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SmartLessons is an awards program to enable IFC clients, partners, donors, and staff to share lessons learned in their dayto-day work. This brochure opens a door into a new kind of knowledge sharing. Instead of lengthy academic articles and formal reports, it presents first-hand and straightforward project stories with pragmatic useful analysis, written by professionals and for professionals. Through the prism of their own experience, good and bad, these authors aim to capture practical insights and lessons that could help advance development-related operations for private sector-led growth across the globe. While IFC supports private sector development both by investing and by providing advisory services that build businesses, this brochure focuses primarily on advisory services in particular. IFC advisory work aims to support small and medium enterprises, to improve the business enabling environment, to accelerate private participation in infrastructure, to increase access to finance, and to strengthen environmental and social responsibility. Much of IFC’s advisory services work is conducted through facilities managed and funded by IFC in partnerships with donor governments and other multilateral institutions.

DISCLAIMER IFC SmartLessons is an awards program to share lessons learned in development-oriented advisory services and investment operations. The ďŹ ndings, interpretations, and conclusions expressed in this paper are those of the author(s) and do not necessarily reďŹ&#x201A;ect the views of IFC or its partner organizations, the Executive Directors of The World Bank or the governments they represent. IFC does not assume any responsibility for the completeness or accuracy of the information contained in this document. Please contact the program at smartlessons@ifc.org.

SmartLesson 1 History, Culture, and IFC Assistance — Promoting Women’s Income Generation in Siwa Oasis by Carmen Niethammer, Heba Abdella, Kamai M. Siblini and Nermine Samir Fadi

SmartLesson 2 Innovative Ways of Promoting and Selling SME Management Training by Nada Abdelnour and Michel Botzung

SmartLesson 3 When a Frontier Market is on the Front Lines: Providing Value–Addition to Firms in Conﬂict–Aﬀected Countries by Bas Auer and Mary Porter Peschka

SmartLesson 4 From Advisory Services Recipient to Knowledge Provider: A Case Study from Morocco by Markus Pilgrim, Omar Balafrej and Zineb Benkirane

SmartLesson 5 Do Not Bank on Consultants to Deliver All the Goods! Sophisticated Clients Require Hands On Project Management by Raiomand Billimoria and Gregory Rung

SmartLesson 6 Working Our Way Down the Food Chain: A Corporate Value–Chain Approach to SME Management Training by Khadiga Fahmy and Nada Abdelnour

SmartLesson 7 Communication as a Tool in Policy Reform: Getting the Message Through in Egypt by Thomas Moullier and Sherif Hamdy

SmartLesson 8 A Business World Without Trial: Introducing Alternative Dispute Resolution in Pakistan by Navin Merchant and Muhammad Azhar Rauf

SmartLesson 9 When You Sweep the Stairs, You Always Start from the Top by Sebastian Molineus

HISTORY, CULTURE, AND IFC ASSISTANCE — PROMOTING WOMEN’S INCOME GENERATION IN SIWA OASIS CARMEN NIETHAMMER, HEBA ABDELLA, KAMAL M. SIBLINI, AND NERMINE SAMIR FADL Seven hundred miles from Cairo, the Siwa Oasis is located close to the Libyan border in Egypt’s Western Desert. Alexander the Great came through here in 331 BC for a consultation with the Oracle of Amun. The remote Oasis was connected to the rest of Egypt only when an asphalt road was built in the 1980s, linking Siwa and Marsa Matruh. Siwa’s solitary location has allowed Siwans to maintain their way of life and to preserve their Siwi language. Still today, Siwa is typically reached after a long 8-hour car ride through the desert. Yet it has recently welcomed internationally famous guests, including the Prince of Wales and Queen Paola of Belgium. Among others, the attraction is an IFC-supported Sustainable Local Development Project implemented by Environmental Quality International (EQI) that includes ecotourism, sustainable agriculture, women’s artisanship, and renewable energy. Dr. Mounir Neamatalla, President of EQI, a Cairobased private sector ﬁrm, chose Egypt’s Siwa Oasis as a unique location to implement the local sustainable development project. The IFC-supported project will have two levels of development impact: (1) At the macro level, the project aims to demonstrate that development initiatives can successfully be undertaken by the private sector and that the private sector has a role to play even at the grass-roots level of development; and (2) at the micro level, the project aims to empower Siwa’s population, promote entrepreneurship, and help preserve the delicate environmental and cultural balance of a threatened ecosystem. IFC’s contributions to the project include US$880,000 in loans and US$468,000 in advisory services grants. The majority of the funds (US$643,000) come from the Environmental Business Finance Program (EBFB), a Global Environment Facility (GEF) funded and IFC-managed program. The Grassroots Business Initiative supports the project with a US$237,000 loan, and PEP-MENA provided US$175,000 in advisory services to the project’s women’s artisanship component. The later is the focus of this SmartLesson.

The oracle of Siwa conﬁrmed Alexander the Great as both a divine personage and the legitimate Pharaoh of Egypt during a visit made prior to his campaign of conquest in Persia.

initiative were going to create employment in several sectors (ecotourism, farming, construction, etc.), it was also clear that, given the cultural context of Siwa, only men would be able to earn income from these opportunities. How would the initiative be able to also support women’s income-generating activities, when Siwan women typically do not leave the home once Lesson 1: Ensure that both women and men directly married? Even younger, unmarried girls would not easily beneﬁt from IFC-supported interventions, especially mix with men in the workplace. when the project takes place in a cultural context where physical gender segregation is the norm. In the past, women were known for their intricate embroidery skills, yet Siwan embroidery had become While the initial components of the Siwa development almost extinct, as only a few older Siwan women had 4

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the skills and some of them now had too poor eyesight to perform such work. Moreover, how would they pass on their knowledge if only a few younger women had expressed an interest in learning? What was needed was an environment conducive to teaching embroidery skills, where women could come together without overstepping cultural gender barriers. The initiative began to work with a group of about 50 women who were provided training by their elders in traditional Siwan embroidery techniques. The incentives for the young women to learn were primarily the opportunities to regularly socialize in a group of peers as well as to obtain a training stipend. Siwa’s embroidered products began to gain a market value and generate earnings for the women. News spread quickly through the towns, and a great demand emerged not only for the training, but also for the opportunity to work in the embroidery workshops.

EQI, in partnership with IFC, addressed this demand by training 300 unmarried Siwan girls in 12 diﬀerent locations throughout Siwa. The training took place at the married women’s homes. Each group was led by one trainer (married) and one training assistant (unmarried). Prevalent illiteracy among the trainees meant there was no need for course books and written materials. Much of the success of the training depended on the head coordinator, who oversaw the implementation of the training. She was assisted by 12 women in charge of training administration that included organization, supervision, distribution of embroidery samples, and accounting. Professionalized, quality-controlled embroidery production would be ensured through continuous learning and training of trainers.

Lesson 2: Make women’s artisanship component an integral part of the overall development initiative, leveraging other project components such as ecotourism. There must be millions of women’s embroidery initiatives around the world. Most of them have micro-enterprise character with the challenge of reaching local (let alone international) markets, thus making it difficult for such businesses to successfully scale-up. How would this women’s artisanship initiative be different? EQI’s upscale “Adrère Amellal Ecolodge” and the IFC cofinanced hotel in the surrounding area of the Shali Fortress attracted many eco-tourists who are interested in buying traditional high-quality souvenirs from Siwa. The premises of “Adrère Amellal” include a beautiful store where embroidered products are sold to mostly highend international tourists. Another store will be opened in the hotel nearby Shali Fortress, centrally located at downtown Siwa’s main intersection. The women’s artisanship initiative has also benefited from visits of famous tourists. Italian hautecouture designer Tony Scervino, a frequent visitor to Siwa, immediately took a liking to the intricate Siwan embroidery stitch, and designer models of the Ermanno Scervino Designer House in Italy have been showing off the Siwa Scervino line at catwalks in Milan. The word about the fashionable design that integrates embroidery by the women of Siwa was further spread when CNN and the BBC featured entire programs on how Italian women were proud to wear the Siwan embroidered haute-couture designer line. The story is a win-win situation: tourists make the products embroidered by women internationally fashionable and contribute to their demand; and the media coverage surrounding the famous Siwa-inspired fashion designs further increases an international interest in visiting the Oasis.

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Lesson 3: Measuring development impact is key not shared that the training has promoted a social space only for the success of the artisanship component in where women can regularly come together and discuss Siwa, but also for scaling up and replication elsewhere. issues pertaining to the community at large. A third set of questionnaires is being designed to evaluate the Under the women’s artisanship component, 300 women impact of the training on women’s ability to generate would be trained. How would that make a difference to income and how that affects decision-making within them or their families? Was the initiative really going to the household, as well as women’s entrepreneurial spirit. empower the beneficiaries, or would women’s economic The impact assessment will be completed 6 months after activities “upset” existing gender relations in the family? project completion (September 2007). The IFC team at an early stage of project implementation suggested that a monitoring and evaluation (M&E) framework would involve setting up a control group of women who would not benefit from the women’s artisanship initiative. In September 2005, baseline information was gathered from 60 women who would benefit from the artisanship project, and 60 who would not. An ongoing qualitative survey was also designed in February 2006 and women who completed their training were asked to participate in the survey. This was to obtain information on training quality and relevance. More than half of the survey questionnaires have been analyzed, and preliminary findings indicate that the typical trainee is 18-25 years old, unmarried, and without children. The majority of the trainees had some primary education, but about 25 percent had none. When asked, “What do you do (or would you do) with the money you earn?”, 60 percent of the trained women – all of whom also received a small training stipend – responded that they would contribute to household expenses, and 40 percent indicated that they would purchase personal items for themselves (such as wedding trousseaus and accessories). Direct Quote: To Basma, the Siwa Artisanship project has represented an alternative opportunity to acquire economic independence: “I neither got an education, nor am I married yet. But I now have a profession that I can rely on to complete my life.” While it is too early to report impacts, anecdotal evidence suggests that the project has been a success. Women report that the training is offering them new opportunities. Forty women are already producing for export, and others are eager for additional workshops so that they can continue to apply their recently acquired skills. Men have also shown their support for the initiative, with many asking for training opportunities for their daughters and sisters. Some of the women also 6

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Lesson 4: Convey the benefits of a comprehensive M&E framework to the client from the very beginning of the project. For IFC, M&E has become an integral part of its work that helps demonstrate to its shareholders and donors that utilized funds are generating greater public good. From EQI’s initial perspective, however, the implementation of M&E translated into additional reporting work and expenses that, from the client’s point of view, should be covered by the development organization, not the private sector firm. In retrospect, the IFC team should have been clearer on reporting requirements as part of the investment and advisory services negotiations and should have emphasized how exactly M&E would benefit the client. Such information would also have helped the client include M&E in its implementation plan and budget. Today, EQI is grateful that a rigorous M&E framework was put in place. It has already helped Siwa Creations, EQI’s brand name for the Siwan fashion line, professionalize its women’s artisan operations. There is now a database that includes information on all beneficiaries, the training they have taken, and the products they have produced and sold. The process has also enabled Siwa Creations to have easily accessible operational information at their fingertips: Siwa Creations’ staff can retrieve information related to its production capacity, costs, and revenues – all essential for an efficient and effective business. Moreover, the ability to report on development impacts has contributed to EQI being seen as a credible private sector partner for development. The 11th International Business Forum, organized by the World Bank Institute and the German Business Group, featured the Siwa Sustainable Local Development Initiative in one of its case studies on “Business and the Millennium Development Goals.” In 2006, EQI was awarded the World Business Award by the International Chamber of Commerce and the United Nations Development Programme for its

development initiative in Siwa. Lesson 5: Continue the search for international market niches to ensure that women (and men) have sustainable income-generating opportunities. As part of IFC’s advisory services package, EQI was able to beneﬁt from an international fair trade (IFAT) assessment with the idea that IFAT (or similar) certification would further distinguish the Siwa products in the international market. As a result of the IFAT assessment, some recommendations have already been successfully translated into action. For example, IFAT-required safety regulations were taken into consideration in the construction of artisanship workshops as well as the olive and date factories. IFAT certiﬁcation is also based on fair pay and provision of socially acceptable remuneration (in the local context), taking into account the principle of equal pay for equal work by women and men. Following the IFAT assessment, EQI plans to document its approach to negotiating with the producers.

For more information on the Siwa Local Development Initiative, visit: http://www.eqi.com.eg

About the Authors Carmen Niethammer, Program Manager, Gender Entrepreneurship Markets (GEM). Heba Abdella, Environmental Quality International (EQI) Project Coordinator. Kamal M. Siblini, Senior Monitoring & Evaluation Specialist, IFC PEP-MENA, Cairo. Nermine Samir Fadl, Operations Analyst, IFC PEP-MENA, Cairo.

Published in May 2007.

In closing, the following characteristics have contributed to the project’s success: • IFC’s global expertise (such as on international fair trade) leverages local skills and knowledge. • Investments and advisory services go hand in hand. • The community has realized social beneﬁts that are also proﬁtable for the private sector. • Cultural preservation and environmental sustainability further promote product marketability.

