agribusiness investment. Results Chain Input Output Outcome Impact Basic Elements Instruments Menu of 2 sector # of firms Private Integrated Solutions investments competitiveness benefitting from Analytics Value chains analyses licensing reform leveraged (target: Business environment $15 million by (target: 100 in FY18) Public-private FY19) Institutional dialogue 1 licensing law strengthening Technical adopted assistance Evaluation and # of private land feedback leases (target: 7 by Agribusiness PPD impact on FY19) multiministerial task reform process force established Effectiveness of institutions Industries Agribusiness Extractives CIIP Annual Report 2016–17 41 TANZANIA Competitive Industries and Innovation Project Leverage: Forthcoming International Development Association Growth Poles operation ($100 million) Partner Coordination: UK Department for International Development, Government of Norway, European Commission, Deutsche Gesellschaft für Internationale Zusammenarbeit Grant Amount: $483,000 Background Tanzania is aiming to accelerate its industrial transformation and is, therefore, seeking to develop a series of policy actions to enable that process. The formulation of policy actions from the Tanzania Business Environment and Competitiveness for Jobs Development Policy Operation project included policies aimed specifically on improving Tanzania’s business environment and on establishing an enabling environment for competitive, job-creating indus- tries. Because of the policy actions, a new investment operation is planned to help advance Tanzania’s industrial development, with an emphasis on labor-intensive, resource-based manufacturing and services sectors. CIIP support for this work includes reviewing recent policies in support of private sector development and exploring the productiv- ity growth of firms, particularly small manufacturing firms in Tanzania. Project Results An evaluation of the lessons from past and current enterprise support programs in Tanzania has been completed. The programs reviewed include a diverse mix of firm-level support programs, including those funded by the WBG, other development partners, and the government. The study was carried out over the course of 2–3 months and involved desk research and several field visits to Tanzania. The study examined various dimensions of the programs, including objectives, legal and management structure, target sector and firm size, type of support instrument, and results achieved. The main findings illustrate that financing programs benefit from accompanying technical assis- tance, and that such assistance is particularly important for SMEs, where a tiered-approach (access to technology and finance and building on training and mentoring) is needed. For implementation, working through existing organiza- tional structures and alongside multiple partners leads to successful outcomes. CIIP is also conducting a firm-level surveys. Tanzania’s private sector faces myriad challenges, and there are few midsized and large private firms, especially in the manufacturing sector. In addition, many firms suffer from low productivity and export capacity. To better understand firm-level dynamics, two surveys have been initiated. The management survey,1 which is focused on surveying 300 firms in the cities of Dar es Saalam, Arusha, and Mwanza and in the region of Kagera, is expected to lead to a better understanding of the role of internal firm capabilities and entrepreneurial and innovative activities. The findings will help design extension and support services to midsize and large manufacturing firms. In addition, a survey on entrepreneurial systems for SMEs has been undertaken. The preliminary findings are helping to design networking assets and collision points (that is, factors that increase the op- portunities for knowledge spillover and innovation-driven entrepreneurship), including incubators and accelerators, aimed at increasing innovative and entrepreneurial activities. For instance, initial data analysis indicates that although start-ups may have access to bank accounts, lines of credit take much longer to establish (in fact, twice as long as in the case of West Bank and Gaza). In summary, the findings and assessments from the CIIP-funded activities will provide specific recommendations for the design modalities and implementation approaches for future programs currently being developed to support industrial transformation. 1. See https://worldmanagementsurvey.org. 42 Results Chain Input Output Outcome Impact Basic Elements Instruments Menu of Integrated Solutions Analytics Value chains 5% increase in # of Country Operations Business environment Strategy and reform Reduction in programs designed procedures to jobs after FY19 Public-private dialogue acquire permits Institutional Clusters 5% increase in strengthening Technical assistance PPD created Reforms enacted private investment through PPD (target: leveraged Catalytic support for Institutional 4 beyond FY18) firms capacity building Evaluation and 2% increase in labor feedback Effectiveness of productivity 2 firm-level surveys institutions conducted Design of incubators Analysis and design SMEs trained or of enterprise support supported programs Industries Agribusiness Livestock $ committed to SME support programs (target: $5 million) CIIP Annual Report 2016–17 43 TIMOR-LESTE Tibar Bay Master Plan Leverage World Bank Group’s Public-Private Partnership for Infrastructure Development and Technical Assistance; International Finance Corporation’s Public-Private Partnership Transaction Advisory Services Partner coordination Foreign Advisory Investment Service, Timor-Leste Ministry of Planning and Strategic Investment, Timor-Leste Ministry of Economy’s Public-Private Partnership unit Grant amount $250,000 Background The CIIP grant supported economic growth in Timor-Leste through the development of an integrated investment master plan of the Tibar Bay Economic Development Area and provided the government with the required support, training, and capacity building that will lead to the plan’s successful and sustainable implementation. Project Results In FY16–FY17, the CIIP grant completed a prefeasibility study of establishing an industrial park in Tibar Bay. The prefeasibility study focused on (1) assessing market interest and potential value-chain development opportunities; (2) evaluating short-, medium-, and long-term demand; and (3) identifying a potential site location. By assessing the market interest, Tibar Bay industrial park could serve four different business areas: logistics, local markets, local materials and local export markets, and low-cost export-oriented production. The market assessment also highlights how different industrial sectors may find the industrial park attrac- tive. The sectors have several characteristics that (1) are complementary to the new Tibar Bay Port, (2) are complementary to the construction industry and expand purchasing power in Timor-Leste, (3) use do- mestic natural resources, and (4) offer local options for market consumption that can compete with im- ports. Recent investments into Timor-Leste are tap- ping into domestic consumption opportunities. This is the case of Heineken, which is investing $40 million to produce beers, water, and soft drinks. There are further opportunities to address domestic consump- tion needs, which are currently sourced from abroad. The proposed industrial park can provide the neces- sary infrastructure complement to the new Tibar Bay Port, including uninterrupted access to power, water, wastewater treatment, and telecommunications. How- ever, based on benchmark comparisons, Timor-Leste is a relatively higher-cost production platform. Sup- ported by well-designed urban and industrial policies and by a continued push for bureaucratic and educa- tional reforms, an industrial park has the potential to attract investment in excess of historical trends. Short of the initia- tives by the government, however, investment into the industrial park will stagnate. To capture this variance, the report considers three demand forecast scenarios: conservative, base case, and aggressive. 