From_MENA

IFC PEP-MENA Regional Offi ce: Nile City Towers, North Tower, 24 Floor

25 C, Corniche El Nile, Ramlet Boulac, Cairo, EgyptTel: +202-24619130/45/60

Fax: +202-24619130/60

SmartLessons is an awards program to enable IFC clients, partners, donors, and staff to share lessons learned in their day-to-day work. Th is brochure opens a door into a new kind of knowledge sharing. Instead of lengthy academic articles and formal reports, it presents fi rst-hand and straightforward project stories with pragmatic useful analysis, written by professionals and for professionals. Th rough 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 fi nance, 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. Th e fi ndings, interpretations, and conclusions expressed in this paper are those of the author(s) and do not necessarily refl ect the views of IFC or its partner organizations, the Executive Directors of Th e 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 [email protected].

SmartLesson 1 4History, 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 8Innovative Ways of Promoting and Selling SME Management Trainingby Nada Abdelnour and Michel Botzung

SmartLesson 3 13When a Frontier Market is on the Front Lines: Providing Value–Addition to Firms in Confl ict–Aff ected Countries by Bas Auer and Mary Porter Peschka

SmartLesson 4 18From Advisory Services Recipient to Knowledge Provider: A Case Study from Morocco by Markus Pilgrim, Omar Balafrej and Zineb Benkirane

SmartLesson 5 22Do Not Bank on Consultants to Deliver All the Goods! Sophisticated Clients Require Hands On Project Management by Raiomand Billimoria and Gregory Rung

SmartLesson 6 25Working Our Way Down the Food Chain: A Corporate Value–ChainApproach to SME Management Training by Khadiga Fahmy and Nada Abdelnour

SmartLesson 7 29Communication as a Tool in Policy Reform: Getting the Message Th rough in Egypt by Th omas Moullier and Sherif Hamdy

SmartLesson 8 33A Business World Without Trial: Introducing Alternative Dispute Resolutionin Pakistan by Navin Merchant and Muhammad Azhar Rauf

SmartLesson 9 36When You Sweep the Stairs, You Always Start from the Top by Sebastian Molineus

4 SmartLessons

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. Th e 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, includ-ing 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 Cairo-based private sector fi rm, chose Egypt’s Siwa Oasis as a unique location to implement the local sustainable development project. Th e 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. Th e 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. Th e 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. Th e later is the focus of this SmartLesson.

Lesson 1: Ensure that both women and men directly benefi t from IFC-supported interventions, especially when the project takes place in a cultural context where physical gender segregation is the norm.

While the initial components of the Siwa development

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 married? Even younger, unmarried girls would not easily mix with men in the workplace.

In the past, women were known for their intricate embroidery skills, yet Siwan embroidery had become almost extinct, as only a few older Siwan women had

Th e oracle of Siwa confi rmed Alexander the Great as both a di-vine personage and the legitimate Pharaoh of Egypt during a visit made prior to his campaign of conquest in Persia.

SmartLessons 5

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.

Th e initiative began to work with a group of about 50 women who were provided training by their elders in traditional Siwan embroidery techniques. Th e 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 diff erent locations throughout Siwa. Th e 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.

Th ere 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 diffi cult for such businesses to successfully scale-up. How would this women’s artisanship initiative be diff erent? EQI’s upscale “Adrère Amellal Ecolodge” and the IFC co-fi nanced hotel in the surrounding area of the Shali Fortress attracted many eco-tourists who are interested in buying traditional high-quality souvenirs from Siwa. Th e premises of “Adrère Amellal” include a beautiful store where embroidered products are sold to mostly high-end international tourists. Another store will be opened in the hotel nearby Shali Fortress, centrally located at downtown Siwa’s main intersection.

Th e women’s artisanship initiative has also benefi ted from visits of famous tourists. Italian haute-couture 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 Desig-ner House in Italy have been showing off the Siwa Scervino line at catwalks in

Milan. Th e 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. Th e 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.

6 SmartLessons

Lesson 3: Measuring development impact is key not only for the success of the artisanship component in Siwa, but also for scaling up and replication elsewhere.

Under the women’s artisanship component, 300 women would be trained. How would that make a diff erence to them or their families? Was the initiative really going to empower the benefi ciaries, or would women’s economic activities “upset” existing gender relations in the family?

Th e 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 benefi t from the women’s artisanship initiative. In September 2005, baseline information was gathered from 60 women who would benefi t 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. Th is was to obtain information on training quality and relevance.

More than half of the survey questionnaires have been analyzed, and preliminary fi ndings indicate that the typical trainee is 18-25 years old, unmarried, and without children. Th e 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 off ering 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

shared that the training has promoted a social space where women can regularly come together and discuss issues pertaining to the community at large. A third set of questionnaires is being designed to evaluate the impact of the training on women’s ability to generate income and how that aff ects decision-making within the household, as well as women’s entrepreneurial spirit. Th e impact assessment will be completed 6 months after project completion (September 2007).

Lesson 4: Convey the benefi ts 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 fi rm. 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 benefi t 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. Th ere is now a database that includes information on all benefi ciaries, the training they have taken, and the products they have produced and sold. Th e process has also enabled Siwa Creations to have easily accessible operational information at their fi ngertips: Siwa Creations’ staff can retrieve information related to its production capacity, costs, and revenues – all essential for an effi cient and eff ective business. Moreover, the ability to report on development impacts has contributed to EQI being seen as a credible private sector partner for development. Th e 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

SmartLessons 7

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 benefi t from an international fair trade (IFAT) assessment with the idea that IFAT (or similar) certif-ication 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 certifi cation 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.

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.• Th e community has realized social benefi ts that are also profi table for the private sector.• Cultural preservation and environmental sustainability further promote product marketability.

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

About the Authors

Carmen Niethammer, Program Manager, Gen-der Entrepreneurship Markets (GEM).

Heba Abdella, Environmental Quality Inter-national (EQI) Project Coordinator.

Kamal M. Siblini, Senior Monitoring & Eval-uation Specialist, IFC PEP-MENA, Cairo.

Nermine Samir Fadl, Operations Analyst, IFC PEP-MENA, Cairo.

Published in May 2007.

8 SmartLessons

INNOVATIVE WAYS OF PROMOTING AND SELLING SME MANAGEMENT TRAINING

NADA ABDELNOUR AND MICHEL BOTZUNG

Th e Private Enterprise Partnership for the Middle East and North Africa ( IFC PEP-MENA) has seized a strategic oppor-tunity 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 diff erent 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 fi rms. Th is SmartLesson examines the lessons learned from launching and promoting management training pro-grams for SMEs in a frontier market.

Background and Challenges: Filling a Void in the Market for Management Training

While small and medium enterprises (SMEs) are unique, as in case of larger businesses, eff ective management is key to unlocking the potentials of increased productivity, profi tability 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 fi nancial 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 fi sh” (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 aff ect the development of SME Management Training market in the region. On the demand side, most entrepreneurs are not convinced of the practical benefi ts training can have on their businesses, and do not have a structured training agenda for their employees. A minority are convinced of the potential benefi ts of training but are unwilling to pay

for training because in the past their training were sponsored by donor agencies for free or at highly subsidized prices. On the supply side, training providers are reluctant to target SMEs, as they are perceived to be more diffi cult 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 specifi cally 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 specifi cities 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.

SmartLessons 9

A. Making Localized and Tailored Training Material Available: In order to fi ll the void in the regional market for training products, IFC PEP-MENA “localized” the Business Edge content (which includes 36 workbooks and trainer manuals) into Arabic and English and incorporated local Middle Eastern case studies. Business Edge material is unique. It is specifi cally tailored for SMEs and unlike available management training products that are literal translations of foreign material, these are customized to fi t the local business environment. Th e localized training material is more relevant and applicable for SMEs, and reduces the cost borne by training providers of developing new training curricula for SMEs.

B. Capacity Building of Partners: As part of its eff ort to build the capacity of training partners, IFC PEP-MENA provides its Business Edge product range to local training providers. Th ese in turn use the Business Edge products as a core in designing their unique and innovative training programs for SMEs. IFC PEP-MENA certifi es the training providers, provides their trainers with train-the-trainer (TOT) sessions, and monitors their performance, ensuring that consistent quality standards are upheld. Each training provider invests in promoting his or her own Business Edge-based training program(s) to SMEs. IFC PEP-MENA supports all training providers through an umbrella promotion campaign. Partners pay a yearly certifi cation fee of $1,000 as well as $200 for each trainer that undergoes the TOT sessions. Th ey also pay $1.30 per Business Edge workbook they purchase for trainees. Partnerships are reviewed on an annual basis, and renewal is based on their performance.