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INNOVATIVE WAYS OF PROMOTING AND SELLING SME MANAGEMENT TRAINING NADA ABDELNOUR AND MICHEL BOTZUNG The Private Enterprise Partnership for the Middle East and North Africa ( IFC PEP-MENA) has seized a strategic opportunity to play a key role in enhancing the management capacity of SMEs through Business Edge, IFC’s international range of management training products and services, especially designed for owners and managers of SMEs. Initially developed by the Mekong Private Sector Development Facility (IFC MPDF), Business Edge is a package of 36 diﬀerent management workbooks (in Marketing, Human Resources, Production and Operations, Finance and Accounting, and Productivity Skills). It also includes Trainer Manuals, Training of Trainer (TOT) sessions, and additional capacity-building tools for training ﬁrms. This SmartLesson examines the lessons learned from launching and promoting management training programs for SMEs in a frontier market.

Background and Challenges: Filling a Void in for training because in the past their training were sponsored by donor agencies for free or at highly the Market for Management Training While small and medium enterprises (SMEs) are unique, as in case of larger businesses, effective management is key to unlocking the potentials of increased productivity, profitability and growth. However, despite being riddled with problems, managerial issues in particular, SMEs in the Middle East and North Africa (MENA) region are reluctant to invest in training. Constrained by limited time, staff, and financial resources, smaller companies consider training costly. Training is often perceived as being more theoretical rather than applicable, and many times SMEs are not convinced that it will have a tangible impact on the bottom line. Meanwhile training agencies have focused instead on the “big fish” (multinationals and larger companies that have a training budget, believe in training, and know what they are looking for), and thus have not tapped into a potentially very large market constituting the bulk of the private sector. While in Vietnam and China, where the Business Edge material was initially developed and rolled out, owners and managers of SMEs share a culture of knowledge acquisition, SMEs in MENA initially proved to be extremely reluctant to invest in management training. Both supply and demand side bottlenecks affect the development of SME Management Training market in the region. On the demand side, most entrepreneurs are not convinced of the practical benefits training can have on their businesses, and do not have a structured training agenda for their employees. A minority are convinced of the potential benefits of training but are unwilling to pay 8

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subsidized prices. On the supply side, training providers are reluctant to target SMEs, as they are perceived to be more diﬃcult clientele, who are harder to reach, and have less money for investment in comparison to corporations. Training providers also lack relevant training material that is localized, practical, and speciﬁcally tailored for SMEs. Instead, many use foreign materials that are designed for large corporations and do not factor in local context, nor use local case studies. Whereas training providers can meet with the Training or Human Resources (HR) Manager of a large corporation to market their training services, how to market their product to SMEs is less evident.

One easy way of overcoming these issues would have been for IFC PEP-MENA to directly contract training providers to deliver management training to SMEs; however, this would not be a sustainable business model with long-term impact, and would result in limited numbers of SMEs being trained. As a result, innovative ways of reaching and convincing SMEs, while at the same time building the capacity of training providers to embark on serving this frontier market, needed to be sought to address the speciﬁcities of the region.

Overcoming the Challenges IFC PEP-MENA has implemented a three-pronged strategy to remove these bottlenecks by simultaneously working on making localized training material available, bridging the capacity of training providers, and stimulating the market for management training.

P a r t ne rs ’ C a pa c ity B u ilding

T raining of T rainers S es s ions Marketing & B us ines s P lanning S upport

Country Level:

Using Business Associations & Other Donor Programs as Training Brokers: Business Edge has tapped into the SME base of donors as well as business associations M a rk e t D e v e lopm e nt in order to recommend the program through open Awarenes s C ampaign (Material & P artners ) P r o du c t De v e lo pm e nt Direct Demand for P artners (C orporate seminars promoting Business Edge material and courses. V alue C hain) R egionally B uilding the B rand E quity (MB C ) S ME T ailored W orkbooks & T rainer Manuals Business Edge pays for the cost of the trainer and training Local languages and local cas e s tudies Affordable cos t and no competitor in the market material, while the donors and business-associations invite their SME base and pay the cost associated with the venue. These events are like “teasers” to give SMEs a A. Making Localized and Tailored Training Material taste of what Business Edge training is about, spreading Available: In order to fill the void in the regional market awareness, and generating demand for training. for training products, IFC PEP-MENA “localized” the Business Edge content (which includes 36 workbooks and Reaching SMEs in the Value Chain of Corporations: trainer manuals) into Arabic and English and incorporated In order to further expand its reach, IFC PEP-MENA local Middle Eastern case studies. Business Edge material has tapped into the value chain of corporations to reach is unique. It is specifically tailored for SMEs and unlike SMEs, signing agreements with leading corporations in available management training products that are literal Egypt. In 2005, Business Edge signed an agreement with translations of foreign material, these are customized to a leading telecommunications company, to implement a fit the local business environment. The localized training program to provide training on key business management material is more relevant and applicable for SMEs, and skills to up to 300 owners and managers of small and reduces the cost borne by training providers of developing medium enterprises that are company clients. Through new training curricula for SMEs. seminars in six cities across Egypt conducted by Business Edge’s network of training partners in Egypt, the B. Capacity Building of Partners: As part of its effort to program is introducing Business Edge training products build the capacity of training partners, IFC PEP-MENA and services to the SME clients of a telecom company, provides its Business Edge product range to local training who are learning essential management concepts to help providers. These in turn use the Business Edge products as them expand their businesses. The program has also a core in designing their unique and innovative training conducted a training needs-assessment of the company’s programs for SMEs. IFC PEP-MENA certifies the distributors in order to begin tailoring comprehensive training providers, provides their trainers with train-the- Business Edge workshops for them based on their key trainer (TOT) sessions, and monitors their performance, management needs. ensuring that consistent quality standards are upheld. Each training provider invests in promoting his or her SME Clients Scheme own Business Edge-based training program(s) to SMEs. IFC PEP-MENA supports all training providers through What is it ? One or half a day training s es sion on a specific management topic (pricing, quality, etc.) an umbrella promotion campaign. Partners pay a yearly What for ? T o generate awareness / demand for Management T raining certification fee of $1,000 as well as $200 for each trainer that undergoes the TOT sessions. They also pay $1.30 per Business Edge workbook they purchase for trainees. Partnerships are reviewed on an annual basis, and renewal • Invites S ME s from its data • S elects a relevant base training topic is based on their performance. • S elects cities, pays for • Identifies and provides C. Stimulating the Market for Training: In order to develop the training market and create greater acceptance and demand for management training as well as generate direct business opportunities for our training partners, IFC PEP-MENA is promoting the Business Edge brand name at the country and regional level.

the B E trainer

venues

• Distributes workbooks

• Advertises the partnership

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SME Distributors Scheme

IFC’s Role: Unique Material, Wholesale Approach, and Leverage

What is it ? A comprehens ive T raining C ours e focus ing on their key management is s ues What for ? Improve management s kills and performance of the dis tributors

• Mobinil promotes the training • Mobinil & its distributors cover the cost of the B E training • T raining Needs Asses sment of Distributors (F G D) • Use the B E T raining P roviders Network to train Distributors & P oints of S ales

Building the Brand Equity at the Regional Level: IFC has cosponsored the Middle East Broadcasting Centre’s (MBC) “The Investor” show, aimed at promoting entrepreneurship in the Arab world. MBC is the largest news conglomerate in the Middle East, with a daily viewership of more than 70 million, and “The Investor” is MBC’s largest production to date. The show, which aired for six weeks, consists of a competition between 13 teams of aspiring entrepreneurs from across the Arab world who are vying to win up to US$500,000 in seed financing to start up their business ventures. IFC has provided MBC with three Business Edge trainers (“The Advisors”) for the duration of the filming of the show as well as fullfledged Business Edge training as a consolation prize for eliminated contestants. Business Edge is receiving a lot of brand exposure on the show, and a whole episode is dedicated to Business Edge. Reference to the Business Edge website (www.businessedge-me.com) is made at the end-credits of the show, and there is a link to the Business Edge website from the specialized “Investor Show” website (www.mbc.net/investor). In order to capitalize on this unique marketing opportunity, the Business Edge website was launched on the same day the MBC show began airing (January 21). The website includes information on Business Edge training providers and the scheduled courses they offer, how to apply for training, and how to become a certified Business Edge training partner. A regional media campaign (in magazines and newspapers) highlighting our partnership with MBC has also begun.

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IFC has three clear comparative advantages, foremost of which is its unique management material. Specifically tailored to SMEs and localized with Middle Eastern case studies, it has no competition in the market. IFC’s comparative advantage also lies in its approachadopting a “wholesale” approach. Unlike other donor agencies working directly with SMEs, IFC’s strategy relies on building the capacity of training agencies in order to ensure the sustainability of training provision to SMEs. By enhancing the capacity of training agencies by providing them with subsidized training material, train-the-trainer workshops, and an umbrella promotion campaign, IFC is ensuring that it is providing them with the tools to create a sustainable, profitable business out of the provision of management training to SMEs. Rather than fostering financial dependence, IFC is providing these partners with the know-how to expand their reach to a potentially lucrative untapped market of SMEs. Finally, IFC can leverage on its other programs in IFC PEP-MENA and on the investment side to make Business Edge a success in the region.

Outcome and Impact: October 2004 to Date • IFC PEP-MENA is currently rolling out the product across the Middle East, and training is now available in Jordan, Yemen, Saudi Arabia, West Bank & Gaza, United Arab Emirates, and Egypt. Business Edge currently has partnerships with 24 training providers in the region. • Since its launch in October 2004, 2,964 SME managers and owners have been trained, and they have given Business Edge methodology, training, and content an average satisfaction rate of 86 percent. • During this period, 190 trainers and 20 Master Trainers from across the region have been trained and certiﬁed in TOT sessions. • In addition to the six open seminars for telecom company’s SME distributors and suppliers in governorates across Egypt, 11 open seminars were organized in cooperation with donor agencies and bussiness associations in Egypt and Palestine, attracting a total of 835 additional owners and managers of SMEs.

and Yemen. The success of these workshops has sparked a demand for more business skills training in the region, and plans are under way for new courses to be offered. The Information and Communications Technology (ICT) program is using Business Edge management training to deliver training to information technology firms and associations in the region. Leveraging on other IFC PEPThe program currently screens numerous demands MENA programs has allowed the Business Edge program for partnerships, as opposed to exerting time and to find new modes of delivery for management training. effort convincing training providers about the benefits Working with the Access to Business Program has allowed Business Edge to render Business Membership of partnering with IFC PEP-MENA. Organizations (BMOs) key brokers in delivering Business Edge training to SMEs. Lessons Learned: • After almost a year and a half of operation in the region, the program does not need to pro actively seek partnerships with training providers as it had to do at the start of the program. Now the program has an established presence in six countries, and training providers call IFC PEP-MENA to create partnerships.

Four Key Lessons for Promoting and Selling SME Stimulating the Market for Training Is Mandatory: The assumption at first was that, armed with Business Management Training in MENA Edge’s unique content, partners would have no trouble Business Edge’s wholesale business model allows delivering management training to SMEs. We learned flexibility in target group and integration with however, that partners do not know how to reach or investment and advisory programs: The Business Edge market to SMEs, as they don’t have an SME database business model that relies on building the capacity of (these do not exist in most MENA countries). On their training providers, and uses localized quality training end, most SMEs don’t have an HR/training person, and material, has proved very relevant to enterprises that are reluctant to pay for training or dispense with limited are not SMEs, namely corporations as well as micro- staff. This led the Business Edge program to focus more enterprises. In March 2005, Wadi Holding Egypt, a on helping the partners to market Business Edge to company specializing in poultry breeding, agriculture, SMEs, with tailored workshops on “How to Effectively food processing, and feed manufacturing, signed an Market SME-Management Training to SMEs,” on the agreement to adopt the Business Edge training materials one hand, and spreading awareness about Business Edge and approach for all its employees. This offered an management training among SMEs through “open opportunity to create a linkage between advisory services seminars” (sample workshops like “teasers” to give SMEs and investment, resulting in an IFC investment in Wadi a taste of what a Business Edge workshop is about) in Foods in May 2005. Moreover, Sanabel, the largest cooperation with business associations, large companies, microfinance network in the Arab world, whose members and donors, on the other. At the regional level, the serve 80 percent of active microfinance clients (775,000 Business Edge program partnered with MBC to comicro-entrepreneurs) in the Arab region, has requested sponsor “The Investor” show, and this contributed to to use Business Edge material to build the capacity of building the brand equity of the program regionally, and helped generate demand. As a result of the show, increased microfinance institutions. enthusiasm among Business Edge-certified partners to Business Edge management training has also served to work with IFC PEP-MENA has been noted, and other create visibility for IFC in countries such as the Gulf potential partners have approached IFC PEP-MENA Cooperation Council-countries where investment has in order to form partnerships. The show is promoting proven more difficult. The business model has allowed the awareness about the Business Edge program in countries program to partner with training institutions that seek to where the program has not yet been introduced, but in promote entrepreneurship (as opposed to SMEs). The which potential partnerships are being sought. business model has also allowed the program the flexibility of leveraging on other IFC PEP-MENA programs, Reluctance to Pay Can Be Overcome: Despite their allowing it to expand its SME base. The Gender Program initial reluctance, both SMEs and training providers are is using Business Edge to train women entrepreneurs. A ready to pay to have access to Business Edge material number of “Women Get the Business Edge” training and services. For their part, SMEs are prepared to pay workshops have been held in Afghanistan, Egypt, Jordan, for Business Edge training provided they are convinced SmartLessons

of its applicability to their real-world business problems. Training providers are willing to pay for certification fees, TOT costs, and workbooks as long as they are convinced that they can make a profitable line of business out of Business Edge, and provided they believe that the material is really unique and relevant to SMEs. Working with Corporations to Reach SMEs in Their Value Chain is a Win-Win Situation: Working with corporations such as telecom company has helped the program reach SMEs by spreading awareness about the availability of management training among telecom company’s SME distributors and suppliers, and generated significant business for Business Edge training partners. Partnership with large corporations creates high-profile publicity in the local media, which promotes awareness about Business Edge management training to the wider SME public, building brand equity and generating greater demand. Similar deals need to be marketed as a “win-win” situation, whereby the corporation can find out what management component is missing in its value chain and can solve it, and IFC can spread its management training to a wider base of SMEs. Working with corporations also offers an opportunity for a potential IFC investment, as occurred with Wadi Holding in May 2005.

