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Document of
The World Bank
FOR OFFICIAL USE ONLY
Report No. 36014-YEM
INTERNATIONAL DEVELOPMENT ASSOCIATION
COUNTRY ASSISTANCE STRATEGY
FOR
THE REPUBLIC OF YEMEN
FOR THE PERIOD FY2006-FY2009
May 17, 2006
Country Department III
Middle East and North Africa Region
This document has a restricted distribution and may be used by recipients only in the performance of their
official Duties. Its contents may not otherwise be disclosed without World Bank authorization.
The date of the last Country Assistance Strategy was September 5, 2002
CURRENCY EQUIVALENTS
(Exchange Rate Effective as of May 17, 2006)
Currency Unit = Yemeni Rials (YR)
US$1 = YR 196.45
SDR 1 = US$1.49348
FISCAL YEAR
January 1 – December 31
ABBREVIATIONS AND ACRONYMS
AAA
APL
CAE
Analytical and Advisory Services
Adaptable Program Lending
Country Assistance Evaluation
CASCR Country Assistance Strategy
Completion Report
CBY
Central Bank of Yemen
CFAA
Country Financial Accountability
Assessment
CPAR
Country Procurement Assessment
Report
CPIA
Country Policy and Institutional
Assessment
CPR
Country Performance Rating
DfID
Department for International
Development
ESW
Economic and Sector Work
EU
European Union
GEF
Global Environment Facility
GPI
Gender Parity Index
IBRD
International Bank for
Reconstruction and Development
IDA
International Development
Association
IEG
Independent Evaluation Group
IFAD
International Fund for Agricultural
Development
IsDB
Islamic Development Bank
LNG
Liquefied Natural Gas
MDG
Millennium Development Goal
NWSSIP National Water Sector Strategic
Investment Plan
PEC
Public Electricity Corporation
PER
PRSC
Public Expenditure Review
Poverty Reduction Support Credit
PSD
Private Sector Development
PWP
Public Works Project
SFD
SME
Social Fund for Development
Small and Medium Enterprise
TA
UK
UNFPA
UNICEF
UNDP
US
Technical Assistance
United Kingdom
United Nations Population Fund
United Nations Children’s Fund
United Nations Development
Program
United States
VAT
WBI
Value Added Tax
World Bank Institute
WHO
World Health Organization
Vice President:
Christiaan Poortman
Director:
Emmanuel Mbi
Task Team Leader: Gaiv Tata
-1-
COUNTRY ASSISTANCE STRATEGY FOR
THE REPUBLIC OF YEMEN
TABLE OF CONTENTS
I.
II.
III.
A.
B.
IV.
A.
B.
C.
D.
E.
F.
G.
V.
EXECUTIVE SUMMARY ..................................................................................... i
COUNTRY CONTEXT.......................................................................................... 1
KEY CHALLENGES AND MEDIUM-TERM PROSPECTS .............................. 3
Progress Towards Poverty Reduction and Social Development............................. 3
Medium-Term Outlook......................................................................................... 17
WORLD BANK ASSISTANCE STRATEGY .................................................... 19
Past Bank Assistance ............................................................................................ 19
Government’s Development Program and the CAS............................................. 22
Development Partners........................................................................................... 23
CAS Design: Pillars, Outcomes and Instruments ................................................. 25
Country Financing Parameters.............................................................................. 34
Lending Scenarios................................................................................................. 34
Results-Based Monitoring and Evaluation ........................................................... 34
MANAGING RISKS ............................................................................................ 35
Figures
Figure 1: Yemen’s Governance Indicators ....................................................................... 6
Figure 2: Ranking of Investment Climate Constraints ................................................... 10
Tables
Table 1:
Table 2:
Table 3:
Table 4:
Table 5:
Table 6:
Boxes
Box 1:
Box 2:
Box 3:
Box 4:
Box 5:
Selected Macroeconomic Indicators ............................................................... 17
Donor Partnerships.......................................................................................... 24
Previous Lending Program and Impact on Country Development Goals....... 27
New Lending Program and Impact on Country Development Goals ............. 29
Economic and Sector Work and Impact on Country Development Goals ..... 31
Proposed Technical Assistance and Implementation Support ........................ 31
Short-term National Agenda for Reform/Matrix of Good Governance
Measures ........................................................................................................... 8
The Emerging Approach to Water.................................................................. 14
Key Successes Under 2003-2005 Country Assistance Strategy .................... 21
World Bank Support to Population Issues ..................................................... 26
Learning from the 2003-2005 Country Assistance Strategy........................... 28
-2Annexes
Annex 1:
Annex 2:
Annex 3:
Annex 4:
Annex 5:
Annex 6:
Annex 7:
Annex A2:
Annex B2:
Annex B3:
Annex B4:
Annex B5:
Annex B6:
Annex B7:
Annex B8:
Annex B8:
CAS Results Chain
CAS Results Matrix
CAS Completion Report
CAS Consultations
CAS Instruments by Country Development Goals
Doing Business Indicators
Country Financing Parameters
Country at a Glance
Selected Indicators of Bank Portfolio Performance and Management
Proposed Lending Program
Summary of Non-Lending Services
Social Indicators
Key Economic Indicators
Key Exposure Indicators
Operations Portfolio (IBRD/IDA/Grants)
Statement of IFC’s Held and Disbursed Portfolio
Map
IBRD Map No. 33513
ACKNOWLEDGEMENTS
This Country Assistance Strategy was prepared by a core team consisting of Torek Farhadi, Afef Haddad,
Stephen Karam, Roseleen Mba-Kalu, Gail Richardson, Mustapha Rouis, T.G. Srinivasan, Gaiv Tata (Team
Leader), Jean-Philippe Tre and Ayesha Vawda. The Government CAS team was led by the Vice Minister of
the Ministry of Planning and International Cooperation, Yahya Al-Mutawakel, included Abdullah Al-Shater,
Mutahar Al-Abbasi, Hisham Sharaf, Mohammed Al- Haweri and Khaled Mohamed Saeed and was supported
by Taha Al-Fusail and Mustafa Al-Khameri. Government contribution was provided under the overall
supervision of H.E. Ahmed Sofan, ex-Deputy Prime Minister and Minister of Planning and International
Cooperation and H.E. Abdul Karim Al-Arhabi, Minister of Planning and International Cooperation.
