SBEP_Final_Report.pdf

Project Close-Out Report

The Small Business Expansion Project (April 2012 – March 2017)

SUBMITTED:

April 2017

TO:

MS. TATJANA MARKOVSKA

Contracting Officer’s Representative

USAID MACEDONIA

MS. ANETA DAMJANOVSKA

National Programme Officer

EMBASSY OF SWITZERLAND

in the Republic of Macedonia

Mirjana Makedonska

Chief of Party

SMALL BUSINESS EXPANSION PROJECT

Debarca #3, 1000 Skopje

Republic of Macedonia mmakedonska@carana.com

Eduardo Tugendhat

Project Manager

The Palladium Group

1331 Pennsylvania Avenue NW, Suite 600, Washington, DC 20004, USA eduardo.tugendhat@thepalladiumgroup.com

Project Name Small Business Expansion Project

Project Description USAID Macedonia Small Business Expansion Project (SBEP) was a five-year project, co-funded by the Swiss Government and implemented by CARANA Corporation, designed to strengthen private sector capacity to drive regional economic development and job creation within selected regions of Macedonia. Its goals were to engage business leaders, local governments, regional development centers and other institutions to identify market opportunities for growth and job creation, upgrade the capacity of micro, small, and medium-sized enterprises (MSMEs) to respond to new market opportunities and grow and strengthen the capacity of business service organizations (BSOs) to better identify and serve the needs of the MSMEs while building the necessary workforce capacity to support the growth of the MSMEs.

Project Lead Mirjana Makedonska

Chief of Party

Debarca #3, 1000 Skopje

Republic of Macedonia mmakedonska@carana.com

Eduardo Tugendhat

Project Manager

The Palladium Group

1331 Pennsylvania Ave NW #600, Washington, DC 20004 eduardo.tugendhat@thepalladiumgroup.com

Project Funder USAID Macedonia and Swiss Government (through SECO)

Duration April, 2012 to March, 2017

Location Macedonia

Agreement Type Contract No: 165-C-12-00101

Geographical Area Pelagonija, Polog, the North-East and Vardar regions in Macedonia

Partners SBEP worked closely with a number of partners, including public-sector entities such as the local governments and their Local

Economic Development (LED) offices, the Regional Development

Centers (RDCs), the National Agricultural Extension Agency

(NEA), the Ministry of Agriculture, Forestry and Water Economy, the Agency for Promotion and Support of Tourism, Macedonia

Invest, the Public Enterprise for Forests Makedonski Shumi, the

National Park Mavrovo, as well as civil society organizations, private firms and consultants with specific technical expertise and a proven track record of providing solutions for MSMEs (e.g. Preda Plus, ALRD, MKonsalting, PointPro, ProBio, Magan-Mak, ATTA, etc.).

Budget 5 million USD (USAID) + 1.7 million USD (Swiss Government)

USAID Technical Office Tanja Markovska, Project Management Specialist, USAID

Macedonia

Table of Contents

1 Executive Summary

1.1 Project Goals and Objectives

1.2 IR 1. Regional opportunities for MSME development identified and pursued

1.3 IR 2. Assisted MSMEs engage in identified market opportunities

1.4 IR 3. Business support organizations provide quality services to MSMEs to pursue identified market opportunities

1.5 IR 4. Assisted MSMEs build a workforce necessary to sustain their growth

1.6 Crosscutting IR 5. Women and Youth in Enterprise

1.7 Budget and Leverage

1.8 General Summary of Results and Successes

1.9 Recommendations for Next Steps

2 Project Implementation Details

2.1 Project Strategy and Methodology

2.2 Project Timeline and Geographical Coverage

2.3 Project Partners, Coordination and Collaboration

2.4 SBEP initiatives

2.4.1 Grow More Corn

2.4.2 Macedonia Adventure Travel

2.4.3 LEADER

2.4.4 Wild-Gathered Products

2.4.5 Light Manufacturing

2.4.6 Women in Business

2.5 Project Monitoring and Evaluation

3 Lessons Learned

3.1 Best Practices

3.2 Major Challenges

3.3 Discontinued initiatives

4 Finance Summary

5 Annexes

SBEP FINAL REPORT (2012-2017) 1

1 Executive Summary

The USAID Macedonia Small Business Expansion Project (SBEP) was a five-year project (2012-

2017), co-funded by the Swiss Government and implemented by CARANA Corporation, designed to strengthen private sector capacity to drive regional economic development and job creation within selected regions of Macedonia. SBEP was one of

USAID’s most diverse projects in terms of initiatives and activities that created catalytic change across a number of economic sectors supporting the expansion of micro, small and medium enterprises (MSMEs), especially in less developed and usually rural regions in Macedonia.

SBEP’s initiatives were implemented in four of the eight planning regions in Macedonia: Polog, Pelagonija, the North-East and the Vardar, with a notable spillover across the rest of the country.

The total budget of the Project was US$6.7 million: it started off with US$5 million by USAID, to which US$1.7 million were added in 2014, by the Government of Switzerland, through their

State Secretariat for Economic Affairs (SECO).