Replication Possibilities Business Edge’s business model, which relies on building the capacity of training partners across the region, can be replicated in the Maghreb (Morocco, Algeria, Tunisia) as well as in Kuwait, Lebanon, and Syria. The telecom company’s model can be replicated with other corporations in Egypt and the region. As a “win-win” situation for the corporations and for IFC, this model can be replicated in other sectors other than telecommunications, including the information technology, pharmaceutical, and insurance sectors.

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About the Authors Michel Botzung, Program Manager, Business Edge, IFC PEP-MENA, Cairo. Nada Abdelnour was an Operations Analyst at IFC PEP-MENA, Cairo.

Published in March 2006.

WHEN A FRONTIER MARKET IS ON THE FRONT LINES: PROVIDING VALUE-ADDITION TO FIRMS IN CONFLICT-AFFECTED COUNTRIES BAS AUER AND MARY PORTER PESCHKA Private sector development (PSD) is important to economic recovery in conflict-affected countries; and the donor community, including the World Bank Group, has a strong role to play. To date, much of the discussion regarding PSD in conflictaffected countries has centered on work related to infrastructure and the business enabling environment (BEE). However, IFC’s Private Enterprise Partnership for the Middle East and North Africa (IFC PEP-MENA) is piloting interventions in the Value Addition to Firms line in several conflict-affected countries. This note considers the suitability of the application of this particular business line – and specifically firm-level assistance – to further IFC’s mission in these countries by examining tentative lessons drawn from our experience in designing the Afghanistan Horticulture Export Clusters Development project. “Until recently, socioeconomic tasks were considered part of long-range development assistance programs that could only begin once peace was at hand. We now know that development can take place even when parts of a nation are at war. Research also shows that, at the end of a conflict, a small window of opportunity exists to restore economic hope and social well-being.” - Johanna Mendelson Forman, Achieving Socioeconomic Well-being in Post-conflict Settings.

Private Sector Development in ConﬂictAﬀected Countries

2. Reorganization of the fiscal sector; and 3. Rebuilding institutions necessary to allow the private sector to revive.1 The role of the private sector is of crucial importance in this period, as it accounts for the bulk of output and employment. How best to encourage private sector development in conflict-affected countries is a relatively new topic, as PSD strategies have not historically been included in conflict reconstruction efforts; rather, they have been considered “second generation reforms” in these high-risk economies. What is agreed upon, however, is the importance of addressing private sector development issues at an earlier stage in the reform process and better adapting PSD strategies to the specific context of the conflict.

The economic impact of armed conflict goes well beyond the immediate human loss and destruction of capital. The war fundamentally changes human behavior and economic choices and as a result changes the economic structure in a country. Physical destruction results not Role of IFC in Conflict-Affected Countries only in the obvious loss of capital assets and in a reduced confidence in longer term investment decisions, but also The World Bank’s role in conflict-affected countries has in a loss of trust between economic agents, thus reducing evolved considerably over the last decade. In FY06, the market transactions. Bank Group, through research, advisory services (AS), investment, and political risk insurance, supported 35 Through this destruction and its far-reaching consecountries affected by violent conflict. One of IFC’s straquences, war diminishes the potential for economic tegic priorities is strengthening its focus in frontier margrowth and social development in affected countries. kets, including many war-torn nations. In frontier counFollowing the cessation of violence there is a narrow wintries, IFC has a key role to play in meeting the financing dow of opportunity in these countries when people are _______ open to “buy in” to the reconstruction of the economy. 1

Such a reconstruction requires three elements: 1. Recovery and expansion of the export base;

Working Paper Number 45(1) Enhancing the Private Sector Contribution to Post-War Recovery in Poor Countries; Tilman Bruck, Valpy Fitzgerald, and Arturo Grigsby; University of Oxford, July 2000.

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needs of the private sector as well as in addressing these countries’ broader private sector development issues. While recognizing IFC’s important role in economic reconstruction in conflict-affected countries, there is no definitive answer on how this mission can be best achieved and where IFC could add most value. What is the scope for investment and advisory services? In terms of advisory services, should we focus on BEE interventions, or are there other types of initiatives, such as firm-level assistance, that are relevant? There are many individual experiences, and while it is the situation on the ground that dictates the specific type of engagement, if IFC is to effectively engage in conflict-affected markets, there is a need to learn and share knowledge.

agribusiness products where Afghanistan has a potential competitive advantage. Shindokhani raisins and Afghan pomegranates in Kandahar Province capture the highest value in export markets and have comparative advantages over Indian and other Asian markets, providing an attractive opportunity for growth. To exploit these comparative advantages, however, signiﬁcant improvements are required; thus, the Afghanistan Horticulture Export Clusters Development initiative is taking a three-tiered approach. The project is: 1. Supporting farmers in improving the quality and quantity of the raisin drying process and pomegranate fruits management, through technology transfer of more eﬃcient drying techniques from lead producer countries; 2. Working with traders to establish or strengthen direct links with farmers to improve quality control; and 3. Helping farmers to understand demand in key export markets, assess their competitive position, and identify potential clients.

IFC in Afghanistan

Afghanistan’s economy has been devastated by more than 20 years of protracted conflict, and exacerbated by the 1999-2001 nationwide drought. Today, Afghanistan is one of the poorest countries in the world by any measure. The Afghan economy is dominated by agriculture (32 percent of estimated total gross domestic product in 2003), and by opium (35 percent). Other sectors are rel- Approach Taken and Lessons Learned atively small, including manufacturing (9 percent - predominantly agricultural processing) and infrastructure (8 1. IFC “Value-Addition” Projects in Conflict-Affected Countries percent). It is estimated that 80-90 percent of economic activity occurs in the informal sector.2 Recover export base: The crucial task of recovering the Despite Afghanistan’s difficult investment environment, export base is twofold, and includes restoring existing IFC has made several investments, in the First Microfi- export capacity while adapting to changes in the regional nance Bank and the Serena Hotel, totaling US$13 mil- and world economy that have taken place during the years lion. Some additional investments are in progress. While of conflict. Because of the importance of agriculture in IFC is interested in participating in selective, catalytic Afghanistan, IFC PEP-MENA sought, in dialogue with investments, in the near term most of its engagement government,3 key private sector players, and the donor will be in the form of AS, deployed via IFC PEP-MENA, community to identify agricultural products for which with initial focus on strengthening the financial sector the country could have a relatively strong competitive and providing value-added to local firms in key sectors, advantage. Raisins were singled out as products which such as agribusiness. could potentially compete successfully in world markets because of the scale and consistency of production, the Afghanistan Horticulture Export Clusters De- relatively nonperishable nature of the product, world market trends, and existing export experience. velopment Project (AHEC) Given the importance of the recovery of the export base to reconstruction and the dominance of agriculture in the Afghan economy, IFC PEP-MENA is concentrating its efforts on enhancing the competitiveness of local firms in _______

Through value chain analysis, the potential and bottlenecks for export of raisins were analyzed. Initially, IFC PEP-MENA planned to strengthen the competitiveness of sun-dried raisins, which were already being exported to _______

World Bank, “Afghanistan – State Building, Sustaining Growth and Reducing Poverty,” 2005.

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Among the government’s core objectives is to “enhance non-opium agricultural production.”

Eastern Europe. It was found, however, that these varieties do not capture a high economic value. Furthermore, their processing factories are not an important stage of the value chain and represent only a small fraction of the value of the raisin. As such, focusing on the improvement of these processing facilities would provide limited impact. Thus, attention was turned to shade-dried raisins, particularly the Shindokhani, which are predominantly grown in the less stable south. Shindokhani capture a significantly higher value, and have potentially attractive export markets in South Asia. The competitive advantage of Afghanistan in these varieties is higher, due to unique climatic conditions; and competition is lower, as production is limited to a few countries. Once it was determined that the security risks of working in the south of Afghanistan could be reasonably mitigated, IFC PEP-MENA decided to focus on those products where it could have the strongest competitive advantage, and therefore have the best potential in recovering its export base. Focus on production, not exclusively on bringing to market: Recovery of the export base in agribusiness includes many challenges: recovery of land; return and retraining of the labor force; recuperation of volume and quality of production; repair of processing facilities; reestablishment of trading and financial linkages; adaptation to new changes in world markets; development of new product lines; and penetration of new export markets. As IFC PEP-MENA is prevented from investing in capital assets, early project plans focused on providing advisory and training services related to current production and market requirements, as well as linking traders and producers to markets and investors. It soon became clear, however, that the key bottleneck to increased competitiveness lies in production capacity. In conflict-affected countries the production base tends to be destroyed, so interventions that focus on bringing-to-market while ignoring the limited capacity of the production base will find it difficult to achieve significant impact.

shortening the payback period for the investor. While the rationale for a subsidy may be well founded in this particular case, it is still at odds with IFC PEP-MENA’s mandate. The project therefore needed to leverage other sources of funds to be able to engage on this level. Thus, IFC PEP-MENA joined forces with IFC’s Grassroots Business Initiative, whose financial contribution enabled the project to provide incentives to producers to invest in new raisin drying house technologies. Develop successful business models: The years of conflict have altered the behavior and choices of farmers, traders, and consumers. Limited security has made the time horizon of investments short and potential markets small. Supply chains and markets are extremely fragmented and financing mechanisms unsophisticated. While agribusiness value chains are quite efficient and effective in servicing the needs of local markets in the prevailing security environment, the business model is too fragmented to achieve the volume and quality required in high-value export markets. To successfully engage in these markets, local firms need to adapt their business practices, requiring significant investments in market knowledge and modern production and management practices. To achieve buy-in from local entrepreneurs in economic reconstruction, the development of new business models that can provide a demonstration effect for local firms is important for success. 2. Approach to Project Design in Conflict-Affected Countries Importance of social networks/low trust: Development assistance is never neutral, always having some political impact; however, impacts are more pronounced in conflict-affected countries, “with assistance creating direct and indirect incentives and disincentives for peace.”4 Thus, it is essential that any engagement in these countries begin with an analysis of the conflict situation in order to understand sources and impacts of conflict, roles played by various actors, and opportunities for aid to contribute to peace and reconstruction. Value chains in a conflict-affected country must be analyzed through a “conflict lens.” Is there a security or conflict reason for the particular organization of supply chains? Are businesses limited in their choice of suppliers or clients? For example, in Afghan agricultural markets, the protra-

It also became apparent that in an environment that is extremely uncertain for investors, investment in new, locally unproven technologies could not be effectively stimulated by advisory and linkage services alone. To allow producers to adopt new technologies in an uncertain business climate, their investments should be economi- ___________ cally viable within a short time horizon. Usually this 4 Strategic Framework for Engagement in National PRSs in Conrequires some sort of investment incentive or subsidy, flict-Affected Countries. DFID. SmartLessons