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.

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 in order to recommend the program through open seminars promoting Business Edge material and courses. Business Edge pays for the cost of the trainer and training material, while the donors and business-associations invite their SME base and pay the cost associated with the venue. Th ese events are like “teasers” to give SMEs a taste of what Business Edge training is about, spreading awareness, and generating demand for training.

Reaching SMEs in the Value Chain of Corporations: In order to further expand its reach, IFC PEP-MENA has tapped into the value chain of corporations to reach SMEs, signing agreements with leading corporations in Egypt. In 2005, Business Edge signed an agreement with a leading telecommunications company, to implement a program to provide training on key business management skills to up to 300 owners and managers of small and medium enterprises that are company clients. Th rough seminars in six cities across Egypt conducted by Business Edge’s network of training partners in Egypt, the program is introducing Business Edge training products and services to the SME clients of a telecom company, who are learning essential management concepts to help them expand their businesses. Th e program has also conducted a training needs-assessment of the company’s distributors in order to begin tailoring comprehensive Business Edge workshops for them based on their key management needs.

SME Clients Scheme

M a rk e t D e v e lopm e nt

P a r t ne rs ’ C a pa c ity B u i ld in g

P r o du c t De v e lo pm e n t

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

S ME T ailored W orkbooks & T rainer Manuals L ocal languages and local cas e s tudies Affordable cos t and no competitor in the market

Awarenes s C ampaign (Material & P artners ) Direct Demand for P artners (C orporate V alue C hain) R egionally B uilding the B rand E quity (MB C )

What is it ? O ne or half a day training s es s ion on a specific management topic (pricing, quality, etc.)

What for ? T o generate awareness / demand for Management T raining

• S elects a relevant training topic

• Identifies and provides the B E trainer

• Distributes workbooks

• Invites S ME s from its data base

• S elects cities, pays for venues

• Advertises the partnership

What is it ? O ne or half a day training s es s ion on a specific management topic (pricing, quality, etc.)

What for ? T o generate awareness / demand for Management T raining













10 SmartLessons

SME Distributors Scheme

Building the Brand Equity at the Regional Level: IFC has cosponsored the Middle East Broadcasting Centre’s (MBC) “Th e 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 “Th e Investor” is MBC’s largest production to date. Th e 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 fi nancing to start up their business ventures. IFC has provided MBC with three Business Edge trainers (“Th e Advisors”) for the duration of the fi lming of the show as well as full-fl edged 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). Th e website includes information on Business Edge training providers and the scheduled courses they off er, how to apply for training, and how to become a certifi ed Business Edge training partner. A regional media campaign (in magazines and newspapers) highlighting our partnership with MBC has also begun.

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

IFC has three clear comparative advantages, foremost of which is its unique management material. Specifi cally 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 approach-adopting 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, profi table business out of the provision of management training to SMEs. Rather than fostering fi nancial 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 certifi ed in TOT sessions.

• In addition to the six open seminars for telecom company’s SME distributors and suppliers in governorates across Egypt, 11 open semi-nars were organized in cooperation with donor agencies and bussiness associations in Egypt and Palestine, attracting a total of 835 addi-tional owners and managers of SMEs.

What is it ? A comprehensive T raining C ourse focus ing on their key management issues

What for ? Improve management skills and performance of the distributors

• T raining Needs Assessment of Distributors (F G D)

• Use the B E T raining P roviders Network to train Distributors & P oints of S ales

• Mobinil promotes the training

• Mobinil & its distributors cover the cost of the B E training

What is it ? A comprehensive T raining C ourse focus ing on their key management issues

What for ? Improve management skills and performance of the distributors

• T raining Needs Assessment of Distributors (F G D)

• Use the B E T raining P roviders Network to train Distributors & P oints of S ales

• Mobinil promotes the training

• Mobinil & its distributors cover the cost of the B E training

SmartLessons 11

• 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.

Th e program currently screens numerous demands for partnerships, as opposed to exerting time and eff ort convincing training providers about the benefi ts of partnering with IFC PEP-MENA.

Lessons Learned:

Four Key Lessons for Promoting and Selling SME Management Training in MENA

Business Edge’s wholesale business model allows fl exibility in target group and integration with investment and advisory programs: Th e Business Edge business model that relies on building the capacity of training providers, and uses localized quality training material, has proved very relevant to enterprises that are not SMEs, namely corporations as well as micro-enterprises. In March 2005, Wadi Holding Egypt, a company specializing in poultry breeding, agriculture, food processing, and feed manufacturing, signed an agreement to adopt the Business Edge training materials and approach for all its employees. Th is off ered an opportunity to create a linkage between advisory services and investment, resulting in an IFC investment in Wadi Foods in May 2005. Moreover, Sanabel, the largest microfi nance network in the Arab world, whose members serve 80 percent of active microfi nance clients (775,000 micro-entrepreneurs) in the Arab region, has requested to use Business Edge material to build the capacity of microfi nance institutions.

Business Edge management training has also served to create visibility for IFC in countries such as the Gulf Cooperation Council-countries where investment has proven more diffi cult. Th e business model has allowed the program to partner with training institutions that seek to promote entrepreneurship (as opposed to SMEs). Th e business model has also allowed the program the fl exibility of leveraging on other IFC PEP-MENA programs, allowing it to expand its SME base. Th e Gender Program is using Business Edge to train women entrepreneurs. A number of “Women Get the Business Edge” training workshops have been held in Afghanistan, Egypt, Jordan,

and Yemen. Th e 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 off ered. Th e Information and Communications Technology (ICT) program is using Business Edge management training to deliver training to information technology fi rms and associations in the region. Leveraging on other IFC PEP-MENA programs has allowed the Business Edge program to fi nd new modes of delivery for management training. Working with the Access to Business Program has allowed Business Edge to render Business Membership Organizations (BMOs) key brokers in delivering Business Edge training to SMEs.

Stimulating the Market for Training Is Mandatory: Th e assumption at fi rst was that, armed with Business Edge’s unique content, partners would have no trouble delivering management training to SMEs. We learned however, that partners do not know how to reach or market to SMEs, as they don’t have an SME database (these do not exist in most MENA countries). On their end, most SMEs don’t have an HR/training person, and are reluctant to pay for training or dispense with limited staff . Th is led the Business Edge program to focus more on helping the partners to market Business Edge to SMEs, with tailored workshops on “How to Eff ectively Market SME-Management Training to SMEs,” on the one hand, and spreading awareness about Business Edge management training among SMEs through “open seminars” (sample workshops like “teasers” to give SMEs a taste of what a Business Edge workshop is about) in cooperation with business associations, large companies, and donors, on the other. At the regional level, the Business Edge program partnered with MBC to co-sponsor “Th e Investor” show, and this contributed to building the brand equity of the program regionally, and helped generate demand. As a result of the show, increased enthusiasm among Business Edge-certifi ed partners to work with IFC PEP-MENA has been noted, and other potential partners have approached IFC PEP-MENA in order to form partnerships. Th e show is promoting awareness about the Business Edge program in countries where the program has not yet been introduced, but in which potential partnerships are being sought.

Reluctance to Pay Can Be Overcome: Despite their initial reluctance, both SMEs and training providers are ready to pay to have access to Business Edge material and services. For their part, SMEs are prepared to pay for Business Edge training provided they are convinced

12 SmartLessons

of its applicability to their real-world business problems. Training providers are willing to pay for certifi cation fees, TOT costs, and workbooks as long as they are convinced that they can make a profi table 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 Th eir 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 signifi cant business for Business Edge training partners. Partnership with large corporations creates high-profi le 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 fi nd 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 off ers 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.

Th e 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.

Published in March 2006.

About the Authors

Michel Botzung, Program Manager, Business Edge, IFC PEP-MENA, Cairo.

Nada Abdelnour was an Operations Analyst at IFC PEP-MENA, Cairo.

SmartLessons 13

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 confl ict-aff ected countries; and the donor commu-nity, including the World Bank Group, has a strong role to play. To date, much of the discussion regarding PSD in confl ict-aff ected 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 confl ict-aff ected countries. Th is note considers the suitability of the application of this particular business line – and specifi cally fi rm-level assistance – to further IFC’s mission in these countries by exam-ining 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 develop-ment can take place even when parts of a nation are at war. Research also shows that, at the end of a confl ict, a small window of opportunity exists to restore economic hope and social well-being.” - Johanna Mendelson Forman, Achiev-ing Socioeconomic Well-being in Post-confl ict Settings.