SBEP’s overarching goal was to stimulate MSME growth as a source of jobs and improved income, through identifying opportunities and facilitating MSME linkages to promising market opportunities, financing and technology. The key issue that needed to be addressed was poorly integrated supply chains, reflection of weak or non-existent linkages among MSME suppliers, aggregators and end-buyers, which has led to informality, inefficiencies, and declining competitiveness across sectors. A related key issue was the very limited public-private dialogue and coordination among stakeholders to structure and implement strategic local and regional economic development programs.

In order to cost effectively support as many MSMEs as possible, and provide the greatest economic stimulus for less developed regions, SBEP structured its activities around two main and mutually reinforcing strategic thrusts: integrating and strengthening supply chains to benefit

MSMEs and link them to markets, financing, technology, and support services, and facilitating public-private dialogue, which would lead to identifying and pursuing strategic priorities, establishing partnerships and implementable economic programs.

SBEP was implemented in four of the eight planning regions in Macedonia, with a notable spillover

SBEP FINAL REPORT (2012-2017) 2

In brief, the principal guiding idea was to better integrate SMEs into more inclusive and stronger value chains through market-driven interventions, with the involvement and support of local partners. Priority was given to value chains that would have the greatest impact, especially in terms of numbers of MSMEs supported, jobs created and investment leveraged.

The main value chains in which SBEP’s interventions took place were:

agriculture, adventure tourism, light manufacturing and wild-gathered products.

To mobilize and engage stakeholders, SBEP utilized an iterative process of consultations with representatives of both local and national institutions, businesses and civil society, in order to pool resources and ideas to identify opportunities, facilitate market linkages and implement initiatives to enhance local economic development. Over the life of the Project, SBEP worked with over 100 reliable local partners, and had more than 3,000 beneficiaries in all the initiatives it implemented.

SBEP made sure to evaluate the market demand and economic viability of each opportunity, as well as leverage local and external resources, thus laying the basis for MSME growth. Each intervention entailed a multifaceted approach comprised of a number of cross-cutting activities, including investment promotion, workforce development, business service organization (BSO) enhancement, improved access to financing, and institutional capacity-building at regional and local levels.

This strategic approach of ensuring more efficient use of existing, but underutilized assets and capacity to promote economic growth in the rural economy has yielded both short- and long-term results. Short-term effects include improved incomes for underemployed people, created and retained jobs and increased investment. Still, the long-term impact is arguably more important:

SBEP established the foundations for continued growth in each of the value chains or sectors where the Project intervened, as well as demonstrated models and approaches that have been adopted by local partners for continued implementation. Continuing these trends will lead to further progress, which according to SBEP’s projections, will reach 8,000 jobs created and retained in the sectors where SBEP operated, and US$73,767,975 mobilized in terms of public and private investment for the economic growth of the regions and MSME development.

Throughout implementation, SBEP made sure to have excellent media coverage of Project activities. According to USAID’s monthly media analysis, SBEP outperformed in media visibility all other USAID Macedonia projects during most months of every project year. It was not only a way to make information more accessible to interested stakeholders beyond the regions where SBEP operated, but also allowed for long-term presence of the best practices developed as a result of the Project’s interventions.

SBEP FINAL REPORT (2012-2017) 3

1.1 Project Goals and Objectives

The overall Project Objective was Strengthened capacity of private sector to drive regional economic development and job creation in targeted regions. In addition, there were four primary and one crosscutting Intermediate Results (IRs), according to which SBEP organized its efforts. These were as follows:

IR 1. Regional opportunities for MSME development identified and pursued

IR 2. Assisted MSMEs engage in identified market opportunities

IR 3. Business support organizations provide quality services to MSMEs to pursue identified market opportunities

IR 4. Assisted MSMEs build a workforce necessary to sustain their growth

Crosscutting IR 5. Women and Youth in Enterprise

In order to achieve these goals, SBEP developed and implemented a number of initiatives and activities in different sectors and regions across the country, all while making sure that they are interconnected and contribute to the achievement of more than one IR.

1.2 IR 1. Regional opportunities for MSME development identified and pursued

SBEP engaged local public, private and civic leaders in a process of consultations and trainings at the regional level, which led to the establishment of formalized regional public-private partnerships, so-called Local Action Groups (LAGs). In essence, these are elements of the

LEADER1 approach of the European Union (EU), which is a method of mobilizing and delivering rural development in local rural communities. EU funding allocated through this mechanism should become available to Macedonia in 2018, and SBEP strived to make the most of the interim period to prepare the necessary infrastructure. Nearly 1,400 people across the four regions attended info-sessions, discussion gatherings and workshops on the LEADER approach, while around 300 went through the process of actual trainings on the various aspects of starting and running a LAG.

In addition to supporting the process of establishing 10 pre-LAGs2 in the regions where it operated, SBEP started building the institutional and operational capacities of these organizations, in order to enable them to absorb the funding once it becomes available. In the last couple of years, SBEP supported the pre-LAGs in developing and implementing 25 small-scale projects, each contributing to the local economic development of their respective micro-region. SBEP’s activities within the LEADER initiative are described below (p. 28).