Significant contributions were provided by many members of the World Bank’s Country Team and officials
from several Government ministries and agencies and are gratefully acknowledged. Administrative support
was provided by Maria Luisa de la Puente and Irene Sitienei.
-iI.
EXECUTIVE SUMMARY
i.
Yemen represents the single largest development challenge in the Middle East: it is
a country of deep rooted tradition endowed with limited resources notably scarce water,
limited arable land and declining oil reserves; a country that has experienced dramatic
internal and external shocks in the last two decades; the only low-income IDA country in
a rich region; and a young country with nearly 50 percent of its population below 15
years and population expected to double in the next 20 years. Despite these constraints,
Yemen developed a multi-party democratic system and a relatively free press ahead of
other countries in the region.
ii. After the civil war of 1994, Yemen undertook painful economic reforms and saw
the benefits through a healthy growth in per capita incomes. With the slowdown in the
reform process between 2000 and 2005, Yemen made limited economic and social
progress over the period of implementing its first Poverty Reduction Strategy Paper
(2003-2005). This limited progress is also reflected in the Bank’s program under the
previous two CASs being rated as moderately unsatisfactory by IEG. External assistance
in support of the Government’s program has been modest despite widespread recognition
of assistance necessary to address the development-poverty-security nexus. Initially, this
resulted from perceptions that Yemen could finance its development from its oil
resources. More recently, aid levels have been lower due to governance concerns as well
as shifting donor priorities.
iii. Beginning with the implementation of delayed economic reforms in July 2005, the
situation has begun to slowly improve. Two recent developments provide the first
significant window of opportunity since the successful growth episode of 1995-1999.
First, the Government has started implementing long delayed reforms and in particular is
confronting the task of reforming Yemen’s governance systems; its success in doing so is
crucial and must be both closely watched and supported by all development partners.
Second, neighboring countries are offering Yemen the long-term prospect of regional
integration and, during the transition period, funding to develop institutions,
infrastructure and human capacities. International experience has demonstrated that, in
addition to the economic benefits of regional integration, the process of integration has
often been an incentive for reform.
iv. This Country Assistance Strategy proposes that the World Bank should help the
Government to make progress on four pillars: increasing non-oil growth; improving
human development outcomes; improving fiscal sustainability; and addressing the
resource sustainability crisis. The CAS also includes, under each pillar, upfront actions
to improve economic governance which need to be implemented immediately even
though the outcomes may only be visible in the medium-term.
v.
Based on Yemen’s IDA allocation, the World Bank will contribute - to Yemen’s
development process - a modest financial amount of around US$400 million in IDA
credits over the four year CAS period. Given the enormous development needs of
- ii Yemen, IDA disbursements will remain modest and annually contribute less than 7.5
percent of development expenditures. The World Bank’s larger contribution will
therefore have to come from: a catalytic role in encouraging other donors to assist
Yemen; providing technical assistance to the Government and working with other donors
to define sector and thematic strategies and improve delivery mechanisms; helping in
improving core Government systems; and exceptionally, using projects to demonstrate
new implementation approaches that, if successful, can be mainstreamed by the
Government and other development partners. This focus will be consistent with
approaches that led to the few successes under the previous CAS.
vi. The risks to the program will be significant and will encompass: development
effectiveness; fiduciary management, macro economic and debt sustainability; realizing
reform payoffs; and regional/internal security issues. These risks will be closely
monitored and are being mitigated, wherever feasible. The Bank will remain closely
engaged recognizing that, despite the high risks, there is also the potential for high reward
to its assistance.
vii. The following issues are suggested for the consideration of the Board.
• Does the CAS design sufficiently incorporate the lessons learned from the
implementation of the previous CAS?
• Is the focus on assisting Government to meet short- to medium-term crises
appropriate?
• Does the CAS program realistically reflect the results that can be obtained from a
modest lending program and somewhat higher levels of non-lending assistance?
-1II.
COUNTRY CONTEXT
1.
The Republic of Yemen was formed in 1990 by the unification of North and South
Yemen. Yemen has a multi-party democratic system; two Parliamentary elections were
held in the 1990s and the most recent Parliamentary elections were held in 2003. The
current presidential system is based on direct elections and the current president was reelected through a direct presidential election in 1999. The next presidential election will
be held in September 2006. There is a relatively free press in Yemen.
2.