Private Sector Development in Confl ict-Aff ected Countries

Th e economic impact of armed confl ict goes well beyond the immediate human loss and destruction of capital. Th e war fundamentally changes human behavior and economic choices and as a result changes the economic structure in a country. Physical destruction results not only in the obvious loss of capital assets and in a reduced confi dence in longer term investment decisions, but also in a loss of trust between economic agents, thus reducing market transactions.

Th rough this destruction and its far-reaching conse-quences, war diminishes the potential for economic growth and social development in aff ected countries. Following the cessation of violence there is a narrow win-dow of opportunity in these countries when people are open to “buy in” to the reconstruction of the economy.

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

2. Reorganization of the fi scal sector; and3. Rebuilding institutions necessary to allow the private sector to revive.1

Th e 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 de-velopment in confl ict-aff ected countries is a relatively new topic, as PSD strategies have not historically been included in confl ict reconstruction eff orts; rather, they have been considered “second generation reforms” in these high-risk economies. What is agreed upon, how-ever, is the importance of addressing private sector de-velopment issues at an earlier stage in the reform process and better adapting PSD strategies to the specifi c context of the confl ict.

Role of IFC in Confl ict-Aff ected Countries

Th e World Bank’s role in confl ict-aff ected countries has evolved considerably over the last decade. In FY06, the Bank Group, through research, advisory services (AS), investment, and political risk insurance, supported 35 countries aff ected by violent confl ict. One of IFC’s stra-tegic priorities is strengthening its focus in frontier mar-kets, including many war-torn nations. In frontier coun-tries, IFC has a key role to play in meeting the fi nancing_______1 Working Paper Number 45(1) Enhancing the Private Sector Con-tribution to Post-War Recovery in Poor Countries; Tilman Bruck, Valpy Fitzgerald, and Arturo Grigsby; University of Oxford, July 2000.

14 SmartLessons

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 re-construction in confl ict-aff ected countries, there is no de-fi nitive 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 advi-sory services, should we focus on BEE interventions, or are there other types of initiatives, such as fi rm-level assistance, that are relevant? Th ere are many individual experiences, and while it is the situation on the ground that dictates the specifi c type of engagement, if IFC is to eff ectively engage in confl ict-aff ected markets, there is a need to learn and share knowledge.

IFC in Afghanistan

Afghanistan’s economy has been devastated by more than 20 years of protracted confl ict, and exacerbated by the 1999-2001 nationwide drought. Today, Afghanistan is one of the poorest countries in the world by any mea-sure. Th e 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-atively small, including manufacturing (9 percent - pre-dominantly agricultural processing) and infrastructure (8 percent). It is estimated that 80-90 percent of economic activity occurs in the informal sector.2

Despite Afghanistan’s diffi cult investment environment, IFC has made several investments, in the First Microfi -nance Bank and the Serena Hotel, totaling US$13 mil-lion. Some additional investments are in progress. While IFC is interested in participating in selective, catalytic investments, in the near term most of its engagement will be in the form of AS, deployed via IFC PEP-MENA, with initial focus on strengthening the fi nancial sector and providing value-added to local fi rms in key sectors, such as agribusiness.

Afghanistan Horticulture Export Clusters De-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 eff orts on enhancing the competitiveness of local fi rms in _______2 World Bank, “Afghanistan – State Building, Sustaining Growth and Reducing Poverty,” 2005.

agribusiness products where Afghanistan has a potential competitive advantage. Shindokhani raisins and Afghan pomegranates in Kandahar Province capture the high-est value in export markets and have comparative advan-tages over Indian and other Asian markets, providing an attractive opportunity for growth. To exploit these com-parative advantages, however, signifi cant improvements are required; thus, the Afghanistan Horticulture Export Clusters Development initiative is taking a three-tiered approach. Th e project is:

1. Supporting farmers in improving the quality and quantity of the raisin drying process and pomegran- ate fruits management, through technology transfer of more effi cient 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.

Approach Taken and Lessons Learned

IFC “Value-Addition” Projects in Confl ict-Aff ected 1. Countries

Recover export base: Th e crucial task of recovering the export base is twofold, and includes restoring existing export capacity while adapting to changes in the regional and world economy that have taken place during the years of confl ict. Because of the importance of agriculture in Afghanistan, IFC PEP-MENA sought, in dialogue with government,3 key private sector players, and the donor community to identify agricultural products for which the country could have a relatively strong competitive advantage. Raisins were singled out as products which could potentially compete successfully in world markets because of the scale and consistency of production, the relatively nonperishable nature of the product, world market trends, and existing export experience.

Th rough value chain analysis, the potential and bottle-necks 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 _______3 Among the government’s core objectives is to “enhance non-opium agricultural production.”

SmartLessons 15

Eastern Europe. It was found, however, that these variet-ies 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 improve-ment of these processing facilities would provide limited impact. Th us, attention was turned to shade-dried rai-sins, particularly the Shindokhani, which are predomi-nantly grown in the less stable south. Shindokhani cap-ture a signifi cantly higher value, and have potentially attractive export markets in South Asia. Th e competitive advantage of Afghanistan in these varieties is higher, due to unique climatic conditions; and competition is low-er, 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; re-establishment of trading and fi nancial 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 capi-tal assets, early project plans focused on providing advi-sory 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 competi-tiveness lies in production capacity. In confl ict-aff ected countries the production base tends to be destroyed, so interventions that focus on bringing-to-market while ig-noring the limited capacity of the production base will fi nd it diffi cult to achieve signifi cant impact.

It also became apparent that in an environment that is extremely uncertain for investors, investment in new, locally unproven technologies could not be eff ectively stimulated by advisory and linkage services alone. To al-low producers to adopt new technologies in an uncertain business climate, their investments should be economi-cally viable within a short time horizon. Usually this requires some sort of investment incentive or subsidy,

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. Th e project therefore needed to leverage other sources of funds to be able to engage on this level. Th us, IFC PEP-MENA joined forces with IFC’s Grassroots Business Initiative, whose fi nancial contribution enabled the project to provide incentives to producers to invest in new raisin drying house technologies.

Develop successful business models: Th e years of confl ict 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 fi nancing mechanisms unsophisticated. While agribusiness value chains are quite effi cient and eff ective 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 fi rms need to adapt their business practices, requiring signifi cant 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 eff ect for local fi rms is important for success.

Approach to Project Design in Confl ict-Aff ected 2. Countries

Importance of social networks/low trust: Development assistance is never neutral, always having some political impact; however, impacts are more pronounced in confl ict-aff ected countries, “with assistance creating direct and indirect incentives and disincentives for peace.”4 Th us, it is essential that any engagement in these countries begin with an analysis of the confl ict situation in order to understand sources and impacts of confl ict, roles played by various actors, and opportunities for aid to contribute to peace and reconstruction. Value chains in a confl ict-aff ected country must be analyzed through a “confl ict lens.” Is there a security or confl ict 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-

___________4 Strategic Framework for Engagement in National PRSs in Con-fl ict-Aff ected Countries. DFID.

16 SmartLessons

cted confl ict explains the lack of direct relationships be-tween farmers, processors, and traders. Goods fi nd 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 lim-ited mobility of economic agents. In conceptualizing the AHEC project, the importance of social networks in a fragmented society was considered and the limited mo-bility of traders was evaluated. Traders benefi ting from the project are drawn from diff erent social networks, and largely drive the selection of farmers, thus ensuring that the participating traders and farmers can actually estab-lish a level of trust required to develop a longer term business relationship, a necessary condition for achieving a more integrated supply chain.

Quick Wins: Following armed confl ict, there usually is a narrow window of opportunity where entrepreneurs are willing to “buy in” to economic reconstruction eff orts and invest in new business opportunities. In addition, it is important that interventions take into account, to the extent possible, the possibility of a fl are-up of confl ict or instability – a real possibility, as it is estimated that 40 percent of nations recovering from confl ict return to violence within fi ve years.5 Th erefore, quick wins are essential to the project, as they allow for the demonstration of tangible results and encourage buy-in from entrepreneurs that have short time horizons and little patience.