Working through intermediary organizations: In general, in projects that aim to provide a demonstration effect, it is important to partner with local intermediary institutions as a mechanism to achieve sustainability and/or scale up of results. In conflict-affected countries, security considerations make it even more important to work through local organizations, as IFC’s security procedures often hinder us from fielding our own staff. In this case, interventions need to be outsourced. Also the need for quick wins directs projects to work with local partners who, because they are on the ground, can move more rapidly into implementation. However, there are important considerations in this regard. Firstly, viable partner organizations may not exist, due to the years of conflict. Secondly, local institutions can be seen as partial to the conflict, adversely affecting the image of Quick Wins: Following armed conflict, there usually is a the project. Potential intermediary institutions also have narrow window of opportunity where entrepreneurs are to be assessed through the lens of conflict analysis. willing to “buy in” to economic reconstruction efforts and invest in new business opportunities. In addition, The AHEC project contracted an international service it is important that interventions take into account, provider with significant experience in the intervention to the extent possible, the possibility of a flare-up of area, but did not include at the outset a local partner conflict or instability – a real possibility, as it is estimated organization in the project. While a local horticulture that 40 percent of nations recovering from conflict traders organization exists in Kandahar, it is a nascent return to violence within five years.5 Therefore, quick entity whose establishment has been largely donor drivwins are essential to the project, as they allow for the en. For this reason it was deemed better to let potential demonstration of tangible results and encourage buy-in cooperation grow naturally through the initiative of the from entrepreneurs that have short time horizons and traders during the project, rather than getting locked in little patience. a partnership with an organization that is not yet firmly established. Quick wins also are a way of mitigating security risks to the project by limiting the time in which specific deliver- Monitoring & evaluation in an unstable environment: ables are achieved. The AHEC project is phased in such a Security in conflict-affected countries can not only way that each discrete period could provide concrete, de- seriously limit the project team’s mobility; it can some monstrable results to entrepreneurs and other stakehold- times cause it to cease altogether. In the case of the AHEC ers. Results in early phases would improve buy-in in later project in Kandahar, UN and IFC security regulations phases. The first (3 month) exploratory phase will result have prevented site visits; consequently, the team’s ability in adapted designs for new raisin drying technologies. to monitor and evaluate the project’s outputs, outcomes, The second (6 month) phase will result in the establish- and impacts are hampered. This is a trade-off that must ment of new drying houses, harvesting techniques, and be accepted if we are to engage in these circumstances, drying technologies. It will also allow traders to test the and for which we try to mitigate through nearly daily benefits of new production technologies on the interna- contact with the implementing partner. tional market place. If successful, subsequent phases will scale up the use of new technologies and solidify access Cooperation with other donors: Donor coordination is to new markets. important in all markets, but conflict-affected countries tend to be exceptionally crowded donor spaces, requiring careful stakeholder relationship management. IFC’s _______ approach in Afghanistan has entailed coordination with 5 World Bank intranet “Conflict-Affected Countries” briefing. a variety of donors, not only to avoid duplication but to maximize individual contributions. We are working March 2006. cted conflict explains the lack of direct relationships between farmers, processors, and traders. Goods find their way to end users through an intricate network of local and regional product markets – resulting in a multitude of one-off transactions, due to the security-related limited mobility of economic agents. In conceptualizing the AHEC project, the importance of social networks in a fragmented society was considered and the limited mobility of traders was evaluated. Traders benefiting from the project are drawn from different social networks, and largely drive the selection of farmers, thus ensuring that the participating traders and farmers can actually establish a level of trust required to develop a longer term business relationship, a necessary condition for achieving a more integrated supply chain.

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with the World Bank in Afghanistan, contributing to its Interim Strategy Note for the country as well as sharing private sector development-dedicated staﬀ in Kabul, to ensure that our strategies are aligned. The design of AHEC was coordinated with the Bank’s Horticulture Development Project. Where the Bank project focuses primarily on increasing agricultural production, IFC concentrates on production improvements post-harvest, supply chain management, and access to markets. The Bank project will contribute to the scale-up of new drying technologies in later phases of our project.

3. The Pivotal Importance of External Risks in Conflict-Affected Countries Importance of security: Not only is there a strong correlation with the willingness of the private sector to invest, but there is also a significant relationship to the ability to provide services. Thus, a deteriorating security situation can severely affect program delivery. We design projects in conflict-affected countries, assuming that staff will be able to travel in a timely and secure manner throughout the project area; however, at the end of the day, this is merely an assumption – and is only as strong as the fragile market to which it refers. Other security implications include our inability – due to the potential risk to our project team and participants’ safety – to publicize these projects until after the fact, which is a real consideration in IFC AS facilities, where a premium is placed on project-related public relations and knowledge sharing. Timing: Reconstruction in a conflict-affected country always requires more time than expected. The Afghan horticulture initiative took 18 months to get off the ground because of a string of political and violent events which delayed the project at multiple stages of development.

Conclusion In the case of Afghanistan, if IFC was to meet its commitment to help the country develop its private sector, then engaging at the firm level was necessary. Twentyplus years of conflict had fundamentally altered economic decision-making in the country. Players had adapted to the tenuous security situation, where one only moved in limited geographical space, resulting in one-off transactions and slim profit margins. Thus, the recovery of the export base so essential to economic reconstruction would not be possible without new business models to enable the private sector to achieve quality and scale to export. Drawing upon its experience in a variety of fields – value-chain analysis, linkages, industry knowledge – IFC set out to design an intervention to enhance the performance of local firms in agribusiness products where Afghanistan has a potential competitive advantage. Operating in an unstable environment and with the clock ticking, the objective was to replace the fragmented business models of war so that value would be added beyond the pilot project’s participants.

About the Authors Bas Auer, Operations Oﬃcer, IFC PEP-MENA, Cairo. Mary Porter Peschka, Senior Operations Manager, IFC PEP-MENA, Cairo.

Published in August 2006.

Other: Finally, externalities unique to the country context can be major obstacles. In Afghanistan, for example, expansion of opiate production and resulting competition for inputs (land, labor, water, and capital) can potentially derail our eﬀorts.

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FROM ADVISORY SERVICES RECIPIENT TO KNOWLEDGE PROVIDER: A CASE STUDY FROM MOROCCO MARKUS PILGRIM, OMAR BALAFREJ, AND ZINEB BENKIRANE Mostafa Temsamani was very skeptical about IFC’s recommendation to the Association of the Industrial Zone of Tangiers (AZIT) that cost-covering fees be introduced for services provided to member enterprises. “I was scared that a member revolt could take place,” said the 56-year-old Managing Director of the association who has held this position for the last 12 years. Instead, revenues from service fees increased and membership satisfaction improved. Today, Mostafa Temsamani advises other Moroccan associations on behalf of IFC on how to initiate a similar transformation from a businessmen’s club to a professional service provider. The main goal of IFC’s Access to Business (A2B) Services Program is to support business membership organizations (BMOs) such as AZIT to improve service delivery to SMEs as well as to promote eﬀective advocacy and information sharing for this sector.

The Start: A Pilot with IFC

• Improving communication with members by helping develop a Web site, a monthly newsletter, and the newsflash, a fax letter to members on important When established in 1990, AZIT primarily played the information to be distributed quickly. role of advocate, addressing infrastructure-related problems in the largest industrial zone of northern Morocco At the end of the partnership with IFC such as frequent flooding due to bad maintenance of the in August 2005, AZIT was no longer the same associadrainage system, an inadequate power supply, and ab- tion it had been in April 2003. sence of waste collection and security problems. The association, which represents 120 companies with 30,000 employees, did not consider itself a service provider. The co-funding of a waste-collection truck by the European Commission prompted AZIT to introduce fees for this particular service in order to reach financial sustainability. Consequentially, AZIT asked IFC to provide advice on how to structure the fee system. IFC was interested in the assignment, as it introduced the possibility of testing the approach of delivering SME assistance via local intermediaries, which in turn guaranteed wider outreach to SMEs, instead of cooperating directly with individual enterprises. The project covered a time span of two years (2003 – Participants at a training delivered by AZIT 2005) and aimed at transforming AZIT from a businessmen’s club focusing on social events to a professional service provider. Main activities included: Lesson Learned #1: Demand analysis is a must for setting up successful services. • Organizing the first member satisfaction and needs assessment ever conducted by the association. As a result of a demand analysis conducted by AZIT in • Developing a marketing plan, including the launch- conjunction with two independent consultants, the orgaing of new services as well as a fee structure for exist- nization was able to quantitatively measure its members’ needs. Upon so doing, AZIT successfully introduced ing and new services. 18 SmartLessons

fees to already existing services, ranging from waste removal to management training to energy-conserving consultancy services that were able to generate revenues. Further, AZIT introduced new fee-based services such as renting technical instruments and a library. The biggest challenge it faced in implementing the fees came from AZIT’s permanent staff and board of directors, not its SME members. However, during its first partnership with AZIT, IFC hired an independent consultant with significant work experience in business associations. The concrete benchmarks that the consultant produced enabled IFC to convince AZIT’s board of the importance of introducing fees to generate revenues from services and to diminish their dependence on donor subsidies and membership fees. Lesson Learned #2: The general concern of associations that the introduction of a service fee or an increase in membership fees will lead to a lack of demand for the service or to a decrease in membership is incorrect. An increase in service fees may even result in an increased demand for the service, as long as the association provides good value for money. AZIT changed from offering services for free to charging fees for most of its services. Revenues from services increased by 300 percent within one year. Before the start of the cooperation, revenues from fees amounted to only 6 percent of the association’s annual budget; now they comprise more than 20 percent, and there is still scope for further increases.

1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 2003

2004

2005

Revenues from services (MAD) Membership fees collected for the current year

Graph showing AZIT’s Revenue Source typically established in order to represent the interests of the enterprises working in the estates and to lobby public authorities to provide the infrastructure and services promised to them. Since last year, IFC has sought to multiply the positive results achieved with AZIT by cooperating with another Moroccan industrial estate association – the Organization of Entrepreneurs of the Ait Melloul Estate in Agadir (ADIZIA), located in the southwestern part of the country. Agadir is the second industrial region of Morocco, after Casablanca. A large proportion of Moroccan agro-food products are produced and exported from this region. The zone of Ait Melloul counts 128 industrial companies from various sectors, with agrofood being the most signiﬁcant. Some 82 percent of these enterprises have fewer than 100 employees. Created in 2001, ADIZIA currently represents one third of the companies in the estate.

The overall satisfaction rate of members increased from 50 percent in 2004 to 63 percent in 2005. Furthermore, the rate of “totally not satisfied” companies dropped from 8 percent to zero. The increased satisfaction of members has paid off financially for the association. While previously only 50 percent of the members paid their annual membership fees on time, today 80 percent Before IFC partnered with ADIZIA, some due diligence pay punctually. was necessary to ensure that ADIZIA had the ideal partner characteristics. Once it was evident that it had Replication of Results – ADIZIA Case Study a high number and extensive coverage of dedicated members from the SME community, a committed and Morocco has approximately 70 industrial estates visionary leadership, and its own permanent staff, IFC throughout the country. As in many countries of the and ADIZIA entered into a partnership agreement whose MENA region, the Moroccan government tried to objectives were in line with those of the A2B Program. develop industrial clusters by building industrial estates offering certain infrastructure or business support As was the case with AZIT, the objective of the IFCservices. Several estates have their own associations, ADIZIA cooperation is to help the association become a professional and sustainable service provider. Based SmartLessons

on the successful results of the AZIT Program, IFC requested AZIT’s participation in a two-day planning workshop for ADIZIA held in September 2005. This workshop not only proved beneficial for ADIZIA, but also helped AZIT’s numerous success stories gain wide exposure. Mostafa Temsamani served as a resource person in the twoday planning workshop with ADIZIA board members, during which he presented the concrete results of the IFC-AZIT partnership as they related to motivating and increasing association-level participation of zone enterprises and how those same results could be replicated in ADIZIA. When asked why he felt compelled to provide assistance to ADIZIA, Mr. Temsamani responded, “The two main motives for my participation in this workshop are: 1) given the importance of our partnership with IFC, AZIT couldn’t answer anything but ‘yes’ to their request, and 2) our wish is that other associations can benefit from our positive experience.” Later on, staff members of ADIZIA participated in hands-on training in Tangiers that demonstrated the range of possible services and the steps entailed in developing a new service.

access to ﬁnance. The IFC presenters took advantage of their participation in the seminar to develop investment leads in the agro-food sector and, as a result, held several business meetings in the Agadir region. Based on AZIT’s successful results of its Human Resources, Maintenance, and Production clubs, ADIZIA created an Environmental Club to motivate and include members in voluntary activities. The new club has already conducted four meetings that have resulted in an action plan and future club activities.