44 In the conservative scenario, 27 tenants would lease 15 hectares of industrial land and generate more than 700 direct jobs. Most of the tenants would be small ventures demanding 5,000 square meters of land or prebuilt warehouses or processing facilities. In this scenario, no large processing ventures locate in the industrial park during the life of the project. This reflects that many medium to large firms receive free or reduced-price land from the government for periods of 10 or more years. Thus, when enterprises can avoid land payments outside the industrial park, there is little or no incentive to pay market lease rates inside the park. In comparison, in the aggressive scenario, 81 tenants would lease 55 hectares of industrial land and generate more than 4,400 direct jobs. The industrial park would attract 6 large processing factories, 15 factories occupying prebuilt spaces, and 12 small processing factories. This scenario assumes a very active industrial policy from the government, which supports attracting and creating processing factories in Timor-Leste. Country Operations Results Chain Input Output Outcome Basic Elements Instruments Menu of Integrated Solutions Regulations and Design of Tibar Analytics Value chains policy reforms Bay master plan Business environment Public-private dialogue Economic Institutional zones strengthening Technical Spatial analysis and Design of industrial assistance Clusters prefeasibility study park Infrastructure Evaluation and feedback PPD established PPD impact on reform process Institutional Improved capacity building effectiveness of Industries institutions Agribusiness Manufacturing CIIP Annual Report 2016–17 45 Non-ACP Country Operation FY17 COUNTRY RESULTS 170 investment 820 million Country Operations opportunities USD public identified and promoted investment leveraged Jordan $71 million in Albania, $249 million in Jordan, $500 million in Egypt 4 SMEs trained or supported 159.5 million USD private investment leveraged Macedonia, FYR $159 million in Macedonia, FYR; $0.5 million in Tunisia Timeline 2013 2014 2015 2016 2017 2018 2019 Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar Macedonia, FYR Tunisia Russian Federation Vietnam Kazakhstan I Croatia Georgia Serbia Tunisia Competitiveness Enhancement Unit Kazakhstan II Albania Jordan Egypt, Arab Rep. CIIP Annual Report 2016–17 47 ALBANIA Pathways to Jobs from Tourism Leverage 2017 Project for Integrated Urban and Tourism Development ($71 million) Partner coordination European Union, State Secretariat for Economic Affairs Grant amount $115,000 Project Activities The government of Albania has identified the south of the country as a pillar for regional development based on its endowment of rich and varied natural resources and cultural heritage assets and their significant potential to drive local and regional economic growth through tourism. The WBG is contributing to this agenda through the PIUTD, a €70 million lending program that targets tourism-related infrastructure improvements in four destination towns (Berat, Gjirokastra, Permet, and Saranda) and selected nearby tourism sites. The landscape around Permet is ideal for hiking, white- Berat, a 13th century UNESCO World Heritage site, is known as the “town water rafting, and horseback riding, as well as a base for a of a 1,000 windows.” It is currently only a half-day visit on tourists’ itineraries. range of nature tourism activities. The PIUTD aims to make Berat at least an overnight option by investing in themed walking trails that connect the old town (above) to the Ottoman castle that overlooks it, by promoting bed and breakfast stays in traditional homes, and by featuring a weekly organic farmers market, monthly arts and crafts exhibitions, and more. Despite the land’s rich tourism resources, this region of Albania has challenges. First, basic urban infrastructure is inadequate to meet residents’ needs and a growing tourism demand, existing assets are deteriorating because of a lack of maintenance, and newly created municipalities lack the capacity to deliver supporting services in a sustainable way. Second, tourism is concentrated over a short time in the summer, is not sufficiently diversified, and is dominated by high-volume and low-value local and regional markets. Third, tourism activities, both at the national and local level, are not supported or managed in a coordinated way. To address those challenges, the CIIP grant helped to define PIUTD interventions that can leverage the destination infrastructure and site-level improvements to create vibrant and viable destinations. CIIP funds were used to conduct a product (and potential product) inventory of the PIUTD project area to define a menu of support under PIUTD that could enhance the value of the products to different tourism market segments. For instance, 14 potential tourism activities were identified around Permet, such as hot springs, six different walking and biking trails, two paragliding sites, bungee jumping, and whitewater rafting. These activities have all been included as PPP opportunities. CIIP funds were also used to conduct a baseline survey that covers all tourism-related enterprises, surveys for tourists’ ex- penditure and motivation, and household surveys in each of the targeted municipalities. The project seeks to increase tourists’ length of stay and daily expenditure in the target destinations, and the tourist and business survey established the following baselines: 48 • Saranda: Accommodation occupancy rates of 68 percent over 2015, average length of stay at 5 nights, and average spending per night of €50 for Albanians and foreigners • Berat: Occupancy rates of 71 percent over 2015, low length of stay at 1.1 night, lowest spending per night at €10 for Albanians and €20 for foreigners • Permet: Average occupancy rates of 78 percent over 2015, length of stay at 1.2 nights, spending per night at €30 for Albanians and €40 for foreigners • Gjirokastra: Low average occupancy of 45 percent in 2015, average length of stay 0.8 nights CIIP funds are being leveraged in a partnership with the US National Parks Service to develop site management plans and models for PPPs and investments for two key sites in the project area: Blue Eye and Porto Palermo. Those sites should leverage public and private investments of more than €20 million, some of which is already earmarked Country Operations under PIUTD. Blue Eye is a 50-hectare protected area around a unique fresh- Porto Palermo is an abandoned Ottoman castle and a former naval base water spring. The site is poorly managed with no interpreta- where CIIP funds are being used to define a development concept for a PPP. tion or activities beyond viewing the clear pool. CIIP funding The site has huge potential as an integrated tourism resort, combining ele- will unlock the potential of this site to be a flagship destination ments of marine and military history