Source: World Bank Enterprise Surveys.

||**Algeria**<br>**2007**|**Egypt**<br>**2008**|**Jordan**<br>**2011**|**Lebanon**<br>**2009**|**Libya**<br>**2009**|**Morocco**<br>**2007**|**Syria**<br>**2009**|**West**<br>**Bank and**<br>**Gaza 2006**|**Yemen**<br>**2010**|**Iraq**<br>**2011**|
|---|---|---|---|---|---|---|---|---|---|---|
|**Leading**<br>**constraint**<br>**to SMEs**|Corruption|Macroeconomic<br>uncertainty|Tax rates|Political<br>instability|Access to<br>land|Tax rates|Corruption|Political<br>instability|Corruption|Electricity|
|**2nd**<br>**leading**<br>|Informal<br>sector<br>|Informal sector<br>certain<br>|Macroeconomic<br>uncertainty|Electricity|Regulatory<br>policy<br>|Electricity|Regulatory<br>policy<br>|Macroecono<br>mic<br>|Electricity|Political<br>instability|
|**constraint**|competitio<br>n|competition|||uncertainty||uncertainty|uncertainty|||
|**3rd leading**<br>**constraint**|Access to<br>finance|Skills and<br>education of<br>available<br>workers|Informal sector<br>competition|Corruption|Access to<br>finance|Informal<br>sector<br>competition|Courts|Regulatory<br>policy<br>uncertainty|Access to<br>land|Corruption|
|**4th leading**<br>**constraint**|Access to<br>land|Regulatory<br>policy<br>uncertainty|Regulatory<br>policy<br>uncertainty|Tax rates|Tax rates|Access to<br>land|Electricity|Corruption|Political<br>instability|Access to<br>finance|
|**5th leading**<br>**constraint**|Electricity|Tax rates|Corruption|Cost of<br>financing|Macroecon<br>omic<br>uncertainty|Access to<br>finance|Skills and<br>education of<br>available<br>|Electricity|Regulatory<br>policy<br>uncertainty|Informal<br>sector<br>competitio|
||||||||workers|||n|
|**6th leading**<br>**constraint**|Political<br>instability|Corruption|Tax<br>administration|Informal<br>sector<br>competition|Informal<br>sector<br>competition|Courts|Customs and<br>trade<br>regulations|Transport|Courts|Access to<br>land|
|**7th leading**<br>**constraint**|Tax rates|Cost of<br>financing|Business<br>licensing and<br>operating<br>permits|Skills and<br>education of<br>available<br>workers|Corruption|Corruption|Tax<br>administration|Crime, theft,<br>and disorder|Tax rates|Crime,<br>theft, and<br>disorder|

Although the overall business climate in the Arab world is not very conducive to private sector development, constraints still vary with size of firms. SMEs do not suffer alone from these constraints, so it is interesting to examine where they identify themselves as more constrained than larger firms. Here, it becomes clear that corruption, electricity, access to land and access to finance are a greater problem and more serious concern for smaller firms. In the case of both access to land and access to financing, it is small as opposed to medium-sized firms that identify themselves as most acutely affected. Regulatory policy uncertainty could weigh more heavily as a problem with SMEs either because they experience more of it, or because they have fewer resources and facilities to cope with it when it occurs. Surveys provide a direct indication of the first explanation. In Algeria, Egypt, Lebanon, West Bank Gaza and Iraq, SMEs are substantially more likely than large firms to disagree that interpretations of regulations are consistent and predictable.

<!-- Start of picture text --> Figure (12): SMEs Reporting that Informal Payments are<br>Made to "Get Things Done"<br>Size of Firm<br> Percent<br> Percent<br><!-- End of picture text --> <!-- Start of picture text --> Figure (13): SME Managers Spending More of their Time<br>Dealing with Regulation<br>Size of Firm<br><!-- End of picture text --> Source: World Bank and Union of Arab Banks. (2010).

SMEs suffer more than large firms from many policy and institutional constraints arising from imperfect markets and, as a result, they benefit disproportionately from reforms. Small firms in particular significantly stand out in the degree to which they identify regulatory policy uncertainty, corruption, access to land, taxation, access to finance, and electricity as serious constraints. For example, senior managers of SMEs spend a higher percentage of their time dealing with bureaucracy (Figure 13), and are more likely to report that informal payments to 16