USAID MACEDONIA SMALL BUSINESS EXPANSION PROJECT Quarterly Report July 1 – September 30, 2012 Including summary of FY 2012

The project's energetic start helped establish credibility and garner praise for its approach and strategy. SBEP's multi-tiered strategy focused on local market supply chain linkages combined with regional and local development resources, creating productive relationships that led to the launch of several strategic initiatives. The SBEP team held discussions with over 15 municipal LED offices, 12 donor projects, four financial institutions, government agencies, and over 50 businesses as part of a broad assessment. These discussions centered on economic issues, ongoing economic stimulus programs, sector-specific activities, and the current business climate in Macedonia. The inclusive approach assisted greatly in the formulation of a coherent project strategy. SBEP met with a number of USAID projects to identify potential synergies, forming agreements of cooperation with the USAID-funded YES, CEED, MATA, AG-BizE, and Rural Network projects. Activities in this quarter centered on three themes: developing strategic partnerships, developing strategic initiatives, and identifying relevant sectors and industries capable of providing economic growth opportunities for small businesses. In the area of strategic partnerships, SBEP reached agreements with the Regional Development Centers (RDCs) of Pelgonija and Polog to create a forum for public-private dialogue as a means to develop strategic plans to access IPA developmental funds. These EU-IPA funds represent the single largest opportunity for regions to access financing for the development of municipalities, the private sector, NGOs, rural tourism, and agricultural enterprises. In the area of strategic initiatives, SBEP initiated several supply chain-oriented pilot projects with leading Macedonia companies. The central idea being demonstrated is that companies can and should redirect their purchasing power away from sourcing imported raw materials and gear that purchasing power toward locally-operated SMEs. The pilot project with Prilep-based Vitaminka, a well-respected exporter of processed foods, has been an effective illustrative model in dialogue with potential regional partners that could benefit from a similar initiative. The pilot with Tetovo-based Veze Sharri, one of Macedonia's largest egg producers, has had a similar effect in discussions with companies in Polog. Establishing partnerships and pilot initiatives has allowed SBEP to identify the sectors demonstrating the most economic promise for SMEs. Through meetings with partners and stakeholders and analysis of existing reports, SBEP has determined that several sectors present viable economic growth opportunities for SMEs in the target regions of Macedonia, including agriculture, construction and building trades, rural tourism, and light manufacturing. The SBEP strategic approach consists of two "vertical" components: private sector engagement with both lead firms and Micro, Small, and Medium-sized Enterprises (MSMEs), and public sector engagement at both the regional and local levels. The two "horizontal" components are Business Service Organization (BSO) Development and Workforce Development (WFD). These four components, along with the fifth goal of creating opportunity for women and youth in all activities when feasible, developed at varying speeds in the Project's first months, with a special emphasis placed on private sector engagement. In FY 2012, SBEP made significant progress developing working relationships with strategic partners in the target regions. These high-level partnerships will allow the Project to leverage local knowledge, experience, and resources as SBEP seeks to create opportunities within its areas of focus. An important part of developing these early relationships has been to underline the Project's facilitative role, which is designed to take full advantage of existing economic dynamics and opportunities in the target regions, minimize duplication of existing development efforts, and maximize capacity transfer to local organizations. SBEP is acting as facilitator in assisting the Regional Development Centers (RDCs) to develop a process with which to convene stakeholders to create a development plan specific to each of the target regions. SBEP is working with the RDCs, local government institutions, and Business Service Organizations (BSOs) to identify existing assets and initiatives which can morph into illustrative economic growth opportunities/models in support of regional strategies. In July, SBEP signed a Memorandum of Understanding (MOU) with the Pelagonija RDC to support the development of the RDC's regional development strategy. SBEP coordinates directly with the RDC's Executive Director Emilia Gjeroska, and is building an operating partnership which complements the ongoing initiatives of the RDC.