1 The acronym ‘LEADER' derives from the French words "Liaison Entre Actions de Développement de l'Économie

Rurale" which means, ‘Links between the rural economy and development actions'. http://enrd.ec.europa.eu/enrd-static/leader/leader/leader-tool-kit/the-leader-approach/en/the-leader-approach_en.html 2 The organizations are still called “pre-LAGs”, because the Ministry of Agriculture, Forestry and Water Economy has not yet opened the required LAG Register, which would accredit them as “LAGs”.

SBEP established 10 pre-LAGs across the four regions where it operated http://enrd.ec.europa.eu/enrd-static/leader/leader/leader-tool-kit/the-leader-approach/en/the-leader-approach_en.html http://enrd.ec.europa.eu/enrd-static/leader/leader/leader-tool-kit/the-leader-approach/en/the-leader-approach_en.html

SBEP FINAL REPORT (2012-2017) 4

One of the keys to SBEP’s success and a significant lesson learned, which should be applied in any future similar development effort, lies in identifying reliable local partners in shaping and implementing interventions.

The involvement of relevant stakeholders from the public, private and civic sphere in discussing and shaping local economic development strategies, and especially participating in the process of vetting market opportunities to be pursued, was instrumental in virtually all of the initiatives undertaken within SBEP. The total number of business leaders, civil society and public officials who participated in identifying opportunities for local economic development over the life of the

Project was 931, of whom 251 (27%) were women. The number of initiatives that were developed and implemented during SBEP is 96, while the public and private investment that was mobilized for the economic growth of the regions amounted to US$51,019,574.

Grow More Corn, SBEP’s biggest and most important flagship initiative, is an excellent example of how SBEP utilized the elements of the LEADER approach. The Project introduced, for the first time in Macedonia, drip irrigation for growing fodder corn and sunflower. The process of mobilizing the corn producers towards adopting the new technology included consultations with mayors, farmers, dairies, financial institutions, and other local, regional and national bodies, which is in itself the essence of the LEADER. At the same time, the Project helped create a better understanding of farms as MSMEs that prosper when effectively integrated to end buyers which in turn allows them to invest in improved technologies which enhance their own income and create an important economic multiplier in the rural regions.

Over the life of the Project, more than 400 farms across the country adopted this technology, covering more than 800 hectares of corn and sunflower under drip irrigation. By doubling and tripling their yields, the farmers have already substituted 11% of the imports of this commodity, and if the trend continues, Macedonia could produce enough corn to fully replace corn imports by 2021, potentially creating 7,000 jobs in all supply chains dependent on corn production. More details about the Grow More Corn initiative can be found below (p. 17).

1.3 IR 2. Assisted MSMEs engage in identified market opportunities

The methodology that SBEP used to achieve IR 2 consisted of identifying and engaging

“champions” in areas where an opportunity for growth had been identified, and supporting them in the process of assuming increasing ownership. SBEP would work closely with them in recognizing the specific challenges they face and the type of assistance they might require to successfully achieve growth. Once the champions experienced positive results and advancement in their business, they would become advocates of the change, and serve as role-models to peers. An illustrative example of this process is the Grow More Corn initiative, in which the best farmers in each region were selected to be the pioneers in introducing drip irrigation for growing corn.

SBEP pioneered drip irrigation for growing corn in Macedonia

SBEP FINAL REPORT (2012-2017) 5

In addition to facilitating access to new technology, SBEP also applied other tools to achieve IR 2, such as providing opportunities for businesses to establish buyer-supplier linkages between themselves, and organizing trainings to upgrade the skills and knowledge necessary to attain growth. SBEP’s role in these processes was primarily facilitative, such as in the Light

Manufacturing initiative (more information on p. 34), where SBEP’s consultants searched for matchmaking opportunities between companies and helped them start a process leading towards potential deals. They also worked on identifying and facilitating projects that would entail new local production development designed for import substitution. Over the life of the Project, SBEP developed a data base of more than 250 companies from the light manufacturing industry interested in such services that would help them expand their business.

These types of endeavors were applied within the entire range of SBEP’s initiatives, including the

Wild-Gathered Products, and the Women in Business, as well as the Adventure Travel initiative.

Again, each of these initiatives is explained in more details below (p. 31, p. 36 and p. 24 respectively).

As a result, over the life of the Project, a total of 1,673 new jobs were created and 333 jobs were retained (i.e. a total of 2,006 jobs) in all of the sectors where SBEP intervened. Over 300 companies adopted new technologies in their production, while 83 MSMEs were linked in the supply chains of larger companies. For more details on the performance monitoring figures, please consult SBEP’s Performance Monitoring Plan Table, in Annex I.

