Revised_RFP_ATTACHMENT_J-1_SOO.pdf

RFP No. 72027820R00002, Amendment No.02, Attachment J-1, USAID Business Growth Activity

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ATTACHMENT J-1

STATEMENT OF OBJECTIVES

1. 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 bordering countries have also significantly impacted Jordan’s growth performance, as border 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 19 percent in the fourth quarter of 2019. The poverty rate was 20 percent in 2016 and significant portions of the population experience transient poverty every 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 rates 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 workers or labor.

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.

This constrained environment forces small and medium sized firms to inefficiently use their capital and labor resources so they can hold on to profit margins. This is reflected in poor product and service quality, low productivity, low competitiveness, and low capacity for long-run expansion.

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Linkages to Mission Strategy and U.S Government

Business Growth falls within USAID/Jordan’s Country Development Cooperation Strategy

(CDCS), which aims to improve prosperity, accountability and equality for a stable, democratic

Jordan and will contribute to the Jordan Economic Growth plan 2018-2022. 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), Jordan 2025, Jordan Reform Matrix, Jordan Renaissance plan 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

2025 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. Performance Objectives

a. Goal and Development Hypothesis

The development hypothesis of the Business Growth Activity is:

If SMEs become more productive and competitive, then SMEs will increase their contribution to

GDP and become drivers of economic growth in 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.

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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. Offerors will identify relevant private sector engagement strategies in line with sectoral challenges and opportunities. 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 shall propose evidence-based methodologies as well as 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. The Offeror will utilize existing assessments and build on previous USAID investments and donor funded projects in this space to develop the PWS.

To avoid duplication and to exploit opportunities, the Contractor is required to coordinate and collaborate with other donors and USAID activities. In the first place, the Contractor will coordinate and collaborate with the Economic Reform Activity (ERA) and the Women’s

Economic Empower and Leadership Activity (WEELA), two planned USAID/Jordan activities working in the same space.

Offerors must propose how to 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 employment. Business Growth should also enhance innovation, technology transfer, and entrepreneurship within the selected sector.

For the purpose of this RFP, USAID Jordan defines small enterprises as those with no less than 10 and no more than 49 employees and medium enterprises as those with no less than 50 and no more than 250 employees.

b. Objective and Outcome:

The objective of the BGA is to improve the competitiveness of Jordanian SMEs.

The Business Growth activity’s primary outcome is to increase SMEs’ productivity and competitiveness. The activity will spur the growth of Jordanian small and medium enterprises resulting in increasing productivity, competitiveness and employment. The activity will assist

Jordanian SMEs to become more productive and competitive. The activity will work with sectors that have the potential to export, increase revenues and employ Jordanians including youth, women and people with disabilities. The activity will work with the private sector to identify problems and will implement sustainable solutions.

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Moreover, Business Growth shall ensure streamlined support to Jordanian SMEs to effectively address the challenges and impact of COVID-19 outbreak. The resultant crisis caused many SMEs to drop in employee size below the SME threshold but can still be considered for BG support.

The Contractor will achieve the BGA outcomes by addressing Objective 1:

SMEs investments, sales including exports increased

The purpose of Objective 1 is to assist SMEs to become more productive and competitive by, in part, expanding sales, increasing investment, enhancing productivity, identifying new and untapped sources of market demand, and building firms’ capacity to meet that demand and potentially create jobs, whether direct, indirect or induced.

The offeror will provide technical assistance and problem-solving services to Jordanian SMEs to enable them to expand their sales and exports, generate increased investment and increase job opportunities for women, men and youth. The offeror will work with the private sector to identify ways to improve SMEs’ operational, management and administrative business practices. The offeror will also propose techniques that will increase access to finance for SMEs, particularly for start-up businesses and those owned by women. The Contractor will help SMEs adopt new technologies and advanced business practices. Furthermore, the contractor will identify and advocate for addressing SMEs’ constraints to growth through a Private Public Dialogue and other appropriate channels.

