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Report of the Business Centres Conference - MEDA

Business centres have been established in eight countries of the MEDA region. Some of these business centres have been incorporated into industrial modernisation programmes (IMPs) whose general objective is the modernisation of industrial enterprises and the improvement of the institutional and legal business environment.

The missions of and range of services offered by Business Centres and IMPs vary according to the situation of the various beneficiary countries and their specific needs.
In this context, the Business Centres Conference held this year in Brussels has gathered the project managers from the delegations and the headquarters, Directors of the Project Management Units (PMUs), and for the first time representatives of the relevant national authorities in order to :

· exchange information and experiences of the current programmes with a view to increasing the efficiency of the services provided and to sharing the methodological tools;
· improve the EC's understanding of beneficiary countries' national policies and upgrading instruments;
· reflect on the role of technical assistance to be provided by the European Commission and identify together new tracks to support the private sector in the MEDA region.

Intended usually for the project managers, this Conference has widened the participation to representatives of the concerned national administrations to share their experience of national policies for private sector upgrading and to identify the best ways of integrating European Commission assistance in support of the national policy.
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Participant's views on the business centres

Business Centres and IMPs generally share the same objective, namely support for the private sector, and provide the same types of services (upgrading, SME training, information services, strengthening of professional associations) but differ in accordance to the special context of each beneficiary country. Project managers were therefore asked to present the projects' activities and results and in particular to underline their specific features.

Euro-Maroc Entreprises (Morocco):
The project contains two special characteristics which are: co-financing of activities by enterprises as well as horizontal activities through professional associations; the PMU's recourse to the Moroccan consulting services specialised in marketing and quality. A reduced use of international expertise combined with an increased use of national expertise which have helped to limit project costs.

Support for the SMEs (Algeria):
The project consists of 3 components which are direct support to enterprises, assistance to financial institutions and support to intermediary structures. The latter have regional branches for better representation and proximity to the SMEs. In addition to the support provided individually to SMEs, the project gives support in a collective framework for companies grouped within specific industrial sectors.
Euro-Lebanese Centre for Industrial Modernisation (Lebanon): The project is largely supported by the local Chambers of Commerce. A financial adviser provides the necessary technical support to the enterprises. Exchanges of information between different projects have already been initiated through mutual visits of the SEBC project in Syria and EJADA in Jordan.

Syrian-European Business Centre (Syria):
The project set up two offices, in Damascus and Aleppo, to cover the overall Syrian industrial fabric. The Euro-Info Centre was incorporated into the project to create some synergy and dynamics between the various entities. An Initiative, "Partnership EU-Mashrek", was launched with the participation of ELCIM (Lebanon) and EJADA (Jordan). Other sectoral activities, such as in the sector of olive oil, were carried out in an integrated manner, combining different business services.

Euro-Tunisie Entreprises:
The project is fully integrated into the national modernisation policy and complementary to the actions of various national institutions involved in support to the private sector (API, CEPEX, Centres technique etc). The project targets small enterprises (SMIs).

Industrial Modernisation Programme (Egypt):
It is the most important programme in the Meda region in budgetary terms. The project is endowed with a local regional representation network (Business Resource Centres) to be closer to the SMEs. Technical assistance needs expressed by enterprises are of three types: basic, standardised and/or specific, hence the need for the project to adapt to these. A sectoral approach is taken to ensure consistency between the activities.

Industrial Modernisation Programme "EJADA" (Jordan):
The project comprises four components: support for the SMEs and for the professional associations; financial instruments for SME financing; vocational training and the development of human resources; institutional strengthening and policy support. Among the financial instruments aimed at SMEs, a Guarantee Fund was set up to grant medium and long term loans to the companies.
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Presentations of national policies for industrial modernisation

Representatives of the national authorities presented their country's policies and instruments in support for the private sector. The experience of the Meda region as regards industrial modernisation is relatively recent compared to that of other regions. The policies vary from one country to another in terms of approach and types of activities undertaken. The representatives of the Moroccan, Lebanese, Tunisian and Jordanian administrations shared their experience and initiatives in this field.

Morocco:
The creation of a new Agency for the Promotion of SMEs and the establishment of a National Fund for Upgrading (FOMAN) foreseen for 2003 are some of the latest developments in the national policy of support for the private sector.

Lebanon:
The Government prepared a Plan for Economic Development which sets the targets and provides a framework for the private sector without creating any specific instruments or institutions.

Tunisia:
Tunisia was the first country to implement a national upgrading programme in 1996. A Fund (FODEC) was created to finance direct support to SMEs. The Agency of Promotion of Industry (API) is the institution which coordinates the development of the private sector. New instruments such as a Restructuring Fund, a Guarantee fund, and assistance for the creation of new enterprises are under study.

Jordan:
The government's efforts are focused on the adaptation of the institutional and legislative framework as well as on establishing a public/private partnership as a platform for consultation with the private sector. Consultations are taking place for establishing instruments to provide various services to the private sector, notably financial services.

Thoughts to be pursued at the policy level
· Avoid tying Industrial modernisation to the Association agreement only; upgrading is in any case a necessity for enterprises in the region due to higher global competition;
· Identify new priorities in cooperation with the European Union which go beyond the traditional upgrading targets (eg. support for the creation of companies);
· Formalise industrial policies and mobilise the necessary national means (financial and other);
· Need for a restructuring of the banking system to improve access to credit and to reconcile the availability of credits with the needs of SMEs.
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Discussions and recommendations of workshop on the theme :
"Facing the challenge of industrial modernisation in the Meda region, is there a recipe for success ?"