1.4 IR 3. Business support organizations provide quality services to MSMEs to pursue identified market opportunities

As previously mentioned, SBEP played primarily a facilitating role in the process of identifying and addressing the development needs of MSMEs. In that context, SBEP worked closely with a number of business support organizations (BSOs), both local and international, that provided technical assistance and expert input into the development of SBEP’s main initiatives, and also extended direct support to many individual Project beneficiaries. The most prominent BSOs participating in SBEP’s initiatives include local consulting company Point Pro, which worked on several issues, such as a white paper on corn production with drip irrigation, several irrigation feasibility studies, and a business plan for the National Park Mavrovo, assessing the possibilities and policy options for the Park to regulate the collection of the wild-gathered products available on its territory; Magan-Mak, a local supplier of drip irrigation equipment, agricultural input and services, that was instrumental in the Grow More Corn initiative; MAMEI, the Macedonian Association of

Metal and Electrical Industry, which took on the SBEP worked with local consulting company PointPro to develop the White Paper on Agribusiness Innovation in Macedonia

SBEP FINAL REPORT (2012-2017) 6

services developed within the Light Manufacturing initiative, such as offering match-making services to companies; and ATTA, the Adventure Travel Trade Association, an international organization which provided advisory services and helped facilitate practical opportunities for the development of the adventure tourism industry in the country within SBEP’s Macedonia Adventure Travel initiative.

In cooperation with ATTA, SBEP was able to help shape the entire industry segment into a more coherent and compact component of Macedonia’s tourism sector, investing in its development and visibility. As a result of the combined leveraged investment from local partners and stakeholders worth US$3,379,568, which went to the organization of

AdventureNEXT - the first regional Western Balkans conference on adventure tourism, improving the offer and services of the local service providers, as well as media exposure of the destination, the revenues of the local adventure tourism industry members have amounted to an estimated US$1,610,053, over the last two and a half years. The initiative is described in greater detail below (p. 24).

Other performance monitoring figures also illustrate these efforts: 659 MSMEs have received business development services through the Project, 16 new services have been developed, and the companies paid BSOs a combined US$145,950 for their services.

Here, however, it is worth pointing out that Macedonian companies are still hesitant to allocate funds for business development services. Experience has shown that they are still relying on receiving free-of-charge similar services provided by a variety of donors, and only decide to pay for such services if there is a legal requirement, such as HACCP plans. This is a challenge that needs to be further elaborated in order to develop an approach and a solution.

1.5 IR 4. Assisted MSMEs build a workforce necessary to sustain their growth

SBEP dedicated a number of efforts on upgrading the skills of new and existing workers, as an integral part of supporting MSMEs to take advantage of new opportunities. A variety of trainings and workshops were organized in practically all of SBEP’s initiatives, intended to contribute to improving the skill sets of the labor force. For example, these interventions included farmers within the Grow More Corn initiative, who received trainings on using drip irrigation technology for growing corn, as well as tour operators, service providers and other adventure tourism industry members, within the Adventure Travel initiative, who received coaching and guidance on a variety of topics for upgrading their businesses. One of the biggest initiatives in terms of the number of beneficiaries trained was the Wild-Gathered Products initiative, in which SBEP facilitated the training of 1,770 collectors of wild herbs and mushrooms from rural and

With the Adventure Travel initiative, SBEP helped put Macedonia on the map as an adventure travel destination

SBEP FINAL REPORT (2012-2017) 7

mountainous areas where this is the only economic opportunity available to the local population. Tapping into the natural resources, while safeguarding them was the principal guiding idea of this initiative, which lends itself to developing into a full-fledged project that would not only tackle this economic opportunity, but work on further developing the legislative and administrative systems that support

it. More about SBEP’s Wild-Gathered

Products initiative below (p. 31). More than 5,000 workers, employees and managers were trained over the life of the project in various skills.

In this context, SBEP allocated resources and efforts during the first couple of years of the Project on an opportunity to develop a public-private partnership for the establishment of a workforce development vocational program in Tetovo which would contribute to increased employability in the construction industry in the region. Although all of the stakeholders agreed to participate in the project, and a number of preparatory activities took place, the initiative never materialized, mainly because of the unresponsiveness of the local administration, i.e. because their commitment never translated into action. This initiative is described in more detail in the Lessons Learned /

Major Challenges section of this report (p. 43).

1.6 Crosscutting IR 5. Women and Youth in Enterprise

In addition to making sure that there is a fair representation of women and youth included as participants and beneficiaries in all endeavors, SBEP designed and implemented an initiative specifically focusing on fostering women and youth entrepreneurship in the Polog region. By providing small grants to already existing small businesses owned and/or managed by women or youth, SBEP supported their growth and ability to create job, thus contributing towards the economic empowerment of women in this rural region. The 25 small businesses supported through the initiative managed to hire a total of 119 new full or part-time employees. The

Women in Business initiative is described in more detail below (p. 36).

On Project level, the total number of participants in all of the technical trainings and workshop organized by SBEP was 5,047, of whom 1,293 were women (25.6%), and 373 young people (7.4%). In addition, SBEP supported a total of 742 microenterprises, of which 70 were owned by women or young people. Finally, of the 2,006 new and retained jobs, 589 were filled by women, and

384 by youth, and the new revenues as a result of SBEP’s interventions amounted to a combined US$40.8 million.

