Enhancing Sme Performance

ENHANCING SME PERFORMANCE
QUARTERLY REPORT, DECEMBER 31, 2005
December 2005
This publication was produced for review by the United States Agency for International
Development. It was prepared by the DAI/Nathan Group, LLC.
ENHANCING SME PERFORMANCE

QUARTERLY REPORT, DECEMBER 2005
The authors views expressed in this publication do not necessarily reflect the views of the
United States Agency for International Development or the United States Government.
Contractor contact information

James Packard Winkler, Chief of Party
DAI-Nathan Group LLC Croatia
Florijana Andraeca 14
Zagreb, Croatia
Tel: 385-1-384-5240
Fax: 385-1-384-5241
E-mail: [email protected]
TABLE OF CONTENTS
iv
A. Table Of Contents
1.
Cross-cutting Results ...............................................................................................1
2.
Significant Events ......................................................................................................1

2.1.
Marketing .....................................................................................................................1
2.2.
Business Development ...............................................................................................3
2.3.
Financial Services .......................................................................................................3
2.4.
Investment facilitation..................................................................................................4
2.5.
Policy Reform..............................................................................................................6
2.6.
Project Management ...................................................................................................6
3.
Status of Budget Expenditures ..............................................................................8
4.
List of Activities Planned for Next Quarter .........................................................8

4.1.
Marketing .....................................................................................................................8
4.2.
Business Services.......................................................................................................8
4.3.
Financial Services .......................................................................................................9
4.4.
Investment facilitation..................................................................................................9
4.5.
Policy reform ...............................................................................................................9
ANNEX A: List of Reports & Deliverables ................................................................... 10
TABLE OF CONTENTS
B. List of Tables
Tables
Table 1: SUMMARY TABLE OF ESP RESULTS......................................................................1
Table 2. ESP FINANCIAL RESULTS ........................................................................................8
Table 3: ESPS DELIVERABLES AND REPORTS.................................................................10
LIST OF TABLES AND FIGURES
vi
C. Abbreviations
ACE
Agribusiness Competitiveness Enhancement (Project)
AMC
Association of Management Consultants
B&B
Bed and Breakfast
CIPO
Croatian Investment Promotion Outreach (Alliance)
CSERP
Croatian Social and Economic Recovery Project
EBRD
European Bank for Reconstruction and Development
ESP
Enhancing SME Performance
EU
European Union
FDI
Foreign Direct Investment
FINA
Finance Agency
GTZ
German Development Agency
HAMAG
Croatian SME Promotion Agency
HBOR
Croatian Bank for Reconstruction and Development
HPB
Hrvatska potanska banka
IDA
Istrian Development Agency
IT
Information Technology
LAN
Local Area Network
LEDA
Local Economic Development Agency
M&E
Monitoring and Evaluation
MIGA
Multilateral International Guarantee Agency
MoE
Ministry of Economy
NASfH
National Association of Small and Family-run Hotels
PBZ
Privredna Banka Zagreb
PRIMA
Entrepreneurship Center, Split
ROP
Regional Operating Programme
SME
Small and Medium Enterprise
TAPA
Technical Assistance Partnership Agreement
UNDP
United Nations Development Program
USAID
U.S. Agency for International Development
ABBREVIATIONS
vii
D. Executive Summary
This quarterly report for the period October 1 to December 30, 2005, covers the first quarter
of ESPs second year of implementation. ESP is exceeding most of its performance
indicators and managing a portfolio of activities with various degrees of risk and impact.
The project continues to meet almost all performance targets during this quarter,
demonstrating bottom line improvements to 910 companies in terms of growth in sales,
revenues, and jobs. Tangible improvements at the company level are critical to establish
credibility for the project and to expand higher value training, consulting, financial and other
services to SMEs through our partners. Financial services brokered by ESP continue to
exceed targets: 626 SMEs received new credit through commercial bank partners, nearly
exceeding the target of 700 firms in the first quarter; 18 companies are using factoring and
non-bank services against the year 2 target of 20.
ESP continued to provide a broad range of high quality training courses to 1,273
entrepreneurs across the country. The demand for training services continues to grow, even
as ESP is charging higher fees through partners for these courses, which are delivered by
practitioners. For the quarter, ESP did not estimate increases in jobs, sales, and exports
because data was not available for this period.
ESP is building a solid foundation of achievements and partnerships to achieve higher
impact in terms of reaching 4,000 SMEs and creating 20,000 jobs. The project is working
with a network of partners to assist firms to reach new markets and respond to buyer
requirements. The Anuga Trade Fair in Cologne, Germany, in early October 2005 included
over 550 products from 62 food companies organized by ESP. ESP is working with the
industry to develop an association to follow up on the export sales opportunities and address
the shortcomings export procedures, licenses, and certificates in cooperation with the
Ministry of Agriculture.
Work on industry and business specific activities is highlighting a number of policy issues
that the project will address. For example, the initiative to support regional guarantee funds
requires conversion of single city or country entities into regional development agencies,
following EU accession guidelines supported by the Ministry of Economy.
Local
governments are risk averse and reluctant to join new regional groupings until they see
success stories of cooperation. ESP is working with the Ministry of Economy to develop such
success stories that result in new credit guarantees and partnerships with regional and
national banks to extend services to SMEs in underserved areas of the country. At the same
time, ESP is working with 17 Business Development Centers across the country to extend
services in franchising, training, and consulting services.
The development of stronger partners is a key part of ESPs strategy to reach into
underperforming areas of the country where USAID can provide assistance to SMEs.
ESP QUARTERLY REPORT, DECEMBER 2005
1. CROSS-CUTTING RESULTS
Table 1: SUMMARY TABLE OF ESP RESULTS
Performance Indicator
No.
Target
LOP
Target
2005
Actual Results
as of September 30
Total number of SMEs assisted
4,000
600
910
Number of jobs created among

