El_Salvador_Competitive_Project_SOL-519-16-000004_-_Section_J_-_Attachments.pdf

SOL-519-16-000004

El Salvador Competitive Project

ATTACHMENT J.1

BACKGROUND AND CONTEXT

In the summer of 2014, more than 67,000 unaccompanied children and youth left their homes in El Salvador, Honduras, and Guatemala to make the dangerous journey to the

United States.

This migration spike is a result of serious and long-standing development challenges in Central America that remain, including lack of economic opportunity and high rates of violence.

El Salvador has one of the highest levels of non-political violence in the world and one of the highest homicide rates in the world. Homicide rates in 2013 were 39.7 per 100,000 inhabitants and by 2014, with the collapse of a truce among the major gangs, violence has escalated to approximately 64 homicides per 100,000 inhabitants.

El Salvador has the highest homicide rate of children and youth up to age 19 worldwide (27/100,000).

In addition, youth are at risk to be recruited into gangs and other criminal organizations.

The U.S. Department of Homeland Security identifies poor economies as a factor pushing emigration to the United States. Overall, Honduras, Guatemala, and El Salvador are among the poorest nations in Latin America with 30 percent, 26 percent, and 17 percent of their people living on less than $2 a day, according to the World Bank.

After El Salvador’s 20-year civil war ended in 1993, the economic environment improved, making the country a seeming success story. However, much of this progress was reversed following the 2008 financial crisis, partly due to growing governance problems, including a substantial rise in criminality and a disconnect between business needs and the government’s approach to economic growth.

From 2010 to 2014, the Salvadoran economy had a low annual average Gross Domestic

Product (GDP) growth rate of 1.8 percent. In 2014, the economy grew only 2 percent, below the 3 percent average of other Latin American economies. Annual exports decreased 4 percent and foreign direct investment (FDI) also decreased almost 50 percent.

El Salvador has the lowest FDI in Central America.

In 2014, the fiscal deficit and total debt levels reached 3.7 percent and 60.3 percent of

GDP, respectively. El Salvador, in part with assistance from USAID and other donors, has increased mobilization of domestic resources through more effective tax collection.

However, spending in the past years has outstripped revenues, and has not been effectively invested in public goods, such as ports, roads, or education, all of which are important to improve business activity. Lack of responsive government services and public investment has led to very low levels of citizen confidence in the GOES.

GAO Report to Congressional Committees on Unaccompanied Alien Children, http://www.gao.gov/assets/680/671393.pdf Unaccompanied Alien Children: An Overview, https://fas.org/sgp/crs/homesec/R43599.pdf

National Police (PNC) Statistics for 2014.

Hidden in Plain Sight: A Statistical Analysis of Violence Against Children, UNICEF 2012.

"Impact Evaluation of USAID'S Community-based Crime and Violence prevention approach in Central

America: Regional Report for El Salvador, Guatemala, Honduras and Panama" p. 54 http://pdf.usaid.gov/pdf_docs/pbaab431.pdf World Bank, http://povertydata.worldbank.org/poverty/region/LAC

FUSADES, Informe de Coyuntura Económica Cuarto Trimestre 2014

FUSADES, Informe de Coyuntura Económica Segundo Trimestre 2015 http://www.gao.gov/assets/680/671393.pdf https://fas.org/sgp/crs/homesec/R43599.pdf http://pdf.usaid.gov/pdf_docs/pbaab431.pdf http://povertydata.worldbank.org/poverty/region/LAC

The country’s competitiveness has declined. The World Economic Forum report compares countries’ potential for sustainability and long-term prosperity. The 2015-2016 report ranks El Salvador 95 out of 140 countries on the Global Competitiveness.

Crime and Theft, Inefficient Government Bureaucracy, Access to Financing, and Insufficient

Capacity to Innovate are listed as the first, second, fourth, and ninth most problematic factors of doing business in El Salvador.

The World Bank Doing Business Report 2016 ranks El Salvador 86 out of 189 countries, an improvement of 11 positions with respect to the 2015 rank of 97 due to improvements in access to credit. However, this position remains well below the 43 and 69 positions reached by El Salvador in 2003 and 2008 reports, respectively. The 2016 Doing Business

Report also indicates sub-indexes of starting a business 125, dealing with construction permits 156, and getting electricity 107, which remain similar to the sub-indexes of

2015.

It is estimated that as much as 60 percent of the labor force in El Salvador is employed in the informal economy, and that women-owned enterprises are the majority of informal businesses. Unemployment is 5.9 percent and underemployment in urban areas is 27.7 percent, and women shoulder a disproportionate share of unpaid work while also often relegated to lower-paid jobs.

Employment spans the export and domestic sectors, including manufacturing, commerce, and services, and vary according to municipality. Most Salvadorans (58 percent) are employed in services, and manufacturing is the second largest employer (23 percent).

As of August 2015, exports reached $3,783.4 million, an annual increase of 5.4 percent compared to the same month in 2014. Traditional products (coffee, sugar, and cotton) represent 8.1 percent of total exports, maquila (textile and apparel) represents 19.9 percent, and non-traditional products (food and beverages, chemicals, metal, paper and carton, plastics and others) represent 72 percent. Every year the share of non-traditional products increases and becomes a more important component of the country’s export structure.