In Polog, SBEP supported 25 small women and youth owned businesses to expand and create jobs

A total of 1,770 collectors were trained and certified on sustainable collection within SBEP's Wild-Gathered Products initiative

SBEP FINAL REPORT (2012-2017) 8

New and Retained Jobs New Revenues

Agriculture Modernization 966 (322 women) $37.5 M

Adventure Travel 174 (49 women) $1.6 M

Light Manufacturing 53 (15 women) $1.4 M

Wild-Gathered Products 616 (41 women) $199.2 K

Women in Business 119 (116 women) $155.5 K

LEADER 10 (6 women) /

Other 68 (46 women) $1,990

TOTAL 2,006 (589 women) $40.8 M

SBEP managed to create and retain a total of 2,006 jobs and helped beneficiaries to gain new revenues in the combined amount of US$40.8 million

1.7 Budget and Leverage

Throughout the project, and within each initiative separately, SBEP made sure to mobilize as much leverage as possible, both in terms of human and institutional resources, and in terms of funding.

This ensured the buy-in into the initiative by the local stakeholders, which in turn contributed towards the sustainability of SBEP’s actions. In financial terms, SBEP spent a total of

US$2,091,171 on the initiatives it launched. At the same time, the leveraged investment for all the initiatives combined, amounted to US$51,019,574.

The budget that SBEP spent on the individual initiatives is as follows:

Total spent by initiative in US$

(May 2012 – March 2017)

Grow More Corn Initiative $ 796,992

Adventure Tourism $ 490,175

Implementation of LEADER Approach $ 258,607

Women Entrepreneurship Fund $ 113,941

LAG Pilot Projects (25) $ 96,117

Light Manufacturing $ 82,651

Feasibility Studies (including Irrigation and Energy Efficiency) $ 77,808

Wild-Gathered Products $ 69,507

Events and Conferences $ 24,115

Diaspora Initiative $ 22,183

Supply Chain Development (Vitaminka and artisans) $ 18,049

Preda Plus Capacity Building $ 12,856

Wheat Supply Chain and IPARD $ 8,091

Prilep LED Strategy $ 7,365

Workforce Development $ 7,279

NEA capacity building $ 5,435

Total $ 2,091,171

SBEP FINAL REPORT (2012-2017) 9

This represents 3.94% of the total amounts that were invested in the various initiatives, as SBEP worked systematically on rallying the support of the stakeholders within each initiative. The table below shows how much funds were leveraged for each endeavor.

LEVERAGED INVESTMENT BY INITIATIVE

SBEP funds spent per initiative

Leveraged Investment per initiative

SBEP cost-share

(actual)

Agriculture Modernization $797 K $44.8 M 1.75%

Adventure Travel $490 K $3.4 M 12.67%

Light Manufacturing $83 K $1.6 M 4.82%

Wild-Gathered Products $70 K $54 K 56.11%

Women in Business $114 K $146 K 43.85%

LEADER $355 K $916 K 27.92%

Other $183 K $132 K 58.07%

TOTAL $2.1 M $51 M 3.94%

1.8 General Summary of Results and Successes

SBEP succeeded in catalyzing systemic change in a number of economic sectors in the country.

The quantitative and qualitative impact captured through SBEP’s performance monitoring system and supported with anecdotal reports from beneficiaries and partners on the ground is considered to be significant and long-lasting. The quote from the evaluators from MSI (Management Systems

International), hired by USAID to track and assess the impact of SBEP, summarizes the overall effect that SBEP had in virtually all the areas where it operated. In their preliminary report, they said:

”SBEP was highly effective at opening people’s eyes to economic opportunities around them and inspiring them to try new approaches and aim high when it came to what they can accomplish.”

In terms of quantitative monitoring, SBEP made sure to track its performance according to the 16 indicators within SBEP’s Performance Monitoring Plan Table (PMP). The final figures are to be found in Annex I to this report. As for the highlights and achievements within each initiative, they are as follows:

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Within the Grow More Corn initiative and the rest of the agriculture modernization interventions, SBEP:

Supported over 400 farms (directly and indirectly) to adopt drip irrigation technology for growing corn and sunflowers, on more than 800 hectares, doubling their corn yields and revenues;

Set a new standard for modern and sustainable corn, sunflowers and rice production in the country;

Created farm level demand for drip irrigation on said crops that will continue after the

Project ends;

Made drip irrigation for corn central to the subsidy support program of the Ministry of

Agriculture;

Achieved over 11% import substitution of corn and set Macedonia on the path to full import substitution by 2021.

Within the Adventure Travel initiative, SBEP:

Steered the public and private sector towards adventure travel development over mass tourism;

Rallied Macedonia’s adventure travel community around a common adventure travel strategy;

Put Macedonia on the map as an emerging adventure travel destination and generated over

150 articles about adventure travel in Macedonia in international travel media;

Organized AdventureNEXT - the first-ever adventure travel conference in the Balkans, bringing the global adventure travel market to Macedonia;

Significantly strengthened Macedonia’s connection to the global adventure travel market and industry;

Strengthened Macedonia’s tourism service providers. Supported the growth of 15 adventure travel events;

Improved paragliding infrastructure and promotion.

Within the Wild-Gathered Products initiative, SBEP:

Trained 1,770 collectors - the bulk of active wild-gathered products collectors in SBEP’s regions, ensuring sustainable exploitation of these products in the coming years;

Increased incomes of collectors by more than 40%;

Supported the opening of four collection centers in the National Park Mavrovo and Polog region;

Established a system for sustainable collection and traceability in the National Park

Mavrovo.