assisted SMEs
20,000
2,000
estimated 2869
Increase in total revenue of

assisted SMEs
$150 M
$25 M
$23.25 Mil
As of September 2005
Increase in export revenue of

assisted SMEs
$20 M
$3.3 M
$4.37 Mil
As of September 2005
Value of foreign direct investment

(FDI)
$80 M
$6M
$51.6 M
Number of SMEs using new bank

financing
2,200
200
626
Number of SMEs using new nonbank financing
65
18
Number of people trained in

enterprise growth areas
800
200
1273
(43% female)
2. SIGNIFICANT EVENTS
Within ESPs four thematic components, outreach and technical interventions occurred,
which either generated key results or laid the foundation for notable developments later in
the year. Key events and milestones are presented below by component.
2.1.
MARKETING
Important developments include the following:
ANUGA Trade Fair: ESP Team assisted 62 companies to exhibit over 550 products at
ANUGA. The show was very successful with over 1,000 visitors and 300 trade leads.
This was the first organized joint exhibition of Croatian specialty food products in a top
international exhibition. Several products, such as prosciutto and truffles, sparked
significant interest among buyers. In November and December, the team worked on the
follow-up of the exhibition:
o Follow-up letters were sent to all visitors at the stand in Cologne.
o Several responses and requests received, mostly for organic food, were
forwarded to producers or regional offices as appropriate.
o Samples of honey, jams, cookies and dried fruits were sent to the UK at the
request of a potential buyer that expressed serious interest.
o Trade leads gathered at the fair were sent to relevant companies or to regional
offices for follow-up as appropriate.
Quality and Standards Training of Trainers: Consultant Ed Nemeroff delivered a

training of trainers session to business service providers and to project staff on
introducing SMEs to the basic concepts of quality and standards. The course focused
on strengthening the clients understanding of the various applications of different quality

systems and certifications. The training also covered buyer beware aspects of
engaging consultants and obtaining certifications, such as awareness about the
importance of accreditation and an explanation of how to determine if proposed services
would lead to a certification that is internationally recognized or valid in the markets of
interest to the client companies. Mr. Nemeroff also presented materials to trainers that
would help SMEs understand how they could fully benefit from an ISO 9000 certification,
and what the differences were between the various quality improvement options open to
SMEs. The training underscored the difference between mandatory technical regulations
and voluntary standards, and the importance of striving for quality improvements to meet
the expectations of clients and the requirements of the market in which the product will
be sold.
Membership Survey for Exporters Association: Mario Bebek facilitated finalization of

the associations membership survey and made changes in the final version of the
survey instrument. The Exporters Association has delayed implementation of the survey
for several months, and has not demonstrated much commitment in following through on
activities where the Association solicited ESP support.
Training for Foreign Investor: Slavonska Drvna Industrija (Snaiderro/Trokut JV)

