officials are needed “to get things done” (Figure 14). Country specific data show that Jordan, Iraq, Lebanon, Libya, Algeria and Syria, SMEs are at least 10 percent more likely to have to make such payments than are large firms. In most countries, those SMEs that do end up paying, on average, pay a higher percentage of their annual revenues than do large firms. This pattern holds for Egypt, Jordan, Lebanon, Libya, Morocco, Syria and Iraq. This may be because interactions with officials have a minimum fixed cost element, irrespective of the value of the “transaction”.

<!-- Start of picture text --> Figure (14): Percent of Firms Required to Make Informal Payments to "Get Things Done" in Selected Arab Countries,<br>by Firm Size<br>120<br>100 SME Large<br>80<br>60<br>40<br>20<br>0<br>West Bank Jordan 11 Morocco 07 Iraq 11 Lebanon 09 Libya 09 Yemen 10 Algeria 07 Syria 09 Egypt 08<br>and Gaza<br>06<br>Source: World Bank Enterprise Surveys.<br> Percent<br><!-- End of picture text --> SMEs also sometimes have a different experience in direct interactions with officials in the context of business inspections. While large firms experience more frequent tax inspections, for example, SMEs report being more likely to be asked to make an informal payment during an inspection. Application of routine regulatory procedures sometimes works to the disadvantage of SMEs. For example, in seven of eight countries for which there is survey data, SMEs experience slower processing of imports than do large firms. This may be because large firms can use skillful intermediaries, or benefit from a learning curve in dealing with ports and customs, but it may also be due to unequal treatment by authorities. Intermediaries may be too costly for smaller enterprises, plus they lack connections that give them access to these intermediaries. Of course it is not only regulatory interpretations that may cause problems, but also the regulations themselves. Regulatory frameworks in the region range from the very good to the very poor but in general smaller firms will be less well equipped to deal with complex and costly regulations.

SMEs also face greater hurdles when attempting to enter export markets. According to World Bank enterprise data, the percentage of large firms that export is over three times that of small firms and almost double that of medium firms,<sup>18</sup> implying difficulties for SMEs to enter export markets. Another indicator on ease of exporting is average number of days to clear customs. On average, small firms spend an extra day and a half to clear customs compared to medium and large firms.<sup>19.</sup> Small firms are at a disadvantage if there are fixed costs relating to obtaining market information, product standards and quality certification and other procedures necessary to enter export markets. Newer and smaller firms may not have the contacts of established firms in export markets and large firms may control key distribution channels. Also, due to their disadvantaged access to finance, SMEs may have profitable opportunities to export for which they cannot obtain funding.

On the regulatory environment, SMEs overall face a bigger challenge, as SMEs place a high priority on rule of law—they feel they could operate and grow better with better governance and

> 18Around 35 percent for large firms vs. 21 percent for medium and 9 percent for small enterprises 197.3 days vs. 5.8 days for medium firms

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