and interpretation. in southern Albania. Much of the CIIP work has centered on identifying potential products and how they can be woven into a tourism offer. Among the potentials identified were several agrotourism opportunities. Albania olive oil is a prized commodity in the region and especially from the olive presses in the south. Olive oil production in southern Albania is mostly organic and pressed in 200-year-old machinery. The CIIP funded product inventory uncovered numerous olive oil producers with poten- tial to add value to their products and to better connect them to markets. Most olive oil produced in the south is sold by word of mouth and packaged in recycled and unlabeled plastic water bottles. The situation is similar for local cheeses, raki, jams and preserves, and wine. There is obvious potential to link these pro- ducers to tourist markets and eventually export markets. CIIP Annual Report 2016–17 49 Project Results As described, the CIIP grant has funded a baseline data collection of the full inventory of tourism-related goods and service providers and existing products in the area of the PIUTD. With this baseline, the team developed a results framework and monitoring and evaluation plan for the PIUTD project so as to monitor job creation (PIUTD expects to create 500 new jobs in tourism-related businesses across the project area); tourists’ length of stay and expenditure (growth by 15 percent); and investments and new business creation (target of 60 new businesses created during the project period). This work also served to identify a rich pipeline of investment opportunities (€40 million or more), some of which will be seeded directly through the PIUTD project. Results Chain Input Output Outcome Impact Basic Elements Instruments Menu of Integrated Solutions Business environment Analytics Value chains Menu of activities Improved access to Gross number of defined and strategy markets jobs Public-private Institutional dialogue formulated strengthening Technical Share of tourism assistance Funding approved Improved tourism Clusters in GDP for infrastructure infrastructure Infrastructure PPD platform created Reforms enacted Private sector through PPD Evaluation and investment feedback PPP structure leveraged for destination Effectiveness of management institutions Institutional Increase in capacity building length of tourist Industries stay SME support SMEs trained or Tourism program designed supported 50 Country Operations CIIP Annual Report 2016–17 51 ARAB REPUBLIC OF EGYPT Upper Egypt Competitiveness Support Project Leverage 2017 Upper Egypt Local Development ($500 million) Grant amount $ 1,157,600 Background The CIIP project development objective is to enhance national and subnational government capacity to design and implement economic competitiveness programs in the lagging upper region of the Arab Republic of Egypt that will catalyze private investment and job creation. The CIIP supported the design and development of the WBG-financed program, Upper Egypt Local Development Program (UELDP), for $500 million. The project was approved by the World Bank Board in September 2016 and became effective in early October 2016. The UELDP aims to improve the enabling environment for private sector–led growth and to strengthen local gov- ernment capacity for service delivery in select Upper Egypt governorates. The program targets 2 of the 10 governor- ates: Sohag and Qena. The two governorates were selected on the basis of population size, poverty rates, economic potential, geographic contiguity, access to basic services, and governorate readiness. The program has two subcom- ponents: subcomponent 1 focuses on improving the environment and competitiveness and subcomponent 2 focuses on improving access to quality services. Project Results CIIP completed a rapid assessment of sector competitiveness and opportunities in Sohag and Qena in May 2016. The study provided an overview of the private sector, distribution of private enterprises by size and markets, employ- ment, and contribution of various supply chains to the region’s economy. The strengths and weaknesses of various subsectors were assessed in manufacturing (furniture, handicrafts, and handwoven textiles); agribusiness (medicinal and aromatic crops); livestock activity (dairy); marble and granite; and others. The rapid analysis assessed the subsectors’ market potential. For example, the overall exports in furniture increased by 9 percent in 2014; however, there are no exporting furniture firms in Sohag. For the tomato paste supply chain industry, both governorates have a comparative advantage in weather, access to land, and farm gate price competi- tiveness. Furthermore, the assessment included a detailed list of recommendations for the analyzed industries. Those recommendations included areas of opportunity for on-the-job skills training, promotion of good practices, invest- ment promotion, and microfinance solutions. In November 2016, a demand assessment of industrial zones in the region was conducted. The purpose was to deter- mine if upgrading services, infrastructure, and management or expansion of the industrial zones in Qena and Sohag could contribute to improving competitiveness and to supporting the growth of existing tenants and potential clients. The study involved the zones of Ahaywa, Gerga, Hew, Kawthar, Qeft, and Tahta, which range from 105 hectares to 456 hectares and from 6 percent to 90 percent occupancy. Some of the main findings include the following: • Almost 80 percent of the respondents face problems in recruiting skilled nonmanagerial staff. This difficulty is generally because of a lack of qualified labor. • Electricity and water are the two priority areas for respondents. Those who were unsatisfied with services ex- pressed concern about insufficient electricity and frequent power outages almost daily. Water issues included insufficient supply, poor quality, and outages. • The highest satisfaction in infrastructure services was reported for internal roads. • Respondents complained about burdensome licensing and registration procedures. 52 From those findings, the report recommended improving maintenance services for the infrastructure networks to enhance business operation efficiency, exploring options for a new governance structure for industrial zones, mitigat- ing regulatory impediments, and establishing business support centers’ innovation and technology-based services. In November 2016, the CIIP supported the development of a Competitiveness Implementation Manual to improve the business environment and competitiveness in the region. The draft manual was presented at a workshop in Qena on April 2, 2017. The workshop included the local implementation units from Qena and Sohag; the director from the Program Coordination Office; and representatives from the Ministry of Investment and International Coopera- tion, Ministry of Trade and Industry, Industrial Development Authority, and Ministry of Planning. Country Operations Results Chain Input Output Outcome Impact Basic Elements Instruments Menu of Integrated Solutions Sector and Competitiveness Private sector opportunity initiatives investment Analytics Value chains Business environment assessment implemented with leveraged Public-private Economic private sector Institutional dialogue zones strengthening Technical assistance Clusters Industrial zone Zones with updated demand assessment infrastructure Infrastructure PPD created Reforms enacted through PPD Evaluation and feedback Governance framework for 