assistance was finalized, including ESP participation in worker re-training and requalification programs designed to qualify workers for employment in the new factory
that will operate at much more sophisticated level than workers are currently prepared
for. The investment by Snaidero Group has the potential to create 180 new jobs in 2006,
and ESPs participation is designed around using trainers and consultants from the AMC
and previous CEP practicums to design training and TA for SDI employees and
management that will be transferable to other manufacturing SMEs. Snaidero will cofund the development and implementation of training programs, providing tutors from
Snaidero Group and an international consulting company (Eupragma) to work with ESP
trainers and consultants, and hiring a team of Croatian consultants specialized in wood
processing which ESP helped identify. ESP will focus on retraining which is non-wood
specific and will use this opportunity to pilot new services and training initiatives. Sinia
Bronic assisted SDI with the identification of consultants/trainers for the re-training and
re-qualification initiative, and coordinated the recruitment and selection process for SDI.
After ESPs initial selection for re-qualification of workers in 12 training programs, SDI
and Snaidero interviewed six candidates, all of which were accepted by Snaidero. In
addition to the consultants selected, ESP identified local business service provider
Otvoreno Ucilite Novska as a potential provider of Language and Informatics courses
for SDI. This concludes the search for local consultants/service providers for this project
and the next steps will be scheduling local consultants to work with Snaidero technical
experts and Eupragma consultants funded by Snaidero to adapt materials and prepare
for delivering the required TA and training in the first quarter of 2006.
Meeting with Ministry of Economy to seek support for the Croatian Association of
Specialty Food Producers, 14.11.2005: Michelle Morgan, Renata eperic Petak, and
Sinia Bronic went with Zoran Manojlovic, representing the Association, to meet with
Ivan Bracic and Ivan Krpan, the persons responsible for reviewing grant applications for
cluster initiatives at the Ministry of Economy, Labor and Entrepreneurship. The
Associations grant request had been denied and Mr. Manojlovic and ESP staff had
requested an appeal meeting. Vice Minister Bracic was briefed about the projects
support of activities related to the gourmet food cluster, and brought to his attention the
success of the Anuga fair in generating interest in Croatian specialty foods. ESP stated
that the Association was in need of support for start-up funds related to professional
administration and organization of the cluster and that the project would like to support
the industry with further activities but that implementation would be slow without the
grant funds due to lack of resources for the Association to fund a full time administrator
to serve as ESPs counterpart. The Association is legally organized as a citizens

association (as suggested by Tajana Kesic Sapic in order to qualify for the funds) and
according to the vice minister is not legally a cluster. Mr. Bracic stated that a cluster
must produce a joint product, and that members should not be competitors. In good faith,
vice minister said that he will study this matter again in order to find the best way that the
ministry can help. In addition, asked for additional detailed information about the 60
participating companies. Renata eperic Petak will check the procedure with Mr. Ivan
Krpan, and follow up with the vice minister and Mr. Krokut. Given the Ministrys
understanding of cluster it is unlikely that ESP industry groups will receive grant funds
through this mechanism and the marketing team is working on identifying other means of
getting the association and the specialty food companies organized to better benefit from
ESP assistance.
Meeting with IDA to discuss the Istrian Quality initiative and support for a business
development planning analysis for Istria county.
Conducted company visits and initial discussions with boat builders, such as Prinz,
Horizont, Tuek and Orka.
2.2.
BUSINESS DEVELOPMENT
Key results include the following:
Visited and introduced a training manual and Phase 2 of ESPs training program to 17
regional partners. This defined roles, responsibilities, fees, promotion, and follow up,
which is designed to build partner capacity to deliver training services.
Defined the training model for start-ups and new entrepreneurs with the Organization for
Security and Cooperation in Europe (OSCE) in areas of special state concern,
particularly Sinjko/Licka County.
The new Director of Business Services, Andrew Schafernacker, arrived on November