Within the Light Manufacturing initiative, SBEP:

Established the first-ever database of light manufacturing companies and a digital platform for matchmaking of companies in Macedonia under the management of MAMEI (The

Macedonian Association of Metalworking and Electrical Industry);

Linked 21 domestic companies to new buyers/suppliers;

SBEP FINAL REPORT (2012-2017) 11

Mobilized private investment in the light manufacturing industry worth US$1.5 million;

Organized the first international light manufacturing B2B conference in Macedonia, bringing together 70 domestic and international companies looking for new partnership opportunities;

Helped Macedonia’s economic promoters and government FDI agencies adopt the database as an essential tool in their work;

Helped establish new links between light manufacturing companies which will continue creating value as they develop.

Within the Women in Business initiative, SBEP:

Catalyzed the growth of 25 women- and youth-owned businesses in the Polog region;

Established the first-ever fund dedicated to supporting women and youth-owned businesses in

Polog’s rural areas, where they are often socially excluded (now managed by the Egalite Foundation);

Successfully raised matching funds from both public and private sector organizations.

And last, but not least, within the LEADER initiative, SBEP:

Introduced the EU’s LEADER approach to local rural development in Macedonia;

Established 10 pre-LAGs, covering 29 municipalities;

Supported the development and implementation of 25 small-scale rural development projects, implemented by the pre-LAGs;

Established a network of LAGs that have the potential to transform how local economic rural development is done in Macedonia – merging democratic development and economic growth into a single comprehensive process;

Initiated a capacity building process through coaching and mentoring the LAGs, improving their chances of becoming fully sustainable;

Initiated the process of opening access to new IPARD funding through the LEADER program.

In an effort to preserve and further upgrade the know-how and expertise that was developed through SBEP’s initiatives, the Project team established AIRE – the Association for

Innovations in the Rural Economy - a legacy organization, which will continue SBEP’s strategic and inclusive approach in implementing a variety of economic activities in agriculture, tourism, light manufacturing, women’s economic activities and other initiatives focused on local economic development in rural Macedonia. AIRE is also perfectly positioned to carry on providing coaching and mentoring to the pre-LAGs in order to strengthen their capacities, as well as take on a range of similar facilitating roles between public, private and civic sector stakeholders to develop local and regional initiatives that support economic growth.

Ms. Rabije Sinani is the owner of the first small business supported through SBEP's Women in Business initiative

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1.9 Recommendations for Next Steps

Based on the results that SBEP achieved over the course of the project, following are the recommendations about the necessary next steps that need to be taken in each of the initiatives, in order to further improve and upgrade the achievements to date.

Agricultural Modernization:

Restructure and reposition NEA (the National Extension Agency) in a way that will improve their capacity to provide a more consistent level of technical support to a broader base of farmers;

Support the development of irrigation infrastructure expansion and modernization projects. Lobby the Government to align this process with the rate of adoption of drip irrigation;

Work with state institutions responsible for policy implementation pertinent to agricultural support on developing an efficient, integrated system for managing the drip irrigation subsidy process in the context of making agribusiness value chains more competitive.

Adventure Travel:

Create a Western Balkans network of key tourism stakeholders and industry leaders.

Develop multi-country adventure travel products and services for the Western Balkans;

Provide adventure guide, service excellence and product development trainings. Finance and support product development projects through the LAGs;

Continue investing in adventure travel infrastructure development and the availability of online travel information. Provide training to travel service provides on online travel services and promotion.

Wild-Gathered Products:

Work with the National Parks and the Public Enterprise Macedonian Forests on developing and enforcing a comprehensive national regulatory wild-gathered products framework and quota system;

Collect data on Macedonia’s potential to produce and export wild-gathered products.

Without knowing how much each region produces in terms of annual capacities and exploitation levels, it is hard to plan ahead and set collection quotas;

Organize collectors, giving them a common voice to be able to negotiate prices and terms with collection centers. Support the processing of raw products, packing, branding and marketing in order to add value to the products.

Light Manufacturing:

Finance the development of MAMEI’s matchmaking database and services in the next 3-5 years until enough value is created for them to be commercialized, ensuring market-based sustainability.

Women in Business:

Finance the capacity building of Egalite, with a focus on employing professional management staff in order to ensure their sustainability and the growth of the Support Fund for Women and Youth Entrepreneurs.

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LEADER:

Build up the organizational capacity of the LAGs through mentoring, coaching, funding and community outreach for the development and implementation of small rural economic development projects;

Lobbying and advocacy for formal recognition of LAGs according to the existing legislation by the MAFWE;

After the opening of the LAG Registry, a call should be opened by MAFWE, to unlock

US$214,000 that are a part of the National Program for the Financial Support of Rural

Development for 2017. LAGs will need support in accessing said funds.

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2 Project Implementation Details

2.1 Project Strategy and Methodology

As previously noted, SBEP’s overarching goal was to stimulate MSME growth as a source of jobs and improved income, through identifying opportunities and facilitating MSME linkages to market opportunities, financing, technology and support services.

The two key issues that needed to be addressed were poorly integrated supply chains, leading to informality, inefficiencies and declining competitiveness across sectors, on the one hand, and very limited public-private dialogue and coordination among stakeholders to structure and implement strategic local and regional economic development programs, on the other.

