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EU puts $3.7 million behind Lebanese business

Chain of development centers to focus on small- and medium-sized enterprises

The European Union unveiled a 2.8 million euro ($3.7 million) investment on Friday to promote the growth of small- and medium-sized enterprises (SMEs) in Lebanon through four business development centers.

Each of the four centers - in Beirut, Tripoli, Saida and Taanil in the Bekaa - will receive up to 700,000 euros to house and nurture SME start-ups as well as advise and provide technical assistance to existing firms.

Economy Minister Sami Haddad said the emphasis on SMEs, which make up more than 90 percent of all domestic businesses, should result in the creation of more jobs. Lebanon has for generations suffered from an extensive brain drain, which has accelerated because of the summer 2006 war with Israel and the ensuing political and economic tumult.

"Right now this is one of the biggest problems we have - we are losing human capital," Haddad told The Daily Star on Friday. "If this can help reverse this brain drain, it will be very good.

"This issue is really essential - SMEs are obviously the pillar of the Lebanese economy. There is no doubt that this program will support developing SMEs in Lebanon, [and] these new SMEs will help create new jobs."

The centers will not get any funds from the ministry, but its SME unit will provide expertise. The centers function as incubators for promising start-ups, as the centers provide space and advice, from producing a business plan and securing financing though developing products and expanding exports. The centers also train managers and help entrepreneurs make contacts in the business community.

In Lebanon, each center can accommodate 15-20 businesses on its premises, while giving external assistance to about 100 companies annually.

Start-ups and functioning SMEs will have to pay the centers for services, although the centers are non-profit entities which should become financially self-sufficient.

The EU, which signed contracts to create the centers last August during the height of the Israeli offensive, decided to locate Lebanon's four centers strategically in order "to attenuate economic disparities within the territory of Lebanon," said Patrick Laurent, head of the European Delegation in Lebanon. "We believe very much in the potential for this SME sector to generate employment in Lebanon."

The Beirut center, known as Berytech, will hone in on start-ups in the technology and health sectors in its 10-story building on Damascus Road. Before receiving EU financing, Berytech has nurtured more than 75 start-ups and created 500 jobs, said Maroun Chammas of Berytech.

In the Bekaa, the center, known as Agripole, will give preference to agro-food and agribusiness SMEs. The facilities in Tripoli and Saida will not focus on any particular industries, although all four centers have a number of private-sector partners.

About 3,000 such centers exist worldwide, with half that total in the United States. The US sites have created about 500,000 jobs since 1988, and studies estimate that every dollar invested through a business development center results in $45 in tax revenue, said Declan Carroll, SME enterprise development adviser at the Economy Ministry.

More than 70 percent of Europe's centers still receive some federal support, while their work generates 40,000 new jobs annually. Research calculated an 85-percent survival rate for European businesses assisted by the centers, compared to the 50-percent probability for a UK start-up to fold within its first two years.

The EU's support for the centers is part of the 17 million euros it has dedicated to promoting the growth of the private sector, said Francisco Lopez-Menchero of the EC Delegation in Lebanon's economic development unit. The centers fall under the rubric of technical assistance; as part of this component the EU is also donating 3 million euros to the European-Lebanese Center for Industrial Modernization.

The EU will also direct funding toward policy improvements, such as reducing administrative obstacles for private business. Kafalat will handle the third aspect of EU financing, managing 3 million euros

in credit guarantees. In an effort to match EU funding, the Lebanese government has promised 800,000 euros.

Beirut 13-03-2007
Redaction
The Daily Star



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