14, 2006, and began a review of 2006 work plan activities, staffing requirements, and
project organization.
Reviewed activities with Prima, a regional partner in Split, and cancelled TAPA with
them, due to their low level of engagement in activities agreed within TAPA and weak
interest engaging in further activities. Assessed other potential training partners in Split
area and selected commercial training partner Microedukacija in Split area.
Created and implemented procedures for sourcing assistance to SMEs through AMC.
Two AMC projects were reviewed and approved with Biljemerkant and Glazbena
mlade.
Developed training materials for 4 courses and piloted them: on Public Relations, SME
Finance, International Standards and Cost Accounting for nation-wide delivery. 9 trainers
trained to deliver training on international standards. Trained 554 participants from 176
SMEs in 12 business topics and 28 courses given by ESP staff and partners.
2.3.
FINANCIAL SERVICES
The most significant events and results of the ESPs financial services team include 104
SMEs assisted through partner financial institutions:
VABA generated credit scored loans for 51 SMEs.
HBOR credit scorecards generated credit scored loans for 20 SMEs. The Team
continued assisting HBOR to develop a hybrid financing product by facilitating meetings
between HBOR in-house attorneys and outside counsel and providing answers to
various questions regarding all aspects of the hybrid financing model. The team also
assisted HBOR in evaluating a statistically based credit scoring system it is considering
to purchase for use with large loan applications, posing questions to the developer of the
model.
HAMAG approved 33 guarantees during the quarter. The fourth and the fifth phases of
STTA for HAMAG were completed. Mary Miller and the team accompanied HAMAG on
visits to Croatian National Bank, PBZ and ZABA to negotiate terms of a proposed
expedited guarantee process. Ms. Miller also assisted HAMAG in planning for 2006 and
summarizing her recommendations for upgrading HAMAGs guarantee operations. The
ESP team continued assisting HAMAG to establish an expedited loan guarantee process
by facilitating meetings between HAMAG and the commercial banks who will be granted
preferred lender status.
On October 11, 2005, the team carried out training for 8 Hrvatska Potanska Banka
relationship managers (loan officers) in the use of the credit scorecards. Continued
helping HPB develop, evaluate and test four different credit scorecards that ESP
developed for the bank: for long and short-term loans, and for small companies vs.
craftsmen (sole proprietors). Scorecards were launched (for testing and actual use) as a
pilot by HPB Zagreb and our team made further adjustments in the scorecards after
receiving feedback from HPB.
On 4 November with the assistance of Mura Regional Development Agency, Slovenia,

the team held a workshop in Plitvice on regional loan guarantee funds, attended by
around 55 representatives from regional development agencies, counties, municipalities,
banks, HAMAG, HBOR and several government ministries. As a direct result of the
workshop, the team started assisting the Varadin County Development Agency AZRA in
establishing a regional guarantee fund.
On November 29 signed a TAPA with Karlovacka Banka, a medium sized, regional bank
headquartered in Karlovac and began implementing the new partnership. Initial
presentation was made to bank staff about credit scoring on 6 December.
Commenced direct assistance to several SMEs, including Caligaris, d.o.o, Ravna Gora,
a wood processor, and Clarum, a pasta producer in Zagreb, Elcon Marine, MGH and
Eurovoce. We will assist these enterprises to select the most appropriate investment
financing and intercede with various financial institutions to bring the financing to fruition.
2.4.
Investment facilitation
Highlights include the following:
Held an extensive, five-day training program on FDI for CEIPA staff, consisting of 8
different modules (Global FDI Trends, Competitiveness and Investment Promotion
Function, How Firms Make Location Decisions, Image Building and Media Relations,
Development of Investment Promotion Materials and Modalities for Investment
Promotion, Investment Promotion Techniques, Developing an Investor Targeting
Strategy (ITS), Investor Facilitation and After-care Services and Project Monitoring and
Evaluation), FDI Glossary, Tips for Investor Inquiry Handling and CEIPA Competency
Ranking. The Training Program was held in the new CEIPA Office in Zagreb from
October 3-7. More than 20 recently hired CEIPA staff participated in the Training.
Together with HBOR, organized the International FDI Conference, Foreign Investment
for the Growth of the Croatian Economy. The Conference was held in Cavtat on October
24, 2005. The FDI team worked on the agenda, list of invitees, presentations of ESP
partners and promotional materials of ESP partners. ESP Investment Facilitation Director
was Conference Chair. About 150 people participated in the Conference, ranging from
representatives of foreign embassies and trade chambers in Croatia and the region,
existing and potential foreign investors, entrepreneurial zones, regional and local
development agencies, commercial banks and international financial institutions. Several
members of GOC spoke at the Conference including Prime Minister, Dr. Ivo Sanader,
Minister of Justice, Ms. Vesna kare-Obolt and Minister of Finance, Mr. Ivan uker.
The Conference attracted huge interest of the Croatian media. USAID Mission Director
as well as ESP Investment Facilitation Director gave several interviews for different
Croatian TV channels and newspapers and emphasized the importance of FDI for job
creation, technology and knowledge transfer and export increase.
On November 23 FDI team member accompanied Mr Simunic, director of ESP client