Thanks to ADIZIA’s lobbying efforts through a series of meetings with various decision-makers of the region and its positive track record for being a dynamic association, the local government of Ait Melloul will start rehabilitating the Industrial Zone in September 2006. Specific activities will include road and waste collection maintenance as well as the provision of electricity services. The local government’s investment amounts to US$2.4 million and will help improve the business environment of current tenants as well as increase the site’s attractiveness. Additionally, ADIZIA was invited to become an active member of a weekly follow-up Lesson Learned #3: From a donor perspective, it is committee on the rehabilitation of the zone. important to notice that a certain reluctance to give Map of Ait Melloul Industrial Zone subsidies for basic operating costs and a strict costsharing policy avoid creating long-term dependencies and will help to increase the association’s commitment. ADIZIA’s board presented a proposal to the general assembly to increase the membership fees in order to further develop the association’s activities as suggested by IFC. While such proposals had always been rejected in the past, a large majority of members approved a 60 percent increase in the annual membership fees, based on the solid and promising nature of the partnership. Lesson Learned #4: South-south knowledge transfer through benchmarking with the service portfolio and fee structures of other associations in the same country is a useful tool to convince board members and permanent staff of the necessary changes. One of the first events held by ADIZIA was a seminar on SME banking jointly organized with IFC and Attijariwafa Bank, one of Morocco’s largest banks as well as a former IFC client. The event, attended by 106 entrepreneurs, helped the bank promote its services as well as enabled ADIZIA members to become more aware of how to obtain 20

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As part of the rehabilitation plan, land and a US$70,000 grant will be provided to ADIZIA to build a new oﬃce within the Industrial Zone, which will enable the association to work closer to its members and consequently improve member-recruitment eﬀorts.

Moreover, the governor of Ait Melloul has repeatedly communicated his desire to have ADIZIA’s membership increase, which could eventually enable the association to assume full managerial responsibility of the zone.

Conclusion As evidenced by this note, business associations are a powerful tool for the promotion of SMEs, as they can oﬀer wide outreach and an integrated approach to service delivery and advocacy. Program design should always focus on service delivery and advocacy, as onetime capacity-building activities like staﬀ training serve only a complementary role.

About the Authors Markus Pilgrim, Program Manager, IFC PEPMENA, Cairo. Omar Balafrej, Project Oﬃcer, IFC PEP-MENA, Rabat. Zineb Benkirane, Project Analyst, IFC PEP-MENA, Rabat.

Published in August 2006.

Further, through cooperation with business associations and very broad outreach campaigns to enterprises, IFC PEP-MENA could identify and recommend potential investment clients to IFC’s investment arm.

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DO NOT BANK ON CONSULTANTS TO DELIVER ALL THE GOODS! SOPHISTICATED CLIENTS REQUIRE HANDS ON PROJECT MANAGEMENT RAIOMAND BILLIMORIA AND GREGORY RUNG It started like a dream project – a sophisticated bank seeking IFC advisory assistance in an area with high development impact, full cost recovery for IFC services, and a highly regarded international consulting ﬁrm to deliver the goods. Unanticipated problems with managing consultants, however, initiated a chain of client-relationship challenges that threatened the much-anticipated happy ending. Based on our experiences, this SmartLesson focuses on managing consultants so that such incidences such as ours can be avoided in the future.

Background

hired SME banking expert team (based in Paris) to undertake the advisory services assignment. The consulting firm, partnered with its Saudi affiliate, put together In 2005, a major bank in MENA (referred to as “the Bank”) entered into discussions with IFC PEP-MENA a strong international team, with subject-matter experts concerning an advisory services program that would assist working on relevant modules of the project. the bank in creating an SME banking business. While SME banking in the Kingdom of Saudi Arabia had not As the project unfolded, however, the IFC team was previously been a target market for IFC PEP-MENA, called on to face many unanticipated challenges, and further due diligence revealed that the Saudi SME bank- scrambled to successfully complete this assignment. ing market was grossly under served, and a well designed and executed project could create positive developmental The Challenges impact by improving access to finance for SMEs. A successful project would also have a strong demonstration The consulting team brought in experts to work on speeffect in the region. cific portions of the assignment. These consultants came The Bank is a sophisticated full-service commercial bank and the third-largest bank in the country. It did not represent the typical profile of IFC PEP-MENA’s advisory clients in terms of size, sophistication, needs, and expectations. The Bank was paying 100 percent of the advisory services costs, including IFC’s time and expenses, and would have high expectations. This would be a challenging assignment, and a high-profile one, given that it was IFC PEP-MENA’s first advisory services project in that country. IFC put together a comprehensive six-module project, covering (i) market research to size the market, evaluate competitors’ offerings and customer needs; (ii) strategy development, including financial projections, choice of business model, vision and objectives; (iii) creation of products, services, and delivery channels; (iv) development of credit policies and processes, reporting, and decision tools; (v) organizational restructuring; and (vi) information technology. After competitive bidding, IFC 22

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and went after their modules were completed. However, not a single specialist stayed on-site throughout the entire project. As per the proposal and the contract, the consulting firm’s local office was supposed to provide a resident project manager, but did not do so. As a result, each new expert joining the team during the project would interview the client and ask similar questions. Seeing the client’s reaction move from patience to frustration, and toward anger at the waste of time, the IFC team stepped in and insisted that one of the senior consultants on the assignment stay through the end and maintain client knowledge that could be passed on to the other consultants. Further investigation revealed that the Paris and local offices had had a disagreement about internal billing rates, and the local office was no longer willing to provide staff for the project. Lesson 1: Ensure there is a Project Manager who will stay throughout the entire project. Experts working on parts of the project are fine, but there should be one person who stays throughout the project, has

knowledge of the whole project, and can coordinate the work of the team so that the client sees a seamless product. Confirm the local office’s commitment to the project. Large international teams often rely on their local counterparts to deliver part of the work. If there are issues within the consulting team (e.g., billing), it can affect delivery of the project.

(1) The team spoke to the senior partner in Paris to make him aware of our concerns; (2) The IFC Project Oﬃcer and banking specialists became more involved in the content of the assignment, spending considerable time at the Bank; and (3) IFC leveraged resources both within and outside IFC to deliver value to the client. Access to Finance Business Line Leader from Washington visited the Bank to discuss best practices in SME banking. IFC also got senior international experts, such as the head of Wells Fargo Bank’s SME business, to come to the Bank and talk to the Bank management about issues in starting an SME business. These initiatives were greatly appreciated by the Bank management.

The client meanwhile had also noticed the missing local staff and started to raise questions. IFC discussed the issue with the consulting firm, who acknowledged their internal problems. In response to IFC concerns, they agreed, at no cost to IFC, to send additional international consultants to supplement the team. The client was happy that they were getting higher caliber interna- Lesson 4: Do as much as possible to make the client tional consultants instead of local consultants – for the happy. The end result reflects on IFC rather than any same price. external consultants, so step in whenever necessary to make sure that the client is getting what was promised Lesson 2: Be willing to pressure consulting firms to seek and that expectations are exceeded. a solution to your problem. Firms will often replace senior staff with junior consultants. Do not accept this. The Bank was having a hard time keeping up with the Any replacements should have the same seniority. IFC demanding pace of the consulting assignment. Though is generally a key global client for these firms, and they this is a sophisticated bank, it was clear that the client will offer acceptable solutions if pushed. was having a problem digesting the information being generated by the team. The consulting team was comOnce the consultants started work and produced reports mitted to other engagements after this project, and could for the initial modules, the client was not entirely happy not stretch out the pace of work. As a result, IFC worked with their quality. The client and the consulting firm with the Bank staff to help them understand, approve, disagreed in their interpretation of the deliverables speci- and implement the recommendations, and also stressed fied in the Terms of Reference (TOR). The TOR and the to nervous bank staff that IFC specialists would be availdeliverables specified therein had been drafted prior to able to guide the bank on an ongoing (off-site) basis for the start of the project, and both parties expected some the next two years. modifications once the work on the project had started. Going forward, IFC insisted that the consultants and Lesson 5: Arrange the timing of the advisory services so the Bank agree to detailed work plans and deliverables that the client can absorb it. An intense period of onfor each module prior to the start of that module. As a site work may be too much for the client to absorb. The result, the consultants were clear on what was expected advisory services should ideally be phased so that there from them during that module, and the Bank was clear is an appropriate amount of time built in for the client on what they were going to get at the end of the mod- to digest the new information. ule. The IFC team had taken steps to keep the client involved Lesson 3: Agree on a detailed work plan and deliverables in the project. Key Bank staffs were included in reguwith the consultant and the client rather than the broad lar project team meetings, each module was written in outlines from the TOR. This will make it clear to all collaboration with the Bank experts, and the CEO was parties what is expected of them. kept informed and was a strong champion of the project. However, as the advisory services assignment started Due to the various issues detailed above, the IFC team to wind down, the IFC team noticed that key decisions noticed that the quality of output from the consulting necessary from the client team (such as sign-off approval firm was not up to the standard expected. This was not for work done) were not being made in a timely manner. acceptable, and the team addressed this on several fronts: We surmise that this may have been due to a desire for SmartLessons

the team to stay on as long as possible. The IFC team, noticing the client’s concerns, started to stress the frequency of the planned follow-up visits, as well as hand over key tasks and responsibilities to bank staff. The client gained confidence in their ability to implement the project on their own. Lesson 7: Encourage the client to take increasing ownership of the project over time so that they are not too reliant on the advisors. The client should be a partner throughout the process rather than simply the receiver of the advisory services. When the project is over, make sure the project design includes followup visits from IFC staff, but the client should have the confidence to continue work without the support of an on-site team of IFC advisors.

The End Result IFC completed the project during the summer of 2006. In August 2006, the bank set up a new business sub-segment called “SME Unit” to cover SME clients. In line with IFC’s recommendations, it has set up three SME Centers, and five more are being constructed. As of February 2007, the Bank has over 1,800 SME customers, with over 800 borrowers. Deposits from SMEs total $97 million, and the committed loan portfolio is $350 million. Perhaps the best indication that the business is sustainable is that it is already profitable, and the Return on Assets of the unit is four times that of the overall loan portfolio of the bank. In view of the success of this advisory services program, the Bank is now discussing additional advisory services from IFC’s Business Edge program. Despite the challenges along the way, this project was a considerable success. The Bank Advisory Services program has incorporated the lessons learned during this project in the design of future projects. Lesson 8: Document lessons learned so that they can be incorporated in the design of future projects. The Bank Advisory Services program has developed a standard work plan for projects that includes many tasks related to mitigating the risks identified above. TORs and Request for Proposals (RFPs) for new projects also build on these lessons.

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About the Authors Raiomand Billimoria, Financial Markets Specialist, IFC PEP-MENA, Cairo. Greg Rung was Banking Specialist and Program Manager at IFC PEP-MENA, Cairo.

Published in May 2007.

WORKING OUR WAY DOWN THE FOOD CHAIN: A CORPORATE VALUE-CHAIN APPROACH TO SME MANAGEMENT TRAINING KHADIGA FAHMY AND NADA ABDELNOUR Business Edge (BE) is IFC’s international range of management training products and services, specially designed for owners and managers of small and medium enterprises (SMEs). Originally developed by IFC MPDF in Vietnam, it includes 36 management topics adapted to the local business culture. In the MENA region, it is distributed by local training ﬁrms in Egypt, Jordan, Yemen, Palestine, UAE, Oman, and Iraq. Since October 2004, more than 13,500 owners and managers of SMEs have been trained across the Middle East. Marketing the program to SMEs and convincing them that management training can have a positive impact on their bottom line have been the main challenges of the program. A unique approach has been developed to reach large numbers of SMEs in a structured manner, working in partnership with large corporations to reach SMEs in their value-chains.

The Business Edge team was in a quandary… It was October 2004, and the Business Edge team was in a quandary about how to reach large numbers of SME owners/managers in Egypt and convince them to enroll in management training workshops. Should they run an advertising campaign in leading business magazines and newspapers? Or should they work with business membership organizations (BMOs) to target their SME members? What would be the most efficient and costeffective way to reach SMEs in a market where management training is regarded as the province of multinational companies with deep pockets? There seemed to be no clear-cut answer, until they heard a radio advertisement stating that the leading telecom operator in Egypt, was launching a promotional package for SMEs, “The Mini Business Package.” It comprised of receiving a free cellphone line with every purchased line. This indicated that the telecom operator must have a large and structured database of SMEs. The team concluded that an effective way to reach and build the capacity of large numbers of SMEs would be to tap into the value-chain of large corporations. Lesson 1. Tapping into the value-chain of corporations can be an efficient, low-cost marketing technique to reach large numbers of SMEs. This approach allows for the delivery of Business Edge management training to the network of SMEs within the corporation’s value-chain, whether it be their custom-

ers, distributors, or suppliers. An advertising campaign is generally very expensive and may not always generate the outcome you are looking for. Individual SMEs are reluctant to invest in management training, and hence it is hard to directly market the management training workshops to them and convince them of the beneﬁts the workshops could have on their overall business performance. Not all BMOs have the capacity to mobilize their members in large numbers, and they generally lack the funds to cover events. Corporations, on the other hand, have the funds and are willing to use them if it beneﬁts them, even indirectly. In addition, many corporations have large SME databases that are structured by geographical area, type of industry, and size of company. Having access to these databases allows us to reach a large number of SMEs in a structured manner.