Quick wins also are a way of mitigating security risks to the project by limiting the time in which specifi c deliver-ables are achieved. Th e AHEC project is phased in such a way that each discrete period could provide concrete, de-monstrable results to entrepreneurs and other stakehold-ers. Results in early phases would improve buy-in in later phases. Th e fi rst (3 month) exploratory phase will result in adapted designs for new raisin drying technologies. Th e second (6 month) phase will result in the establish-ment of new drying houses, harvesting techniques, and drying technologies. It will also allow traders to test the benefi ts of new production technologies on the interna-tional market place. If successful, subsequent phases will scale up the use of new technologies and solidify access to new markets.

_______5 World Bank intranet “Confl ict-Aff ected Countries” briefi ng. March 2006.

Working through intermediary organizations: In general, in projects that aim to provide a demonstration eff ect, it is important to partner with local intermediary institutions as a mechanism to achieve sustainability and/or scale up of results. In confl ict-aff ected countries, security considerations make it even more important to work through local organizations, as IFC’s security procedures often hinder us from fi elding 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 confl ict. Secondly, local institutions can be seen as partial to the confl ict, adversely aff ecting the image of the project. Potential intermediary institutions also have to be assessed through the lens of confl ict analysis.

Th e AHEC project contracted an international service provider with signifi cant experience in the intervention area, but did not include at the outset a local partner organization in the project. While a local horticulture traders organization exists in Kandahar, it is a nascent entity whose establishment has been largely donor driv-en. For this reason it was deemed better to let potential cooperation grow naturally through the initiative of the traders during the project, rather than getting locked in a partnership with an organization that is not yet fi rmly established.

Monitoring & evaluation in an unstable environment: Security in confl ict-aff ected countries can not only seriously limit the project team’s mobility; it can some times cause it to cease altogether. In the case of the AHEC project in Kandahar, UN and IFC security regulations have prevented site visits; consequently, the team’s ability to monitor and evaluate the project’s outputs, outcomes, and impacts are hampered. Th is is a trade-off that must be accepted if we are to engage in these circumstances, and for which we try to mitigate through nearly daily contact with the implementing partner.

Cooperation with other donors: Donor coordination is important in all markets, but confl ict-aff ected countries tend to be exceptionally crowded donor spaces, requiring careful stakeholder relationship management. IFC’s approach in Afghanistan has entailed coordination with a variety of donors, not only to avoid duplication but to maximize individual contributions. We are working

SmartLessons 17

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. Th e 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. Th e Bank project will contribute to the scale-up of new drying technologies in later phases of our project.

Th e Pi3. votal Importance of External Risks in Confl ict-Aff ected 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 signifi cant relationship to the ability to provide services. Th us, a deteriorating security situation can severely aff ect program delivery. We design projects in confl ict-aff ected 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 confl ict-aff ected country always requires more time than expected. Th e 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.

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 eff orts.

Conclusion

In the case of Afghanistan, if IFC was to meet its com-mitment to help the country develop its private sector, then engaging at the fi rm level was necessary. Twenty-plus years of confl ict had fundamentally altered econom-ic 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 trans-actions and slim profi t margins. Th us, 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 fi elds – value-chain analysis, linkages, industry knowledge – IFC set out to design an intervention to enhance the per-formance of local fi rms in agribusiness products where Afghanistan has a potential competitive advantage. Op-erating in an unstable environment and with the clock ticking, the objective was to replace the fragmented busi-ness models of war so that value would be added beyond the pilot project’s participants.

Published in August 2006.

About the Authors

Bas Auer, Operations Offi cer, IFC PEP-MENA, Cairo.

Mary Porter Peschka, Senior Operations Man-ager, IFC PEP-MENA, Cairo.

18 SmartLessons

Th e Start: A Pilot with IFC

When established in 1990, AZIT primarily played the role of advocate, addressing infrastructure-related prob-lems in the largest industrial zone of northern Morocco such as frequent fl ooding due to bad maintenance of the drainage system, an inadequate power supply, and ab-sence of waste collection and security problems. Th e as-sociation, which represents 120 companies with 30,000 employees, did not consider itself a service provider. Th e co-funding of a waste-collection truck by the European Commission prompted AZIT to introduce fees for this particular service in order to reach fi nancial sustainabil-ity. 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 test-ing the approach of delivering SME assistance via local intermediaries, which in turn guaranteed wider outreach to SMEs, instead of cooperating directly with individual enterprises.

Th e project covered a time span of two years (2003 – 2005) and aimed at transforming AZIT from a business-men’s club focusing on social events to a professional ser-vice provider. Main activities included:

• Organizing the fi rst member satisfaction and needs assessment ever conducted by the association.

• Developing a marketing plan, including the launching of new services as well as a fee structure for existing and new services.

• Improving communication with members by helping develop a Web site, a monthly newsletter, and the newsfl ash, a fax letter to members on important information to be distributed quickly.

At the end of the partnership with IFC in August 2005, AZIT was no longer the same associa-tion it had been in April 2003.

Lesson Learned #1: Demand analysis is a must for setting up successful services.

As a result of a demand analysis conducted by AZIT in conjunction with two independent consultants, the orga-nization was able to quantitatively measure its members’ needs. Upon so doing, AZIT successfully introduced

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 Tangi-ers (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. Th e 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 eff ective advo-cacy and information sharing for this sector.

Participants at a training delivered by AZIT

SmartLessons 19

fees to already existing services, ranging from waste re-moval 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. Th e big-gest challenge it faced in implementing the fees came from AZIT’s permanent staff and board of directors, not its SME members. However, during its fi rst partnership with AZIT, IFC hired an independent consultant with signifi cant work experience in business associations. Th e concrete benchmarks that the consultant produced en-abled 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: Th e 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 off ering 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.

Th e overall satisfaction rate of members increased from 50 percent in 2004 to 63 percent in 2005. Furthermore, the rate of “totally not satisfi ed” companies dropped from 8 percent to zero. Th e increased satisfaction of members has paid off fi nancially for the association. While previously only 50 percent of the members paid their annual membership fees on time, today 80 percent pay punctually.

Replication of Results – ADIZIA Case Study

Morocco has approximately 70 industrial estates throughout the country. As in many countries of the MENA region, the Moroccan government tried to develop industrial clusters by building industrial estates off ering certain infrastructure or business support services. Several estates have their own associations,

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. Th e zone of Ait Melloul counts 128 industrial companies from various sectors, with agro-food being the most signifi cant. 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.

Before IFC partnered with ADIZIA, some due diligence was necessary to ensure that ADIZIA had the ideal partner characteristics. Once it was evident that it had a high number and extensive coverage of dedicated members from the SME community, a committed and visionary leadership, and its own permanent staff , IFC and ADIZIA entered into a partnership agreement whose objectives were in line with those of the A2B Program.

As was the case with AZIT, the objective of the IFC-ADIZIA cooperation is to help the association become a professional and sustainable service provider. Based

0 200,000 400,000 600,000 800,000

1,000,000 1,200,000 1,400,000 1,600,000

2003 2004 2005

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

20 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. Th is workshop not only proved benefi cial for ADIZIA, but also helped AZIT’s numerous success stories gain wide exposure.

Mostafa Temsamani served as a resource person in the two-day 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, “Th e 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 benefi t 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.

Lesson Learned #3: From a donor perspective, it is important to notice that a certain reluctance to give subsidies for basic operating costs and a strict cost-sharing 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 fi rst 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. Th e 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

access to fi nance. Th e 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. Th e new club has already conducted four meetings that have resulted in an action plan and future club activities.

Th anks to ADIZIA’s lobbying eff orts 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. Specifi c activities will include road and waste collection maintenance as well as the provision of electricity services. Th e 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 committee on the rehabilitation of the zone.

Map of Ait Melloul Industrial Zone

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

SmartLessons 21

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 off er wide outreach and an integrated approach to service delivery and advocacy. Program design should always focus on service delivery and advocacy, as one-time capacity-building activities like staff training serve only a complementary role.

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.

Published in August 2006.

About the Authors

Markus Pilgrim, Program Manager, IFC PEP-MENA, Cairo.

Omar Balafrej, Project Offi cer, IFC PEP-MENA, Rabat.

Zineb Benkirane, Project Analyst, IFC PEP-ME-NA, Rabat.

22 SmartLessons

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 fi rm to deliver the goods. Unan-ticipated 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

In 2005, a major bank in MENA (referred to as “the Bank”) entered into discussions with IFC PEP-MENA concerning an advisory services program that would assist the bank in creating an SME banking business. While SME banking in the Kingdom of Saudi Arabia had not previously been a target market for IFC PEP-MENA, further due diligence revealed that the Saudi SME bank-ing market was grossly under served, and a well designed and executed project could create positive developmental impact by improving access to fi nance for SMEs. A suc-cessful project would also have a strong demonstration eff ect in the region.