2 local zone management implementation designed units established Industries Firm-level assistance SMEs trained or Manufacturing Livestock Agribusiness program designed supported Marble and Granite CIIP Annual Report 2016–17 53 JORDAN Mobilizing Syrian Diaspora for New Markets and Investments for Syrian Refugees Leverage 2017 Jordan Program for Results: Economic Opportunities for Jordanians and Syrian Refugees ($249 million) Partner coordination UK Department for International Development, Deutsche Gesellschaft für Internationale Zusammenarbeit, European Union, US Agency for International Development Grant amount $250,000 Background This CIIP grant has played an important role in the Jordan Program for Results: Economic Opportunities for Jorda- nians and Syrian Refugees. This $300 million project supports the Jordan Compact between the international com- munity and the government of Jordan. The compact, which was signed on February 4, 2016, in London provides economic opportunities for Syrian refugees in return for improved market access to the European Union, grants, and concessional finance. Project Results The key results in the project include labor market reforms to ease the work permit process, investment climate re- forms to improve the weak business environment, and strengthened investment promotion capabilities. The impact indicators include creating more than 50,000 jobs (using the proxy of number of work permits issued), facilitating more than 30 investments, leveraging more than $40 million in private investment, and creating the Syrian Interna- tional Business Association. During the earliest stages of this WBG operation, a critical factor for success involves attracting investors who will employ Syrians. As a result, a comprehensive technical assistance program was designed to support the government’s investment promotion efforts. This technical assistance program consists of three broad themes of support: • Strengthening the relationship with the diaspora • Strengthening the key value chains where refugees can work—manufacturing, agriculture, and construction • Capacity building of the Jordan Investment Commission The diaspora work, which CIIP is the prime funder along with the UK Department for International Development and Deutsche Gesellschaft für Internationale Zusammenarbeit, is based on the premise that there is a large pool of Syrian diaspora investors already in Jordan. Moreover, there is evidence that Syrian investors are very enthusiastic employers of their fellow Syrians. From the start, Syrian investors had no collective voice to advocate for a resolution of regulatory barriers or to fa- cilitate investment or trade. This meant that (1) the business diaspora had to be located, (2) their issues and concerns had to be identified, and (3) they needed to be organized. Those tasks required extensive consultation, analysis, and substantive meetings. The CIIP grant financed 19 consultation meetings and focus groups conducted globally to locate the business dias- pora and to identify the main issues or concerns. On February 27–28 2017, a Syrian Diaspora Business Forum took place in Germany. To organize the event, the CIIP collaborated with the WBG, Deutsche Gesellschaft für Internatio- nale Zusammenarbeit, UK Department for International Development, International Organization for Migration, and Center for Mediterranean Integration. More than 100 stakeholders participated, including representatives from the Syrian diaspora community, academics, private sector, policy makers, NGOs, and think tanks. The initial findings exceeded expectations. The team found a thriving but remarkably disconnected diaspora com- munity located in a wide range of places, from Buenos Aires to Dubai, with interest in supporting investments that would help refugees from virtually everywhere. ESCOA has estimated that this diaspora has potentially $100 billion of investible capital at its disposal. That capital significantly differentiates it from many other diaspora communities. 54 The initial engagement with the Syrian diaspora quickly revealed two broad areas of interest: investing in host coun- tries and in Syria. No strong preference was indicated toward any one host country. That said, countries that made an effort to welcome investment were highly appreciated. One-third of the diaspora already had operating investments in Syria, and with the possibility of return, an additional third would go back. For the diaspora, investing in host countries was not seen as a barrier to investing in Syria as well. At the business meeting, the government of Jordan made a strong pitch to the Syrian diaspora that generated a lot of interest, and some initial investment transactions were identified in the garments and water sectors. The Jordan International Compact is currently following up on those specific transactions and connecting directly with all the investors that attended the business forum. Country Operations Other outcomes of the forum included committing to specific transactions and working directly with all the inves- tors that attended the forum, establishing the Syrian International Business Association, and articulating measures to resolve financing and investment climate constraints. The association launched in July 2017. The team also conducted an online survey that gathered 185 responses from diverse groups within the Syrian di- aspora. The survey respondents were either investors, business owners, or senior management, with more than 95 percent having an undergraduate degree or higher and most of them engaged in the service sector. For investment potential, the survey found that more than 50 percent of the respondents currently invest or support refugee activities in neighboring host communities, that there is high interest in direct investments whether in refugee host countries or in Syria, and that there is strong interest to invest in funds that lend money to MSMEs in host countries. Although contributing to the development impact for refugees is important, the Syrian diaspora, broadly speaking, expects a private equity–level return of 20–25 percent. Finally, the survey found that there is high interest in a Syrian business association like the Syrian International Business Association. Although it is still early in the process, indications show that this activity is valuable for Jordan’s investment promotion efforts, for potentially other host countries, and for the eventual reconstruction of Syria. A similar exercise for the Iraqi, Libyan, and Yemeni diaspora is recommended. Results Chain Input Output Outcome Impact Basic Elements Instruments Menu of Integrated Solutions Analytics Value chains Joint Syrian diaspora 170 investors $10 million Business environment action plan identified in private Public-private Regulatory barriers investment Institutional Labor dialogue identified leveraged strengthening and skills Technical assistance Diaspora business 6 strategic (target: $200 Access Evaluation and forum and conference partnerships created million in FY19) feedback to finance 40,000 work Labor market reforms Less burdensome permits issued work permit process Industries PPD created Improved effectiveness of Manufacturing Agriculture Construction Syrian International institutions Business Association created Active participation of Capacity building of diaspora Jordanian Investment Commission CIIP Annual Report 2016–17 55 KAZAKHSTAN Leveraging Transport Connectivity to Develop Competitive and Innovative Industries and to Promote Job