Selling the Idea to the Telecom Operator … The Pitch The Business Edge team decided to target telecom operator’s SME customers and distributors. They met with the SME sales manager and convinced him that Business Edge management training workshops could be an excellent value-added service for the corporation’s SME customers. It could help it build better relationships with its customers and generate more brand loyalty. It could also contribute to fulﬁlling the company’s public relations and corporate social responsibility goals. The SME sales manager received the idea with enthusiasm. He stated that the corporation had provided many value-added services before SmartLessons

but had never thought of training. He was willing to test feedback from the corporation’s management. it on the company’s SME customers as a first step to see its impact. Total project cost was US$27,000. IFC covered 15 per cent and the telecom operator covered 85 per cent. Lesson 2. It is important to work with the functional department whose customers you are targeting and not the Human Resource Department. Even then, it can SME Distributor Training take quite some time to finalize the agreement. Based on the positive feedback received from the SME In the case of this telecom operator, it took 6 months customer training, the head of the corporation’s Distribefore we could start implementation due to the internal bution Department requested that we expand the initiaapprovals required. The Business Edge team learned that tive to encompass its entire network of 15 distributors. working with the SME Sales Department as opposed to These distribution companies account for 98 per cent the Human Resource Department is a better strategy of the telecom operator’s sales, and each has between 10 because functional departments such as sales, distribu- and 100 employees, with the majority being in sales. The tion, marketing, purchasing, etc. usually have funding telecom operator requested that IFC deliver comprehenfor reward programs for their customers. Human Re- sive Business Edge training to the distributors in areas source and, more specifically, training departments, on that are hindering their performance. The Business Edge the other hand, have limited resources that they allocate team implemented and covered the cost of a training to the corporation’s staff. While it is more challenging to needs assessment and provided support and quality aswork with functional departments, as they are less ex- surance to the telecom operator in selecting the relevant perienced with management training than their Human topics and the certified Business Edge training provider Resource counterparts, they have the commitment to that will tailor and deliver the workshops. The telecom build incentives and enhance the business performance operator contracted the Business Edge-certified training of their customers. They are also indispensable in tailor- provider and covered the full cost of the training. ing the training to the specific needs of their customers. Moreover, they have interest in assessing the impact of A “Business Planning” workshop was delivered to the the training on their customers’ sales performance and owners of telecom operator’s distributors in December in gathering essential data that can help us monitor and 2006. Based on the positive feedback, the telecom operaevaluate the intervention. tor is now requesting a further expansion of the initiative to train the sales managers, finance managers, and sales representatives of its 15 distributors in addition to 50 of The Implementation: its second-level distribution companies, which they refer SME Customer Training to as “Super Dealers.” After discussions with the telecom operator’s SME sales manager, it was agreed that we would deliver a half-day Total project cost to date was US$13,500. While IFC workshop on “Pricing and Pricing Strategies” to 300 of covered 32 percent of the cost, the telecom operator its SME customers in six different governorates across 68 percent and 60 participants were trained in total. Egypt. The SMEs were selected by the telecom operator from different industries based on the number of employees they had, ranging from 10 to 100. IFC covered Lesson 3. IFC must play the role of a facilitator and the costs of the trainer and the materials. The telecom op- provider of expertise and quality assurance in SME erator covered the cost of venue and meals for six events. management training, rather than a donor that It also paid for three quarter-page advertisements in the subsidizes the cost of the training and distorts the leading Egyptian newspapers to announce the events as market. a part of the telecom operator’s social responsibility program toward the Egyptian business community. Busi- There is a significant demand from corporations in a ness Edge received a satisfaction rating of 91 percent on wide range of industries for Business Edge training, and the workshops from the participants and a very positive they have demonstrated willingness to pay. They have found the material to be extremely practical and relevant 26

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to the needs of SMEs in their value-chain, and have expressed that there is no competition to Business Edge in the market when it comes to localized SME management training products. IFC should facilitate the process and make the corporations cover a substantial part of the overall project cost. Lesson 4. The more the corporation realizes the beneﬁts of management training of the SMEs within its valuechain, the more it is prepared to expand the initiative and invest in the cost of the training, making IFC’s share of the total cost decrease substantially over time. To date, IFC has covered 32 percent of the expenses related to training telecom company’s distributors; however, with the upcoming workshops, IFC’s contribution to the overall project cost will be as low as 4 percent.

A Win-Win Model This type of distribution model has proven to be a winwin for all stakeholders involved. Impact on SMEs and Corporations The Business Edge team is currently in the process of measuring the impact of the training on the SMEs and at the corporate level. The value-chain approach allows for control groups to be put in place in order to generate more accurate results. Some of the indicators currently being measured include: increased sales of the corporation’s products and services, increased investment by SMEs within the corporation’s value-chain, increased employment, use and application of knowledge gained through the training, and perceived changes in SME business practices. For now, repeat requests coming from the corporations and the SMEs within their value-chain is already an indicator that the training is beneﬁcial.

mand for SME management training, the Business Edge team began a comprehensive effort to capitalize on the SME networks of other large corporations in the region and developed a pipeline of potential clients, including Unilever. Lesson 5. The value-chain model contributes to building the capacity of local training providers. In order to ensure sustainability and the widest possible coverage, Business Edge enters into agreements with local training providers and builds their capacity by giving them access to relevant management training content including self-study workbooks and trainer manuals, training their trainers on flexible learning methodologies, and improving their marketing and business planning skills. After Business Edge certifies the training providers and their trainers, they can deliver Business Edge training courses. The value-chain approach has generated significant business for the certified Business Edge training providers in Egypt by giving them access to large numbers of SMEs in a structured manner. This has contributed to further building their capacity by familiarizing them with a larger pool of SMEs in various industries and with differing management training needs. Lesson 6. Working with the big fish builds the brand equity of the Business Edge product. The placement of the Business Edge brand next to large global brands such as Unilever and Microsoft significantly strengthens the Business Edge brand equity. Brand recognition is important for generating further demand for training. It can also help Business Edge enter new markets outside the MENA region where these brands are recognized.

Lesson 7. This model can be replicated across different industries and countries and give IFC a competitive Impact on IFC’s Business Edge Program and Its Cer- edge in its investment operations. tified Training Providers It has proven to be a highly flexible and cost-effective model that can: For IFC, this approach has stimulated demand for man• Be easily integrated into other advisory services agement training and built the brand equity of the prodprograms uct. For instance, in response to the joint advertising • Be offered as a value-added service to existing or campaign that was implemented with the telecom compotential IFC investment clients pany, the Business Edge team received a phone call from • Be adapted to any stage of an IFC investment project Microsoft requesting a similar service for companies in its value-chain. As a result of the successful intervention with the telecom operator, and the demonstrated deSmartLessons

This model is not restricted to corporations in the fastmoving consumer goods industry. We are currently under negotiation with an IFC investment client in Oman, a leading bank, to train its SME clientele.

About the Authors Khadiga Fahmy, Business Edge Team Leader and Operations OďŹ&#x192;cer, IFC PEP-MENA, Cairo. Nada Abdelnour was an Operations Analyst at IFC PEP-MENA, Cairo.

Published in January 2007.

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COMMUNICATION AS A TOOL IN POLICY REFORM: GETTING THE MESSAGE THROUGH IN EGYPT THOMAS MOULLIER AND SHERIF HAMDY At the end of 2005, the recently appointed reformist government led by Prime Minister Ahmed Nazif started to engage in drastic reforms of the business environment. Building on the momentum created by a successful tax reform, the government, through the General Authority for Free Zones and Investment (GAFI), took a very active role in the establishment of onestop-shop facilities. But despite some visible progress, GAFI was still baffled by the difficulty of re-engineering administrative processes and achieving an effective delegation of authority from central line ministries to their local authorities. One obvious constraint faced by GAFI in Alexandria was the limited knowledge and understanding of the reform process by Egypt’s civil servants. Equally, GAFI suffered from a lack of effective recognition and support from the private sector for the government’s genuine commitment to turn Egypt into a more transparent and predictable place for start-up investors.

How Could IFC Help?

Getting Everybody on Board: Using a Communications Strategy Egypt had a particularly complex regulatory environment for business start-ups. The initial diagnostic carried out by IFC found that the registration and licensing of new businesses involved more than 220 days and 132 processes across 18 institutions having diﬀerent goals and objectives. Facing so much complexity and institutional fragmentation, the reform process clearly showed one central challenge: How to reach out to all major groups having a stake in the reform? What messages were important to link them in a joint eﬀort to simplify business start-up processes for new investors?

GAFI’s one-stop-shop service center has contributed to a signiﬁcant reform eﬀort of business start-up procedures in Egypt since early 2005.

In late 2005, IFC teamed up with GAFI and the Governorate of Alexandria to create a coordinated simpliﬁcation eﬀort of all start-up procedures through a pilot project based in Alexandria. An intensive communication campaign was set at the very heart of the project and proved crucial to motivating the middle management in government institutions, particularly at the local level, to participate in the reform process. The communication and public relations strategy also focused on turning the private sector into a proactive partner taking part in the technical re-engineering of procedures and fully investing itself in measuring the longer-term impact of the reform process.

Carefully choosing our communications objectives and our target audiences is how we started oﬀ.

Choosing Our Objectives The communication strategy was developed only after the release of an IFC report showing a comprehensive technical diagnostic of business start-up procedures, three months after the effective start of the project. The technical diagnostic consisted of process maps of business licensing requirements showing the actual complexity of the procedures and was illustrated with detailed facts and figures. As all the institutions involved in business licensing having a stake in the reform process were identified, it was now possible to define target audience groups and conceive a well-targeted message for each of them. SmartLessons

The communication strategy was jointly developed by the IFC Project team and the Communications Oﬃcer as an integral part of the project. The strategy was then discussed with our main partners and clients, particularly with the Policy Advocacy Unit of GAFI. The strategy focused on three main communications goals: 1. Raising awareness of the private sector about the new services of the One-Stop Shop center of Alexandria 2. Increasing the visibility of GAFI, the Industrial Development Authority (IDA), the Ministry of Housing, and the Alexandria Governorate and their eﬀorts in reforming business start-up licenses 3. Increasing the civil servants’ awareness of and commitment to the ongoing reform process.

Segmenting the Target Audience The strategy focused on three particular target or audience groups: (i) the private sector, (ii) our direct counterparts in the public sector and (iii) the broader population of civil servants having a stake in the reform process. While other groups such as NGOs or the public at large could also have been targeted, we decided to stay more focused, given the relatively short life span of the Project (18 months). A Communication Plan was developed deﬁning the required media tools and activities, designating the responsible person or client institution, and outlining a budget for each activity. Communications activities included a mix of mass media coverage (i.e., a national conference organized in Alexandria), and a series of workshops and events. 1) The private sector: The message for private sector audience was to encourage the private sector of Alexandria to turn into a constructive pressure group in the reform process and seek the active participation of private sector key ﬁgures in the re-engineering process of business licensing procedures. This was important, since the Project wanted to set up and moderate working groups on industrial licensing and building permits. These working groups are composed of individual members from both public and private institutions. 30

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An important milestone in the Project was the signing of a Memorandum of Understanding (MoU) with the strongly established Alexandria Business Association (ABA). In late 2006, the MoU formalized the private sector cooperation with GAFI and IFC in organizing a joint monitoring effort of business licensing reforms, based on a selection of indicators to be measured on a semiannual basis. Overall, the MoU pursued the objectives of building the policy advocacy of our private sector partner as well as using ABA as an active player in the detailed reengineering of business start-up procedures. IFC is now facilitating the creation of a reform monitoring capacity to enable the ABA to disseminate to the media simple, accurate, credible, and concrete information on the state of business regulatory reforms in the region. Through such media coverage, information will reach out to the Egyptian private sector at large in a more systematic and organized way. It will also adequately convey to the government sensitive messages on the pace of reforms and the remaining bottlenecks. 2) The public sector counterparts: This group formed the secondary audience group and included the senior management of 18 institutions involved in business licensing in Egypt and their line ministries. This group was clearly divided into two subtiers: the “champions” and the “followers.” The message here focused on encouraging the second tier to follow the approach and momentum of the first tier, thus to become part of the leadership “pack” themselves. IFC created several events and opportunities with the major goal of rewarding reformers with more credit and visibility for their commitments to the reform process. Typically, these events took the form of press conferences and signature of MoUs with a few individual institutions committing resources, empowering staff, and developing detailed roadmaps to reform business licensing. For instance, such events were organized with the IDA and the Ministry of Housing. During these events, IFC and its new partner institution would provide compelling facts on the benefit of realized “quick-wins” as well as their vision on how they would streamline business procedures both in the short and longer term. Other substantive messages targeted the “second tier” and used international best practice examples to illustrate how institutions pursuing important policy objectives could combine their traditional mandate with the additional objective of attracting new investment to

contribute to new job creation and income opportuni- Closely tie advisory services on developing media activities to the development of a sound and costties. effective Monitoring & Evaluations strategy within the The broader population of civil servants: This was client institution. Facts and figures on the actual pace the third audience group and was also divided into two of reform and its bottlenecks will create a substantive subgroups. These consisted of those who were directly message to the target audience, increase focus on reform engaged in the reform of business start-up procedures issues, and lead to more accountability. and those who were not. Given the time and resource constraints, IFC chose to target mainly the first group. Develop a dual communication strategy addressing the Within the 4 months which followed the technical diag- two strategic angles of the reform process: Engaging nostic, IFC focused on a group of roughly 30 “core man- top policymakers is a must but – equally – engaging agers” at the middle management level across five main the middle management is essential, with distinctive institutions. It developed a communication strategy messages and objectives in both cases. combining regular roundtable discussions, training from international experts, and two study tours in Europe Educate the media to secure a strong message on the and North America of about one week each. Systematic project’s partners, objectives, and benefits. media coverage was organized in connection with these events, including an international media event when the Bringing the Media Up to Speed Egyptian delegation reached Portugal. A national conference organized in November 2006 in IFC’s main objective was to complement the top-down Alexandria provides a concrete illustration of IFC’s comapproach generally pursued with the first and second au- munications approach in this Project. A press conference dience groups with a “bottom-up” approach. The idea was organized on the eve of the national conference. It was to present to the senior policymakers workable, con- involved several regional and three national TV channels structive, and best practice business simplification solu- together with the Arabic, English and French-speaking press to also reach out to the international investment tions emerging from their own management base so that community. IFC acknowledged the reform efforts of its they would be more inclined to endorse them. IFC’s oth- core partners and pointed to concrete achievements of the er message to the “core managers” focused on account- new government team in simplifying business procedures. ability and the need to develop precise, measurable track IFC stressed that more needed to be done and that more institutions should join the reform process. records of reform efforts. Lessons Learned Rely on a handful of key individual government figures strongly associated with the reform process. Use their clout, personal credibility, and individual experience to connect and motivate small and large audiences. Use the media to reward reformers. To strengthen the reform leadership, disseminate their vision and therefore induce other institutions to jump on the bandwagon of reforms. Build up the “media management” skills of your main partners (particularly, private sector organizations) to leverage and sustain your outreach, reinforce the message to both civil servants and the private sector, and ultimately, improve the project development impact.

