The World Bank Increasing Domestic Impact of Investments Through Linkages

The World Bank Broadening Domestic Impact  The impact on the domestic economy of large- scale investment varies significantly  In part depends on the intrinsic capital- intensity of the sector  Promoting linkages to domestic firms can enhance and broaden the impact of major investments

The World Bank Benefits of Linkages  For Large Firms:  Reduced procurement, production, and distribution costs  Improved integration in new overseas markets  Enhanced reputation and local license to operate  For Small-Medium Enterprises (SMEs):  Access to new clients and markets  Enhanced skills, standards, and capacity  Acceleration of knowledge transfer and technology upgrading  For Local Communities:  Stimulation of economic activity, increased employment opportunities, and local or regional competitiveness  Added local purchasing power

The World Bank Approaches to Promoting Linkages  Building SME Skills and Capacity  Procurement Opportunities  Access to Information  Access to Finance  Corporate Social Responsibility  Leveraging Global Standards

The World Bank Building SME Skills and Capacity  Facilitating training, mentoring, and consulting for SMEs over a period of time  Mozlink, an IFC program in partnership with CPI.  Program has had a significant impact on SMEs and the local economy  Built the capacities of 45 local SMEs.  Mozal spends $17 million with 250 Mozambican companies monthly.  The success of MozLink encouraged four corporations in Mozambique—Mozal, Sasol, CDM, and Coca-Cola—to partner with IFC to design a three-year SME development and linkages program, MozLink

The World Bank

Building SME Skills and Capacity (cont.)  Standardized training modules can be very cost-effective. IBM & IFC have developed an online SME Toolkit containing self- guided modules.  Martins Group in Brazil has provided online training to 11,000 people through its Martins Retail University.  A number of companies have developed best practice guidelines specific to particular industries or business activities.  Unilever’s Sustainable Tea Initiative provides guidelines for tea farmers to produce crops with high yield and nutritional quality, and low environmental impact.

The World Bank Procurement Opportunities  Firms can establish internal programs that aim to increase engagement with SME suppliers  ExxonMobil in Chad is an example  The National Content Strategy encourages:  Contracts to be broken up into manageable sizes  Shorter payment cycles  Longer-term contracts  The Local Business Opportunity Program has helped develop local suppliers through:  Supplier assessment program, which found significant gaps in accounting, risk management, HR.  In response, training initiated in IFC managed facility

The World Bank Access to Information  It can be difficult and costly to identify the right SMEs, and especially costly for large numbers of small transactions  One solution is dedicated staff or departments  Anglo American has created Anglo Zimele to identify and perform due diligence on potential SME suppliers.  In Chad, ExxonMobil has developed supplier databases for 60 potential suppliers, as well as 1,000 additional SMEs surveyed by IFC/Chamber of Commerce.  SBP shares supplier databases with large firms in South Africa, Tanzania, and Malawi.

The World Bank Access to Finance  Financial services are critical to SMEs success in scaling up production and upgrading technology, but SMEs often regarded as high risk.  Financing coupled with technical assistance for entrepreneurs can help promote access to finance.  Mozambique Small and Medium Enterprise Initiative)  Programs can also catalyze lending to SMEs through providing risk guarantees and training to financial institutions  Madagascar Partial Risk Guarantee Program  BP Supplier Finance Facility in Azerbaijan

The World Bank Corporate Social Responsibility  Ensures management commitment to domestic linkages  Local content targets become a part of Managers’ performance assessment  Social Responsibility Agreements can help assure balanced expectations on all sides, and provide performance measures  Newmont in the Ahafo mine in Ghana has involved traditional, local and regional officials in its Social Responsibility Agreement, which will underpin a broader community development plan  Diavik Diamond Mines (Canada) socio-economic monitoring and participation agreement signed with authorities and indigenous groups outlining company’s commitments to local SME development and linkages

The World Bank Leveraging Global Standards Increasingly global accreditation bodies are working with multi-nationals to ensure compliance with social and environmental standards

The World Bank International Standards  ISO Standards on Environment  Extractive Industry Transparency Initiative  UN Compact

The World Bank Challenges and Lessons  Securing internal commitment within large firms  Plan early, plan for the long-term, consult widely, and be prepared to adjust  Managing expectations and reducing dependence  Strengthening public policy environment  Customize to fit industry, investor, and local context »OBRIGADO!