Nase Klasje to the Municipality of Luka to explore the plots available in the industrial
zone and the Municipality investment-related conditions. Mr Simunic was satisfied with
this location but will visit other short-listed locations as well. Due to the introduction of a
new production line Mr Simunic is looking for a new location to place its growing
business.
From December 14 to 16, FDI director and Representatives of Soritz, an Austrian

investor into vegetable production, visited for the third time partners in Dalmatia and
discussed in detail the agreements, with specific attention to quality, quantity, delivery
times, etc., to be signed with local suppliers. CIPA representative attended all the
meetings and will make follow-up contacts on the Soritz project in the future. ESP will
also monitor the project development with CIPA.
Made an extensive analyses of the outstanding issues regarding the final decission of
the American investor (Ecologic systems) to invest into tire recycling business in
Karlovac region (an area of special state concern). The project is valued at 4.2 mil$ and
will create 32 jobs in the first year of operation.
MIGA hi-tech study results for Croatia were presented by Mr Paddy Gallagher, an Irish
consultant, in Split on November 29. FDI Team, APIU Director Mr Zeljko Kirincic and his
team,and Mr Dermot Coffey and Hrvojka Skokovic from EIOP Vienna participated in this
presentation.
CIPO Alliance training ' How to best promote your location' was held in Split from
November 29 December 2. 15 participants (8 CIPO members, 3 ESP partners involved
in FDI and 4 APIU members) were trained in negotiation, communication and
presentation skills by Mr Peter Finnegan, an Irish consultant
On December 9, FDI Team and three Zadar city and county officials visited the Istrian
Development Agency (IDA). Since the Zadar county is in the process of establishing a
regional economic development agency (first in Dalmatia), the main purpose of the tour
was to draw on the Istrian experience in setting up and running successfully such an
institution. IDA director, Darko Lorencin gave a presentation on IDA, its structure and
activities, and EU projects that IDA is involved in. Participants also visited 5 business
zones in Istria.
2.5.
Policy Reform
Follow-up on Metrology, Accreditation, Standards and Quality (MAS -Q): ESP staff
have held a series of consultations with the heads of the Certification and Accreditation
Agencies, as well as private sector organizations on areas to improve quality standards
and management. ESP is developing several concepts for promotion and marketing of
quality standards, training activities, consultation services, and public-private cooperation
to raise awareness and improve policies and services for the private sector. ESP is
organizing a working session on March 1 as part of a high profile workshop with World
Economic Forum and National Competitiveness Council on quality standards, with
representatives from key government agencies and ministries, as well as private sector
representatives. The purpose is to develop consensus on specific actions to raise
awareness of quality standards and define action steps for services and improved
institutional capacity.
Tax Simplification Study: The ESP team held a series of consultations with the
Steering committee of HUP, led by Mr. Damir Kustrak, on developing the tax reform
package that will ultimately be reviewed and approved by the HUP Board, which
represents 26 industries and 5,000 companies. A series of meetings in the quarter made
significant progress in establishing new proposals for personal income tax, as well as
changes to deductions, introducing tax on capital gains and interest income, and other
provisions. HUP plans to hold a series of consultations with social partners, government
and donor representatives in January-February, and introduce the tax reform proposal at
the day of the Entreprenuer on March 6, 2006, with the Prime Minister present.
Regulatory Guillotine: The assessment during October to December conducted by

ESP staff and Scott Jacobs through a series of presentations, workshops and
consultations with senior officials in government and private sector has achieved
significant interest in the regulatory guillotine. The Guillotine aims to eliminate up to half
of the business regulations, reform another third, and reduce the administrative burden
on business. ESP will launch a workshop on March 1 during the visit of Augusto LopezClaros, World Economic Forum and the National Competitiveness Council with a working
session on the Guillotine with representatives from government and private sector. The
Guillotine will be included in Croatias national strategy, according to Martina Dalic, State
Secretary of National Strategy, and NCC will host a series of discussions and a
conference in early April.
Labor Market Conference: ESP co-sponsored the Conference Croatian Labor Market
in the 21st century organized by the Croatian Employers' Association and Moj Posao
Portal in Zagreb on November 8, 2005. USAID Mission Director in Croatia, Mr Jeffers
was one of the key note speakers and Zrinski Pelajic, FDI Director, presented the topic
'FDI and the labor market'. USAID/ESP encouraged the organizers to focus more on
productivity, economic and social aspects of the labour market, EU accession, and to
include a wide range of speakers. The Conference gathered around 160 participants
ranging from representatives from trade unions, ministries, public institutions, academia
to private sector and labor related service providers.
2.6.
Project Management
ESP undertook a number of activities to improve project management:
New staff members recruited in the previous quarter joined the ESP team: Andrew
Schafernaker as Business Development Director, Sinia Bronic as Marketing Specialist,
Petra Potocnik as Translator, Mirela Spreicer as new Receptionist, and Zrinka Nazor as
Business Development Assistant. Staff already employed or working as interns also
started in their new roles: Miroslav Levanic as Marketing Assistant and Hana Pavlinic as
Zagreb Region Coordinator.
Held regional staff meeting on identification of initiatives for the 2006 work plan; assisted
staff with designing and developing terms of reference, and budgeting for these
activities.
Jim Penkusky, former Chief Financial Officer of Nathan Associates, worked with ESP
staff to build capacity among local staff on procurement of local services. He provided a
training course for all staff and worked with the COP, contracts administrator, and other
staff to develop a LOE Tracker for CLIN 2, TAMIS module for contracts administration
and procurement procedures, and consult with the CTO and COP on contract issues.
Staff documented new administrative procedures for a number of programmatic and
administrative tasks and organize documentation and approval files.
Jeff Luebbe, Director of Finance and Administration, began an internal audit and
systems review of ESP from October 20 to November 3, 2005, at no cost to ESP
contract. DAI is paying for this consultancy. In the second part of the quarter, the
recommendations from the internal audit were implemented.
Negotiated final terms for a larger office at the same location and started renovation of
the new premises. Expected date of the move to the new office space is mid January.
Short-listed and conducted interviews of candidates for the positions of Manager of