Organizing a press conference the day before the event also served the purpose of educating the media and providing them with background information on IFC and the benefits of business simplification. This preparatory event enabled the press to contextualize important information in the next day’s conference and therefore to better focus on the key messages. Within the next few days, these messages had been widely disseminated in Egypt. The conference disseminated the results of the technical diagnostic on business start-up procedures. IFC gave the floor to international speakers from North America and New Zealand on their respective reform experience of automation and the introduction of client-oriented building permit procedures. The conference was also used to host the signing of a new MoU with the Alexandria Business Association which marked the beginning of a joint innovative policy advocacy initiative on business licensing reforms.

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Conclusion About the Authors The project is well underway and has achieved strong visibility in Egypt. The first results were made possible by relentless communication efforts using a mix of mass media and communication tools. These efforts were at the heart of the IFC’s advisory intervention. As of May 2007, tangible results of the project included a reduction of business and tax registration requirements from 35 days to 10 days. A new IDA office was set up in the Alexandria one-stop-shop center in GAFI, and a risk-based assessment system for industrial licensing was introduced. Local staff are now entitled to process two risk categories of investment projects locally and are now able to deal with about 80 percent of new requests. Practically, for most investors in Alexandria, the time to go through this process is now reduced by 50 percent, roughly equivalent to a reduction of 35 days. Working with two districts in the Alexandria region, IFC actively engaged with the Ministry of Housing and is now aiming for a 50-percent reduction in the time and number of procedures for building permits by the end of 2007. The solutions developed by the Project are now being replicated in other parts of Egypt. Such results are now generating new materials for an effective public relations campaign stressing the benefits and the payoffs of a participative approach to reforms of the business environment.

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Thomas Moullier, Program Manager, Business Regulatory Reform Program, IFC PEP-MENA, Cairo. Sherif Hamdy, Project Oﬃcer, Business StartUp Simpliﬁcation Project, IFC PEP-MENA, Alexandria.

Published in May 2007.

A BUSINESS WORLD WITHOUT TRIAL: INTRODUCING ALTERNATIVE DISPUTE RESOLUTION IN PAKISTAN NAVIN MERCHANT AND MUHAMMAD AZHAR RAUF As is true in many developing countries, enforcing a contract in Pakistan presents a formidable challenge. According to the 2007 Doing Business Report, it takes 55 procedures and costs about one-quarter of the disputed amount to settle a dispute in Pakistan. Many other analyses conﬁrm these ﬁndings, judging that one litigation may take somewhere between 5 and 10 years. As a result, courts remain backlogged with approximately 1.5 million cases, a third of which are commercial. SMEs, constituting 90 percent of all businesses, are impacted the most by the backlogs.

What Is “ADR” or “Mediation”? ADR stands for alternative dispute resolution and refers to alternatives to the established and traditional method of dispute resolution in the form of litigation. The need for an alternative to litigation is becoming increasingly popular, primarily because of time and cost considerations but also because it helps to avoid the adversarial process, which leaves wounds and destroys relationships. Mediation is the assisted negotiation, where the very presence of a professional mediator changes the underlying dynamic of the negotiating process. Its distinctive feature is that parties have ultimate control over settling their dispute. Mediation could therefore be deﬁned as a voluntary, nonbinding, private dispute resolution process in which a neutral person helps the parties try to reach a negotiated settlement.

Looking back at mid-2005, when IFC PEP-MENA began to address the introduction of court-referred mediation, the ongoing ADR project has come a long way: professional mediators have been trained and certified, a mediation center has been established in Karachi, a high-level Advisory Board is driving the process, pilot courts now apply case management to select mediation candidates, and most importantly private parties are beginning to use mediation to settle their disputes. But getting there was not all that simple! Build partnerships and secure alliances A huge backlog of cases and inadequate resources within the judiciary to tackle the problem made the government and the judiciary look for innovative ways to find a solution. And when IFC PEP-MENA offered to introduce court-referred mediation for commercial cases, it found willing partners. This started with an international conference, organized by IFC, in August 2005 that introduced the experience of similar initiatives in the UK, India, and Uganda. This unique interaction gave local judicial and government officers a first-hand account of the benefits of mediation and the steps required to introduce it in the local civil justice system. Some key champions were identified and were kept in the loop as the project was being designed.

Pakistan has some experience with ADR in the form of so-called “panchayats,” which literally refers to assembly of ﬁve wise and respected elders chosen and accepted by the village community. These assemblies settle disputes between individuals and villages. However, these judgments are legally nonbinding and are typically applied to personal or family disputes. In short, there are no eﬀective alternatives to lengthy and costly judicial procedures for Pakistani enterprises to settle any commercial Get an inclusive Advisory Board disputes. To change the traditional mind-set of key stakeholders, In principle, Pakistan seemed a perfect candidate for the project team felt that it was not enough to just listen introducing commercial meditation along the lines of to their concerns but rather it was essential to make them IFC’s recent experiences in the Balkan countries. SmartLessons

partners in project implementation. The team was successful in garnering support from key stakeholders, and as a result an Advisory Board was constituted comprising the Chief Justice of Sindh as the Chairman, and the Attorney General, a High Court judge, and the President of the Karachi Chamber of Commerce and Industry as key members. The Board provided strategic oversight and direction to the project and ensured a “buy-in” from all the relevant stakeholders. Framework showing the ADR process

the positives did not work the same way for both groups. While a reduction in the huge backlog of the cases was an incentive for the judges, it was looked at negatively by the lawyers. A mix of trainings, a study tour, and awareness-raising seminars was used to develop a “constituency” among the key stakeholders. On the study tour to the United Kingdom, the judges clearly saw the diﬀerence between institutionalized mediation and traditional conciliation and became even more convinced of the value being delivered through mediation. They are now willing to send cases to the Mediation Center and have started proactively persuading the parties to opt for mediation rather than spending years in the court.

Lawyers have also started looking at it as an additional income-generating avenue. Some of them who were trained as mediators are even more comfortable with the process. This is indicated by the fact that the first case of the Center was referred directly by a lawyer-mediator who preferred mediation to litigation. Others who have been able to experience the process first hand are now more willing to refer more cases to the Center—one law firm whose first case was successfully settled has agreed to The project team leveraged its support with the Board mediation in three more cases. No wonder a lawyer has to overcome certain formidable challenges. It was the this to say about his experience of mediation: Board’s strong support that allowed the project team to handle challenging situations without compromising the “For my client, the litigation could have cost up to project outcome. 10 million Pakistani rupees (nearly $165,000) and have gone on for anywhere between five and seven At a later stage, when independent parties started ap- years. Instead of dragging on for years, the case took proaching the Center for resolution of their commercial a day and a half of mediation, and rather than costing cases, the Board readily agreed to amend High Court enough to bankrupt the company, the only cost inrules to provide an adequate enforceability mechanism curred was the mediation fees and the consulting fee for settlement agreements of such cases. for the lawyers to review the agreements.” Build alliances by raising awareness of practitioners and The trade bodies, whose members are the target end-usend-users ers, are now showing greater eagerness to have recourse to this alternate mechanism to release their assets caught For the uptake of ADR/Mediation as an accepted conup in litigation. They have also started thinking in terms flict resolution practice, three sectors needed to develof having a clause for mediation inserted into their fuop sufficient confidence in the process. These included ture contracts, and asking the Center to arrange in-house judges for finding space for mediation services within the mediation training for the member firms. existing judicial system; lawyers, the gatekeepers of the litigation process, for accepting it as a credible alternative The key lesson learned from the above is that the users to litigation; and the end-users (the private sector) for love it but potential customers need to be persuaded to identifying value in exercising the ADR/Mediation opbuy it. The promotion/communication campaign should tion. It was soon realized that the judges and lawyers are be aggressive. the main catalysts for transforming the system, but all 34

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Build capacity and incentives to achieve sustainability

Build the foundations of a ﬁnancially self-sustaining Center

A market mechanism was adopted to identify and select suitably qualiﬁed and motivated participants for the mediators’ training. This helped in ensuring the commitment of the trainees to the training activities and also created suﬃcient eagerness for them to work at the Center to make use of newly acquired skills. The initial skills training course was followed by an advanced course to train 18 world-class mediators and 6 master trainers. This has helped and will continue to help institutionalize and sustain the training capacity within the country in general, and at the Mediation Center in particular.

The Pakistan ADR project has started with an eye on securing the financial sustainability of the initiative even in the post-IFC period. This started with the charging of fees from the training participants, despite the fact that the concept of mediation was almost unknown in Pakistan. Later on, when the Center opened its doors for mediation services, a fee schedule was chalked out, with 75 percent of the fee going to the mediators and 25 percent being retained by the Center, preserving the continual professional interest of the former and covering the overhead expenses of the latter. A corporate membership scheme has also been designed, inviting businesses to beEstablishing the Center come members and have access to discounted services at After developing the requisite skills set, IFC, with the the Center. help and support of the Advisory Board, helped to establish Pakistan’s first mediation center as a nonprofit legal Develop curriculum and localize training capacity entity in January 2007. A Board of Governors headed locally by a former Chief Justice of Pakistan and consisting of eminent personalities from the legal and business sectors For the broader institutionalization of ADR/Mediation, of Karachi was inducted. The high stature and profile of the project plans to engage with existing local training the board members have served to create sufficient cred- institutes and law schools to develop training programs ibility, provide quality assurance, and give visibility to and curricula on ADR mediation. This would support the Center. The Board is bringing its diverse professional initial training and capacity building among lawyers and experience to bear on improving the operations and fu- judges who play a key role in promoting ADR Mediation. ture strategy of the Center.

About the Authors Navin Merchant, Operations Oﬃcer, IFC PEPMENA, Pakistan. Muhammad Azhar Rauf was a Project Oﬃcer for Pakistan ADR project.

Published in May 2007.