According to CONAMYPE, and based on the VII Economic Census of 2005, there are

175,178 micro, small, medium and large enterprises or economic establishments in El

Salvador. They produce total annual gross sales of $19.7 billion and employ approximately 700,000 people. There are 158,574 microenterprises representing 90.5 percent of total enterprises, with annual sales of approximately $1.6 billion; 13,208 small enterprises or 7.5 percent, with annual sales of $3 billion; 2,624 medium enterprises or

1.5 percent, with annual sales of $4.6 billion; and 772 large enterprises or 0.4 percent with annual sales of $10.4 billion.

The Global Competitiveness Report 2015-2016, http://www3.weforum.org/docs/gcr/2015-

2016/Global_Competitiveness_Report_2015-2016.pdf

Doing Business Report 2016 for El Salvador, http://www.doingbusiness.org/data/exploreeconomies/el-salvador/~/media/giawb/doing%20business/documents/profiles/country/SLV.pdf

International Monetary Fund, El Salvador: 2014 Article IV Consultation-Staff Report; Press Release;

and Statement by the Authorities of El Salvador. IMF Country Reports 15/13 at page

DIGESTYC, Encuesta de Hogares de Propósitos Múltiples 2013

Marco Integrado de Evaluación de un Entorno Favorable para el Desarrollo de las Mujeres Empresarias en El Salvador (EFADEMU), http://www.ilo.org/wcmsp5/groups/public/---americas/---ro-lima/---sro-san_jose/documents/genericdocument/wcms_224386.pdf

Banco Central de Reserva de El Salvador, Evolución del Comercio Exterior a Agosto 2015.

http://www3.weforum.org/docs/gcr/2015-2016/Global_Competitiveness_Report_2015-2016.pdf http://www3.weforum.org/docs/gcr/2015-2016/Global_Competitiveness_Report_2015-2016.pdf http://www.doingbusiness.org/data/exploreeconomies/el-salvador/~/media/giawb/doing%20business/documents/profiles/country/SLV.pdf http://www.doingbusiness.org/data/exploreeconomies/el-salvador/~/media/giawb/doing%20business/documents/profiles/country/SLV.pdf http://www.ilo.org/wcmsp5/groups/public/---americas/---ro-lima/---sro-san_jose/documents/genericdocument/wcms_224386.pdf http://www.ilo.org/wcmsp5/groups/public/---americas/---ro-lima/---sro-san_jose/documents/genericdocument/wcms_224386.pdf

The U.S. remains by far the main commercial partner for El Salvador; 46.5 percent of total exports go to the U.S. The second most important market is the Central American region including Panama, with 39.8 percent of exports. The remaining 13.7 percent is divided among the Dominican Republic, Mexico, Germany, Holland, South Korea, Taiwan and other countries. El Salvador has an opportunity to diversify exports and take advantage of market opportunities generated through trade agreements. El Salvador has agreements with the U.S., the European Community, Mexico, the Central American countries, Panama, Dominican Republic, Colombia, Chile, and Taiwan.

A 2013 study by the Central Bank of El Salvador, using the Product Space Methodology, recognizes that El Salvador has comparative advantages in certain products vis-à-vis other countries.

These products are in industry sectors such as agro-industry, tourism, light manufacturing, and pharmaceuticals, among others. To make these products competitive in international markets, the sectors require pro-business policies to stimulate production and employment, and improvements in the business enabling environment such as flexible labor legislation, property rights and contract compliance, more streamlined bureaucracy, improved transparency, and macroeconomic stability. The

GOES is prioritizing 16 industrial and service sectors that have the greatest potential for economic growth, as determined by the GOES National Policy of Development, Diversification and Productive Transformation of El Salvador.

A 2015 study by the Salvadoran Foundation for Economic and Social Development

(FUSADES) analyzes and proposes laws, public policies, and practical recommendations to improve specific aspects of the business climate.

For example, some of the new legislation, reforms, regulations, and policies proposed are in the areas of: electronic signature, commerce code reforms, creation of enterprises through technological means, municipal business registration through the GOES site www.miempresa.gov.sv, international services, and international trade, among others.

COLLABORATION WITH THE GOVERNMENT OF EL SALVADOR

El Salvador is one of four countries in the world implementing the U.S. Government interagency Partnership for Growth (PFG) Presidential Initiative.

The PFG Presidential

Initiative represents an innovative approach to bilateral cooperation, with the

Governments of the United States and El Salvador partnering to reduce El Salvador’s obstacles to economic growth. A joint team of U.S. Government and GOES economists conducted a Constraints Analysis diagnostic study in 2011, which identified the key barriers to economic growth in El Salvador: crime and insecurity, and low productivity in the tradables sector.

Together, the two governments then developed a Joint Country

Action Plan outlining a broad program of 20 goals to improve security and economic performance from 2011 to 2016.

