72027820R00002_-_Attachment_I_-_Draft_Statement_of_Objectives.pdf

Business Growth (BG) Activity Request for Information (RFI) 72027820R00002

ATTACHEMENT I

DRAFT STATEMENT OF OBJECTIVES (SOO)

1. Purpose

In Jordan, barriers restrict SME competition, creation of new firms, and the capacity of SMEs to respond to changing market conditions. The USAID Business Growth activity will increase growth for small and medium enterprises (SMEs) by improving their competitiveness. Improved competitiveness of SME firms in Jordan will contribute to a more economically stable and prosperous Jordan. The activity must help SMEs create opportunities for women and youth to help Jordan harness its economic potential and accelerate its journey to self-reliance.

2. Scope

This Statement of Objectives (SOO) describes the goal and objectives of USAID/Jordan’s five-year Business Growth activity. This SOO is provided in lieu of a U.S. Government statement of work and does not state how the work is to be accomplished: rather, it provides offerors the flexibility to propose cost-effective innovative approaches to improve the competitiveness of SMEs in Jordan. Offerors are required to submit a performance work statement (PWS) that describes their approach in accomplishing the overarching goal of the activity and its objectives.

The PWS must include: (1) work stated in terms of results rather than methods of performance;

and (2) provide measurable performance standards and a method of assessing contractor performance. The PWS must enable USAID to assess the performance of the work against specific, clear, and measurable performance standards, such as quality, quantity, timeliness, targets, and risk mitigation. The performance standards must contribute to the stated purpose of this SOO.

The performance work statement must incorporate the following:

a) A clear strategy for meeting Business Growth’s overarching goal in a manner that will sustain results beyond the life of the activity.

b) A realistic, yet ambitious plan for meeting the offeror’s proposed performance targets;

c) An activity Results Framework that addresses the objectives and the goals stated above;

d) A collaborative, learning, and adapting approach that: 1) generates, captures, shares, and applies evidence, information and knowledge to support and improve development outcomes; and 2) uses information to adapt and improve cost effectiveness over the life of activity.

3. Period and Place of Performance

Business Growth is a five-year activity that will be performed in the Hashemite Kingdom of Jordan. When proposing interventions, offerors must take into consideration the needs of different geographic areas and localities, their local communities and their customs.

Background

Jordan is an upper middle-income, $42 billion economy ranking 12th in the Middle East and North Africa (MENA). With a highly educated population of 10.2 million (2019), its purchasing power parity (PPP) adjusted gross domestic product (GDP) is $17,971 or the equivalent of $11,296 in current dollars.

Although its economy is among the smallest in the MENA region, Jordan is regarded as a safe and stable country. The economy is diversified, with significant contributions from services, manufacturing, transport, tourism, and large exports of phosphate and potash.

Long-run economic growth performance has been above average at 5.59 percent for the period 1976-2016. Growth slowed after 1994, coinciding with the introduction of the exchange rate peg.

Growth for 1994-2016 averaged 4.49 percent, and it peaked at 8 percent during the U.S. military buildup in Iraq. However, from 2011 to the present, GDP growth has slowed down to an average of 2.5 percent or less. One reason was the economic slowdown in the Gulf economies that lowered investment, exports, remittances and financial inflows. Conflicts in neighboring countries have also significantly impacted Jordan’s growth performance, as neighbors have provided historical trade routes and destinations for Jordanian goods. Jordan’s trade deficit is equal to one-third of its GDP, one of the highest trade deficits in the world.

Official unemployment reached 18.7 percent in the second quarter of 2018. The poverty rate was 20 percent in 2016 and significant portions of the population experience transient poverty throughout any given year. Employment prospects for Jordanian youth and women are considerably worse than for the average population. Unemployment for males has been 16.6 percent while female unemployment reached 26.8 percent. The unemployment for youth age groups 15-19 and 20-24 recorded the highest rates ever at 42.1 percent and 37.7 percent respectively. Finally, 83 percent of Jordanian women in all age groups were not seeking employment resulting in one of the world’s lowest labor force participation rate at 15.3 percent.

The largest employer is the public sector: 41 percent of all officially employed labor works for the public sector with a wage premium over the private sector of 35 percent for males and 26 percent for females. As a result, public sector wages are a significant contributor to Jordan’s high debt to GDP ratio. Labor markets are fragmented, and 30 percent of the labor force is foreign born.