Business Services, Tourism Industry Coordinator, ICT Industry Coordinator, Operations
Management Advisor, and Zagreb Regional Manager. Selected Gjorgji Mikovski as
Manager of Business Services and Nataa Curic as Zagreb Regional Manager.
Project Coordination
ESP worked effectively with other USAID and donor projects during the quarter:
ACE and ESP collaborating on participant training programs and food safety systems to
expand exports
LGRP and ESP collaborating on FDI benchmarking to enhance zone use and
management for FDI and economic growth
CIPO Alliance, MIGA and ESP collaborating on investor site visits and investor
information requirements to increase FDI
USAID/Croatian Privatization Project and ESP cooperating on one privatization project

currently managed by the Croatian Privatisation Fund (ZRC Lipik-ASSC) and possible
ESP assistance in finding potential strategic investor.
3. STATUS OF BUDGET EXPENDITURES

Table 3 presents project expenditures, as invoiced to-date. At the end of December, ESP
expenditures amounted to $ 5.327.532 or 22% percent of the total contract value
($19,170,704).
On June 22, 2005, USAID increased the total obligated amount by $3,200,000 to $10,
146,024. Project expenditures amounted to 37.6 percent of the new obligated amount.
Table 2. ESP FINANCIAL RESULTS
Amount
Budgeted
Cost Incurred
as of the end of
the Previous
Quarter
Costs
Incurred this
Quarter
Total Costs
Incurred Todate
Budget
Balance
CLIN 1
$ 16,942,142
$ 3.966.134,31
$ 1.108.243,00
$ 5.074.377,00
$ 12.976.007,69
23 %
CLIN 2
$ 2,228,562
$ 83.953,00
$ 253.155,00
$ 2,059.360,35
8%
Total
$ 19,170,704
$ 1,192.195,79
$ 5.327.532,00
$ 15,035.368,04
22 %
Category
$ 169.201,65
$ 4.135.335,96
Percent
Expended
of Total
Budget
4. LIST OF ACTIVITIES PLANNED FOR NEXT QUARTER

In addition to on-going activities, additional major activities planned under each area for next
quarter are as follows, by component.
4.1.
MARKETING
Design of group consultancy/train the trainers program which will result in increased
effectiveness of BSPs. To be launched as a pilot for Snaidero/Trokut investment in
Q1/06.
Initiate training in tourism product-development and marketing for up to 100 regional

tourism bodies, inbound tourism operators, and SMEs to improve destination marketing.
Contract a local consulting firm to design and implement services and "one stop shop"
for conversion of unregistered private accommodation owners (UPAOs) to small hotels,
bed & breakfasts and pensions and start-up of "one-stop" shop for UPAOs with Small
Hotels Association
4.2.
BUSINESS SERVICES
Launch of EFQM approach to building BAS capacity and improving SME

competitiveness. Training of EFQM assessors planned for Feb 2006.
Launch of a sequence of regional team led activities in conjunction with RDAs and
LEDAs aimed at improving SME industry competitiveness and building capacity of
business development services. It is expected that a minimum of 8 separate regional led
activities would be initiated during the quarter ending March 2006.
Launch of Business Navigator planned for February 2006.
Develop and pilot 9 new training courses (Market Research, Basic legal issues,
Employee-Employer Relationship, Managerial Accounting, Tax Issues, Franchising,
Investor Services, updated Packaging and Labeling and Payment collection), hold 50
workshops/trainings on old and new topics, and train at least 200 people.
Complete business services demand survey to establish demand among SMEs for
different types of services and their willingness to pay for them.
Initiate capacity building of ESP partner business associations (Small Hoteliers