Th e Bank is a sophisticated full-service commercial bank and the third-largest bank in the country. It did not rep-resent the typical profi le of IFC PEP-MENA’s advisory clients in terms of size, sophistication, needs, and expec-tations. Th e Bank was paying 100 percent of the advi-sory services costs, including IFC’s time and expenses, and would have high expectations. Th is would be a chal-lenging assignment, and a high-profi le one, given that it was IFC PEP-MENA’s fi rst advisory services project in that country.

IFC put together a comprehensive six-module project, covering (i) market research to size the market, evaluate competitors’ off erings and customer needs; (ii) strategy development, including fi nancial projections, choice of business model, vision and objectives; (iii) creation of products, services, and delivery channels; (iv) develop-ment of credit policies and processes, reporting, and decision tools; (v) organizational restructuring; and (vi) information technology. After competitive bidding, IFC

hired SME banking expert team (based in Paris) to un-dertake the advisory services assignment. Th e consult-ing fi rm, partnered with its Saudi affi liate, put together a strong international team, with subject-matter experts working on relevant modules of the project.

As the project unfolded, however, the IFC team was called on to face many unanticipated challenges, and scrambled to successfully complete this assignment.

Th e Challenges

Th e consulting team brought in experts to work on spe-cifi c portions of the assignment. Th ese consultants came and went after their modules were completed. How-ever, not a single specialist stayed on-site throughout the entire project. As per the proposal and the contract, the consulting fi rm’s local offi ce was supposed to pro-vide 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 ques-tions. 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 se-nior 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 offi ces had had a disagreement about internal billing rates, and the local offi ce 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 fi ne, but there should be one person who stays throughout the project, has

SmartLessons 23

knowledge of the whole project, and can coordinate the work of the team so that the client sees a seamless product. Confi rm the local offi ce’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 aff ect delivery of the project.

Th e client meanwhile had also noticed the missing lo-cal staff and started to raise questions. IFC discussed the issue with the consulting fi rm, who acknowledged their internal problems. In response to IFC concerns, they agreed, at no cost to IFC, to send additional inter-national consultants to supplement the team. Th e client was happy that they were getting higher caliber interna-tional consultants instead of local consultants – for the same price.

Lesson 2: Be willing to pressure consulting fi rms to seek a solution to your problem. Firms will often replace senior staff with junior consultants. Do not accept this. Any replacements should have the same seniority. IFC is generally a key global client for these fi rms, and they will off er acceptable solutions if pushed.

Once the consultants started work and produced reports for the initial modules, the client was not entirely happy with their quality. Th e client and the consulting fi rm disagreed in their interpretation of the deliverables speci-fi ed in the Terms of Reference (TOR). Th e TOR and the deliverables specifi ed therein had been drafted prior to the start of the project, and both parties expected some modifi cations once the work on the project had started. Going forward, IFC insisted that the consultants and the Bank agree to detailed work plans and deliverables for each module prior to the start of that module. As a result, the consultants were clear on what was expected from them during that module, and the Bank was clear on what they were going to get at the end of the mod-ule.

Lesson 3: Agree on a detailed work plan and deliverables with the consultant and the client rather than the broad outlines from the TOR. Th is will make it clear to all parties what is expected of them.

Due to the various issues detailed above, the IFC team noticed that the quality of output from the consulting fi rm was not up to the standard expected. Th is was not acceptable, and the team addressed this on several fronts:

(1) Th e team spoke to the senior partner in Paris to make him aware of our concerns; (2) Th e IFC Project Offi -cer 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 start-ing an SME business. Th ese initiatives were greatly ap-preciated by the Bank management.

Lesson 4: Do as much as possible to make the client happy. Th e end result refl ects on IFC rather than any external consultants, so step in whenever necessary to make sure that the client is getting what was promised and that expectations are exceeded.

Th e Bank was having a hard time keeping up with the demanding pace of the consulting assignment. Th ough this is a sophisticated bank, it was clear that the client was having a problem digesting the information being generated by the team. Th e consulting team was com-mitted to other engagements after this project, and could not stretch out the pace of work. As a result, IFC worked with the Bank staff to help them understand, approve, and implement the recommendations, and also stressed to nervous bank staff that IFC specialists would be avail-able to guide the bank on an ongoing (off -site) basis for the next two years.

Lesson 5: Arrange the timing of the advisory services so that the client can absorb it. An intense period of on-site work may be too much for the client to absorb. Th e advisory services should ideally be phased so that there is an appropriate amount of time built in for the client to digest the new information.

Th e IFC team had taken steps to keep the client involved in the project. Key Bank staff s were included in regu-lar project team meetings, each module was written in collaboration with the Bank experts, and the CEO was kept informed and was a strong champion of the proj-ect. However, as the advisory services assignment started to wind down, the IFC team noticed that key decisions necessary from the client team (such as sign-off approval for work done) were not being made in a timely manner. We surmise that this may have been due to a desire for

24 SmartLessons

the team to stay on as long as possible. Th e IFC team, noticing the client’s concerns, started to stress the fre-quency of the planned follow-up visits, as well as hand over key tasks and responsibilities to bank staff . Th e cli-ent gained confi dence 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. Th e 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 follow-up visits from IFC staff , but the client should have the confi dence to continue work without the support of an on-site team of IFC advisors.

Th e End Result

IFC completed the project during the summer of 2006. In August 2006, the bank set up a new business sub-seg-ment called “SME Unit” to cover SME clients. In line with IFC’s recommendations, it has set up three SME Centers, and fi ve more are being constructed.

As of February 2007, the Bank has over 1,800 SME cus-tomers, with over 800 borrowers. Deposits from SMEs total $97 million, and the committed loan portfolio is $350 million. Perhaps the best indication that the busi-ness is sustainable is that it is already profi table, 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 chal-lenges along the way, this project was a considerable suc-cess. Th e Bank Advisory Services program has incorpo-rated 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. Th e Bank Advisory Services program has developed a standard work plan for projects that includes many tasks related to mitigating the risks identifi ed above. TORs and Request for Proposals (RFPs) for new projects also build on these lessons.


About the Authors

Raiomand Billimoria, Financial Markets Spe-cialist, IFC PEP-MENA, Cairo.

Greg Rung was Banking Specialist and Pro-gram Manager at IFC PEP-MENA, Cairo.

SmartLessons 25

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 own-ers 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 fi rms 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 manage-ment 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.

Th e 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 effi cient and cost-eff ective way to reach SMEs in a market where manage-ment training is regarded as the province of multination-al companies with deep pockets? Th ere 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, “Th e Mini Business Package.” It comprised of receiving a free cell-phone line with every purchased line. Th is indicated that the telecom operator must have a large and structured database of SMEs. Th e team concluded that an eff ective 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 effi cient, low-cost marketing technique to reach large numbers of SMEs.

Th is 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 benefi ts the workshops could have on their overall business per-formance. 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 benefi ts them, even indirectly. In addition, many cor-porations have large SME databases that are structured by geographical area, type of industry, and size of com-pany. 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 … Th e Pitch

Th e Business Edge team decided to target telecom opera-tor’s SME customers and distributors. Th ey met with the SME sales manager and convinced him that Business Edge management training workshops could be an excellent val-ue-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 fulfi lling the company’s public relations and corporate social responsibility goals. Th e SME sales manager re-ceived the idea with enthusiasm. He stated that the cor-poration had provided many value-added services before

26 SmartLessons

but had never thought of training. He was willing to test it on the company’s SME customers as a fi rst step to see its impact.

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 take quite some time to fi nalize the agreement.

In the case of this telecom operator, it took 6 months before we could start implementation due to the internal approvals required. Th e Business Edge team learned that working with the SME Sales Department as opposed to the Human Resource Department is a better strategy because functional departments such as sales, distribu-tion, marketing, purchasing, etc. usually have funding for reward programs for their customers. Human Re-source and, more specifi cally, training departments, on the other hand, have limited resources that they allocate to the corporation’s staff . While it is more challenging to work with functional departments, as they are less ex-perienced with management training than their Human Resource counterparts, they have the commitment to build incentives and enhance the business performance of their customers. Th ey are also indispensable in tailor-ing the training to the specifi c needs of their customers. Moreover, they have interest in assessing the impact of the training on their customers’ sales performance and in gathering essential data that can help us monitor and evaluate the intervention.