Since unification, Yemen has coped with several shocks. At the time of the first
Gulf war, the country coped with the return of around 800,000 Yemenis working in the
Gulf countries and a temporary suspension of most foreign aid. Subsequently, it
overcame a civil war in 1994. Yemen has experienced other internal security problems
(e.g. terrorist attacks on the USS Cole in 2000 and the French tanker Limburg in 2002
and more recently conflict in the Sada’a governorate in 2005). Yemen is considered a
Fragile State i.e. it is among a group of countries whose: policies and institutions are
weak making them vulnerable in their capacity to deliver services to citizens, control
corruption or provide for sufficient voice and accountability; and there are risks of
conflict and political instability. Within the typology of Fragile States, Yemen exhibits
most of the characteristics of a gradual reformer.1
3.
Poverty is a nation-wide phenomenon with an estimated 42 percent of the
population of 19.2 million (in 2004) living in poverty with a higher concentration in rural
areas (where 73 percent of Yemenis live).2 For nearly a decade after unification, Yemen
achieved a reasonable annual GDP growth rate (5.2 percent), securing a decent 2 percent
per-capita growth. Several factors helped in achieving growth in this period, such as the
increased market resulting from the integration of North and South Yemen, an eighty
percent increase in oil production as new oil wells came on stream in 1994, steady
decline in internal conflicts after the end of the 1994 civil war and a successful
macroeconomic stabilization and reform program in the second half of the 1990s with the
support of the international community. The reform program focused on inflation
control, price and trade liberalization, reduction in subsides, unification of the exchange
rate regime and financial sector reforms. All of these reform efforts were successful and
private investment and growth responded well. The period 1995 to 1999 stands out
clearly as a peak period of growth in post-unification Yemen.
4.
Since 2000 GDP growth has steadily begun to slip as the Government became
distracted from maintaining the momentum of reforms. First, pressures for fiscal
1
Yemen is among the initial group of countries where the OECD Principles for Good International
Engagement in Fragile States are being piloted. The World Bank identifies Fragile States by weak
performance (below 3.0) on the Country Policy and Institutional Analysis and as marginal Fragile States (if
the CPIA is below 3.2). Using only CPIA benchmarks, Yemen would not be classified as a Fragile State as
its CPIA rating is slightly above the marginal level. The typology of Fragile States consists of countries: in
deterioration; prolonged crisis or impasses; post-conflict or political transition; and in gradual
improvement. See Fragile States – Good Practice in Country Assistance Strategies, The World Bank, 2005.
2
Yemen Poverty Update, The World Bank, 2002. Poverty estimates based on 1998 Household Budget
Survey.
-2prudence lessened as revenues increased significantly from the dramatic increases in oil
prices since 2000. Second, security concerns began to dominate both in Yemen and in
the region after the September 11 events. Over this period, quality of governance also
remained weak. Several reform initiatives floundered: the privatization process stalled,
introduction of a General Sales Tax and the reduction in petroleum subsidies were
repeatedly shelved, political commitment for legal and judicial reforms wavered, and the
implementation of civil service modernization and health sector reforms slowed. Private
investment slumped in 1999 and continued to fall steadily to reach a mere 10 percent of
GDP, halving from the average during the period of reforms.
5.
Yemen ranks 151st out of 177 countries on the 2005 Human Development Index.
There has been an increase in average life expectancy (up from 41.6 years in 1970 to 63
in 2003) with women’s life expectancy mirroring the overall trends. Similarly, there has
been a significant increase in enrollment rates in basic education (up from 3 million in
1996 to 4.1 million in 2004). However, there are many remaining areas of concern
including: high fertility rates (population growing at over 0.5 million people per annum);
infant and child mortality; maternal mortality; malnutrition (18 percent of the population
or about 3 million people) particularly for children under 5; and low female literacy rates
which stood at 28.5 percent in 2002. Hence, significant challenges remain despite
achievements over the last three decades.
-3III.
KEY CHALLENGES AND MEDIUM-TERM PROSPECTS
A. Progress Towards Poverty Reduction and Social Development
6.
Yemen’s long-term vision3 is focused on achieving social and development
progress. Medium-term measures for progress in the Government’s First Poverty
Reduction Strategy (2003-2005)4 are based on the Millennium Development Goals
(MDGs).5 In support of these goals, the First PRSP was designed around five major
pillars: achieving economic growth; developing human resources; improving
infrastructure; granting social protection; and enhancing governance and participation.
The Government’s First PRSP Progress Report (for 2003 and 2004) acknowledges that
only limited progress was made towards achieving the long-term development goals.
The main goal of reducing the percentage of the poor by 13 percent is not likely to have
been met. There have been some successes in meeting targets for: basic education
enrollment (for both boys and girls), road rehabilitation and maintenance, power supply
and expanded coverage for social protection. Missed targets include: GDP growth,
mortality indicators for infants, children and mothers, and access to water and electricity.
As the main reasons for the weak performance, the APR identified: dampened investor
interest in the region following the second Iraq war; internal security concerns; and a
slowdown in economic reforms.
7.
The May 2006 Bank/IMF Joint Staff Assessment of the PRSP progress report
concurs that the very slow pace of structural reforms was the main cause of the poor
progress under the PRSP. This report and the 2004 Country Policy and Institutional
Assessment (CPIA) also identify insufficient action in public sector management and
governance as impediments to growth.
8.
As described in the paragraphs below, progress in achieving the MDGs has been
limited and based on current trends, Yemen is unlikely to achieve the MDGs by 2015,
with the possible exception of achieving universal primary education.6
Poverty Reduction
9.