Organization of American States, Foreign Trade Information System, Current Trade Agreements of El

Salvador, http://www.sice.oas.org/ctyindex/SLV/SLVAgreements_s.asp

El Espacio de Productos, una Hoja de Ruta para la Diversificación Exportadora, http://www.bcr.gob.sv/bcrsite/uploaded/content/category/2133091572.pdf

FUSADES, Diagnóstico y propuestas para el fortalecimiento del marco legal e institucional del clima de negocios en El Salvador, http://fusades.org/node/6886

Partnership for Growth (PFG), http://sansalvador.usembassy.gov/partnership-growth.html

PFG Constraints Analysis, http://photos.state.gov/libraries/elsavador/92891/PFG/ES%20Constraints_Analysis.pdf http://www.miempresa.gov.sv/ http://www.sice.oas.org/ctyindex/SLV/SLVAgreements_s.asp http://www.bcr.gob.sv/bcrsite/uploaded/content/category/2133091572.pdf http://fusades.org/node/6886 http://sansalvador.usembassy.gov/partnership-growth.html http://photos.state.gov/libraries/elsavador/92891/PFG/ES%20Constraints_Analysis.pdf

The El Salvador Competitive Project aligns with the PFG Presidential Initiative

Tradables Goal #1 Promote an Environment of Trust and Improve the Business Climate;

Tradables Goal #5 Support a Strategy for Attracting and Promoting Foreign Direct

Investment and Making El Salvador a More Attractive Place for Foreign Investment; and

Tradables Goal #6 Surmount Low Productivity of Tradables by Transforming Factors of

Production of the Tradables Sector Through Innovation and Quality, and a Focus on the

International Market.

In collaboration with other U.S. Government agencies, USAID contributes to the U.S.

Government’s Strategy for Engagement in Central America.

Our objective is the evolution of an economically integrated Central America that is fully democratic;

provides economic opportunities to its people; enjoys more accountable, transparent, and effective public institutions; and ensures a safe environment for its citizens. The El

Salvador Competitive Project will contribute to the U.S. Government’s Strategy for

Engagement in Central America, “Prosperity” component: "Business Development," and specifically with the sub-lines 1.8.1 Host nations and private sector reform laws and regulations to enable businesses, and micro, small and medium enterprises (MSMEs) in particular, to do their work and be part of the formal sector; and 1.8.2 MSMEs participate in more productive, market-oriented, and competitive value chains.

The Project supports the “Plan of the Alliance for Prosperity in the Northern Triangle”

(A4P).

The A4P outlines medium-term commitments by the Governments of El

Salvador, Honduras, and Guatemala to tackle the factors contributing to illegal migration to the United States and promotes strategic sectors, attracts investment, and encourages international trade to "stimulate the productive sector to create economic opportunities."

Commitments by the Northern Triangle governments will improve the business climate, ensure more effective government, create jobs, reduce poverty, improve the quality of public services, and expand economic opportunities. The Project contributes to the A4P strategic line of action (A) Stimulate the Productive Sector to Create Economic

Opportunities, and specifically sub-line (i) Promoting Strategic Sectors and Attracting

Investment.

The Project aligns with the GOES Five-Year Development Strategy, which highlights the importance of SMEs as drivers for economic growth, and the need "to promote a competitive economy." The Project will also support the GOES priorities outlined in their Plan El Salvador Seguro, launched by GOES in January 2015. The plan states that the country’s main problem is being "affected by high levels of violence, crime and fear that restrict the freedom of people, affecting their quality of life and the harmonious coexistence, limiting choices of human development and eroding the rule of law and democracy." The GOES will implement the El Salvador Seguro Plan in 50 municipalities, prioritizing 10, starting in Ciudad Delgado, adding 16 in the second year, and 24 in the third year. The initial municipalities selected: Ciudad Delgado, Colón, Cojutepeque, Jiquilisco, Mejicanos, San Salvador, Santa Ana, Sonsonate, Soyapango, and

Zacatecoluca.

U.S. Government’s Strategy for Engagement in Central America, https://www.whitehouse.gov/sites/default/files/docs/central_america_strategy.pdf

Plan of the Alliance for Prosperity in the Northern Triangle http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=39224238

Plan El Salvador seguro, http://www.presidencia.gob.sv/wp-content/uploads/2015/01/El-Salvador-

Seguro.pdf https://www.whitehouse.gov/sites/default/files/docs/central_america_strategy.pdf http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=39224238 http://www.presidencia.gob.sv/wp-content/uploads/2015/01/El-Salvador-Seguro.pdf http://www.presidencia.gob.sv/wp-content/uploads/2015/01/El-Salvador-Seguro.pdf

The El Salvador Competitive Project is aligned with the GOES National Policy of

Development, Diversification and Productive Transformation in El Salvador, launched in

September 2014 and implemented by the Ministry of Economy.

As a result of this policy, the Ministry of Economy is implementing three projects: 1) Development and

Diversification of the Salvadoran Production; 2) National Fund for Innovative and

Technological Entrepreneurship; and 3) National Fund for Territorial Investment. GOES is demonstrating a positive approach for supporting tech start-ups and business development services. The Project will support GOES to work with MSMEs in strategic sectors forming value and supply chains for export development.

The Project will closely partner with the GOES including the Ministry of Economy, the

National Commission for Micro and Small Enterprise (CONAMYPE), the El Salvador

Export and Investment Promotion Agency (PROESA), and other national and subnational institutions, donors, civil society organizations, and the private sector.