In Jordan, small enterprises with fewer than 20 employees account for 98 percent of all firms employing 77 percent of private sector employment. There is a statistically significant correlation between poverty reduction and a growing SME sector. However, the SME sector potential for growth is constrained by an improving but difficult enabling environment, ranking 75 out of 190 in the World Bank Doing Business Report and 59 out of 140 in the Global

Competitiveness Report. These facts coupled with poor macro performance force small and medium sized firms to keep their profit margins through low and inefficient utilization of capital and labor. This is reflected in poor product and service quality, low productivity, low competitiveness, and low capacity for long-run expansion.

Linkages to Mission Strategy and U.S Government

Business Growth falls within USAID/Jordan’s Country Development Cooperation Strategy (CDCS)1, which aims to improve prosperity, accountability and equality for a stable, democratic Jordan and will contribute to the Jordan Economic Growth plan 2018-20222. This activity supports the mission’s Development Objective’s 1 goal of “Broad-based Economic Development Accelerated” and its intermediate results IR1.1 “Private sector competitiveness increased” and IR

1.2 “Workforce development and opportunities for vulnerable groups increased especially the poor, women and youth.” USAID/Jordan is currently developing a new CDCS that will prioritize inclusive private sector-led growth.

Link to Government of Jordan Priorities

This activity will support the Government of Jordan’s priorities contributing to the Jordan Economic Growth Plan (JEGP),3 Jordan 2025 and a series of ambitious plans to strengthen Jordan’s economy. Business Growth will directly contribute to Jordan’s economic growth plan by aligning its funds to JEGP’s stated goals, including stimulating private sector resource mobilization and improving the enabling environment to increase business dynamism. Business Growth will also help Jordan government achieve Jordan 20254 objectives, specifically:

“Encouragement of small and medium-sized businesses”, “Increase foreign investment by enhancing and increasing business and investment competitiveness” and "Development of economic sectors through market creativity and honing the tools and means of high-value-added export-oriented sectors."

Donor Coordination

Donors active in SMEs development include the European Union (EU), Germany, Canada, and the Netherlands. Although USAID remains the primary donor in Jordan, other donors have established initiatives in economic growth development. Activities to be undertaken under this project will be coordinated with other donors and stakeholders to avoid duplication and to encourage strategic investments.

1 https://www.usaid.gov/jordan/cdcs 2 https://rhc.jo/en/media/jordan-economic-growth-plan-2018-2022 3 https://rhc.jo/en/media/jordan-economic-growth-plan-2018-2022 4 http://inform.gov.jo/en-us/By-Date/Report-Details/ArticleId/247/Jordan-2025 https://www.usaid.gov/jordan/cdcs https://rhc.jo/en/media/jordan-economic-growth-plan-2018-2022 https://rhc.jo/en/media/jordan-economic-growth-plan-2018-2022 http://inform.gov.jo/en-us/By-Date/Report-Details/ArticleId/247/Jordan-2025

4. Performance Objectives

a. Goal and Development Hypothesis

The development hypothesis of the Business Growth Activity is: If SMEs become more competitive, then SMEs will contribute to a more economically stable and prosperous Jordan.

In Jordan, many barriers exist that restrict competition and hamper firm incentives and their capacity to respond to changing market conditions or prevent new firm generation. Therefore, offerors in their proposals must show a clear understanding of market failures, price distortions, and the inadequate enabling environment and explain how their proposed interventions will enable SMEs to become more competitive. Competitiveness in this context is defined as firm level increases in value as measured by gross domestic value added or any alternative measure of SMEs’ contribution to national wealth and employment.

In summary, offerors must describe how their interventions will result in enhancing competition and competitiveness that results in economic growth in the presence of an adverse enabling environment. This includes demonstrating how they will assist SMEs and, potentially, civil society organizations. The offerors must also propose how they will engage the Government of Jordan (GOJ). Offerors must explain how they will work in partnership with relevant government ministries, agencies and departments, economic development zones or any relevant authorities, both at the national and local level, that regulate and impact SME performance.

Offerors must also propose innovative ways to provide flexible, rapid, and responsive support both to the government and the private sector to ensure that competitiveness of Jordanian SMEs in domestic, regional and international markets improves.