The last Household Budget Survey was undertaken in Yemen in 1998. The detailed
analysis of the 1998 HBS data was undertaken in a 2002 Poverty Update which estimated
that 42 percent of households were poor based on a lower poverty line (i.e. food and nonfood expenditures of Rials 3,210 per person per month) which corresponded - based on
the prevailing exchange rate at the time - to a US$0.80 per day poverty line. The major
determinants of poverty were in line with other countries and showed that poverty status
3
Yemen Vision 2025, 2002.
The PRSP also overlapped with the 2nd Five Year Development Plan (2001-2005).
5
The MDG focus is expected to continue in the Second PRSP as Yemen is one of the pilot countries under
the UN Millennium Project and considerable support has been provided by the UN system to the analysis
and formulation of goals under the Second PRSP.
6
The assessment is based on emerging data from the new census which suggests that enrolment rates may
be higher than previously estimated; this assessment will be confirmed at the next Joint Donor Education
Review.
4
-4was negatively influenced by: larger size of the household; larger number of dependents
per household; younger age of the head of household; lower education attainment;
employment status of the head of household; lower remittances; and particular
geographical locations (which were considered a proxy for poor infrastructure).
10. Additional poverty analysis since that time has been based on partial analysis;
poverty is assumed to have remained stagnant or decreased only slightly since the last
survey. Work on a new Household Budget Survey commenced in July 2005 (after the
completion of the 2004 Census) and the full year survey process will be completed by
June 2006. A full update of the poverty situation is, hence, expected in 2007 and its
findings would be presented in the 2008 CAS Progress Report.
Macro-Economic Context
11. Fiscal revenues (38 percent of GDP) are heavily dependent on oil (which
contributes about three-quarters of revenues). As the oil sector generates few jobs, the
primary mechanism for transferring the benefits from oil revenues to the population are
through: public transfers; public services and public investments. While safety net
transfers are limited, fuel is being sold domestically below international prices and
subsidies are now costing 10 percent of GDP. These subsidies, which are poorly targeted
are as large as development expenditures and reduce the resources available for achieving
the MDGs as well as for investing in infrastructure and public services necessary for
supporting growth. With total Government expenditures at 40 percent of GDP, the
primary fiscal account is nearly in balance. External balances are heavily dependent on
oil; out of merchandise exports of US$ 6.6 billion in 2005, oil contributed US$5.8 billion.
Imports stood at US$4.5 billion. At end-December 2005, foreign reserves stood at
US$5.4 billion with the Central Bank of Yemen’s holdings accounting for over 9.4
months of import equivalent.7
12.
In July 2005, the Government re-launched its macro-economic reform program.
Prices of fuel products (diesel, gasoline, kerosene and Liquefied Petroleum Gas) were
almost doubled reducing the overall fuel subsidy by 29 percent (estimated at world prices
at the time). Unfortunately, the fuel price increase led to three days of rioting throughout
the country, loss of life and property damage. The introduction of VAT at a 10 per cent
rate was deferred to January 1, 2007 but was introduced at an interim rate of 5 per cent
for local production and 8 percent for imported goods. Similarly, a new Customs Law
was passed.
13. In addition to the ongoing challenges of managing the budget’s heavy dependency
on oil, an additional challenge would arise as projections indicate that the oil production
will decline and barring the discovery of major new oil reserves, Yemen could become a
net oil importer by 2011. This may result in oil revenues reducing over the next decade
and affecting the state’s ability to finance the current social compact. The key
implications of this challenge for the fiscal situation; external balances; and public
indebtedness are discussed further in Section B on the medium-term outlook.
7
The other major contributor was workers remittances which amounted to US$1.1 billion.
-5-
14. Public Financial Management. The Yemen Country Financial Accountability
Assessment (CFAA) identified serious weaknesses in the areas of: internal controls;
internal and external audit; accounting and reporting; and financial and audit capacity.
In addition to specific public sector issues, there is an overall context in which accounting
and auditing practices in Yemen inadequately adhere to International Accounting
Standards (IAS); and International Standards on Auditing (ISA). There is both a need
for improved accounting education and training and a focus on professional ethics. In
August 2005, the Cabinet approved a Ten Year Public Financial Management reform
strategy to address these weaknesses including reforms and capacity building to increase
the efficiency in managing public finances. The successful implementation of these
measures would also improve fiduciary risk ratings in future assessments. The
Government followed this up by preparing a detailed Action Plan to implement this
strategy. It is currently finalizing the detailed financing arrangements with interested
donors in the context of a Partnership Agreement. The development of a computerized
system to institutionalize those reforms in key ministries is also proceeding and should be
operational by FY 2008. Further efforts to strengthen the accounting and auditing
profession will be needed to complement the PFM program; this would also have
beneficial spillovers in improving the investment climate as well as strengthening
fiduciary reporting on Bank projects.
Governance and Public Sector Management
15. Good governance is a central element of the development process. Like in many
developing countries, the Government has commenced the move to a system based on
rule of law and predictable funding of local authorities based on legally defined
responsibilities. This transition holds the promise of reducing opportunities for
corruption and poor governance but it will be challenging to the status quo as it could
impact on the role of “Shaykhs” who are community leaders playing an important role for
the Government in conflict resolution and mobilizing local communities;8 and similarly,
affect consensus building which is often achieved through a process of negotiation where
allegiance is accorded to the state in exchange for benefits.9 Progress in governance is
currently assessed on three broad dimensions: voice, accountability and political stability;
government effectiveness, regulatory burden and rule of law; and control of corruption.