Objective 1 will achieve, at a minimum, the following outcomes/results:

1. Sales of assisted SMEs expanded at least by 20 % compared to the baseline* over the life of the project.

2. Exports of SMEs expanded by at least 5% (measured in USD value) for assisted firms’ baseline over the life of the project.

3. Investment (debt, equity as well as revenue-based financing or royalty-based financing (RBF)) in SMEs increased by a minimum ratio of 1:1 for assisted firms’ baseline.

4. Employment by assisted firms increased by a minimum of 10% (disaggregated by gender and age) over the life of the project.

5. Public Private Dialogue platform to facilitate policy focused on SME competitiveness improved.

Offerors may propose additional indicators as part of the AMELP.

* Baseline is the information for selected companies during a year prior to BG interventions that will be used to measure performance post BG intervention. The contractor is required to collect the baseline for each SME at the start of support and report this to USAID. The mission’s

Monitoring, Evaluation, and Learning Activity (MELA) contractor will verify the methodology used to collect this baseline.

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Rapid response to emerging opportunities - CLIN 0003

Business Growth Activity shall ensure the provision of 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. The Offeror shall have the ability in terms of organizational capability to involve the necessary expertise, and any other ways deemed necessary to respond to a broad range of contingencies in the current fluid Jordanian environment.

This flexibility requirement includes the contractor anticipating and/or maximizing those business opportunities that come into existence suddenly that adapt and respond to the changing economic, political, and institutional environment - such as new laws and regulations or macroeconomics shocks, also as a result of COVID-19 pandemics, to mitigate risks to SMEs’ competitiveness.

The Offeror must propose LOE under the term CLIN (0003) of the contract for specific labor categories anticipated for such supplemental technical assistance, separated by the different areas of expertise, and for expatriates and locals. The Offeror's proposal may include but is not limited to the following illustrative labor categories: Local Business Advisor Coordinator, Local

Economist, Expatriate Senior Business Advisor, Local Senior Business Advisor.

Grants under Contract - GUC mechanism

It is anticipated that the Contractor will award grants for Objective 1. The Contractor should not provide a grant and/or technical assistance free of charge to client SMEs, consortiums, associations, or trade and business organizations. Although, exceptions may be considered on a case-by-case basis. The firms’, organizations’ or associations’ leveraging can include in-kind contributions as well as cash outlays. Stronger firms, organizations and associations should generally expect to pay a greater matching contribution than small firms, organizations and associations and, as time goes on, the grantee firms, organizations and associations should pay higher proportions. Each grant must be justified based on productivity or employment impact, revenue generation potential, gains in technology transfer, gains in eliminating business constraints or other development criteria leading to improvements in competitiveness.

The following are examples of grants that could be awarded:

● Grants to procure innovative and new technology, certifications, equipment or services to increase product sophistication and improve a firm’s or sector’s productivity or processes and embrace new market opportunities.

● Grants to support local organizations (e.g. private sector advocacy groups) working to identify and alleviate organizational constraints to growth (at the firm and sector levels) through business and trade-enabling policy and procedural reform and dialogue.

1. OPERATING PARAMETERS

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

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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 Economic Development

Accelerated” which guided the design of active USAID EDE activities that will be online while this activity is implemented.

Offerors must demonstrate an 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 proposed interventions would be different and innovative compared to previous approaches so as to increase the likelihood of achieving the purpose of this SOO.

The contractor shall coordinate and collaborate with the Economic Reform Activity (ERA) and the Women’s Economic Empower and Leadership Activity (WEELA), two new USAID/Jordan activities working in the same space. Offerors may propose to collaborate with other USAID activities for effective activity implementation.

b. Gender and Youth

Offerors are encouraged to 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/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.

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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 makes 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, the Contractor must present a full Cost-Benefit Analysis (CBA) 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 ensure its viability and institutionalization and will also be

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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 adaptation. 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 will have to 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) to be launched around the same time as BGA.

f. Monitoring, Evaluation, and Learning

Offerors must implement a robust monitoring, evaluation, and learning system based on rigorous data collection, timely reporting, and adaptive management. 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.