THE DEVELOPMENT CHALLENGE

The enabling environment in El Salvador, include several constraints that impede growth and competitiveness in global markets, such as:

Private-Sector Capacity

El Salvador has a shortage of business management capacity at the individual level and in institutions. The country lacks a critical mass of potential producers and employees with skills to produce competitive exports. Gaps in market linkages also exist. For example, small producers are not well prepared to supply local or international large buyers and retailers. Low product quality, inadequate packaging, non-compliance with food security standards, unreliable product delivery, limited understanding of export markets, and other factors need to be overcome to improve supply chains

To compete in the global economy, Salvadoran MSMEs must master basic business skills, communications, market development, quality, production, innovation and technology skills. In addition, business owner/managers also need soft skills such as leadership, team work, empathy, and empowerment. MSMEs have limited time and resources to understand complex public and private standards that differ from market to market. They are even less able to invest in complying with standards ranging from certification to traceability to upgrades in the production process.

The majority of microenterprises in El Salvador are subsistence in nature or non-growth-oriented and most owners do not intend to grow their businesses significantly or innovate.

The Minister of Economy supports start-ups through several initiatives promoting technology, such as Pixels, Inventa, Innoveemprende, and the Prototypes Program.

Private organizations such as FUSADES ProInnova also promote technological startups with initiatives such as First Tuesday. Other related initiatives are described in the spell out (F6S) website.

Micro and small enterprises provide very little added value in their supply chains, unless they are linked to larger buyers. Large enterprises account for the vast majority of

Política Nacional de Desarrollo, Diversificación y Transformación Productiva http://minec.gob.sv/index.php?option=com_phocadownload&view=category&id=142:politica-nacional-de-fomento-diversificacion-y-transformacion-productiva&Itemid=63

F6S, https://www.f6s.com/startups http://minec.gob.sv/index.php?option=com_phocadownload&view=category&id=142:politica-nacional-de-fomento-diversificacion-y-transformacion-productiva&Itemid=63 http://minec.gob.sv/index.php?option=com_phocadownload&view=category&id=142:politica-nacional-de-fomento-diversificacion-y-transformacion-productiva&Itemid=63 https://www.f6s.com/startups exports, which is not unusual in any economy, but large enterprises are not necessarily taking advantage of domestic linkages with micro and small enterprises. Stronger linkages between and among supply chains from micro to small, and from small to medium and large exporters are needed.

Private Sector Productivity

According to USAID’s inclusive growth diagnostic for El Salvador, low productivity is a binding constraint on the country’s growth. Without increased productivity, it is unlikely that El Salvador can create the growth necessary to regain its lost ground economically and achieve the social and economic goals it has set for its own growth.

Future economic growth will require increased diversification, specialization, and added value to move beyond short-shelf-life commodities and primary products to more durable, higher value tradable goods, as well as services.

Government Performance

The GOES is interested in increasing and diversifying exports and investment. In 2014, the economy grew 2 percent, below the 3 percent average of other Latin American economies. Permitting and licensing approvals are often laden with delays, while unexpected changes to laws and policies lead to low investor confidence. There is also a limited institutional capacity to promote reforms that lead to growth, especially broad-based, inclusive and competitive growth.

Size and Informality

El Salvador has very high levels of informality, including unregistered firms operating, unlicensed construction, informal subsistence employment and unregistered employment by licensed firms. The International Labor Organization (ILO) estimates that 66.4 percent of non-agricultural labor force is employed in the informal sector.

According to the GOES Multipurpose Household Survey, more than 770,000 Salvadorans or 49.3 percent of the economically active population in urban areas, make their living in the informal sector.

Microenterprises are 158,574, or roughly 90.5 percent of all firms in El Salvador. Of these, only 9.3 percent have formal accounting records and the remaining 143,866 do not register their operations. In addition, 116,525 microenterprises are in the category of

“cuentapropia” or self-employment, and are of subsistence in nature or non-growth-oriented.

Anecdotal evidence in El Salvador indicates that informal business owners are not motivated to formalize, have poor information on formalization, but when better informed, they might choose to formalize. Unfortunately, research on reasons why they prefer informality – and therefore how to address it – is limited. Whatever the cause, informality is leading to the creation of subsistence microenterprises with limited productivity and unable to grow, and lost public resources.

Partnership for Growth: El Salvador Constraints Analysis 2011 http://photos.state.gov/libraries/elsavador/92891/PFG/ES%20Constraints_Analysis.pdf

ILO, Statistical Update on Employment in the Informal Economy, http://laborsta.ilo.org/applv8/data/INFORMAL_ECONOMY/2012-06-Statistical%20update%20-

%20v2.pdf

DIGESTYC, Encuesta de Hogares de Propósitos Múltiples 2011.

http://laborsta.ilo.org/applv8/data/INFORMAL_ECONOMY/2012-06-Statistical%20update%20-%20v2.pdf http://laborsta.ilo.org/applv8/data/INFORMAL_ECONOMY/2012-06-Statistical%20update%20-%20v2.pdf

Violence and Criminality

Violence and criminality in El Salvador directly affect the investment climate. Businesses of all sizes unanimously agree that gang violence and extortion are major impediments to investment and business. According to the National Council of Small Businesses

(CONAPES), 82 percent of SMEs are subject to extortion payments.

Failure to pay can be life threatening, and payment – especially for small firms – may lead to insolvency. Many firms stay informal and under-advertised to avoid attention from gangs. Violence and security raise the costs of protecting employees and physical assets.