Yemen ranks in the lowest 25th percentile on all areas in 2004 as shown in Figure 1. 10
8
Draft Country Social Analysis, The World Bank 2006
Yemen: Democracy and Governance Assessment, ARD Inc, February 2004
10
D. Kaufmann, A. Kraay and M. Mastruzzi, 2005 - Governance Matters IV: Governance Indicators for
1996-2004
9
-6Figure 1: YEMEN’S GOVERNANCE INDICATORS
16. Decentralization. A 2000 Local Authority Law mandated decentralization to
elected councils at governorate and district levels; local council elections were held for
the first time in 2001 and are giving greater voice to citizens, especially those living in
rural areas. By the end of 2005, there are local accountant offices at governorate and
district levels and the local budgets for 2005 were prepared fully and directly by local
authorities. The pace of implementation of the fiscal decentralization process has been
slow and local governments have limited resources over which they have discretion. In
order to make progress the Government would need to further explore revenue and
expenditure assignments within the intergovernmental fiscal system.
17. Public Sector Reform. Government effectiveness indicators (which measure the
competence of the bureaucracy and the quality of public service delivery) have remained
low reflecting growing impatience of the public over the state of public administration.
The Public Administration workforce is large (at 725,000 persons including civil
servants, security forces and other employees)) and underpaid but the large wage bill (at
about 13 percent of GDP) has meant substantially increasing pay scales would not be
fiscally affordable without an effective Human Resource policy. After an initial
implementation delay, there has been some progress recently. In July 2005, a
comprehensive wage reform strategy was approved by Parliament and implementation
has begun: most allowances were merged into a basic salary; around 60,000 individuals
receiving salaries inconsistent with their jobs and qualifications were removed from the
payroll; minimum salary levels were increased to slightly above the poverty line; and
wage increases were provided only to those civil servants who have been confirmed not
to be ghost workers. Work is well advanced on a civil servant identification system
(utilizing biometric identification methods) which is expected to become operational in
-7the second quarter of 2006 and thereafter result in further reduction of ghosts and double
dippers. This has been complemented by sector reform activities; for example, a Cabinet
approved regulation to tie teaching posts to the school rather than to the individual
teacher (234,000 members of the civil service in 2004) should address a significant
bottleneck to the delivery of quality education services in the rural areas.
18. Regulatory Reform. Low percentile rankings of regulatory burden indicators
(which measure the incidence of market-unfriendly policies) and the rule of law
indicators (which measure the quality of contract enforcement, the police, and the courts,
as well as the likelihood of crime and violence) are confirmed by recent country sector
work (the Investment Climate Assessment) which points to administrative burden and
discretion in implementing regulation and taxation as among the top constraints to private
sector development as has been noted in paragraph 23.
19. Anti-Corruption. Finally, Yemen has seen a deterioration in control of corruption
indicators. Transparency International’s corruption perception index declined from 2.6 in
2003 to 2.4 in 2004 before recovering to 2.7 in 2005 when Yemen was ranked 103rd out
of 159 countries. Clearly, the problems with administrative discretion described in
paragraph 18 have a direct impact on corruption but grand corruption is also perceived to
cause a major drain on public resources. In addition, weak Government procurement and
financial management systems (as noted in the Country Procurement Assessment Review
and Country Financial Accountability Assessment) also contribute to administrative
corruption.
20. Commencing the Implementation of Good Governance Measures.
The
Government has begun to implement several delayed reforms over the past year including
macro-economic reforms (paragraph 12); public financial management (paragraph 0);
and public sector reform (paragraph 17). Finally, in January 2006, the Government has
proposed a comprehensive governance reform agenda through a Cabinet approved
National Agenda For Reform/Matrix of Good Governance Measures including:
introducing an anti-corruption legislative framework consistent with commitments made
under the UN Convention Against Corruption; joining the Extractive Industries
Transparency Initiative; increasing transparency in public procurement and financial
management; and ensuring greater independence of the judiciary and the supreme audit
institution from the executive branch. This National Agenda for Reform has become a
central focus of a new Cabinet appointed in February 2006 which is closely monitoring
its implementation (see Box 1).
-8-
Box 1: Short-Term National Agenda for Reform/Matrix of Good Governance Measures
In January 2006, the Government adopted and commenced implementing its National Agenda
for Reform which includes concrete actions in twenty focal areas including:
•
Anti-Corruption. Laws on Anti-Corruption and Financial Disclosure to reduce conflict of
interest and put in force commitments included in the UN Convention Against Corruption;
National Corruption Record; and confidential reporting mechanism and protection for
whistleblowers.
•
Revenue Transparency. Join the Extractive Industries Transparency Initiative (EITI)
which supports improved governance in resource-rich countries through the full publication
and verification of company payments and government revenues from oil, gas and mining.
Studies have shown that when governance is good, such revenues can foster economic
growth and reduce poverty.
•
Procurement reform. Cabinet approval of National Procurement Manual and Standard
Bidding documents (completed); establishment of a tracking system to monitor all public
procurement; invitation of international experts and local external observers to participate as
observers in the High Tender Board; and amendment of the Public Tenders Law to better
define the role of the HTB, require disclosure of public procurement information, mandate
disclosure of income and assets of individuals with public procurement roles, require
disclosure from bidders of close relationships with decision-makers in public procurement.