Th e Implementation:SME Customer Training

After discussions with the telecom operator’s SME sales manager, it was agreed that we would deliver a half-day workshop on “Pricing and Pricing Strategies” to 300 of its SME customers in six diff erent governorates across Egypt. Th e SMEs were selected by the telecom operator from diff erent industries based on the number of em-ployees they had, ranging from 10 to 100. IFC covered the costs of the trainer and the materials. Th e telecom op-erator covered the cost of venue and meals for six events. It also paid for three quarter-page advertisements in the leading Egyptian newspapers to announce the events as a part of the telecom operator’s social responsibility pro-gram toward the Egyptian business community. Busi-ness Edge received a satisfaction rating of 91 percent on the workshops from the participants and a very positive

feedback from the corporation’s management.

SME Distributor Training

Based on the positive feedback received from the SME customer training, the head of the corporation’s Distri-bution Department requested that we expand the initia-tive to encompass its entire network of 15 distributors. Th ese distribution companies account for 98 per cent of the telecom operator’s sales, and each has between 10 and 100 employees, with the majority being in sales. Th e telecom operator requested that IFC deliver comprehen-sive Business Edge training to the distributors in areas that are hindering their performance. Th e Business Edge team implemented and covered the cost of a training needs assessment and provided support and quality as-surance to the telecom operator in selecting the relevant topics and the certifi ed Business Edge training provider that will tailor and deliver the workshops. Th e telecom operator contracted the Business Edge-certifi ed training provider and covered the full cost of the training.

A “Business Planning” workshop was delivered to the owners of telecom operator’s distributors in December 2006. Based on the positive feedback, the telecom opera-tor is now requesting a further expansion of the initiative to train the sales managers, fi nance managers, and sales representatives of its 15 distributors in addition to 50 of its second-level distribution companies, which they refer to as “Super Dealers.”

Lesson 3. IFC must play the role of a facilitator and provider of expertise and quality assurance in SME management training, rather than a donor that subsidizes the cost of the training and distorts the market.

Th ere is a signifi cant demand from corporations in a wide range of industries for Business Edge training, and they have demonstrated willingness to pay. Th ey have found the material to be extremely practical and relevant

Total project cost was US$27,000. IFC covered 15 per cent and the telecom operator covered 85 per cent.

Total project cost to date was US$13,500. While IFC covered 32 percent of the cost, the telecom operator 68 percent and 60 participants were trained in total.

SmartLessons 27

to the needs of SMEs in their value-chain, and have ex-pressed that there is no competition to Business Edge in the market when it comes to localized SME manage-ment training products. IFC should facilitate the process and make the corporations cover a substantial part of the overall project cost.

Lesson 4. Th e more the corporation realizes the benefi ts of management training of the SMEs within its value-chain, 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 re-lated to training telecom company’s distributors; how-ever, with the upcoming workshops, IFC’s contribution to the overall project cost will be as low as 4 percent. A Win-Win Model

Th is type of distribution model has proven to be a win-win for all stakeholders involved.

Impact on SMEs and Corporations

Th e Business Edge team is currently in the process of measuring the impact of the training on the SMEs and at the corporate level. Th e 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 corpo-ration’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 benefi cial.

Impact on IFC’s Business Edge Program and Its Cer-tifi ed Training Providers

For IFC, this approach has stimulated demand for man-agement training and built the brand equity of the prod-uct. For instance, in response to the joint advertising campaign that was implemented with the telecom com-pany, the Business Edge team received a phone call from 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 de-

mand for SME management training, the Business Edge team began a comprehensive eff ort to capitalize on the SME networks of other large corporations in the region and developed a pipeline of potential clients, including Unilever.

Lesson 5. Th e 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 lo-cal training providers and builds their capacity by giving them access to relevant management training content in-cluding self-study workbooks and trainer manuals, train-ing their trainers on fl exible learning methodologies, and improving their marketing and business planning skills. After Business Edge certifi es the training providers and their trainers, they can deliver Business Edge training courses. Th e value-chain approach has generated signifi -cant business for the certifi ed Business Edge training pro-viders in Egypt by giving them access to large numbers of SMEs in a structured manner. Th is has contributed to further building their capacity by familiarizing them with a larger pool of SMEs in various industries and with diff ering management training needs.

Lesson 6. Working with the big fi sh builds the brand equity of the Business Edge product.

Th e placement of the Business Edge brand next to large global brands such as Unilever and Microsoft signifi cant-ly 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. Th is model can be replicated across diff erent industries and countries and give IFC a competitive edge in its investment operations.

It has proven to be a highly fl exible and cost-eff ective model that can: • Be easily integrated into other advisory services programs• Be off ered as a value-added service to existing or potential IFC investment clients• Be adapted to any stage of an IFC investment project

28 SmartLessons

Th is model is not restricted to corporations in the fast-moving consumer goods industry. We are currently un-der negotiation with an IFC investment client in Oman, a leading bank, to train its SME clientele.

Published in January 2007.

About the Authors

Khadiga Fahmy, Business Edge Team Leader and Operations Offi cer, IFC PEP-MENA, Cai-ro.

Nada Abdelnour was an Operations Analyst at IFC PEP-MENA, Cairo.

SmartLessons 29

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 one-stop-shop facilities. But despite some visible progress, GAFI was still baffl ed by the diffi culty of re-engineering administra-tive processes and achieving an eff ective 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 suff ered from a lack of eff ective 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?

In late 2005, IFC teamed up with GAFI and the Gov-ernorate of Alexandria to create a coordinated simplifi -cation eff ort of all start-up procedures through a pilot project based in Alexandria. An intensive communica-tion 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. Th e 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.

Getting Everybody on Board: Using a Communications StrategyEgypt had a particularly complex regulatory environment for business start-ups. Th e initial diagnostic carried out by IFC found that the registration and licensing of new businesses involved more than 220 days and 132 pro-cesses across 18 institutions having diff erent 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 im-portant to link them in a joint eff ort to simplify business start-up processes for new investors?

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

Choosing Our Objectives

Th e 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 eff ective start of the project. Th e technical diagnostic consisted of process maps of business licensing requirements showing the actual complexity of the procedures and was illustrated with detailed facts and fi gures. As all the institutions involved in business licens-ing having a stake in the reform process were identifi ed, it was now possible to defi ne target audience groups and conceive a well-targeted message for each of them.

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

30 SmartLessons

Th e communication strategy was jointly developed by the IFC Project team and the Communications Offi cer as an integral part of the project. Th e strategy was then discussed with our main partners and clients, particu-larly with the Policy Advocacy Unit of GAFI.

Th e 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 Alexandria2. Increasing the visibility of GAFI, the Industri- al Development Authority (IDA), the Ministry of Housing, and the Alexandria Governorate and their eff orts in reforming business start-up licenses3. Increasing the civil servants’ awareness of and commitment to the ongoing reform process.

Segmenting the Target Audience

Th e strategy focused on three particular target or audi-ence groups: (i) the private sector, (ii) our direct coun-terparts in the public sector and (iii) the broader popula-tion 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 defi ning the re-quired media tools and activities, designating the respon-sible 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) Th e private sector: Th e message for private sector au-dience 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 sec-tor key fi gures in the re-engineering process of business licensing procedures. Th is was important, since the Proj-ect wanted to set up and moderate working groups on industrial licensing and building permits. Th ese working groups are composed of individual members from both public and private institutions.

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 sec-tor cooperation with GAFI and IFC in organizing a joint monitoring eff ort of business licensing reforms, based on a selection of indicators to be measured on a semiannual basis. Overall, the MoU pursued the objectives of build-ing the policy advocacy of our private sector partner as well as using ABA as an active player in the detailed re-engineering 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. Th rough 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 gov-ernment sensitive messages on the pace of reforms and the remaining bottlenecks.

2) Th e public sector counterparts: Th is group formed the secondary audience group and included the senior management of 18 institutions involved in business li-censing in Egypt and their line ministries. Th is group was clearly divided into two subtiers: the “champions” and the “followers.” Th e message here focused on en-couraging the second tier to follow the approach and momentum of the fi rst 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 in-stance, 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 benefi t of realized “quick-wins” as well as their vi-sion 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

SmartLessons 31

contribute to new job creation and income opportuni-ties.

Th e broader population of civil servants: Th is was the third audience group and was also divided into two subgroups. Th ese consisted of those who were directly engaged in the reform of business start-up procedures and those who were not. Given the time and resource constraints, IFC chose to target mainly the fi rst group. Within the 4 months which followed the technical diag-nostic, IFC focused on a group of roughly 30 “core man-agers” at the middle management level across fi ve main institutions. It developed a communication strategy combining regular roundtable discussions, training from international experts, and two study tours in Europe and North America of about one week each. Systematic media coverage was organized in connection with these events, including an international media event when the Egyptian delegation reached Portugal.