Creation along the Center–South Road Corridor in Kazakhstan Leverage Center–South Transport Corridor Project Partner coordination Organisation for Economic Co-operation and Development, European Commission Grant amount $419,435 Background This CIIP project helped prepare the Center–South Transport Corridor, a planned lending of $2.1 billion. The Center–South Road Corridor Project complements the construction of a large road infrastructure investment with the development of competitive, job-creating SMEs and industries. However, because of the collapse in oil prices, the government decided to put the project on hold. Project Results The CIIP completed a spatial analysis of firms along the center–south road corridor to prepare for the project. The objective was to identify established and latent clusters of firms that stood to benefit most from the market ac- cess gains resulting from the road corridor. To carry out the assessment, the national business registry database was geocoded to identify firms. In addition, the national road network was mapped, and road types and conditions were assigned values corresponding to their most appropriate travel speeds. This coding allowed for each firm and location to be analyzed for their overall market access by measuring the travel time to Kazakhstan’s 15 largest cities using the existing road network. The analysis confirmed the hypothesis that transport costs are a significant factor in deciding a firm’s location in Ka- zakhstan. Firms that benefit from strong agglomeration economies will continue to cluster both with firms in other industries and in places where travel times to major markets are lowest. Firms dependent on immobile resources, such as land and water, are less likely to cluster on the basis of market access to major urban areas. They would benefit from more road investment in rural areas near their production input resources that would connect them to customers in major markets. The city of Arkalyk, which is within the proposed Astana Corridor, was identified as the most likely to benefit from Astana Corridor road enhancements. It has an existing base of firms, connective infrastructure, and is close to immo- bile resources. Arkalyk is expected to see the largest relative improvements in travel time to market because of the in- vestment (more than three fewer hours travel time to Astana). In the Karaganda Corridor, firms along the corridor where it con- tinues parallel to the northwest shore of Lake Balkhash would reap the most gains, with ap- proximately two to three hours less travel time to the nearest markets given the provided road data. The map shows a rough esti- mate of gains to major cities by upgrading corridor roads, with the largest gains shaded in blue. 56 Although the Center–South Road Corridor Project was suspended, the analytics provide valuable insights and can be reconsidered if the project is resumed in 2018. The team conducted a review of the logistics sector of Kazakhstan to identify challenges and to make recommenda- tions. Among the challenges are that (1) the sector faces increased costs because of inadequate logistics infrastructure, poor operation, and underdeveloped logistics services; (2) there is uncertainty regarding delivery times because of inefficiencies at the border crossing points, where there are wait times, inefficient customs procedures, and the need for unofficial payments to expedite processing; (3) there is limited access by private operators to the railway market and intermodal transportation; and (4) there is a lack of knowledge of modern logistics and supply chain manage- ment as well as a need for adoption of supply chain management practices. The review recommends (1) developing a national transport and logistics strategy and action plan; (2) ensuring integrated planning of intermodal facilities Country Operations and logistics centers; (3) encouraging market entry of international third party logistics; (4) developing value-added logistics services; (5) improving cross-border procedures and increasing reliability; (6) ensuring market access for pri- vate intermodal operators, which involves the use of more than one form of transport for a journey; (7) improving education and training in logistics and supply chain managment; (8) establishing a PPD on transport and logistics; and (9) introducing performance measurement metrics and certification standards for self-regulation. Results Chain Input Output Outcome Impact Basic Elements Instruments Menu of Integrated Solutions Spatial analysis of Time and cost to Jobs created firms along road import and export (target: 8,000, Analytics Business environment corridor of which 4,000 Public-private Market accessibility dialogue are for women, Institutional index strengthening Technical beyond FY18) assistance Jobs and 3 interventions Evaluation and competitiveness designed Infrastructure feedback diagnostic Growth poles and corridors Net number of new firms in Database and $ value commited targeted sector mapping of firms to infrastructure (target: 1,000 investment beyond FY18) Institutional Effectiveness of capacity building institutions Industries Agribusiness Logistics Tourism CIIP Annual Report 2016–17 57 FYR MACEDONIA Competitive Industries and Innovation Support Program Leverage 2 WBG Development Policy Loans on Competitiveness ($100 million); 2 investment operations—WBG Skills Development and Innovation Support Project ($24 million), EU Local and Regional Competitiveness in Tourism (€18 million) Partner coordination European Commission, US Agency for International Development Grant amount $1,523,455 Background This CIIP grant, initiated in May 2013 and closed in March 2017, was created to enable the former Yugoslav Repub- lic of Macedonia’s economy to transition to a higher growth trajectory through reforms that incentivize productivity growth in major sectors in which the country has a latent competitive advantage, such as manufacturing, agriculture, and tourism and that tackle enabling factors, such as skills and innovation. These were addressed through two WBG DPLs on competitiveness (in 2012 and 2014) and two investment operations, WBG Skills Development and Innovation Support Project (lending) and EU Local and Regional Competitiveness Project (nonlending), with focus on tourism. Project Results The first DPL of $50 million was approved by the board of directors of the World Bank on November 2012 to strengthen the competitiveness of FYR Macedonia’s economy by incentivizing productive investment and techno- logical upgrading in the manufacturing, agribusiness, and trade logistics sectors and by establishing conditions to pro- gressively increase labor market flexibility and skills development. The second DPL of $100 million became effective on July 2014 to build on the reforms supported by the first DPL. In addition, it put more emphasis on reforms that can incentivize greenfield investment and technology upgrading in manufacturing, promote agribusiness develop- ment through improved management of state-owned agricultural land, introduce a risk-based approach for inspec- tions in international trade, and initiate legal amendments that foster labor market flexibility and innovation capacity. An investment operation in tourism from the EU Local and Competitiveness Project with funding of €18 million was identified, developed, and approved with CIIP support. This project, which was approved in January 2016 and became effective in July 2016, will be implemented through December 2019. It will enhance