•
Public Financial Management. Implement the Public Financial Management Strategy;
amend the law of the external audit entity to ensure its independence from the Executive
Branch and establish mechanisms for its reports to be published; and expedite Parliamentary
approval of Public Debt Management Bill (completed).
•
Civil Service Reform. Prepare an Action Plan to implement the Civil Service Reform
strategy and publish guides for government services and fees.
•
Private Sector Development. Revise laws and regulations to reduce cost and time required
to establish a new business and prepare a comprehensive report of all changes required to
improve government services provided to applicants for new businesses; reduce time taken
for customs clearance and inspection procedures from 8 to 4 days; review and amend tax
code to be in conformity with international norms; develop information system to automate
transactions of the Tax and Customs Authority; and require the Central Bank to enforce
compliance with Basel prudential guidelines.
•
Judiciary. Amend the law of Judicial Authority to ensure: separation of powers from the
executive and ensure administrative and financial autonomy of the justice system and
develop and implement an action plan to improve court performance.
•
Press. Complete the preparation of a new draft Press Law aimed at protecting rights and
public liberties and take actions against those who harass or abuse journalists.
•
Law and Order. Passage of Regulation of Weapons Possession Bill through Parliament.
-9Growth
21. Yemen’s economy is dominated by oil (estimated at 27 percent of GDP and 90
percent of merchandise exports). Other economic activities in Yemen consist of services
(38 percent of GDP); agriculture (15 percent); manufacturing, utilities and construction
(10 percent); and Government services (10 percent).11 While the oil sector makes a
substantial contribution to GDP it generates few jobs (21,000 jobs). The burden of job
creation is, hence, on the agriculture (including fisheries), manufacturing and service
sectors. Official unemployment figures (at 11.3 percent) are high and actual
unemployment rates are likely to be even higher. With low domestic demand, there are
additional challenges in developing an internationally competitive export sector given the
“Dutch disease” effects of oil exports on the exchange rate.
22. In the 1990s, GDP growth in Yemen has been driven mainly by factor accumulation
rather than productivity growth which was negative for most of the decade.12 Even this
accumulation is at risk as private sector investment in Yemen is declining - falling from
20 percent of GDP in 1997 to 13 percent by 2004.
23. Private Sector Development. Yemen has been a difficult place for doing business;
it ranked as 90th out of 155 countries in the overall ease of doing business but ranked as
151st on the ease of starting a business.13 The top investment climate constraints reported
by domestic firms are shown in Figure 2.14 Specifically,
• Macro-economic instability, tax rates, corruption, tax administration, anticompetitive or informal practices and smuggling or dumping.
• There is another set of constraints - less significant than the top ranked constraints –
but still identified as a problem by over a third to half of all firms surveyed: power,
customs regulation, land and access to finance. Some of these constraints get a higher
ranking by firms of different sizes or firms in particular locations.15
24. Agriculture. Agricultural activities are conducted in four agro-ecological zones;
the majority of cultivated land is in the highlands and plateaus and a majority of
agricultural households own livestock. Qat which is the major cash crop, represents only
15 percent of cultivated land but generates around a third of agricultural GDP; production
increased over the past decade though profits have accrued primarily to larger farmers.16
About half of the cultivated land is under irrigation (spate, tube wells or spring) and the
other half is under rainfed agriculture. There have been improvements in spate irrigation
to better manage surface water but groundwater continues to be extracted at unsustainable
11
2005 estimates in Government PRSP Progress Report Table 3.
Economic Growth in the Republic of Yemen: Sources, Constraints, and Potentials; World Bank, 2002.
13
Doing Business 2006, The World Bank, 2005.
14
Draft Investment Climate Assessment, 2006. While the rankings are based on a survey of 488 formal
firms in manufacturing, services and commerce in four locations, many of these constraints are also likely
to affect firms of all sizes and rural enterprises and farms as well.
15
Land access is a significant problem for small firms; access and cost of finance for medium-sized firms;
and worker skills and education for large firms. Electricity is a concern for firms in Al-Hodeida, access to
land in Aden; “anti-competitive or informal practices” and “smuggling and dumping” in Taiz.
16
See draft Country Social Analysis, 2006.
12
- 10 levels in part due to subsidized diesel prices. Agriculture (including fisheries) contributes
15 percent to GDP but provides employment for 55 percent of the active population; the
discrepancy reflects seasonal employment, underemployment and low productivity. Low
productivity results from: low yielding seed varieties; water shortages, problems with
access to inputs and outputs (due to poor road infrastructure and institutions); postharvest losses; and lack of quality assurance services, particularly for exports.