In 2011, the World Bank estimated that El Salvador had a cost of crime and violence of approximately 11 percent of GDP.

Extortion reduces profitability, and attempts to avoid attention from gangs limit marketing and investment opportunities. In 2015, the

Global Peace Index, published by the Institute for Economics and Peace (IEP), ranked El

Salvador as 10 th out of 162 countries analyzed with the higher cost of violence. The estimated cost is 17 percent of GDP or more than $8,400 million equivalent to $1,340 per capita.

In February 2014, the GOES launched the National Strategy for Violence Prevention

(ENPV by its Spanish acronym.) The strategy reiterates that the "prevention of violence and the fight against crime and criminality are key parts of the process of national pacification that must support the construction of a social pact for security, which give continuity and sustainability."

In January 2015, the GOES launched the “Plan El

Salvador Seguro,” which prioritizes municipalities for targeted and coordinated interventions using a geographically-oriented, place-based approach. USAID also uses the plan to focus activities.

Access to Finance

Although credit to the private sector in El Salvador has expanded after the 2008 global recession, MSMEs continue having limited access to credit at favorable conditions to expand business and grow.

From 2006 to 2009, USAID/El Salvador assisted Salvadoran financial institutions to become more efficient and profitably while serving SMEs. Due to the lack of specialized

SME credit analysis and risk management systems, some commercial banks viewed

SMEs as too small, risky, and time-consuming to serve in significant numbers.

USAID/El Salvador helped financial institutions transition from cumbersome, manual analysis systems to more streamlined evaluation tools, significantly reducing the time and paperwork required to secure SME loans. After 2008, the global recession reduced capital flows to El Salvador and in 2010; approximately $275.5 million of foreign direct investment left the country. Access to credit for the private sector dropped significantly reflecting the deterioration of the economy and the greater thoroughness of financial

Consejo Nacional de la Pequeña Empresa de El Salvador (CONAPES), Informe Consultivo Empresarial, último trimestre de 2014.

Banco Mundial, Crimen y Violencia en Centroamérica – Un Desafío para el Desarrollo, 2011:

http://siteresources.worldbank.org/INTLAC/Resources/FINAL_VOLUME_I_SPANISH_CrimeAndViolen ce.pdf

GOES Estrategia Nacional de Prevención de la Violencia, http://www.undp.org/content/dam/el_salvador/docs/demgov/UNDP_SV_ENPV_2014.pdf

FUSADES, Informe de Coyuntura Económica Segundo Trimestre de 2015, página 11.

http://siteresources.worldbank.org/INTLAC/Resources/FINAL_VOLUME_I_SPANISH_CrimeAndViolence.pdf http://siteresources.worldbank.org/INTLAC/Resources/FINAL_VOLUME_I_SPANISH_CrimeAndViolence.pdf http://www.undp.org/content/dam/el_salvador/docs/demgov/UNDP_SV_ENPV_2014.pdf institutions in granting credit. Access to financing was difficult as a result of the economic uncertainty, and as a consequence affected to a greater extent MSMEs. The

Final Report of the USAID Financial Services for SMEs Project can be found in the following link to the USAID Development Experience Clearinghouse (DEC):

http://pdf.usaid.gov/pdf_docs/pa00krsz.pdf

From 2011 through 2014, the USAID Improving Access to Financial Services Project collaborated with local organizations to improve the loans and financial services offered to MSE’s and to address the financial needs of this market sector. Relatively small amounts of timely credit, supported by appropriate supplemental services, allowed MSEs to succeed and to serve as a catalyst for increased employment and a stimulus to local economies.

USAID/El Salvador has two ongoing Development Credit Authority (DCA) programs with Banco Davivienda (09/27/2013 to 09/27/2021) and Banco de America Central

(09/26/2012 to 9/26/2022) that allow the banks to lower collateral requirements and lend to SMEs on a longer term basis (3 years+) for capital investments.

After the global recession, financial institutions in El Salvador expanded credit to the private sector.

From 2012 through 2014, credit to the private sector expanded annually at an average rate of 6.5 percent.

GOES encouraged credit expansion to SMEs by restructuring the Multi-sectorial Bank (BMI) and converting it in the El Salvador

Development Bank (BANDESAL). The Inter-American Development Bank loan approved in 2015 a loan for $100 million to facilitate SMEs access to credit. In addition, a movable assets law was passed in 2015, and a registry for collateralized assets was established to reduce risk and facilitate lending to MSMEs, leading to a jump of 56 places to the 15 th in the 2016 Doing Business Report “Getting Credit” sub-indicator.

Business Enabling Environment

As indicated in section C2, the enabling environment for business and investment has improved in El Salvador, as evidenced by its rank of 86 out of 189 countries in the world on the World Bank’s Doing Business 2016.

However, it remains below the 43 and 69 ranks reached in 2003 and 2008, respectively.

Improvements in the business environment are needed at the subnational and national levels.

1. Municipal-Level Constraints. Municipalities play an important but partial role in the investment climate and business environment of El Salvador. For a number of functions, such as registration and local permits, implementation of national or municipal laws and regulations are conducted through municipal governments.

Municipal governments and the private sector had little trust or cooperation. The situation has begun to improve – sometimes dramatically – through the creation of

Municipal Competitiveness Committees (CCMs), which have facilitated public-private dialogue to address weaknesses in services to the private sector and communities highlighted by the Municipal Competitiveness Index.