IFC’s main objective was to complement the top-down approach generally pursued with the fi rst and second au-dience groups with a “bottom-up” approach. Th e idea was to present to the senior policymakers workable, con-structive, and best practice business simplifi cation solu-tions emerging from their own management base so that they would be more inclined to endorse them. IFC’s oth-er message to the “core managers” focused on account-ability and the need to develop precise, measurable track records of reform eff orts.

Lessons Learned

Rely on a handful of key individual government fi gures 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.

Closely tie advisory services on developing media activities to the development of a sound and cost-eff ective Monitoring & Evaluations strategy within the client institution. Facts and fi gures on the actual pace of reform and its bottlenecks will create a substantive message to the target audience, increase focus on reform issues, and lead to more accountability.

Develop a dual communication strategy addressing the two strategic angles of the reform process: Engaging top policymakers is a must but – equally – engaging the middle management is essential, with distinctive messages and objectives in both cases.

Educate the media to secure a strong message on the project’s partners, objectives, and benefi ts.

Bringing the Media Up to Speed

A national conference organized in November 2006 in Alexandria provides a concrete illustration of IFC’s com-munications approach in this Project. A press conference was organized on the eve of the national conference. It involved several regional and three national TV channels together with the Arabic, English and French-speaking press to also reach out to the international investment community. IFC acknowledged the reform eff orts of its core partners and pointed to concrete achievements of the new government team in simplifying business procedures. IFC stressed that more needed to be done and that more institutions should join the reform process.

Organizing a press conference the day before the event also served the purpose of educating the media and pro-viding them with background information on IFC and the benefi ts of business simplifi cation. Th is preparatory event enabled the press to contextualize important infor-mation in the next day’s conference and therefore to bet-ter focus on the key messages. Within the next few days, these messages had been widely disseminated in Egypt.

Th e conference disseminated the results of the technical diagnostic on business start-up procedures. IFC gave the fl oor to international speakers from North America and New Zealand on their respective reform experience of au-tomation and the introduction of client-oriented build-ing permit procedures. Th e conference was also used to host the signing of a new MoU with the Alexandria Busi-ness Association which marked the beginning of a joint innovative policy advocacy initiative on business licensing reforms.

32 SmartLessons

Conclusion

Th e project is well underway and has achieved strong visibility in Egypt. Th e fi rst results were made possible by relentless communication eff orts using a mix of mass media and communication tools. Th ese eff orts 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 offi ce 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 aim-ing for a 50-percent reduction in the time and number of procedures for building permits by the end of 2007. Th e solutions developed by the Project are now being replicated in other parts of Egypt.

Such results are now generating new materials for an ef-fective public relations campaign stressing the benefi ts and the payoff s of a participative approach to reforms of the business environment.


About the Authors

Th omas Moullier, Program Manager, Busi-ness Regulatory Reform Program, IFC PEP-MENA, Cairo.

Sherif Hamdy, Project Offi cer, Business Start-Up Simplifi cation Project, IFC PEP-MENA, Alexandria.

SmartLessons 33

Pakistan has some experience with ADR in the form of so-called “panchayats,” which literally refers to assembly of fi ve wise and respected elders chosen and accepted by the village community. Th ese assemblies settle disputes between individuals and villages. However, these judg-ments are legally nonbinding and are typically applied to personal or family disputes. In short, there are no eff ective alternatives to lengthy and costly judicial proce-dures for Pakistani enterprises to settle any commercial disputes.

In principle, Pakistan seemed a perfect candidate for introducing commercial meditation along the lines of IFC’s recent experiences in the Balkan countries.

Looking back at mid-2005, when IFC PEP-MENA began to address the introduction of court-referred mediation, the ongoing ADR project has comea long way: professional mediators have been trained and certifi ed, 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 fi nd a solution. And when IFC PEP-MENA off ered to introduce court-referred mediation for commercial cases, it found willing partners. Th is started with an international conference, organized by IFC, in August 2005 that introduced the experience of similar initiatives in the UK, India, and Uganda. Th is unique interaction gave local judicial and government offi cers a fi rst-hand account of the benefi ts of mediation and the steps required to introduce it in the local civil justice system. Some key champions were identifi ed and were kept in the loop as the project was being designed.

Get an inclusive Advisory Board

To change the traditional mind-set of key stakeholders, the project team felt that it was not enough to just listen to their concerns but rather it was essential to make them

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 confi rm these fi ndings, 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 re-fers to alternatives to the established and traditional method of dispute resolution in the form of litigation. Th e 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 nego-tiation, where the very presence of a professional me-diator changes the underlying dynamic of the negoti-ating process. Its distinctive feature is that parties have ultimate control over settling their dispute. Mediation could therefore be defi ned as a voluntary, nonbind-ing, private dispute resolution process in which a neu-tral person helps the parties try to reach a negotiated settlement.

34 SmartLessons

partners in project implementation. Th e team was suc-cessful 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 At-torney General, a High Court judge, and the President of the Karachi Chamber of Commerce and Industry as key members. Th e Board provided strategic oversight and direction to the project and ensured a “buy-in” from all the relevant stakeholders.

Framework showing the ADR process

Th e project team leveraged its support with the Board to overcome certain formidable challenges. It was the Board’s strong support that allowed the project team to handle challenging situations without compromising the project outcome.

At a later stage, when independent parties started ap-proaching the Center for resolution of their commercial cases, the Board readily agreed to amend High Court rules to provide an adequate enforceability mechanism for settlement agreements of such cases.

Build alliances by raising awareness of practitioners and end-users

For the uptake of ADR/Mediation as an accepted con-fl ict resolution practice, three sectors needed to devel-op suffi cient confi dence in the process. Th ese included judges for fi nding space for mediation services within the existing judicial system; lawyers, the gatekeepers of the litigation process, for accepting it as a credible alternative to litigation; and the end-users (the private sector) for identifying value in exercising the ADR/Mediation op-tion. It was soon realized that the judges and lawyers are the main catalysts for transforming the system, but all

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 diff erence between institutionalized mediation and traditional conciliation and became even more convinced of the value being de-livered through mediation. Th ey are now willing to send cases to the Mediation Center and have started proac-tively persuading the parties to opt for mediation rather than spending years in the court.

Lawyers have also started looking at it as an addition-al income-generating avenue. Some of them who were trained as mediators are even more comfortable with the process. Th is is indicated by the fact that the fi rst 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 fi rst hand are now more willing to refer more cases to the Center—one law fi rm whose fi rst case was successfully settled has agreed to mediation in three more cases. No wonder a lawyer has this to say about his experience of mediation:

“For my client, the litigation could have cost up to 10 million Pakistani rupees (nearly $165,000) and have gone on for anywhere between fi ve and seven years. Instead of dragging on for years, the case took a day and a half of mediation, and rather than costing enough to bankrupt the company, the only cost in-curred was the mediation fees and the consulting fee for the lawyers to review the agreements.”

Th e trade bodies, whose members are the target end-us-ers, are now showing greater eagerness to have recourse to this alternate mechanism to release their assets caught up in litigation. Th ey have also started thinking in terms of having a clause for mediation inserted into their fu-ture contracts, and asking the Center to arrange in-house mediation training for the member fi rms.

Th e key lesson learned from the above is that the users love it but potential customers need to be persuaded to buy it. Th e promotion/communication campaign should be aggressive.

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Build capacity and incentives to achieve sustainability

A market mechanism was adopted to identify and se-lect suitably qualifi ed and motivated participants for the mediators’ training. Th is helped in ensuring the com-mitment of the trainees to the training activities and also created suffi cient eagerness for them to work at the Center to make use of newly acquired skills. Th e initial skills training course was followed by an advanced course to train 18 world-class mediators and 6 master trainers. Th is 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.

Establishing the Center

After developing the requisite skills set, IFC, with the help and support of the Advisory Board, helped to estab-lish Pakistan’s fi rst mediation center as a nonprofi t legal entity in January 2007. A Board of Governors headed by a former Chief Justice of Pakistan and consisting of eminent personalities from the legal and business sectors of Karachi was inducted. Th e high stature and profi le of the board members have served to create suffi cient cred-ibility, provide quality assurance, and give visibility to the Center. Th e Board is bringing its diverse professional experience to bear on improving the operations and fu-ture strategy of the Center.