Association, Croatian Exporters Association, AMC) with participation of expatriate
specialist. Start Jan 2006.
4.3.
FINANCIAL SERVICES
Special leasing program aimed at yacht industry with Lokat Leasing to finance more
sales of Croatian yachts.
STTA to augment factoring in Croatia through training with Bankers Association and by
improving PBZs factoring operation.
Carry out the next phase of consultancy on hybrid financing for HBOR.
Ongoing consultancy and support for HAMAG to improve its loan guarantee operations,
particularly implementation of expedited guarantee approval process for the largest
Croatian banks.
Assist Varadin County and other counties or municipalities in establishment of regional

loan guarantees.
Assist Karlovacka Banka to establish credit scoring to increase small business lending;
and ZABA in deposit mining exercise
4.4.
INVESTMENT FACILITATION
The major activities under this component in the next quarter include:
Continue working with the existing investors in the pipeline and pitching for new potential
investors.
Continue assisting CEIPA in developing strategy, performance indicators, FDI facilitation,

promotional materials, and web content.
Prepare STTA to train ESP partners involved in FDI on marketing plan for zone
development in Q2/06.
4.5.
POLICY REFORM
Tax reform proposal to be discussed with social partners and HUP.
Regulatory guillotine and quality management to be discussed during NCC-WEF

workshop on March 1; NCC taking more active role in policy advocacy work with key
government counterparts, promoting regulatory guillotine with key government
champions.
ANNEX A: LIST OF REPORTS & DELIVERABLES

ESPs cumulative list is presented in Table 3.
Table 3: ESPS DELIVERABLES AND REPORTS
Title
Author
Date
Roger Manring (Nathan staff)
11/05/04
Work Plans
First Annual Work Plan (October 04- September 05)
Quarterly Reports
Quarterly Matrix/Report, October- December 04
Paola Lang, DAI staff
Quarterly Matrix/Report, January March 05
Quarterly Matrix/Report, April June 05
Quarterly Matrix/Report, July - September 05
Jim Winkler, DAI staff and

Aleksandra Andrakovic, ESP
staff
Quarterly Matrix/Report, October December 05
Jim Winkler, DAI staff and

Aleksandra Andrakovic, ESP
staff
Monthly Reports
October 04
Charles Conconi, Nathan staff
November 04
December 04
January 05
February 05
March 05
April 05
June 05
July 05
Jim Winkler, DAI staff
August 05
September 05
October 05
November 05
December 05
Consultant Reports
M&E Plan and Operating Manual
IT Systems Manual
William Millsap, Social Impact

Consultant (later revised by
Paola Lang)
12/29/05
Sani
01/14/05
(7/20/05)
10
HAMAG Certified Consultant Program: Training

Materials, Operating/procedural Manual and Final
Report
Paul Moran, DAI consultant
12/25/05
Institutional Upgrade of HAMAG Technical Assistance

with Assumption of the UNDP/EU Guarantee Fund:
Initial Report and Action Plan
Mary Miller, DAI staff (STTA)
05/12/05
Survey on Corporate Governance
Economic Institute (STTA)
06/20/95
Tourism Market Study
Alan Saffery, Nathan consultant
05/03/05
Institutional Upgrade of HAMAG Technical Assistance

with Assumption of the UNDP/EU Guarantee Fund:
Interim Report
Mary Miller, DAI staff (STTA)
5/12/05
HAMAG Voucher Program: Operational Manual and

Start-Up Materials
Regionalni centar za razvoj

d.o.o.
March 2005
Benefits of Registering Informal Accommodations
Dalmaconsult d.o.o.
09/12/05
Hybrid Financing Product
Bryce Khadabux
Pending
FDI Benchmarking
P.J. Daly
Paola Lang
Pending
MAS-Q Activities in Croatia
Edward Nemeroff
December
05
Tax Simpification Study

Survey of the Croatian system
Study Macro projections
PPT presentations, draft papers, workshops
Mark Gallagher, Ante Babic
12/01/05
02/01/05
Regulatory Guillotine
The Regulatory Guillotine Strategy
Cleaning up rules with the Regulatory Guillotine
Scott Jacobs
October
2005/revised
in December
2005
M & E Data base

