Domestic Resource Mobilisation for SME in Bolivia

Domestic Resource Mobilization for Micro and Small Enterprises (MSE) in BoliviaJos Luis Pereira Ossio

Table of contentsCountry contextThe MSE problemMSE perspective in National Economic and Social Development PlanPolicies and tools proposals

Country context

Bolivias general information

Surface rea: 1098581 KM2Population: 10000000Officially considered a lower Middle Income CountryDoing Bussiness Rank: 157/189 countries

Bolivia Key Development Indicators Units201120122013Latin America & Caribbean 2013Lower middle income 2013GeographySurface areathousand sq. km1098.581098.581098.5819461.7321590.48PopulationPopulation, ages 15-64in thousands6155.216291.356427.95386631.871629311.84Population growth%1.641.651.651.141.49Urban population% of total population66.8667.2867.7078.9738.84Economic developmentGNI, Atlas methodcurrent USD in millions20265.9023298.8027214.315607105.895310498.10GNI per capita, Atlas methodcurrent USD1960.002220.002550.009535.582073.53GNI per capita, PPPcurrent international $5200.005410.005750.0014204.145965.94GDP growth%5.175.186.782.474.96GDP per capita growth%3.463.455.031.323.41PovertyPoverty headcount ratio at $1.25 a day, PPP% of population6.977.98n/an/an/aPoverty headcount ratio at $2 a day, PPP% of population11.9512.72n/an/an/aLife expectancy at birth, totalyears66.6366.93n/an/an/aInfant mortality rateper 1,000 live births33.4032.2031.2015.5044.00Child malnutrition% of children under 5n/an/an/an/a24.38EducationAdult literacy, male% of ages 15 and older96.6097.11n/an/an/aAdult literacy, female% of ages 15 and older88.0891.87n/an/an/aGross primary enrollment, male% of population of official age group95.16n/an/an/an/aGross primary enrollment, female% of population of official age group93.72n/an/an/an/aAccess to resourcesAccess to an improved water source% of population88.0088.10n/an/an/aAccess to improved sanitation facilities% of population46.3046.40n/an/an/a

Source: www.aidflows, World Bank 2015

Bolivia key economic indicators

Source: Bolivia Systematic Country Diagnosis, World Bank Group

Micro and Small Entreprises (MSE)

Relevance of MSE in BoliviaSector/NumberLarge enterprisesSmall and MediumMicro enterprisesTotal%Productive92113.851213.584228.35632,0%Services75320.292169.046190.09126,6%Commerce63522.588271.786295.00941,3%Total2.30956.731654.416713.456%0,3%8,0%91,7%100%

Relevance of MSE in Bolivia

MSE relevance in Bolivia

MSE characterization in Bolivia

MSE obstacles in development context

MSE main obstacles and bottlenecks

Some highlights of MSE in National Economic and Social Development Plan 2015-2020Source: Plan de Desarrollo Econmico y Social en el Marco del Desarrollo Integral para Vivir Bien (2015 2020)

Transformation of the National Productive matrixCommunity Economic, and Social Productive ModelHydrocarbonsMinningElectricityEnvironmental ResourcesIndustry, manufacture and craftsTurismAgriculture developmentHousingTrade, transport service and other servicesStrategic sectors generating surpluses

Income and Employment generating sectorsIndustrializationNational social bondsPoverty reductionIncome redistribution: social programs

STATE REDISTIBUTIONS SYSTEM SURPLUSES

Selection of sectoral goalsEconomic and Social Development Plan, Goals 2020Base line 201450% of the banking portfolio is dedicated to productive micro, small and medium enterprises 34%At least 40% of Foreign direct investment (FDI) is aimed to the diversification of productive matrix, FDI reach at least 8.1 of GDP6.4% of GDPMicro and Small Enterprise Gross Production Value reach USD 3644 MMUSD 2275 MMMedium, Small and Micro Enterprises share at least 10% of exports value.3%MSE increase their access to Technology (10%), Financing (35%) and Training (15%)Actual: Technology (6.1% ), Financing (23.5) and Training (8.2)

Draft of financial solutions through Domestic Resource Mobilization

The formalization road, a tough challenge.

INCREASE TAX REVENUTOOLSPOTENTIALRISKSDesign specific tax system, regarding sectoral characteristics and needsNational tax system can benefit through at least 2 million new contributors.MSE deliver of oficial receipts will permit operate new financial products, as leasing or factoringOrganized social opposition, since actual system seems fair for MSE, even if Simplified Tax Regime contributes less tan 0.05% of total contributions.Weak own capacities for tax reportImplement National Micro and Small Entreprise RegisterThe register will permit to know better sectoral needs and to develop specific policies.Register will allow MSE participate in States contracts and other formal contracts and tendersRegister is perceived as State control for tax proposes.

INFRASTRUCTURE INVESTMENTSTOOLSPOTENTIALRISKSProductive Infrastrucuture could be provided by public or private invesments: roads, industrial water and electricity supply. Increasing public and private investment will have a positive efect in MSE running cost and competitivenessMSE sector is volatile and can make some infrastructure useless.

Invest in Productive Innovation CentersIncrease level and use of technolgy in MSE processConfigure clusters and improve vertical and horizontal intergration in production systems.Services sustainability could be hard to reach. Explore private and public colaboration to pay off investements.Invest in MSEs human resources, technical formation programsPenetrate in new markets and sectors, integrating information technology. Improve MSE management cultureHuman resources are unstable.

Bolivia has succesfully issued emission of national bonds in international financial markets. A special emission could be feasible in order to boost MSE sector.Financial Incentives : Bonds and funds. TOOLSPOTENTIALRISKSTraining and capacity building bondsMSE could receive Training bonds that can be exchanged against MSE specific training programs.MSE personal unstability.Cleaner production bondsMSE could receive Cleaner Production bonds, wherever environmental friendly measures are adopted in production systemsMSE dont consider environmental factor as a social duty.Financing cluster integrationLarge and medium size companies could benefit from special credit conditions (guarantee fonds, low interest rate, long term funding), wherever MSE are integrated in the value chain.Risks are similar as current banking operations.

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