Banco Central de Reserva de El Salvador, Préstamos e Inversiones al Sector Privado, http://bcr.gob.sv/bcrsite/?cdr=18&lang=es

FUSADES, Informe de Coyuntura Económica Segundo Trimestre de 2015, página VI.

World Bank Doing Business Report 2016, http://www.doingbusiness.org/data/exploreeconomies/el-salvador/~/media/giawb/doing%20business/documents/profiles/country/SLV.pdf http://pdf.usaid.gov/pdf_docs/pa00krsz.pdf http://bcr.gob.sv/bcrsite/?cdr=18&lang=es http://www.doingbusiness.org/data/exploreeconomies/el-salvador/~/media/giawb/doing%20business/documents/profiles/country/SLV.pdf http://www.doingbusiness.org/data/exploreeconomies/el-salvador/~/media/giawb/doing%20business/documents/profiles/country/SLV.pdf

Many CCMs have improved services for business, but they are constrained by national problems (addressed below) and by economies of scale. In a small country such as El Salvador, there are 262 municipalities and many of them are simply too small to improve the business climate unless several municipalities work together as

“micro-regions” to attract public investment from the national government or ensure business-friendly environments for growth-oriented investors. Municipalities have limited fiscal resources for larger-scale investments. The formation of such micro-regions is beginning, and is an opportunity for assistance.

2. National-Level Constraints. Economic growth is also constrained by policies and the regulatory environment at the national level, which sets legal framework for investment and export. According to businesses of all sizes, national policies are often at odds with business need and subject to unexpected, inconsistent change.

Problems cited include lack of legal part-time labor, a flawed secured-lending system, discriminatory retirement age for women, and non-transparent and inconsistent licensing regimes, among others. When policies are properly conceived, there is often limited capacity of the GOES to design and implement appropriate laws and regulatory regimes.

ATTACHMENT J.2

LIST OF ACRONYMS

A4P Plan of the Alliance for Prosperity in the Northern Triangle

ACDMYPE Asociación de CDMYPEs

ACTFL American Council for the Teaching of English Language

ADS Automated Directive System

ASI Salvadoran Industrial Association

AWP Annual Work Plan

BANDESAL El Salvador Development Bank

BIDs Business Improvement Districts

CCIES Salvadoran Chamber of Commerce and Industry

CCMs Municipal Competitiveness Committees

CDCS Country Development Cooperation Strategy

CDMYPE Spanish Acronym for SBDC - Centro de Desarrollo de la Micro y

Pequeña Empresa

CEN Strategy Central America Strategy

CNR National Registry Center

COEXPORT Corporation of Exporters

CONAMYPE National Commission for Micro and Small Enterprise

CONAPES National Council of Small Businesses

COP Chief of Party

DCA Development Credit Authority

DEC Development Experience Clearinghouse

DO Development Objective

DQA Data Quality Assessment

EMPRE Unidades Empresariales

ENPV National Strategy for Violence Prevention

ESEN Escuela Superior de Economía y Negocios

EU European Union

FONDEPRO Productive Development Fund – Fondo para el Desarrollo Productivo

FSI Foreign Service Institute

FUSADES Salvadoran Foundation for Economic and Social Development

GDP Gross Domestic Product

GIS Geographic Information System

GIZ German Cooperation

GOES Government of El Salvador

GUC Grants under a Contract

HEI Higher Education Institutions

ICT Information and Communication Technologies

IDB Inter-American Development Bank

IEP Institute for Economics and Peace

ILO International Labor Organization

IR Intermediate Result

LGBTI Lesbian, gay, bisexual, transgender, and intersex

M&E Monitoring and Evaluation

MCC Millennium Challenge Corporation

MCI Municipal Competitiveness Index

MCP Municipal Competitiveness Project

MDGs Millennium Development Goals

MSME Micro, Small and Medium Enterprise

NGO Non-Government Organization

OMR Regulatory Improvement Organization

PFG Partnership for Growth

PROESA El Salvador Export and Investment Promotion Organization

QDDR Quadrennial Diplomacy and Development Review

SBDC Small Business Development Center

SME Small and Medium Enterprise

SOW Statement of Work

STIPs Science, Technology, Innovation and Partnerships

USAID United States Agency for International Development

USG United States Government

ATTACHMENT J.3

BRANDING STRATEGY OUTLINE FOR ACQUISITION

INSTRUMENTS IN BILATERAL ACTIVITIES

I. Project name – El Salvador Competitive Project (TBD in Spanish)

A. Project name – The use of acronyms is allowed only for internal purposes.

Avoid use of gerund in Spanish translations. Whenever possible, start Project name with

“USAID” (i.e. USAID Higher Education for Economic Growth – Proyecto de USAID de

Educación Superior para el Crecimiento Económico). The public name of a Project in

Spanish will include the word “Proyecto” as opposed to “Actividad” for clarity. It is not necessary to add “Project” and the word “Activity” will not be used at the end of the public name in English.