Figure 2: RANKING OF INVESTMENT CLIMATE CONSTRAINTS
Leading Constraints: Yemeni Enterprises
73
Macroeconomic Uncertainty
71
Tax rates
61
Corruption
54
Tax administration
54
Anticompetitive or informal practice
52
Smuggling or dumping
47
Electricity
40
Customs & trade regulations
37
Access to land
34
Cost of financing
31
Legal system/conflict resolution
31
Regulatory policy uncertainty
28
Access to finance ( collateral)
28
Crime, theft & disorder
24
Business licensing/operating permits
23
Skills/education of workers
15
Transportation
12
Labor regulations
0
10
20
30
40
50
60
70
80
Percent of respondents evaluating constraints as "major" or "very severe"
25. Fisheries. With a coastline of 2,230 km, Yemen has a wealth of fisheries
resources. Previously, Yemen allowed uncontrolled expansion of large foreign fisheries
fleets in Yemeni waters which carried the risk of over-fishing and resulted in fish exports
of only US$13 million. The Government has since discontinued the issuance of foreign
fishing agreements. This has led to the fisheries sector becoming the most important
source of non-oil export revenues (US$210 million in 2004). There is further potential
to tap lucrative markets in Europe and elsewhere for fresh fish which conform to strict
quality standards. The main constraints include: lack of planning information, research
and fisheries management plans; lack of infrastructure; and institutional capacity.
26. Urban Growth. Yemen has the highest rate of urban growth in one of the fastest
urbanizing regions (7 percent per annum). This has outstripped city capacity to provide
services, resulting in a mushrooming of informal settlements and urban slums where
residents lack tenure security and access to reliable and affordable infrastructure
services.17 The Government is focusing on three major port cities (Aden, Al-Hodeidah
and Al-Mukallah) to attract investment and stimulate economic growth. Formulation of
city development strategies (including updating of physical and investment planning) is
well underway and with small seed investments already made in Aden, there has been an
17
It is estimated that well over 10 percent of the housing stock in Taiz City is informal, while an estimated
65 percent is not legally registered and the cost of median housing to median income is in the range of 75:1.
- 11 encouraging response by the private sector with investments (including FDI) approaching
US$85 million in 2005 alone. The remaining challenges are: to replicate this approach in
other cities; and to accelerate the private sector provision of infrastructure through
enclaved industrial or export processing zones. In order to increase exports, it may also
be necessary to complement this with addressing specific administrative and institutional
constraints. 18
27. Natural Gas. Yemen has significant gas reserves (proven reserves of 17 trillion
cubic feet). Currently, natural gas plays a small role in Yemen’s economy; most gas
extracted with oil is re-injected. Production sharing contracts in Yemen have given no
property rights over gas to the private sector which is not unusual in a country where
there is no gas market or ability for export. There is significant potential for additional
GDP, foreign exchange and Government revenues from the development of gas in the
medium-term. Long-term contracts (25 years) have already been entered into for
extraction and export of two-third of these reserves. Construction of a Liquefied Natural
Gas (LNG) plant, associated pipeline and other facilities will cost $3.7 billion. Once
exports commence – currently projected for 2009 - the gross annual value is estimated at
around US$1.5 billion (in 2005 prices) or around one-fourth of crude oil exports. Net
benefits would be lower as costs of development, transport, and liquefaction would need
to be deducted but actual numbers have not yet been estimated. Further, given that the
export of Liquified Natural Gas is likely to commence in the foreseeable future, the
central issue for Government is to give the private sector appropriate incentives to
explore, produce and utilize gas (including for power generation).
28. Financial Sector. The financial system in Yemen is underdeveloped and plays a
limited role in the economy despite the adoption of a number of reform measures during
the last decade. The predominant institutions in the system are the Central Bank of
Yemen (CBY), fifteen commercial banks (two government, four foreign, and nine
domestic private banks) and two public sector specialized banks. The four largest banks
hold 65 percent of total banking system assets and branches are primarily in Sana’a and
other large cities. Nonperforming loans are estimated at a quarter of total loans and there
are concerns regarding adequate provisioning. Significant progress has been made in
banking regulation and supervision, but much still remains to be done in enforcing the
new prudential rules. While access to finance is currently extremely limited in Yemen,
international evidence indicates that financial sector reforms are needed for growth and
poverty reduction and also needed to reduce the frequency and cost of financial crises
which require costly bailouts by Governments.
Human Development
29. Education. The focus has thus far been on improving access to basic education.
In 2004, gross enrollment in basic education had increased to 4.1 million children (or
76.4 percent). Gains in other sub-sectors were equally significant: between 1996 and
2004, access to secondary and tertiary education improved by more than 80 percent. This
18
Mitsubishi Research Institute: “Enhancing Yemen Export Competitiveness: Diagnosis and Policy
Options”, 2005
- 12 significant growth in access has been complemented with improvements in gender equity.
Although low by international standards, the gender parity index (GPI) has improved
substantially. Nevertheless, sustained focus is required on reaching those who are most
likely to stay out-of-school or dropout before completing basis education. Yemen also
faces challenges in improving the quality of learning and will benchmark the
performance of its 4th and 8th grade students internationally by participating in the
Trends in International Mathematics and Science Study in 2007. In post-compulsory
education - secondary, vocational/technical, and higher education - the government is
confronting the challenges of improving the relevance of curricula to changing labor
market and social needs, and increasing the efficiency of public expenditure. The strategy
for TVET focuses on increasing the participation of employers in program design and
delivery. The strategy for secondary education would address the need to increase access
for girls and develop more diverse, relevant and cost effective curriculum options. In the
higher education sector, work is ongoing to finalize a national strategy that focuses
attention to a leaner and more cost-efficient higher education system.