Offerors must carry out an initial comprehensive private sector assessment that will identify the following

▪ Outputs and inputs of SMEs in Jordan disaggregated by economic sectors and geographical areas;

▪ Sectors that have high potential to grow and create jobs, especially jobs for the large share of highly educated Jordanian women that are out of the labor force;

▪ Current contribution of SMEs to GDP in high potential growth sector(s);

▪ Recommendations of sector(s) that Business Growth should support. The choice of sector(s) should take into consideration the ability of Business Growth to boost productivity of high growth potential SMEs and create jobs. Business Growth should also enhance innovation, technology transfer, and entrepreneurship within the selected sector.

b. Outcome and objectives:

The Business Growth activity’s primary outcome is to increase SMEs’ gross value added to GDP. Offerors can achieve this outcome by addressing the following objectives:

Objective 1: Competitiveness of Jordanian SMEs improved

The purpose of Objective 1 is to assist Jordanian SMEs to become more competitive. Since many factors inhibit SMEs’ growth in Jordan, offerors must also propose how they will identify these factors and how they will combine firm-level support with other interventions so that SMEs become more competitive.

Objective 2: Opportunities for SME growth harnessed/captured Over the years, USAID/Jordan has received several unanticipated GOJ and private sector requests at the time of the design. When implemented they contributed to achieving the portfolio objectives. Objective 2 serves the same purpose - to provide flexible, rapid, and responsive support both to the government and the private sector to ensure that competitiveness of Jordanian SMEs in domestic, regional and international markets improves. This component will enable the offeror to propose a mechanism to introduce as-needed interventions that adapt and respond to the changing economic, political, and institutional environment - such as new laws and regulations or macroeconomics shocks, to mitigate risks to SMEs’ competitiveness. Most of the results of this objective are expected to contribute to Business Growth Objective 1 and will be monitored and tracked accordingly.

5. Operating Parameters:

The offeror’s Business Growth Activity Monitoring, Evaluation, and Learning (MEL) Plan must ensure that each topic below is tracked, and lessons learned are applied through adaptive management throughout implementation.

a. Coordination with other USAID’s projects USAID’s overall goal in Jordan is to improve prosperity, accountability, and equality for a stable democratic Jordan. USAID Economic Development and Energy (EDE) assistance is provided within the framework of the development objective of “Broad-based Inclusive Economic Development Accelerated” which guided the design of active USAID EDE activities that will be online while this activity is implemented.

Offerors must demonstrate a thorough understanding of the current landscape of previous and ongoing programs by USAID, other donors and the GOJ that are working in the same space.

They must also include how this USAID intervention can bridge gaps and/or offer unique value-added in programming from other donors so that gains in competitiveness are permanent and accrue beyond the life of the activity. Offerors need to highlight how their suggested interventions would be different and innovative compared to old approaches so as to increase the likelihood of achieving the purpose of this SOO.

The offerors shall complement and coordinate with other USAID/Jordan activities working in the same space. These are expected to include, but are not limited to, the Economic Reform Activity (ERA) and the Women’s Economic Empowerment and Leadership Activity (WEELA). It is essential that the successful offeror work closely with other USAID activities and donors to avoid duplication of efforts and incorporate lessons learned.

b. Gender and Youth:

Offerors are encouraged to be innovative and present activities that will increase women’s participation rate in the labor force. Interventions under this activity must address gender issues and women’s empowerment, including identifying opportunities to support women entrepreneurs and women-owned businesses. Gender aspects and implications of specific interventions, including opportunities to reduce gender-related biases or risks, must be considered.

Opportunities to promote the equitable professional development of women, youth and disadvantaged groups in assisted SMEs and GOJ institutions must be sought.

This should include unorthodox fields where they can work and excel rather than just focusing on traditional occupations. The offeror must show an in-depth understanding of cultural norms and the constraints they impose in Jordan and through analysis identify these unorthodox opportunities. Since Jordanian female labor participation rates are among the lowest in the world, increasing female operated SMEs and and/or their employment will have a large impact in contributions to the national economy.

Furthermore, offerors need to show how they will coordinate with other USAID activities, donors, and government and civil society efforts to create synergies.

The offerors must also focus on enabling youth to access economic and social opportunities in SMEs since they are a valuable and under-utilized sector of the labor force. This means activities that will increase their employment or them starting up SMEs. Offerors must ensure their proposed interventions build upon the results of current and past USAID private sector and workforce development projects.