Build the foundations of a fi nancially self-sustaining Center

Th e Pakistan ADR project has started with an eye on securing the fi nancial sustainability of the initiative even in the post-IFC period. Th is 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 per-cent being retained by the Center, preserving the contin-ual professional interest of the former and covering the overhead expenses of the latter. A corporate membership scheme has also been designed, inviting businesses to be-come members and have access to discounted services at the Center.

Develop curriculum and localize training capacity locally

For the broader institutionalization of ADR/Mediation, the project plans to engage with existing local training institutes and law schools to develop training programs and curricula on ADR mediation. Th is would support initial training and capacity building among lawyers and judges who play a key role in promoting ADR Media-tion.


About the Authors

Navin Merchant, Operations Offi cer, IFC PEP-MENA, Pakistan.

Muhammad Azhar Rauf was a Project Offi cer for Pakistan ADR project.

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

36 SmartLessons

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 bet-ter corporate governance. Th is 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. Th e company also published its corporate governance improvement plan on its website, underlining its com-mitment to transparency and accountability. Th e process was expensive in the short term (it cost 5 percent of the company’s annual profi t to make the upgrades). However, the share price soared 29 percent after the changes were made, and several equity fi rms expressed interest in making an investment after the overhaul.

Case 2: IFC team conducted a corporate governance assessment for a potential investment client. Th e company’s (Company 2) CEO was eager to pursue corporate governance improvements for his institution. However, the IFC team failed to ob-tain the board’s commitment. One year after the submission of the fi nal 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.

Th e two cases above from the IFC PEP-MENA Corpo-rate Governance Program highlight the importance of securing a real and demonstrable commitment by a com-pany’s senior offi cers and directors before embarking on the journey of corporate governance reform.

Indeed, two issues highlight the challenges in improving corporate governance. First, directors and offi cers often do not understand the meaning of corporate governance. Second, there is a lack of understanding of how corpo-rate governance can improve the bottom line. Issues such as this can lead to resistance to change, and overcoming them is a formidable but necessary task to building the business case for companies to implement corporate gov-ernance. Th is SmartLesson focuses on how such com-mitment is obtained when implementing any company-level work to eff ect change to a company’s governance framework, policies, and practices.1 Th e note is targeted to advisory staff implementing corporate governance projects; however, it may also be applicable to other staff who engage with private sector clients.

Th e issue: How do you overcome resistance to change?

Most project teams implementing corporate governance reforms at the company level may be confronted with

initial skepticism, lack of knowledge, and resistance to change. For one, most company directors and offi cers may not truly understand the meaning of corporate gov-ernance. A recent IFC survey on corporate governance practices across the MENA region showed that 59.2 per-cent of respondents could not defi ne corporate gover-nance properly. Most confused “corporate governance” with “corporate social responsibility.”

In relation to the level of understanding about how good corporate governance can add value to the bottom line, only 49.3 percent of respondents in the same survey thought corporate governance was important or very important to their organization. And those that did mostly cited compliance as the main driver for reforms.To illustrate resistance issues, imagine yourself as a project offi cer who has to make the business case for corporate governance during a meeting with the company founder and chairman. Th e issue at hand: How do you change the board’s composition from one composed exclusively of family members (in particular, sons and daughters who may not be qualifi ed to sit on the board) to one

__________1 Th is is the second SmartLessons paper on corporate governance, after “Structuring Corporate Governance Projects.” Contact [email protected] to request this lesson.

SmartLessons 37

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 fu-ture generations.

One Answer: A three-step approach built around commitment.

Experience shows that to eff ect real change at the board-room level, the best means of doing so is through a three-step approach built around commitment.

Step 1: Sow the seeds

Th e fi rst step a project team may wish to take is to prop-erly defi ne and build the business case for corporate governance among potential clients. Awareness-raising events are an excellent means of doing so. However, the project team should keep the following lessons in mind:

Organize events for senior decision-makers that are interactive and fun. Roundtables and seminars during which participants can interact and pose questions, even 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, role-playing, and mock board meetings. Ensuring that high-level 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 partnering with local organizations is better allocation of staff time. Organizing events can be extremely time-consuming with procurement, conference organization and administration.

Having a local partner to plan, organize, and carry out such events enables project staff to focus on providing value-added services such as preparing and delivering course material. It is also an excellent means of passing knowledge on to the local partner organization. In the end, it just makes business sense for IFC staff to focus on

providing corporate governance know-how and not con-ference management. Th e 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 of-fered by IFC in the United Arab Emirates (UAE).

Give them something they can touch and feel. Integrating local case studies and success stories into these events will help demonstrate that corporate governance works in practice. Indeed, Company 1 is already being used as a model case study, Company 2 as its antithesis. 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 programs, e.g., the Banca Commerciala Romana (BCR) story.2 For example, the program team recently organized a large-scale conference on corporate governance for banks in Riyadh—the fi rst such conference in Saudi Arabia—for over 258 bankers and other stakeholders. Th e team not only allowed for interactive elements to be integrated into the event, such as a panel discussion, but also invited the CEO of BCR to present his views on how to implement corporate governance and the positive impact this had on his bank.

Be smart: Use these events as business development opportunities. While many will rightly argue that training as such is not a core competency of IFC, it is an eff ective means of reaching out and explaining the benefi ts of corporate governance to a broad audience. __________2 Details on the Banca Commerciala Romana case study can be found at www.ifc.org/ifcext/corporategovernance/.

Picture 1: A ward ceremony for the best annual report during a corporate governance conference in E gypt.

38 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).

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 profi table) 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 awareness-raising events organized by their offi ce. A relationship was quickly forged between the company and IFC, and the project team agreed to conduct a full corporate governance assessment for the fi rm. One year later, the company became an investment client.

And fi nally, 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. Th e 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 profi ts 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, off ering 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: Th e drill-down phase

Focus on providing in-depth and targeted advice to sup-port individual banks and companies, or groups of indi-viduals (e.g., directors or company secretaries) in imple-

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

Map, but do not forget to gauge commitment. A project should strategically defi ne, select, and approach its future clients to ensure that the right companies are chosen for maximum development impact and demonstration eff ect, 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. Th e CGP’s experience is that there are three types of companies ideally suited to become best practice case studies: (i) private, family-owned companies that are seeking a public listing; (ii) companies that are in fi nancial diffi culty, or coming out of a scandal, that now seek to turn their operations around and rebuild stakeholder trust; and (iii) state-owned 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 assess-ment 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 gover-nance review is a shorter, less time-consuming version of a corporate governance assessment. Corporate governance consultations con-sist of targeted advice on a single corporate governance issue - for example, how to establish an audit committee.

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

SmartLessons 39

window-dressing project. Th is 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 propo-sition. Company 1 was a company in the process of a turnaround; Company 2 was a start-up company, pre-occupied 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. Th is will ensure that these selected companies reap the full benefi ts of corporate governance, rather than dilute the potential impact by working with a large number of companies on a one-off basis. Th is 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-specifi c 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. Th is 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. Th e 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 eff ective in eff ecting 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 mid-level managers. Th e fact that Company 1 attended every single part of the Board Development Series speaks volumes. Th e 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. Th e 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. Th en, 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 Th ese workshops targeted an important, if select, group of 38 CEOs, CFOs, and board members. Th e course participants soon understood that corporate governance does indeed pay, and before the course had fi nished, they had already managed to formally change 48 policies and procedures within their companies.

Does the end justify the means? Company-specifi c 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 effi cient and eff ective 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 eff ective. Th is 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 Th e Board Development Series is an in-depth and interactive course on corporate governance targeted to current and future di-rectors. Th e 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. Th e course was recently accredited by the Institutional Shareholders Services, and those participants who complete the course, including a fi nal examination, carry the title of “certifi ed director.”

40 SmartLessons

Step 3: Build long-term relationships with clients.

Explain, but also hold hands. Th e delivery of a corporate governance assessment may well be insuffi 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. Th is has the added value of building long-term relationships with key clients and ensuring that these companies become future best practice case studies.

Published in September 2007.

About the Author

Sebastian Molineus, Senior Operations Offi cer, Corporate Governance - World Bank, Washing-ton, DC.

SmartLessons 41

Th e Private Enterprise Partnership for Th e 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 offi ce 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 Offi ce Contact: Jesper KjaerGeneral Manager, IFC PEP-MENANile City Towers, North Tower, 24 Floor25 C, Corniche El Nile, Ramlet Boulac, Cairo, EgyptTel: +202-24619130/45/60Fax: +202-24619130/60

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