the contribution of tourism to local economic development and will improve the capacity of the government and public entities to foster tourism growth and to facilitate destination management. The project invests in policy reforms to create an enabling environment, technical assistance in destination management, and tourism-related infrastructure and noninfrastructure. The successful implementation of the FDI attraction reforms in FYR Macedonia has led to a large increase in total and net exports. FDI inflows were 3.6 percent of GDP in 2016, which is up from 2.3 percent in 2014 and 2015. Goods exports increased to 34.1 percent of GDP in 2016, which is up from 32.4 percent in 2014 and 33.5 percent in 2015. Employment grew 2.1 percent year-over-year in 2016, with a large share of jobs linked to public stimulus programs. The average unemployment rate was 23.7 percent at the end of 2016, which is down from 26.1 percent at the end of 2015. In the agribusiness sector, the most important reform was the approval of a law that provides for gradual sale of state-owned land to agricultural producers using market principles. The preparatory work for piloting agricultural land sales has been completed. The CIIP also helped to improve the efficiency of trade logistics services by introduc- ing a risk-based approach for sanitary and health inspections that is facilitating the transportation of manufacturing and agricultural goods at border crossings. This improvement has reduced transport delays and administrative costs. In the manufacturing sector, the WBG team built on the DPLs supported by CIIP and worked with an inter- institutional working group coordinated by the Ministry of Finance. The WBG team and the working group implemented a pilot supplier development program to connect local SMEs from light manufacturing industries with large foreign companies, with a special focus on the automotive value chain. A readiness diagnostic of do- mestic firms to supply foreign companies was undertaken (particularly to assess the firms’ ability to meet quality 58 standards), and five qualified suppliers were chosen through a transparent multistage process. The companies will benefit from training, technology extension, and facilitated access to credit. The DPL team produced a technical note and organized several workshops for the government counterparts on international best practices in design and implementation of supplier development programs. In November 2016, a tourism development plan was created with CIIP funds for 10 strategic destinations in prior- ity market segments across the country. The report includes targets, actions, and expected effects, as well as recom- mendations. The purpose of the development plan is to ensure that the market segments can grow to their fullest potential. Results of the project so far include establishing and staffing a project implementation unit led by the cabinet of the deputy prime minister for economic affairs. The unit has received training by the World Bank team on PPD, market assessment and segmentation, destination management, and monitoring and evaluation. The team has also worked with the unit on environmental, social, and fiduciary (financial management and procurement) aspects of project Country Operations implementation. Furthermore, the project has completed the tourism market assessment. In the area of innovation, the Fund for Innovation and Technological Development (FITD), with support from the World Bank–funded Skills Development and Innovation Support Project (2014–19), launched the third call for proposals for mini grants for innovative start-up and spin-off firms and for matching grants from established firms for commercialization of innovation. A total of 52 applications were received. Four were approved for €119,521 of funding from the government’s program for rural development and from the World Bank’s investment operation. In February 2017, the fund launched the fourth call for minigrants for start-up and spin-off firms and for matching grants for commercialization of innovation. A total of 59 applications were received, of which 31 applications were for the mini grants and 28 applications were for the matching grants. An administrative check is currently under way, and the awards were made in September 2017. FITD, with technical assistance from WBG, is improving the rulebooks for the instruments for technology extension and for accelerating the fifth call expected this autumn. Tourism assets in Skip, Radovis, and the surrounding area (seen above) is one of 10 destinations in a state of neglect and in need of renova- tion. CIIP funds were used to define investment gaps such as (a) the type of accommodation offered versus the markets being targeted, (b) weak tourism offerings for priority markets, (c) poor maintenance of tourist sites, and (d) weak service and tourism promotion around the circuit. CIIP Annual Report 2016–17 59 Results Chain Input Output Outcome Impact Basic Elements Instruments Menu of Integrated Solutions Analytics Value chains 2 regulations and Time and cost 8,000 jobs created Business environment policy reforms to comply with Public-private dialogue Economic regulations Institutional Labor zones $387 million strengthening and skills Technical # of FITD assistance Clusters PPD created in private instruments enacted Public finance Institutional investments through PPD Growth poles capacity building Innovation Evaluation and and corridors FITD strengthened feedback 5% growth in tourist arrivals Financial instruments 40.2% of private and volume funding mobilized in 57% share in committed FITD medium high- Industries SME support 78 SMEs trained or tech exports Agribusiness Information Technology Manufacturing programs supported Tourism FITD accelerator programs Patents for innovation Fabrication Labs 60 Country Operations CIIP Annual Report 2016–17 61 SERBIA CIIP Competitiveness Project Leverage Competitiveness and Jobs Project ($100 million) Partner coordination European Union Delegation, UK Embassy Grant amount $750,000 Background The CIIP grant supported the design and implementation of the Competitiveness and Jobs Results-Based Loan ($100 million), which became effective on March 31, 2016. The overall engagement experienced several delays and challenges because of the national election on April 24, 2016. A cabinet shuffle in key ministries for the project (Ministry of Economy; Ministry of Education, Science, and Technological Development; and Ministry of Public Administration and Local Self-Government) caused further delays. Key Activities In January 2017, the Strategic Framework for the Serbian Development Agency was adopted by the Ministry of Economy. The project supported the development of the framework as part of the reforms. The Ministry of Econ- omy is currently preparing sectoral policies for four sectors: wood and furniture, plastics and rubber, food processing, and machinery and equipment. Some of the main characteristics of these sectors are the following: • The wood and furniture sector includes 1,984 companies that employ 22,196 workers. Sector revenues are €754 million and exports are €279 million (almost doubled from €169 million in 2008). Also, improving com- plexity of the value chain by strengthening service activities, such as design and marketing, could add signifi- cantly more value. • The plastics and rubber sector consists of approximately 1,100 companies that employ 19,832 workers. Sec- tor revenues are €1.3 billion and exports are approximately €800 million (more than doubled from €400 mil- lion in 2009). The sector is now undergoing rapid growth and breaking through to foreign markets thanks to less expensive labor and electricity prices. To build on this expansion, investments are needed in technol- ogy and innovation that make the products more competitive. Linking local companies from the rubber and plastics sector in clusters or similar forms of association represents a significant opportunity for an intensive transfer of knowledge and experience by reducing input costs and by increasing joint research, development, and adoption of dominant trends. • Food processing is the largest manufacturing sector in Serbia and accounts for 26 percent of overall manufac- turing. It consists of approximately 3,900 companies that employ 71,273 workers (total employment in Serbia is about 1.8 million people). One segment where Serbia could significantly improve its performance is in the export of fruits and vegetables, particularly berries. • Machinery and equipment consists of 1,338 companies with 23,061 workers. It is one of the largest export- ing sectors in Serbia, with exports of around €2 billion in 2015. Serbia is well positioned to benefit from the current wave of nearshoring. However, the potential growth of the sector may be significantly affected by the limited availability of a qualified work force and the limited capacities of family enterprises to adjust their businesses to the requirements of high quality and reliability. CIIP supported the development of a comprehensive registry of administrative procedures faced by businesses. In total, about 2,500 procedures were identified and listed. The next stage will include a detailed description of all the steps for each procedure and training for approximately 450 civil servants to facilitate the process. 62 Some Result to Date After a setback in 2016, there is now good progress on the matching grants program. The technology transfer facility has been met, it has been established, and funding (approximately $1 million) has been allocated in the 2017 budget. The technology transfer facility pipeline currently contains 19 applications. The mini and matching grants were pi- loted by the Innovation Fund between 2011 and 2016 and were funded with €6 million from the EU Instrument for Pre-Accession Assistance funds. In this period, the Innovation Fund managed four financing calls during which 326 Serbian firms submitted applications for either the mini or matching grants programs. Of those, 91 firms applied to the matching grants program and 247 firms applied to the mini grants program. Overall, 469 projects were submit- ted by the 326 firms. Of those, 55 projects were approved for Innovation Fund support, with a 12 percent approval rate. Country Operations The call for proposals was announced on June 1, 2017, and was open until September.1 The call includes both mini and matching grants applications. The financing offered by the mini grants program covers a maximum of 85 per- cent of the total approved project budget and up to €80,000 for a one-year project. The financing offered by the matching grants program covers a maximum of 70 percent of the total approved project budget and up to €300,000 for a two-year project. Financing decisions are competitive and use a robust international peer review system and the independent investment committee that includes international and diaspora professionals experienced in managing technology firms, scientific research, commercialization, and investor communities. Results Chain Input Output Outcome Impact Basic Elements Instruments Menu of Integrated Solutions Analytics Value chains Investment law on # of firms that Private Business environment Public-private investment and benefit from new investments Institutional dialogue export promotion services (target: 90 (target: strengthening Technical passed beyond FY18) $2.5 million assistance beyond FY18) Public finance Development agency established Catalytic support for firms Innovation Evaluation and Results-based Inter-Ministerial Net # of new feedback Working Group management units firms (target: established set up in three 52 beyond ministries FY18) Industries Funding spent # of innovative Agribusiness Manufacturing on innovation products or services and research and developed (target: development 20 beyond FY18) Innovation Fund established (FY17) 5 new export promotion services established 1. See http://www.innovationfund.rs/innovation-fund-relaunches-two-successful-programs-serbian-smes/. CIIP Annual Report 2016–17 63 TUNISIA Competitiveness Enhancement Unit and Competitiveness Diagnostic and Public Private Dialogue Leverage Third Export Development Project ($50 million) Partner Coordination African Development Bank, European Commission Grant $305,030 Background CIIP started its engagement with the sector diagnostics and competitiveness through PPD (2013–16) work, which pioneered a sector-specific PPD approach through a pilot on pharmaceuticals, electronics, garments, and informa- tion technology services. The project was recently completed featuring a successful experience, especially in pharma- ceuticals, and had a clear effect on both country policy and World Bank operations. In October 2014, a decree modernizing the regulatory framework of clinical trials in Tunisia was issued. It was ac- companied by an action plan to develop clinical trials in Tunisia, followed by a participation in the World Economic Forum in January 2016 by the minister of health to promote investments in clinical trials. Another key reform on pricing is currently under preparation. This work led to the reduction of the average time for medical appraisal re- views, which is a necessary step to place a product on the market, by more than 70 percent—from 2.5 to 3 years in 2013 to 6 to 9 months in 2017. Project Results The project successfully supported backbone institutions that promote investment and increase competitiveness. The best example was in the information technology sector where technical support to Smart Tunisia, the newly created Tunisian investment promotion agency in information technology and offshore services, has delivered unexpectedly positive returns. Smart Tunisia signed 17 conventions with information technology services and offshoring firms in 2015, which have committed to employing 3,929 people over 4 years, 1,000 of which (25 percent) were already employed by May 2016. Smart Tunisia is now negotiating with a pipeline of 30 foreign investors for a potential of 10,000 jobs in information technology and offshoring in the coming 4 years. The second CIIP diagnostic and PPD support aimed at supporting the government in establishing a competitiveness enhancement unit that can replicate the PPDs in any sector consisting of the following: • A delivery unit reporting to the prime minister and focused on implement policy priorities (for example, facilitating access to housing for first-time homeowners, enabling access to microcredit in lagging regions, and placing 25,000 young unemployed people in existing job vacancies) • A dedicated interministerial value chain and cluster development (through PPD) unit dedicated to a bottoms- up approach to strengthen the competitiveness of high-value-added Tunisian products oriented toward grow- ing markets (ranging from high-end olive oil to fast-fashion garments to medical tourism) CIIP supported the preparation of the concept note for the delivery unit and secured $1.8 million through the Mid- dle East and North Africa Transition