B. Graphic identity. This section is ruled by the Agency’s graphic standards and it is not subject to adjustments. For details, visit www.usaid.gov/branding. You will need to ensure that the following specifications for the graphic identity are stated in the branding strategy:

1. Logo, brandmark and tagline will follow standard USAID procedures.

2. Documents and materials in Spanish should use the USAID logo in Spanish. Sub brands should not be used.

3. Placement (USAID prefers logos to start from top or bottom left and USAID prefers to be the first organization in logo line up when possible)

4. Size—USAID logo should be equal in size when co-branding

5. Colors (primary and secondary color palettes)

6. Formats (vertical, horizontal)

II. Positioning – Origin of the assistance stated verbally, visually and/or textually. It will always be identified as coming “From the American People,” except when a determination is made.

Contractors’ graphic identity must not be included. The following apply to this Project:

Jointly sponsored by USAID and the host-country government in compliance with its own branding guidelines

Jointly sponsored by USAID and select sub-grantees, in compliance with their own branding guidelines

III. Level of visibility – Level (high, medium, low).

Public Communications (advancing the project objectives) should be conducted at a high visibility level, either independently or jointly with local partners.

Project Communications (describing or marketing the project itself) should be conducted at a low level of visibility.

All media contact must be consulted with the USAID Communications Team. Media contact includes: press conferences, interviews, statements to the media, press releases, media advisories, media training, media contests, alliances with the media, etc.

http://www.usaid.gov/branding

Further details of the Public Communications Plan and Project Communications Plan will be determined upon award after baseline assessments have been drafted, local partnerships initiated, and sufficient data has been collected to drive decision making.

IV. Messages – All branding strategies must include the Primary Message. In the

Secondary Message you should relate it to the Project name, as described below:

Primary message for Project Communications: “from the people of the United States of

America”

Secondary message for Project Communications: “Improving the competitiveness of the

Salvadoran economy” (TBC)

Primary message for Public Communications: TBD

Secondary message(s) for Public Communications: TBD

V. Audiences – Consider the target audience you plan to reach, taking into account the following areas:

A. Target audiences for bilingual Project Communications (TBC):

Stakeholders and other interested parties

USG in El Salvador and in Washington D.C.

U.S. Congress

GOES counterparts

Municipal governments

Private sector leaders

Civil society leaders

Other donors

Small business development service providers

Justification: Stakeholders and other interested parties have a special interest in development. They can help USAID/El Salvador to disseminate both specific and general messages, as well as become partners to broaden the impact of the Project.

B. Target audiences for Public Communications in Spanish (TBC):

Salvadoran Stakeholders

Owners and operators of micro, small and medium businesses

National and local government officials responsible for economic c ompetitiveness

Business development services

Business associations

Salvadoran foundations and other potential local partners working on economic development issues.

Justification: A main focus of USAID competitiveness activities in El Salvador are owners and operators of micro, small, and medium businesses. Targeting the beneficiaries of these activities and engaging in entrepreneurs will help magnify the impact of USAID activities.

VI. Communications materials: TBD

Prior to production and/or publication, all Project Communications and Public

Communications materials will be approved by the COR, in consultation with the USAID

Communications Team.

VII. Branding and marking requirements for other parties:

Grants under contracts must be branded and marked in accordance with standards for assistance instruments, as per AADP 05-11.

Sub-contracts under contracts must be branded and marked in accordance with standards for acquisition instruments.

VIII. Other organizations to be acknowledged:

Co-branding may be with the host government or grantees working under contracts.

Guidelines will be provided on a case by case basis. The following elements will be considered:

Level of participation

A. Type of relationship with USAID

B. Local organization’s ownership of the Project

C. Political sensitivities

ATTACHMENT J.4

USAID FORM 1420-17 - CONTRACTOR BIOGRAPHICAL DATA SHEET

Please download a version from here: https://www.usaid.gov/forms/aid-1420-17

ATTACHMENT J.5

Past Performance Information (PPI) https://www.usaid.gov/forms/aid-1420-17

The form is not required if the below information is available in the Government past performance systems.

(To be completed by the offeror)

1. Contract Number:

2. Contractor (Name and Address):

3. Type of Contract: Negotiated Sealed Bid Fixed Price

Cost Reimbursement _____ Hybrid (explain) _______________________

4. Complexity of Work: Difficult Routine

5. Description, location, and relevancy of work:

6. Contract Dollar Value: Status: Active Completed

7. Date of Award:

Contract Completion Date (including extensions): _____

8. Type and Extent of Subcontracting:

9. Name, Address, Telephone Number, and E-mail Address of the Procuring Contracting Officer and/or the Contracting Officer ’s Representative (and other references—e.g., Administrative

Contracting Officer —if applicable):

Submission Date: MMMM DD, YYYY

[Contract/Agreement] Number: [insert number]

Activity Start Date and End Date: MMMM DD, YYYY to MMMM DD, YYYY

[COR/AOR] Name: [insert name]

Submitted by: [insert name], Chief of Party

[Name of Prime Implementing Partner]

[Insert address]

Tel: [insert number]

Email: [insert email]

ACHMENT J.6

[PROJECT TITLE]

ANNUAL WORK PLAN

MMMM DD to MMMM DD, YYYY

[Insert partner and/or activity logo here]

Last updated on: Annual Work Plan FY XXXX Page X of X

ACTIVITY INFORMATION

Program Name:

Activity Start Date And End Date:

Name of Prime Implementing Partner:

[Contract/Agreement] Number:

Name of Subcontractors/Subawardees:

Major Counterpart Organizations

Geographic Coverage

(cities and or countries)

Reporting Period:

Acronyms and Abbreviations

List all acronyms and abbreviations pertinent to the activity. The first time a word requiring an acronym or abbreviation is used in the body of the report, spell out the word in full with the acronym in parentheses.