In order to achieve widespread results, as well as sustainability, SBEP’s strategy was to approach these issues from both ends: by fostering dialogue among disparate stakeholders, including businesses, public sector institutions and civil society organizations, and by working directly with lead firms and MSMEs to identify needs, facilitate market linkages, implement initiatives, and take these initiatives to scale. SBEP’s efforts aimed at using existing, but underutilized assets and capacities more efficiently to promote economic growth, while adding value in all interventions, which typically included a combination of investment, workforce development, business service organization (BSO) enhancement, improved access to financing, and institutional capacity-building at regional and local levels.

SBEP Methodology

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Over the life of the Project, SBEP launched initiatives in several value chains to address the root causes of unemployment and stagnant local economies. These include SBEP’s flagship Grow More

Corn initiative, the Adventure Travel, Light Manufacturing, Wild-Gathered Products, and Women in Business initiatives, which are all based in real market opportunities. In all of these areas SBEP has addressed critical development “gaps” – a technology gap, a skills gap, a financing gap, gaps in market linkages, or some combination thereof.

Furthermore, SBEP recognized the EU LEADER process as a highly effective mechanism for institutionalizing the supply chain methodology at the regional and local level, and partnered with the Regional Development Centers (RDCs)3 in implementing a series of training and coordination workshops across the four regions, resulting in 10 registered public-private partnerships, which will become official Local Action Groups (LAGs), once the Ministry of Agriculture, Forestry and

Water Economy opens the LAG Registry. However, the organizations are already eligible to apply for funds for local development programs, and their institutional capacities are currently built in order to make them ready to access EU development funding for rural development once it becomes available in 2018.

It needs to be pointed out that some of the pilot initiatives launched by SBEP were not developed into full-fledged initiatives and were discontinued at some point, whether because of the modest potential for replication and growth, or due to the unresponsiveness of key local and/or national stakeholders, or a combination thereof. Such examples are the aforementioned vocational education program in the Polog region, and the pilot initiative of reviving the industrial tomatoes supply chain in Pelagonija. Both cases are explained in more detail in the “Major Challenges” section of this report (p. 43).

2.2 Project Timeline and Geographical Coverage

The SBEP was launched in April of 2012, and projected to end four years later, in April of 2016.

However, the Project was approved three subsequent no-cost extensions, which prolonged the final Project closing date to March 31, 2017.

The Project was implemented in four of the eight planning regions in Macedonia: Polog, Pelagonija, the North-East and the Vardar region. It was first launched in Polog, a region in the north-west of the country, with ethnically mixed and predominantly young population, but with high unemployment rates, low formal economic activity and somewhat neglected by Government development programs. It was followed by Pelagonija, a modestly developed region with growth potential. The third and fourth region – the North-East and Vardar - were added in year 3, when the Swiss funding became operational and the Project was ready to replicate, i.e. extend successful initiatives, such as those related to agricultural value chains, and the introduction of the EU

LEADER approach for local rural development. Some of the initiatives had a significant spillover effect throughout the country, such as the Grow More Corn, while for others, it was impractical and insensible to limit activities to the four regions, given the size of the country and the nature of the interventions, e.g. the Adventure Tourism and the Light Manufacturing initiatives. At the same time, the Women in Business initiative was specifically focused in the Polog region, as it was custom-made according to its specific socio-economic and cultural circumstances.

3 The RDCs are the functional units of GOM’s decentralization strategy for regional development, initiated in 2008 with the establishment of the country’s eight planning regions.

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2.3 Project Partners, Coordination and Collaboration

SBEP maintained two project offices throughout most of the duration of the Project: one in

Tetovo and one in Skopje. However, as SBEP initiatives were implemented in predominantly rural areas, the team was constantly in the field, networking with local stakeholders, collecting and processing insights that fed into decision making on next steps and shaped future interventions.

SBEP’s modus operandi relied on continuous interaction with partners, be it local, regional or national, and coming from the private, public and civic sectors. The process of involving and cooperating with stakeholders in each initiative has contributed to both their capacity building, as well as to the sustainability of the initiatives beyond the Project. In its first year, SBEP made sure to proactively engage with firms, municipal governments, and existing programs at the regional and local levels to identify opportunities and test approaches. Subsequently, the same methodology was implemented for all the initiatives that were launched within SBEP. Over the life of the

Project, SBEP has worked with over 900 business leaders, public officials and civil society representatives in developing strategic interventions to benefit the local economy, create jobs and increase incomes among the beneficiaries.

Project activities were implemented in collaboration with a number of local Business Service

Organizations (BSOs), including public-sector partners such as the local governments and their

Local Economic Development (LED) offices, the Regional Development Centers (RDCs), the

National Agricultural Extension Agency (NEA), the Ministry of Agriculture, Forestry and Water

Economy, the Agency for Promotion and Support of Tourism, Macedonia Invest, the Public

Enterprise for Forests Makedonski Shumi, the National Park Mavrovo, as well as civil society organizations, private firms and consultants with specific technical expertise and a proven track record of providing solutions for MSMEs (e.g. Preda Plus, ALRD, MKonsalting, PointPro, ProBio, Magan-

Mak, ATTA, etc.). By executing Project initiatives through local firms and public-sector bodies, SBEP validated their expertise, enhanced and added to their experience, and thus helped build up their capacity and strengthen their credibility. This added to a stronger local knowledge base in areas like supply chain enhancement and access to finance, further developing the local economy.