Fund to finance the rollout of the delivery unit in its first 2 years of operations. The unit is now on track and is currently working on three main priorities: (1) monitoring and supporting implemen- tation of the prime minister’s three priority programs on microfinance, housing, and unemployment; (2) supporting the implementation of eight priority public investments identified during the Tunisia 2020 investment forum; and (3) conducting deep-dive analyses with recommendations on purchasing power and industrial licensing. The team then turned to supporting the creation of an interministerial platform to conduct cluster and value chain specific PPD facilitation. Specifically, the platform ensures coordination among the value-chain development com- ponents of each of the four projects based on an approach such as the one piloted by the sector diagnostics and competitiveness through PPD. The identification and implementation of actions through the platform and related projects aim to catalyze links between firms in targeted value chains, to increase local value addition, and to lead to 64 more exports and jobs. The four investment projects from the International Bank for Reconstruction and Develop- ment will finance the operational costs of the platform (through lending proceeds), while also reserving significant investment budgets (estimated at $50 million across the four operations) for implementing its recommendations. Expected Impact The activities financed through the related projects are expected to impact 12–16 value chains, including agrofor- estry (exports of fresh tomatoes, high-end olive oil, rosemary, and other products based on aromatic and medicinal plants); labor-intensive activities (modernized artisanal products and fast-fashion garments); and services (offshoring of information technology services and medical tourism). From those products, 6,000 firms and farmers are expected to benefit, with the aim of increasing export growth rates by 50 percent compared to the national average and creat- ing more and better jobs, especially for young women and men in Tunisia’s lagging regions. Country Operations The combined effect of the two CIIP-funded technical assistance activities have enabled sustainable local capacity to conduct sector-specific PPDs in all regions and sectors to (1) inform policy reforms, (2) orient public investments, and (3) directly support private sector firms in strengthening their competitiveness on higher-value-added market segments, with all related effects on exports, job creation, and regional development. Results Chain Input Output Outcome Basic Elements Instruments Menu of Integrated Solutions Analytics 8 PPDs strengthened 6 sectoral strategies Business environment Value chains established through Public-private Institutional dialogue Competitiveness PPD strengthening Technical enhancement unit assistance Clusters established 1 reform enacted per sector per year Catalytic support Launch of a cluster for firms development unit Improved public Evaluation and service delivery feedback $1.8 million mobilized for Export growth in support of the targeted sectors competitiveness (target: 50%) enhancement unit Industries Pharmaceuticals Information Technology Medical Tourism Garments and Textiles CIIP Annual Report 2016–17 65 66 CHAPTER 3 Financial Portfolio and Resource Use through June 2017 CIIP Annual Report 2016–17 67 Table 3.1 Donor contribution schedule   Committed Paid-in Outstanding Actual in USD Total in USD   in contribution currency FY13 FY14 FY15 FY16 FY17 SDTF (ACP)       EC 15,038,850.00 13,534,965.00 1,503,885.00 - 10,039,184.32 7,750,421.73 - - 17,789,606.05 Subtotal       - 10,039,184.32 7,750,421.73 - - 17,789,606.05 MDTF         Switzerland 3,000,000.00 3,000,000.00 - 1,625,652.72 1,690,140.85 - - - 3,315,793.57 Austria 5,000,000.00 5,000,000.00 - 6,454,500.00 - - - - 6,454,500.00 Norway 11,000,000.00 11,000,000.00 - - - 1,494,463.69 - - 1,494,463.69 EC 4,708,000.00 4,237,200.00 470,800.00 3,080,915.20 - 2,395,995.35 - - 5,476,910.55 Subtotal     11,161,067.92 1,690,140.85 3,890,459.04 - - 16,741,667.81 Total 11,161,067.92 11,729,325.17 11,640,880.77 34,531,273.86 Investment income (a)   14,491.21 36,605.48 36,596.84 34,060.09 74,865.73 196,619.35       Grand total 11,175,559.13 11,765,930.65 11,677,477.61 34,060.09 74,865.73 34,727,893.21 Figure 3.1 Total Donor Contributions (Including Investement Income), Commitments, and Disbursements 40,000,000 35,000,000 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 - Total Donor Contributions Current CIIP Commitments Disbursements Proposed New Received and Investment Commitments (Batch 1) Income Table 3.2 Summary of Project-Level Commitments and Disbursements Sources and Uses $ Total Total donor contributions received (MDTF + SDTF) 34,531,273.90 Investment income on MDTF Funds 196,619.35 Total Funds 34,727,893.25 Current CIIP commitments (Operations, Knowledge, and Administration) 28,129,902.13 Central 2% fee 690,625.48 Remaining Balance 5,907,365.64 Disbursements (disaggregated by Operations, Knowledge, and Administrative Categories) 21,658,391.96 Central 2% Fee 690,625.48 Program Administration MDTF: includes management, collaboration, global knowledge, competitiveness programs, and 1,576,897.96 analysis and assessment Program Administration SDTF: includes management, competitive analysis, competitiveness programs, innovation and 1,804,445.41 entrepreneurship support, and innovation and enterpreneurship programs at industry level MDTF — Country Operations and Knowledge 9,951,465.52 SDTF — Country Operations 7,634,957.59 68 Table 3.3(a–c) Project-Level Disbursement Approved Actual Disbursed Grant Grants FY14 FY15 FY16 FY17 Balance Table 3.3a: Ongoing Country Operations (ACP) Ethiopia $ 1,365,000 157,284.78 540,146.26 305,840.71 195,260.63 166,467.62 Haiti $ 1,875,000 294,516.24 594,906.52 511,884.43 241,505.24 232,187.57 Jamaica $ 525,000 - 122,206.20 229,346.69 83,716.88 89,730.23 Mauritania $ 420,000 - 47,704.56 215,098.68 108,785.57 48,411.19 Nigeria $ 1,400,000 - - - 437,475.44 962,524.56 OECS countries $ 500,000 - 62,312.02 238,518.37 85,894.19 113,275.42 Suriname $ 695,000 - - - 243,060.11 451,939.89 Tanzania II $ 483,000 - - - 218,819.41 264,180.59 Timor-Leste $ 250,000 - - 99,326.36 65,850.20 84,823.44 Subtotal 7,513,000 451,801.02 1,367,275.56 1,600,015.24 1,680,367.67 2,413,540.51 Table 3.3b: Ongoing Country Operations (World) Albania $ 115,000 - - - 55,663.55 59,336.45 Egypt, Arab Rep. $ 1,157,600 - - - 257,097.18 900,502.82 Jordan $ 400,000 - - - 164,673.84 235,326.16 Kazakhstan II $ 419,435 - - 137,837.34 151,087.10 130,510.62 Macedonia, FYR $ 1,523,456 454,953.94 420,467.71 595,386.89 52,647.19 - Serbia $ 750,000 - 149.15 216,299.80 247,079.69 286,471.36 Tunisia $ 786,188 253,742.25 295,754.80 181,898.75 54,792.29 - Tunisia II $ 305,030 - 10,001.50 28,598.92 107,963.09 158,466.49 Subtotal 5,456,709 - 726,373.16 1,160,021.70 1,091,003.93 1,770,613.90 Table 3.3c: Ongoing Knowledge Initiatives Country Innovation Diagnostic for $ 500,000 - - 239,936.30 194,272.38 65,791.32 Competitiveness and Employment creation in ACP, transition and other developing countries Experience with matching grants $ 75,000 - - 74,918.91 - 81.09 Enhancing WBG support to special economic $ 500,000 - 30,792.80 175,555.53 192,305.37 101,346.30 zones Subtotal 1,075,000 - 30,792.80 490,410.74 386,577.75 167,218.71 CIIP Annual Report 2016–17 69 www.theciip.org ciip@worldbank.org CIIP Competitive Industries and Innovation Program Financed by in partnership with