Thereafter, use only the acronym.

Last Updated on Annual Work Plan FY XXXX Page X of X

1. Project Description

(1-2 pages)

1.1.1 Project Description/Introduction

Short and concise introductory section that gives a quick overview of the project, goals/objectives, target beneficiaries, geographical locations, etc. This is a standardized paragraph that can be used in each quarterly report. It should be BRIEF, no more than one page.

Activity Theory of Change

This should be a logical, easy-to-follow statement that indicates: IF there are XXX activity inputs, THEN there will be XXX results. A diagram to illustrate the theory of change may be included as an Annex.

1.2 Overarching activity objectives and expected key result areas

A diagram to illustrate key result areas may be included as an Annex.

1.3 Links of activity objectives to strategy

A. USAID/El Salvador Country Development Cooperation Strategy and Project Logical Frameworks (Consult your A/COR for guidance as needed.)

B. Government of El Salvador strategies

1.4 Target beneficiaries

Include relevant foci by geography and/or gender as appropriate.

2. Implementation Approach

(1-2 pages)

2.1 Key Activities

Succinctly describe key activities within the upcoming fiscal year which will be implemented to achieve the key results outlined in Section 1.3.

2.2 Collaboration and Coordination

Describe any expected collaboration and coordination with other stakeholders such as governments, other donors, local organizations, non-government organizations, academic institutions, etc.

3. Monitoring, evaluation, & learning Plan

(1-2 pages)

3.1 Learning Agenda

List up to five major learning questions linked to relevant key result areas. Briefly discuss how knowledge will be collected and analyzed for the learning questions.

3.2 M&E Systems

Describe M&E systems which will be developed or improved upon within the reporting period.

3.3 Evaluation and Research Plan

List any planned assessments, evaluations, operations research, studies, surveys or any other anticipated research to be conducted within the reporting period. Clearly indicate the purpose and intended use of the research.

Evaluation Plan Matrix

Title Research Type Purpose of research Intended use of research Expected dates of implementation

3.4 M&E Plan Matrix

Include all indicators which are useful for strategic, management purposes for USAID. This should be a limited set of mostly outcome-level indicators, and including a mix of standard and custom indicators. The implementing partner may choose to track additional output level indicators for activity management purposes; however, they need not be included here.

The M&E Plan is a living document which should be reviewed and updated at least on an annual basis. Proposed changes to the M&E plan since the last reporting period must be highlighted in yellow, and are subject to the final approval of the activity A/COR. The IP must follow the guidance of the A/COR if the information must be inputted into AidTracker plus, DATIM, or other performance management system.

Table 1(a): PMP Indicator progress - USAID Standard Indicators and Project Custom Indicators

[Strategic Objective]

Indicator Data

Source

Baseline data FY 2016 Quarterly Status – FY 2012 Annual

Performance Achieved to Date (in %)

Target Justification for Fiscal Year of this Annual

Report

Year Value Annual

Cumulative Planned target

Annual Cumulative

Actual Q1 Q2 Q3 Q4

Intermediate Result (IR):

Sub-IR:

Intermediate Result (IR):

*Note that these targets are proposed by the implementing partner. The A/COR will establish the actual targets with close consultation with the IP.

4. INTEGRATION OF CROSSCUTTING ISSUES and USAID FORWARD

PRIORITIES

4.1 Gender Equality and Female Empowerment

4.2 Sustainability Mechanisms

4.3 Environmental Compliance

4.4 Global Climate Change

Address only if your program does not receive GCC funding but can speak to impact in either adaptation and/or mitigation).

4.5 Policy and Governance Support

4.6 Local Capacity Development

4.7 Public Private Partnership (PPP) and Global Development Alliance (GDA)

Impacts

4.8 Science, Technology, and Innovation Impacts

5. STAKEHOLDER PARTICIPATION AND INVOLVEMENT

Government, regional organizations, NGOs, private sector, academia, civil society, other donors, etc.

6. MAJOR UPCOMING TASKS OR EVENTS

Major Task/Event Brief description of purpose Planned date(s) As applicable, specify what kind of support may be required from USAID/Ethiopia.

Insert additional rows as needed

7. APPENDICES

7.1 Theory of Change and/or Key Result Areas Diagram

Optional illustration of activity logic and intended results.

7.2 Geographic coverage

Map (recommended) and/or list of activity implementation sites.

I. ANTICIPATED RISK

Describe any anticipated risk associated with the implementation approach. Include any risk mitigation measures which will be implemented.

II. STAFFING PLAN

Highlight any proposed changes for the year.

III. TECHNICAL ASSISTANCE (TA) NEEDS

Organization and/or person(s) who will provide TA, if known

Type of TA Purpose of TA Dates of TA

Insert additional rows below as necessary

IV. International Travel Plan

Name of traveler(s) Purpose of international travel

Destination Travel dates

Insert additional rows below as necessary

Appendices

a. Detailed GANTT chart of schedule of planned activities

b. Budget Plan