Opening ceremony of the ﬁrst mediation center performed by the Chief Justice of Sindh High Court

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WHEN YOU SWEEP THE STAIRS, YOU ALWAYS START FROM THE TOP SEBASTIAN MOLINEUS Case 1: A chairman of a logistics and transportation provider sought IFC help to improve its performance through better corporate governance. This idea came to him while attending a training course on corporate governance— the Board Development Series—organized by IFC’s Egypt Corporate Governance Program (CGP). Under the chairman’s leadership, the company (Company 1) made bold corporate governance improvements, including: (i) making the board and audit committee more professional; (ii) recruiting a professional corporate secretary; and (iii) drafting a policy on related party transactions. The company also published its corporate governance improvement plan on its website, underlining its commitment to transparency and accountability. The process was expensive in the short term (it cost 5 percent of the company’s annual profit to make the upgrades). However, the share price soared 29 percent after the changes were made, and several equity firms expressed interest in making an investment after the overhaul. Case 2: IFC team conducted a corporate governance assessment for a potential investment client. The company’s (Company 2) CEO was eager to pursue corporate governance improvements for his institution. However, the IFC team failed to obtain the board’s commitment. One year after the submission of the final corporate governance assessment report—and the ouster of the CEO by the board—the company has yet to implement any of the report’s recommendations. initial skepticism, lack of knowledge, and resistance to change. For one, most company directors and officers may not truly understand the meaning of corporate governance. A recent IFC survey on corporate governance practices across the MENA region showed that 59.2 percent of respondents could not define corporate goverIndeed, two issues highlight the challenges in improving nance properly. Most confused “corporate governance” corporate governance. First, directors and officers often with “corporate social responsibility.” do not understand the meaning of corporate governance. Second, there is a lack of understanding of how corpo- In relation to the level of understanding about how good rate governance can improve the bottom line. Issues such corporate governance can add value to the bottom line, as this can lead to resistance to change, and overcoming only 49.3 percent of respondents in the same survey them is a formidable but necessary task to building the thought corporate governance was important or very business case for companies to implement corporate gov- important to their organization. And those that did ernance. This SmartLesson focuses on how such com- mostly cited compliance as the main driver for reforms. mitment is obtained when implementing any company- To illustrate resistance issues, imagine yourself as a project level work to effect change to a company’s governance officer who has to make the business case for corporate framework, policies, and practices.1 The note is targeted governance during a meeting with the company founder to advisory staff implementing corporate governance and chairman. The issue at hand: How do you change projects; however, it may also be applicable to other staff the board’s composition from one composed exclusively of family members (in particular, sons and daughters who engage with private sector clients. who may not be qualified to sit on the board) to one The two cases above from the IFC PEP-MENA Corporate Governance Program highlight the importance of securing a real and demonstrable commitment by a company’s senior officers and directors before embarking on the journey of corporate governance reform.

The issue: How do you overcome resistance to change? __________ 1

This is the second SmartLessons paper on corporate governance,

Most project teams implementing corporate governance after “Structuring Corporate Governance Projects.” Contact reforms at the company level may be confronted with smartlessons@ifc.org to request this lesson. 36

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with independent directors? A proper explanation is needed to overcome any skepticism and build a sound and compelling business case, showing how corporate governance pays oﬀ and how independent directors can help ensure that a business sustains the livelihood of future generations.

providing corporate governance know-how and not conference management. The IFC brand name usually does the rest. Take a look: In case 1, the chairman, attended not one but several IFC training events; in case 2, none of client company’s directors attended similar courses offered by IFC in the United Arab Emirates (UAE).

One Answer: A three-step approach built around Give them something they can touch and feel. commitment. Integrating local case studies and success stories into these events will help demonstrate that corporate governance Experience shows that to effect real change at the board- works in practice. Indeed, Company 1 is already being room level, the best means of doing so is through a three- used as a model case study, Company 2 as its antithesis. step approach built around commitment. When local case studies are unavailable, such as during a project’s start-up phase, the project team can fall back on success stories from other regions or corporate governance Step 1: Sow the seeds programs, e.g., the Banca Commerciala Romana (BCR) The first step a project team may wish to take is to prop- story.2 For example, the program team recently organized erly define and build the business case for corporate a large-scale conference on corporate governance for governance among potential clients. Awareness-raising banks in Riyadh—the first such conference in Saudi events are an excellent means of doing so. However, the Arabia—for over 258 bankers and other stakeholders. project team should keep the following lessons in mind: The team not only allowed for interactive elements to be integrated into the event, such as a panel discussion, Organize events for senior decision-makers that are but also invited the CEO of BCR to present his views on interactive and fun. Roundtables and seminars during how to implement corporate governance and the positive which participants can interact and pose questions, even impact this had on his bank. if in a limited manner, are preferable to one-dimensional (and often boring) conferences, although the latter type of event, if organized with interactive elements, may be suitable for introducing the topic of corporate governance. Interactive elements may include discussions around case studies as well as breakout groups, roleplaying, and mock board meetings. Ensuring that highlevel decision-makers (board chairmen, directors, and senior managers) participate is important to increasing the chance of implementation at the corporate level. How? Partnering with a local institution with strong contacts in the business community is probably your best bet to ensure that the audience is indeed made up of senior directors and managers. Another reason for Picture 1: A ward ceremony for the best annual report partnering with local organizations is better allocation during a corporate governance conference in E gy pt. of staff time. Organizing events can be extremely timeconsuming with procurement, conference organization and administration. Be smart: Use these events as business development opportunities. While many will rightly argue that Having a local partner to plan, organize, and carry out training as such is not a core competency of IFC, it is such events enables project staff to focus on providing an effective means of reaching out and explaining the value-added services such as preparing and delivering benefits of corporate governance to a broad audience. course material. It is also an excellent means of passing __________ knowledge on to the local partner organization. In the 2 Details on the Banca Commerciala Romana case study can be end, it just makes business sense for IFC staff to focus on found at www.ifc.org/ifcext/corporategovernance/. SmartLessons

In addition, training events are opportunities for developing business — both advisory and investment services—and promoting IFC’s brand name among a country’s private sector, which may not always be familiar with the topic at hand (or with IFC, for that matter).

menting good corporate governance. Examples of such targeted assistance may include corporate governance assessments and reviews, company-speciﬁc workshops, and consultations.3 The following lessons learned in implementing step 2 again show the necessity to obtain buy-in and commitment:

Use these events to identify future champions. Awareness-raising events also let staff identify key players who are likely to emerge as future corporate governance champions, who may well request more in-depth (and profitable) advisory services, and who can serve as future case studies. To cite another example, in 2003, while implementing the Russia Corporate Governance Project, the local team leader in Samara noticed that both the CEO and the chairman of a company traveled almost two hours each way to participate in the awarenessraising events organized by their office. A relationship was quickly forged between the company and IFC, and the project team agreed to conduct a full corporate governance assessment for the firm. One year later, the company became an investment client. And finally, do not be afraid to charge! One argument frequently cited in this respect is that fees would lessen the outreach due to lower attendance levels. However, the corporate governance project team in Egypt found the opposite to hold true: when it organized a free conference in April 2006, 69 participants attended. The project team went on to organize three further events and charged between $45 and $60 per person; to everyone’s surprise, they attracted an average of 73 participants over the three events. To date, the Egypt Corporate Governance Project has generated $132,192 in revenues and $58,243 in net profits from its training activities alone! Moreover, charging fees not only helps cover IFC project expenses, it also adds drive for IFC staff (who may work that extra 10 percent to meet higher expectations) and also increases the likelihood that participants will act on the takeaways from the conference. Finally, although some may argue that conferences and seminars are “public goods” and should not be subject to participation fees, offering free conferences may undermine the market for conferences and training events, contrary to IFC’s mandate to support and not displace the private sector. Step 2: The drill-down phase Focus on providing in-depth and targeted advice to support individual banks and companies, or groups of individuals (e.g., directors or company secretaries) in imple38

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Picture 2: Breakout session during a corporate governance work shop in E gy pt.

Map, but do not forget to gauge commitment. A project should strategically define, select, and approach its future clients to ensure that the right companies are chosen for maximum development impact and demonstration effect, in particular when engaging in single company projects, such as corporate governance assessments. A mapping exercise will help project staff strategically approach and select future client companies thatare best placed to serve as case studies. The CGP’s experience is that there are three types of companies ideally suited to become best practice case studies: (i) private, familyowned companies that are seeking a public listing; (ii) companies that are in financial difficulty, or coming out of a scandal, that now seek to turn their operations around and rebuild stakeholder trust; and (iii) stateowned enterprises that are seeking to privatize. All will likely have the motivation and commitment for real change, rather than treat corporate governance as a __________ 3

A corporate governance assessment consists of an in-depth assessment of a company’s corporate governance framework, policies and procedures, and actual practices, which is then followed by a set of recommendations and an implementation plan. A corporate governance review is a shorter, less time-consuming version of a corporate governance assessment. Corporate governance consultations consist of targeted advice on a single corporate governance issue - for example, how to establish an audit committee.

window-dressing project. This mapping exercise should be done in close collaboration with IFC’s investment side to ensure that a future investment is a possibility and also to help demonstrate IFC’s value-added proposition. Company 1 was a company in the process of a turnaround; Company 2 was a start-up company, preoccupied with thousands of other management issues. Quality over quantity. Because of the amount of work required to implement the recommendations contained in a corporate governance assessment/review, it is advisable to focus on a few highly committed companies, making the selection process acutely important. This will ensure that these selected companies reap the full benefits of corporate governance, rather than dilute the potential impact by working with a large number of companies on a one-off basis. This will further help ensure the business case is properly built. CEO and chairman buy-in. Prior to initiating a corporate governance assessment (or other single company - focused projects), both the chairman and the CEO should have formally voiced their awareness of and commitment to the project. It is a mistake to have company-specific work solely supported by the CEO and other senior managers without the board also actively approving and supporting the project (and vice versa). In fact, during the corporate governance assessment, two of the board members of Company 2 did not make the time to meet with the project team; and the one director who did showed outright hostility toward corporate governance. And so without support from both the board and management, it is unlikely that recommendations made for improving corporate governance practices will be implemented. In those cases where neither the chairman nor the CEO constitutes or represents the majority shareholders, commitment from the majority shareholders should be sought as well. This understanding should be formally captured in an agreement to be signed by the chairman and the CEO, e.g., an advisory agreement, or through an exchange of letters. Conducting targeted workshops for senior participants— the Board Development Series. The CGP has found that targeted workshops for groups of individuals (e.g., chairmen, directors, CEOs, company secretaries, internal auditors), in particular when conducted with the same group of participants over an extended period of time, are highly effective in effecting change. Indeed, following the mantra of “less is more,” the CGP’s

experience is that inviting fewer but more senior people can have greater impact than inviting more junior midlevel managers. The fact that Company 1 attended every single part of the Board Development Series speaks volumes. The experience of the Pakistan Corporate Governance Project is another good example: the project initially organized a series of broad awareness-raising events, such as a conference on corporate governance for listed companies in Karachi in November 2006, which attracted over 150 participants. The event proved useful in raising awareness of corporate governance among mid-level managers; however, it is unlikely that major impacts at the company level were achieved. Then, in a follow-up to this event, the project organized a series of interactive workshops within the framework of a course called the Board Development Series.4 These workshops targeted an important, if select, group of 38 CEOs, CFOs, and board members. The course participants soon understood that corporate governance does indeed pay, and before the course had finished, they had already managed to formally change 48 policies and procedures within their companies. Does the end justify the means? Company-specific advisory services should not be viewed as an end unto themselves. Of course, any intervention, even for a single company, will have a positive contribution. However, it is likely to be a drop of water on a hot stone. To ensure that the potential impact is not limited to a single client - and that donor funds are used in an efficient and effective manner - it is imperative to ensure that that one single success story serves as a example to others. Writing simple, two-to-three-page case studies and disseminating these during awareness raising events has proven effective. This is especially true for companies in the same sector who may see corporate governance improvements in one of their competitors as a potential threat to their market position and seek to implement corporate governance reforms of their own.

__________ 4

The Board Development Series is an in-depth and interactive course on corporate governance targeted to current and future directors. The course in its current format consists of four parts, each part consisting of six modules of two to three hours. Given the level of detail and length, the Board Development Series is typically taught over a half-year period. The course was recently accredited by the Institutional Shareholders Services, and those participants who complete the course, including a ﬁnal examination, carry the title of “certiﬁed director.”

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Step 3: Build long-term relationships with clients. About the Author Explain, but also hold hands. The delivery of a corporate governance assessment may well be insuďŹ&#x192;cient to ensure the achievement of expected project outcomes and impact on its own. Indeed, the CGP has worked with a number of clients such as a regional gas company that did not have the internal know-how or resources to implement the recommendations. All corporate governance assessments or reviews should thus be designed to include time spent on working with the client to implement the recommendations made in the report, e.g., by providing consultations and workshops. This has the added value of building long-term relationships with key clients and ensuring that these companies become future best practice case studies.

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Sebastian Molineus, Senior Operations OďŹ&#x192;cer, Corporate Governance - World Bank, Washington, DC.

Published in September 2007.

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The Private Enterprise Partnership for The Middle East and North Africa (PEP-MENA) Following recommendations made at the G8 summit in 2004 IFC established PEP-MENA, a multidonor facility for advisory services to support private sector development across the MENA region. Covering 19 countries from its main oﬃce Cairo, spanning from Morocco in the West to Pakistan in the East, IFC PEP-MENA’s mandate is to stimulate private sector growth to help create employment and income opportunities across the region. Its activities are funded jointly by IFC, Canada, France, the Islamic Development Bank, Japan, Kuwait, the Netherlands, the United Kingdom, and the United States. IFC PEP-MENA’s strategy focuses on four key areas, or ‘pillars.’ • Improving the Business Enabling Environment • Strengthening Financial Markets • Supporting Small and Medium Enterprise Development • Promoting Privitatizations and Public-Private Partnerships Regional Oﬃce Contact: Jesper Kjaer General Manager, IFC PEP-MENA Nile City Towers, North Tower, 24 Floor 25 C, Corniche El Nile, Ramlet Boulac, Cairo, Egypt Tel: +202-24619130/45/60 Fax: +202-24619130/60