New opportunities were vetted through an iterative consulting process involving public and private stakeholders. All the initiatives supported by SBEP were the result of extensive conversations with local actors including mayors, Local Economic Development offices (LED), Regional Development Centers (RDC), chambers of commerce, business owners, and civil society organizations. This organic approach to local economic development has proven to be much more effective than a “top-down” strategy.

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2.4 SBEP initiatives

2.4.1 Grow More Corn

SBEP started with the implementation of the Grow More

Corn initiative in 2012 with the purpose of demonstrating that through the introduction of new technologies and good agricultural practices – specifically, drip irrigation and fertigation4 solutions – productivity can be significantly increased, thereby creating a positive effect on a macro- and micro- economic level. The focus on this particular commodity is attributable to the fact that corn forms the foundation for several major value chains in Macedonia and globally, including dairy, poultry and egg, beef and processed food. Increased yields and better quality of corn bring ripple effects across all of these sectors.

In the first year (2013), SBEP introduced a package of drip irrigation technology, improved farming protocols, and continual technical outreach services with 40 leading corn farmers on pilot plots in two target regions of Macedonia: Polog and Pelagonija. The results were remarkable: on average, our farmers saw a 41% increase in yields of corn grain, and a 32% increase in yields of silage, the

4 Drip fertigation or “nutrigation” refers to an irrigation scheme delivering precise amounts of water and essential plant nutrients directly to the root of a crop. The system economizes both water and agro-chemical use, reduces weed growth, and maximizes uptake at the individual plant level. Fertigation technology effectively allows a farmer precise control over factors which have historically been dictated by weather and soil conditions. It has been shown to dramatically improve yield volumes and quality on a variety of crops in dozens of countries with widely varying climactic conditions. For more, please visit www.netafim.com.

Statistical data from 2012 showed that Macedonia’s low average corn yields of 4.3 t/ha of grain and 30 t/ha of silage put the country at the bottom of productivity in both

European and regional contexts

(below the 6.6 t/ha European average), resulting in 62,000 tons of imported corn annually (35% of the total consumption), in addition to a deficit from related food products, such as meat and dairy.

SBEP's sign marking the first pilot plots of corn grown with drip irrigation technology file:///C:/Users/dell/Desktop/www.netafim.com

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main input for cattle feed. In addition to the impressive yield gains, farmers have reported that the introduction of this technology has saved water, and has created significant labor-hours savings – by up to 80%. This frees up time for other productive activities for income generation, as many farmers have found. In 2014, SBEP scaled up to include 80 new farmers in the program, and yields continued to increase, as our farmers began to make their own investments in these proven methods. In the third season (2015), SBEP supported an additional lot of 160 farmers across the four regions, reaching a total of 280 farmers participating in the Grow More Corn program.

Beside the assistance from SBEP, a number of farmers decided to invest in more drip irrigation equipment by themselves, and there were producers who were not part of the program, but had learned about the benefits of the technology and decided to invest in it on their own. By the end of 2016, the total number of farms that adopted this technology exceeded 300, while the total number of hectares on which corn and other feed crops are grown with drip irrigation neared

800, which represents 11% of the 7,000 hectares needed to satisfy the domestic needs for corn and substitute imports.

The projection that the imported corn can be substituted by domestic production by raising the average corn grain yields on 7,000 hectares to 13 t/ha with the use of drip irrigation and good agricultural practices, was made based on the calculations within the White Paper on corn – a policy paper on Agribusiness

Innovation in Macedonia, developed by SBEP and local consulting company PointPro in 2014.

The paper focused on a cost-benefit analysis for a Government Financial Support program introducing drip irrigation for corn production nationwide. Its purpose was to demonstrate the potential economic benefits of the introduction of drip irrigation for growing corn in the Republic of Macedonia based on a detailed and cross-cutting analysis and appropriate policy proposals. It was intended to serve as a key policy document to the Macedonian Government in the design, creation and implementation of a financial support program for the introduction of drip irrigation for corn production.

SBEP shared the document containing a detailed analysis, conclusions, and recommendations about the benefits of drip irrigation with the Ministry of Agriculture and other governmental bodies. The then newly appointed Minister of Agriculture, Mihail Cvetkov, recognized the importance of the initiative and understood the potential wide-ranging impact this initiative can have with additional support from the Government. The activity was in line with the Ministry’s plans to stimulate and promote agricultural production, and as a result, the Government of Macedonia included and officially approved the so-called 50/50 measure for subsidizing drip irrigation for growing corn within the National Program for Financial Support of

Agriculture in 2014. Some US$111,000 were allocated in the first year, and since then, the funds earmarked for this purpose have been increasing continuously, reaching US$3.3 million for 2017.

Funds allocated in the National Program for

Financial Support of Agriculture for the…