92803 June 8, 2007 Links: - What is IDA? - Our Work in Nicaragua More on Nicaragua: - Borrowing History - Data & Statistics - Research - Contact Us At the time of project design and early implementation, Nicaragua lagged far behind its neighbors in Central America in terms of competitiveness and had no clear strategy to address the issue. In 2002, the Global Economic Forum's World Competitiveness Index ranked Nicaragua 75th out of 80 countries in the world, citing the lack of development in exports, technological capacity, and private sector development. The Competitiveness Project was designed to propose and test options for improving the business environment in Nicaragua and to pilot new business development services (BDS), especially through developing sectoral clusters   geographic concentrations of businesses and organizations in related industries   that allowed small and medium producers and processors to get access to the services they needed, and to influence policy and research agenda to respond to their demands. Facilitated private sector development in Nicaragua by dramatically simplifying business regulations and laws, strengthening institutions, developing industry clusters, promoting exports, attracting foreign direct investment, and piloting sustainable business development services. Highlights: - Days and procedures required to start a business fell from 71 days and 12 procedures in 2003 to 39 and 6 in 2006. At number 67 of 178 countries surveyed in the World Banks’ 2006 Doing Business report, Nicaragua ranks highest among Central American countries and moved up from a position of 72 in 2005. - Against growth targets of 10 percent, indicators in four project-supported industries (tourism, coffee, dairy, and light manufacturing) met or surpassed expectations: -- Tourist arrivals increased 17 percent in 2004 (525,400 to 614,800) -- Coffee production nearly doubled, from 1.10 million quintals in 2004/05 to 2.07 million quintals in 2005/06 Ð including premium and organic coffee. -- Total dairy product exports grew 33 percent from 2003 to 2004. -- Employment grew by 38 percent in the tourism industry and by 67 percent in light manufacturing. - Pro-Nicaragua, Government investment promotion agency, attracted US$137.7 million in foreign direct investment, leading to the creation of over 12,000 jobs between 2003 and 2005; Free Zone exports amounted to US$700 million in 2004. - IDA’s technical assistance brought global expertise to the creation of competition, free trade zone, and commercial registry laws. - IDA built capacity for Nicaragua's Export Promotion Agency (NicaExport) and Nicaragua’s Investment Promotion Agency (ProNicaragua), drawing on experience and assistance of the Multilateral Investment Guarantee Agency, also part of the World Bank Group. - To support the cluster activities, IDA drew on the extensive experience of IFC’s Foreign Investment Advisory Service with additional support from a Bank-Netherlands Partnership Program grant. - Total project cost was US$5.95 million of which IDA contributed US$5.4 million and the government US$550,000. Despite improvements in Nicaragua’s competitiveness, bureaucracy and regulation still prevent Nicaragua from taking full advantage of the benefits of global markets, including those arising from its membership in the Dominican RepublicÐCentral America Free Trade Agreement (DR- CAFTA). IDA will continue to support this work through the Enhanced Competitiveness Project (US$17.0 million), which will help strengthen institutions and provide technical support and matching grants to the private sector to create jobs, increase productivity, and promote exports by meeting the requirements of DR-CAFTA. Nicaragua Competitiveness Learning and Innovation Loan (2001-06) Project documents