This report has analysed the role of small and medium-sized enterprises (SMEs) in the Mediterranean, with particular reference to the local and regional context in which they operate. It was argued that SMEs play a vital role in enhancing competition, entrepreneurship, employment growth, economy-wide efficiency, innovation, growth and the alleviation of poverty. However, the SME sector is, in general, weak and underdeveloped across the Mediterranean region. This is unfortunate because the region faces a large number of common challenges that a stronger SME sector would help to address. These challenges include: reversing the ill-effects of an uneven development process; increasing a generally low level of per capita income; (re)igniting the process of structural transformation that has stalled across the region; reducing the high levels of inequality; improving governance; and turning the daunting demographic projections into a force for positive transformation, rather than a potential source of increased poverty and instability. A strong and vibrant SME sector has the potential to play a major role in overcoming these challenges and act as the primary driver of development across the region. However, there are a large number of barriers to SME development across the region, with the report identifying three of the concerns most widely cited by businesses across the region, most of which are SMEs. First, difficulties in accessing finance are most widely cited as the number one constraint on doing business in the Mediterranean, a fact that is especially worrying given that recent evidence draws a strong and positive link between financial development and economic growth. Second, the public administrations of the region are also considered not always to be helpful when doing business, with red tape and an occasional lack of transparency, all seemingly problematic for many countries. Third, the inadequacy of key infrastructure, such as roads, power, water and telecommunications, is a widely cited concern for firms across the Mediterranean. The fact that the SME sector is so underdeveloped across the Mediterranean implies that there is considerable scope for improving the level of interaction and co-operation between local and regional authorities, on one hand, and SMEs - both existing firms and prospective entrants, on the other. Improving this interaction is essential because, in one of the paradoxes of globalisation, the competitiveness of national economies is often built upon geographically limited agglomerations, which are in turn often composed of large numbers of SMEs. Consequently, successful socio-economic development is nearly always built on local and regional foundations. Encouraging SMEs should provide a natural role for local and regional authorities that is both distinct from, and complementary to, broader national objectives. A number of key recommendations and proposals to improve the environment for SMEs were presented. The first major recommendation is to identify local and regional obstacles to entrepreneurship and SME development across the Mediterranean. Successfully identifying binding constraints on entrepreneurship will allow local and regional authorities to target the use of scarce resources in a more pragmatic and effective manner. While proposing the identification of local and regional binding constraints implies a tailored approach to the different regional circumstances, several general recommendations were made that appear to be important for the whole region. It was argued that local and regional efforts should be made to: alleviate access to finance constraints for SMEs; facilitate the internationalisation of SMEs; create local development agencies; promote and build skills and motivations for entrepreneurship and SME development; and encourage youth entrepreneurship. ARLEM has a vital function to perform in helping to foster an environment conducive to the development of a vibrant SME sector in the Southern Mediterranean and to act as a coordinator and facilitator between key stakeholders -- EU Bookshop.