Report on Advisory Services Operations in the Middle East and North Africa REPORTING PERIOD JULY 2011 – JUNE 2012 IFC Advisory Services in the Middle East and North Africa is supported by the Canadian International Development Agency, the European Commission, Harakat, International Bank for Reconstruction and Development, Islamic Development Bank, Switzerland’s State Sec- retariat for Economic Affairs, UKaid, USAID, and the governments of Denmark, Japan, Luxembourg, Netherlands, and Spain. Contents List of Abbreviations ....................................................................................................... 5 Overview of Fiscal Year 2012 .......................................................................................... 6 I.Introduction ...........................................................................................................6 II.Key Development Results ...................................................................................6 III.Geographical Coverage .....................................................................................7 IV.Expenditure ........................................................................................................9 V.Partnerships ........................................................................................................9 VI.Going Forward – Continuing to Respond to Challenges in MENA ...................9 Responding to Thematic Challenges ............................................................................11 I .Introduction .......................................................................................................11 II. Fostering MSME Development to Accelerate Economic Growth and Job Creation ...........................................................................................................11 III.Reducing Resource Intensity and Supporting Green Growth .......................13 IV. Fostering Economic Inclusion .........................................................................15 V.Creating Private Sector Investment Opportunities in Agribusiness ................18 Investment Climate ........................................................................................................ 21 I.Operational Context ...........................................................................................21 II.Purpose and Approach .....................................................................................21 III.FY12 Results ................................................................................................... 22 IV.Program Highlights .......................................................................................... 23 V.Challenges and Lessons Learned ................................................................... 25 VI.Future Prospects ............................................................................................. 26 Access to Finance .......................................................................................................... 27 I.Operational Context .......................................................................................... 27 II.Purpose and Approach .................................................................................... 27 III.FY12 Results ................................................................................................... 27 IV.Program Highlights .......................................................................................... 29 V.Challenges and Lessons Learned ................................................................... 33 VI.Future Prospects ............................................................................................. 33 Sustainable Business Advisory ..................................................................................... 34 I.Operational Context .......................................................................................... 34 II.Purpose and Approach .................................................................................... 34 III.FY12 Results …………………………………………………..………........………..34 IV.Program Highlights ...........................................................................................36 V.Challenges and Lessons Learned …………………………………………….…...41 VI.Future Prospects ……..…………………………………………...……...…………..42 Public-Private Partnerships .......................................................................................... 43 I.Operational Context .......................................................................................... 43 II.Purpose and Approach .................................................................................... 43 III.FY12 Results ………………………………………..………........…………………..44 IV.Program Highlights ...........................................................................................45 V.Challenges and lesson Learned ……………………………………………….…...47 VI.Future Prospects ………………..………………………………...……...…………..47 Sources and Uses of Funding ........................................................................................ 48 I.FY12 Expenditure ............................................................................................. 48 II.Sources of Funding .......................................................................................... 49 III.Client and Partnership Overview …………………………..………........………..50 Annexes ........................................................................................................................... 55 Annex A: Indicator Definitions and Methodology Notes .................................... 55 Annex B: Fiscal Year 2012 Results and Targets ................................................ 63 Annex C: Targets: Fiscal Years 2011-2017 ........................................................ 67 List of Abbreviations A2F Access to Finance ABA Alexandria Business Association ACRI Arab Credit Reporting Initiative ADR Alternative Dispute Resolution AFFI Arab Financing Facility for Infrastructure AMB Al Amal Microfinance Bank AMF Arab Monetary Fund AS Advisory Services BoP Bank of Palestine BLC Bank Lebanon Commercial BLF Banque Liban Francaise CIDA Canadian International Development Agency CG Corporate Government CEO Chief Executive Officer CGAP Consultative Group to Assist the Poor DFID Department for International Development (UKaid) DBACD Dakahlya Businessmen Association for Community Development DAB Da Afghanistan Bank e4e e4e Initiative for Arab Youth FY Fiscal Year HBL Habib Bank Limited GHG Green House Gas GIZ Gesellschaft Fur Internationale Zusammenarbeit IBRD International Bank for Reconstruction and Development IC Investment Climate ICT Information and Communication Technology IDA International Development Association IDRC International Development Research Centre IFI International Finance Institution LGBC Lebanon Green Building Council MENA Middle East and North Africa MFI Microfinance Institution MSME Micro, Small, and Medium Enterprises MISFA Microfinance Investment Support Facility for Afghanistan NPL Non-Performing Loan OECD Organization for Economic Cooperation and Development PPIAF Public-Private Infrastructure Assistance Facility PPP Public-Private Partnership PICG Pakistan Institute for Corporate Governance SBA Sustainable Business Advisory SECO State Secretariat for Economic Affairs SEF Sustainable Energy Finance SME Small and Medium Enterprises UNEP United Nation Environments Program UAB Union Arab Bank USAID United States Agency for International Development WBI World Bank Institute 6 REPORT ON ADVISORY SERVICES OPERATIONS IN THE MIDDLE EAST AND NORTH AFRICA Overview of Fiscal Year 2012 I. Introduction Our challenge in the Middle East and North Africa (MENA) this year has been to effectively respond to the widespread changes in the region. We have focused on engaging clients and partners to help rebuild our portfolio in line with MENA’s evolving demands. At the beginning of the year, over 40 percent of our portfolio was suspended due to instability in various countries. Projects in Yemen and Syria had to be closed, while others in Egypt had to be re-designed or delayed until stability was re-established. At the same time, we were challenged to deliver in markets like Tunisia, where we had not operated for several years. Despite the hurdles, the 2012 fiscal year proved to be a success. At the end of the 12-month period ending in July, we had 27 new projects approved, and another five in the late stages of the approval process. We ramped up activities across the region, particularly in the areas of investment climate, access to finance, and corporate governance. Those efforts are reflected in the growth in program expenditures, which increased 22 percent this year. A prime example of that expansion is in Tunisia, where we now have four active engagements, up from none. We have focused on microfinance, corporate governance, investment climate reform, small and medium enterprise (SME) banking, and training to strengthen youth employability. In our efforts to respond to challenges across the region, we will continue to ramp up our program this fiscal year, and expect another year of rapid portfolio growth. II. Key Development Results Despite the significant challenges as we began the year, the program has largely delivered on our targets, as can be seen from the table opposite. We had a very strong performance in our SME banking as we continue to rapidly increase that portfolio. Demand from banks continues to build as they seek to diversify