ESP CDM 1.0 Diagrams, CDM Report 1.0, ESP CDM
Report
Pardus d.o.o.
22 Dec 05
Credit Scoring Model (VABA)
Tocher Mitchell, DAI staff
1/25/05
Deposit Mining
1/25/05
Guidelines on Local Guarantee Schemes
1/31/05
List of Business Service Providers
Darije Josic, ESP staff
1/26/05
Strategy Paper: Loan Products
3/1/05
Strategy Paper: Credit Enhancements
3/1/05
Briefing to Companies Exhibiting at ANUGA
Michelle Morgan, Nathan staff
4/1/05
Spring 05 Training Program Guidelines
Marko Slunjski
4/1/05
Credit Scoring Model for SME Start-Ups
5/5/05
Credit Scoring Manual
5/27/05
Annual Report of the Association of Small and Family-
Tatjana Horvath, ESP intern
7/12/05
ESP Work Products
11
Run Hotels
Product Offerings for ESP Partners
7/12/05
Cost-Shared Consultancies through the AMC: Final Reports

Gumi-Implex
Ruica Maruic
Pogaj d.o.o.
Argus d.o.o.
10/11/05
November
2005
Optimus d.o.o.
10/20/05
Training Courses
AMC: EU Accession
AMC consultant
ESP/Deloitte: Operations Management
Igor aravanja
4/1/05
ESP: Strategic Planning
Zdravko Kuzmic
4/1/05
ESP: Packing and Labeling
Michelle Morgan, Dean Vranic
4/1/05
ESP: EU Accession Grants
Nenad Kocmar, Karlo Culo
4/1/05
ESP: Buyer Agent Orientation Training
Robert Delemarre, Ron Wherry
4/1/05
ESP/MicroGrupa: Market Positioning
Glenn Surabian, Nathan staff,

5/9/05
ESP/MicroGrupa: Market Segmentation

5/9/05
ESP/MicroGrupa: Cost Accounting
Marko Slunjski, ESP staff
April 2005
ESP/MicroGrupa: Employee Incentives

April 2005
ESP/PBZ: Foreign Exchange Risk Management
PBZ staff
April 2005
ESP: Company Diagnostics
Glenn Surabian, Nathan staff
August 2005
ESP: How to Interview a Client
Tocher Mitchell, Ivan Pilepic
June 2005
ESP: Credit Scoring
Tocher Mitchell, Ivan Pilepic
August 2005
International Standards and Accreditation
Edward Nemeroff
Nov. 05
12

Enhancing Sme Performance

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ENHANCING SME PERFORMANCE

QUARTERLY REPORT, DECEMBER 31, 2005

ENHANCING SME PERFORMANCE

Contractor contact information

Cross-cutting Results ...............................................................................................1

Significant Events ......................................................................................................1

Business Development ...............................................................................................3

Financial Services .......................................................................................................3

Project Management ...................................................................................................6

Status of Budget Expenditures ..............................................................................8

List of Activities Planned for Next Quarter .........................................................8

Financial Services .......................................................................................................9

Policy reform ...............................................................................................................9

ANNEX A: List of Reports & Deliverables ................................................................... 10

LIST OF TABLES AND FIGURES

Agribusiness Competitiveness Enhancement (Project)

Association of Management Consultants

Bed and Breakfast

Croatian Investment Promotion Outreach (Alliance)

Croatian Social and Economic Recovery Project

European Bank for Reconstruction and Development

Enhancing SME Performance

Foreign Direct Investment

German Development Agency

Croatian SME Promotion Agency

Croatian Bank for Reconstruction and Development

Hrvatska potanska banka

Istrian Development Agency

Local Area Network

Local Economic Development Agency

Monitoring and Evaluation

Multilateral International Guarantee Agency

National Association of Small and Family-run Hotels

Privredna Banka Zagreb

Entrepreneurship Center, Split

Regional Operating Programme

Small and Medium Enterprise

Technical Assistance Partnership Agreement

United Nations Development Program

U.S. Agency for International Development

ESP QUARTERLY REPORT, DECEMBER 2005

Total number of SMEs assisted

Number of jobs created among

Increase in total revenue of

Increase in export revenue of

Value of foreign direct investment

Number of SMEs using new bank

Number of SMEs using new nonbank financing

Number of people trained in

Important developments include the following:

Quality and Standards Training of Trainers: Consultant Ed Nemeroff delivered a

on strengthening the clients understanding of the various applications of different quality

Membership Survey for Exporters Association: Mario Bebek facilitated finalization of

Training for Foreign Investor: Slavonska Drvna Industrija (Snaiderro/Trokut JV)

ESP QUARTERLY REPORT, DECEMBER 2005

to serve as ESPs counterpart. The Association is legally organized as a citizens

Key results include the following:

The new Director of Business Services, Andrew Schafernacker, arrived on November

ESP QUARTERLY REPORT, DECEMBER 2005