(In order to place the discussions of this workshop in the context of the Barcelona Process and to become acquainted with the different local contexts, the moderators invited the participants to describe, in a first round of discussions, how the Free trade Area (FTA) is perceived by the private sector in their countries.
Moderators then suggested that the discussions of this workshop be structured around the following two topics:
- what are the essential elements of a national industrial policy
- and how can European support best be integrated in this national policy.

Perception of the Euro-Mediterranean Free trade area
At first, the Association Agreement provoked the enthusiasm of the private sector in most MEDA countries where it was signed. Entrepreneurs were sensitive to the opportunities brought to them by the agreement (European aid, foreign investments). Such enthusiasm came of course with some apprehension which quickly grew with the advances on import tariff dismantling. As regards the national authorities, they perceive the FTA as a strategic choice and a definite commitment even though they face a difficult reality.

· Tunisia:
Tariff dismantling worries but has at the same time a catalyst effect on the process of upgrading enterprises. This is why authorities decided to put the date of entry into force of the agreement two years forward, in order to stimulate the private sector and prevent a passive attitude among entrepreneurs. It is too early to judge the impact of the agreement on the national economy, we must wait until 2008 (in particular to evaluate the impact of tariff dismantling with regard to the most important lists of products).

· Egypt:
The general perception of the agreement is rather negative. The difficult start of the majority of EC projects has reinforced the feeling that the agreement brings few advantages and opportunities. In fear of European competition, numerous entrepreneurs hesitate to create companies and especially to invest in the industrial sector and prefer to seek refuge in more protected sectors such as property and tourism. It is therefore crucial to liberalise all sectors of the economy in order to avoid this kind of distortion. However, some dynamic entrepreneurs who quickly became aware of the economic stakes involved in the association agreements, started upgrading their company early and made considerable gains, triggering in parallel local competition dynamics.

· Algeria:
The private sector regrets not having been consulted sufficiently by the national authorities on the terms of the agreement and is rather hostile to it. Moreover, given that the Algerian industry (except petroleum) is primarily turned towards the internal market, the majority of Algerian entrepreneurs feel threatened by the agreement. However, the private sector welcomes the reforms started by the national authorities such as privatisation which enable the private sector to progress.

· Lebanon:
The signature of the agreement a few months ago was welcomed even if the agreement will not radically transform the economic reality of the country given that the Lebanese market is already very open (the majority of import taxes had already been suppressed and numerous free trade agreements have already been concluded with other countries). For Lebanon, the principal challenge consists in reducing the debt of the country without crowding out the private sector and in establishing a legal framework defining the rules of the game whilst leaving to the private sector room for manoeuvre.

· Morocco:
The private sector was very trusting to begin with, it had eagerly taken part in the national consultation exercises at the time of the negotiations. However, after the initial years where protection was still allowed by the Agreement, the private sector lives a period of pessimism because it now has to cope with the painful phase of tariff dismantling (start in March 2003), competition of the accession candidates, and the end of the Multifibre agreement (the textile sector is one of the most important in Morocco, Tunisia, Egypt).

· Jordan:
The private sector perceives the association agreement rather favourably and welcomes especially the possibility of integration in a wider market, even if it is aware of its lack of competitiveness (high production costs). However it has invested in specialised sectors such as new information technologies and cosmetics and hopes to find a place in the regional or even world economy. As elsewhere in the region, the private sector would like to benefit more quickly and more tangibly from European aid as regards industrial upgrading (considering the long delays in starting EC projects).

· Syria:
Discussions on an Association Agreement are only at the preliminary stage. The Syrian economy was closed and protected for more than 30 years and the concept of a private sector has only emerged after 1991 as a result of the adoption of Law No. 10. The SEBC project is the only EC project geared towards the Syrian private sector.
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Recommendations
Key elements of an industrial modernisation policy


· Policy based on a national vision of the objectives to be achieved and of the means and strategies to be used;
· Strengthen the national institutions which play a key role in the industrial modernisation process;
· Making national funds available to elaborate and implement an effective industrial modernisation policy;
· Carry out policies adapted to the needs of the companies:
· support the upgrading of existing companies;
· encourage the entrepreneurial spirit and the creation of enterprises;
· facilitate the restructuring of certain companies;
· Foresee and facilitate the conversion of certain companies.
· Attract foreign direct investments;
· Encourage innovation;
· Stimulate and support quality improvement;
· Launch or accelerate institutional reforms especially of the financial sector;
· Foresee social measures to mitigate the negative social consequences of the economic transition process.

The role of European cooperation

· Support programmes with communication/information on the Free Trade Area;
· Trigger institutional reforms and/or encourage the development of national modernisation strategies;
· Provide support for a social safety net policy (Social Pillar of the Barcelona Process);
· Support relevant national initiatives, in particular by means of co-financing;
· Fill potential institutional vacuums with regard to private sector support;
· Institutional support and transfer of expertise between administrations;
· Improvement of SMEs' access to the projects;
· Increase the aid budget (grants and loans);
· Foresee a new generation of programmes;
· Encourage the EIB in its first steps towards the creation of a Euro-Mediterranean bank (note that the Mediterranean is the only region not endowed with its own regional development bank)
· Emphasize the importance of the rules of origin.

Brussels,04 28 2003
info
European union
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