Data collected on people for monitoring, evaluation and learning purposes shall be, at a minimum, sex-and age disaggregated, and surveys and other MEL tools shall include qualitative questions to elicit information that allows differentiation of impacts based on demographics of the population and activity interventions. Data and information related to gender, youth, assumptions and other special topics will be integrated into the activity’s learning agenda.

c. Inclusive Development USAID is committed to the inclusion of people who have physical and cognitive disabilities and those who advocate and offer services on behalf of people with disabilities. This commitment extends from the design and implementation of USAID programming to advocacy for and outreach to people with disabilities. USAID’s policy on disability is as follows: To avoid discrimination against people with disabilities in programs which USAID funds and to stimulate an engagement of host country counterparts, governments, implementing organizations and other donors in promoting a climate of nondiscrimination against and equal opportunity for people with disabilities. The USAID policy on disability is to promote the inclusion of people with disabilities both within USAID programs and in host countries where USAID has programs.

USAID therefore requires that the contractor not discriminate against people with disabilities in program implementation and that it make every effort to comply with the objectives of the USAID Disability Policy in performing this contract. To that end and within the scope of the contract, the contractor’s actions must demonstrate a comprehensive and consistent approach for including men, women and children with disabilities.

d. Sustainability:

Sustainability is integral to this activity. In particular, when working with GOJ institutions, reforms must command a sufficiently broad constituency to hold up through changes in administration. Approaches to implementation should be flexible to adapt to changes in priorities or leadership within key institutions. Offerors are requested to present and demonstrate that they are aware of and will be actively working to find key sustainability champions in partner institutions early in program implementation.

Simultaneously, different approaches must be sought to ensure sustainability of approaches to making Jordanian SMEs competitive and self-reliant after this activity ends. Firms are defined as sustainable if their expansions are derived from normal market processes and not transfers from government or non-profit actors. Since firm level cash flows must be collected, offerors must present a full cost-benefit analysis two years into the activity subject to USAID guidelines and approval, using a 15 year projection and a 12 percent discount rate. The CBA must include the financial analysis, the economic analysis, stakeholder analysis, and a risk assessment of key variables. The CBA must summarize its calculations on a modified internal rate of return (MIRR) both financial and economic.

Offerors are required to present a sustainability plan for each of the above mentioned interventions to demonstrate how each activity will be sustained after the end of USAID assistance. This will include but is not limited to: who will be leading the work and how, what resources are they going to be using and how will the government and private sector continue updating the systems and applying the know how they acquired through the life of the activity.

The plan should be designed to start with each sub-activity to insure its viability and institutionalization and will also be documented in the monitoring, evaluation and learning plans.

The offeror must also include ways in which they can build up the necessary human capital in the public and private sector to ensure continuity of work.

e. Collaboration, Learning, and Adaptation (CLA) Offerors must propose how Collaboration, Learning, and Adaptation (CLA) principles will be reflected throughout their proposed interventions. They must propose how collaboration with stakeholders, beneficiaries, counterparts and other USAID activities will be approached; how learning will be reflected by project staff; how that learning will be captured, shared, and utilized; and, how the activity will translate collaboration and learning to needed adaption. They will state how their CLA approach will serve as a base for learning and knowledge sharing, as well as how the offeror will capture the change brought about by activity interventions, learn and share what worked and what did not. The CLA approach must describe how the Offeror will apply flexibility and timely responsiveness that enables the offeror to refine activity work plans and interventions to respond to changing conditions and opportunities over the life of the activity. Offerors must present how they will coordinate with other activities and co-develop their annual work plans in concert with other implementers to amplify synergies and complementarity and reduce duplication with other USAID and donor activities. This includes, but is not limited to: the USAID Women’s Economic Empowerment and Leadership Activity and the USAID Economic Reform Activity (ERA).

f. Monitoring, Evaluation, and Learning To track progress and inform program decision-making, monitoring, evaluation, and learning will be a core focus of this activity. Monitoring the program must, to the extent possible, utilize existing monitoring and evaluation frameworks and systems used by the GOJ and international reporting requirements. Offerors must implement a robust monitoring, evaluation, and learning system based on rigorous data collection, timely reporting, and adaptive management. Testing innovative approaches and scaling them up will be maximized as an opportunity for learning and adapting. Data-gathering under this program will also be used by contractors as a capacity-building exercise for the GOJ, to complement interventions across all objectives. USAID will conduct an evaluation of the activity utilizing a third party; the Offerors will, therefore, ensure full cooperation with the external evaluation teams post-award.

The Business Growth Activity will adapt at different levels on a continuing basis during implementation in response to lessons learned and changes in the activity environment.

The nature of collaboration with USAID/Jordan is based on the continuous exchange of information and close involvement of the USAID/COR in the planning and implementation of the activity’s interventions. The activity will effectively disseminate key findings and lessons learned among stakeholders, counterparts & beneficiaries.