30. Health. The health status of the Yemeni population is poor as measured by all
conventional indicators and Yemen is not on track to achieve health-related MDGs. Life
expectancy (at birth) is only 63 years, while maternal mortality (365 per 100,000 live
births), infant mortality (80 per 1000 live births), and under-five mortality (113 per 1000
live births) are among the highest in the region. Outcomes in rural areas are much worse
than urban areas. With 64 percent of all health expenditures being private and 36 percent
from public sources, Yemen has one of the lowest financial risk protection rates. Further,
at 1.4 percent of GDP, absolute levels of public expenditures are also low in comparison
with countries of similar income levels.
31. Nutrition. Malnutrition is widespread in Yemen, reflecting the high rates of
poverty found in both rural and urban areas. Among children under five years, 46 percent
are underweight while 52 percent are stunted (short for their age); these rates are even
higher among the poorest population quintiles. Vitamin and mineral deficiencies are also
widespread, resulting in an estimated loss of 1.3 percent of GDP.
32. The health sector in Yemen suffers from a number of serious challenges:
inequitable and inadequate access to services; poor quality of services (in both the public
and private sectors) due to a lack of essential drugs, poor facilities (many without water
and sanitation), inadequate equipment, insufficient and inadequately trained staff, and
high absentee rates among public employees. The 2000 Health Sector Reform has gone
largely un-implemented, in part due to changes in the top management of the
implementing Ministry. However, following the signing of a donor harmonization
agreement in December 2005, the Government, with support from the development
partners, has launched a major health sector review with the aim to revise the existing
strategy for reform by September 2006.
33. Social Protection. Vulnerability in Yemen exists at individual, community and
institutional levels. Since poverty is widespread, the social protection system is important
for many households. Public and private transfers (including zakat, pensions, local and
- 13 foreign remittances and government programs) provide substantial source of livelihood
for the poor and they account for about 8 percent of total expenditures of the average
Yemeni household. However, there are no comprehensive risk-reducing mechanisms
(such as labor market policies and programs). Most of the existing public mechanisms
have limited coverage, are not well targeted (with the exception of the Social Fund for
Development and the Public Works Project) and are inefficient in terms of providing
adequate protection for those in need. The Government is planning to undertake a
comprehensive review of the social protection sector including existing cash benefits,
pension schemes and other programs and plans to formulate its Social Protection Strategy
outlining the main directions for sector reforms.
34. Children and Youth. Children and youth make up 76 percent of the total
population, and the incidence of poverty among children is 21 percent higher than the
adults. Around 60 percent of the children and youth in Yemen suffer from poor health
and educational outcomes. The government recently endorsed a National Strategy for
Children and Youth that provides a comprehensive and multi-sectoral framework to
address risks that children and youth face along the life cycle stages, their consequence
on subsequent years and their implications for reducing poverty and reaching the MDGs.
This strategic framework is being incorporated into the Second PRSP and will also be
used by line ministries to incorporate children and youth issues into sectoral strategies.
Environmental Sustainability
35. Water. Water scarcity in Yemen is serious and getting worse; per capita
availability of water in Yemen is at 2 percent of world and 10 percent of regional
averages. Groundwater extraction has reached 130% of recharge with agriculture using
about 90 percent of the groundwater and within that, qat has become a major source of
water depletion. The consequent drop in aquifer levels has increased extraction costs.
Urban and rural water supply and sanitation coverage are not keeping pace with the
growth of the population. Yemen’s challenge is, hence, to better manage groundwater
resources and slow depletion while simultaneously increasing access to water (and
sanitation) services for both agricultural and potable uses for an under-served population.
Realizing the challenges facing the water sector, the government’s 2004 National Water
Sector Strategic Investment Plan (NWSSIP) and the World Bank’s supporting 2005
Country Water Resources Assistance Strategy have focused on groundwater management
as a central challenge. This new approach is described in Box 2.
36. Population. Despite a 25 percent decline in the total fertility rate between 1960 and
2003, total fertility remains among the highest in the world. With 6.2 births per woman
(down from 7.2 in 1993), corresponding to a growth rate of 3.0 percent, Yemen’s
population is increasing by over 500,000 persons per year and is expected to double to 40
million by 2030. The causes of the persistently high fertility rates are myriad and
complex. Among the most important are: low, but increasing, utilization rates of modern
contraceptives (from 1 percent in 1979 to 23 percent in 2003); the cost of contraceptives;
early age of first marriage; high infant mortality; high illiteracy rates among women; a
preference for large families; and opposition to contraceptives among men, whose
- 14 approval is needed for use by women. In addition, poor access, particularly in rural
areas, to health care and family planning services is another important factor, which
contributes not only to the low rates of breast feeding, but also to an estimated unmet
need for family planning of 51 percent (in 2003; up from 39 percent in 1997).19 While
Yemen has a National Population Strategy, which is supported extensively by a number
of development partners, population growth remains a serious challenge.
Box 2: The Emerging Approach to Water
The development of water resources and services has played an important part in driving Yemen’s growth over the
last thirty years. As problems with high levels of groundwater extraction and urban and rural water supply and
sanitation began to accelerate by the late 1990s, Government and donors were spurred to change. The National
Water Resources Authority (NWRA) was created; projects to improve irrigation efficiency were implemented and
autonomous urban water utilities introduced. In 2003, Government passed a water law, reorganized the sector
under a single Ministry of Water and Environment (MWE), and began an integrated approach to basin
management.
In 2004, Government formulated the National Water Sector Strategy and Investment Program (NWSSIP) with
Yemeni and donor stakeholders as an integrated approach to the water sector. The new approach involves a multisectoral framework including key policy and institutional changes and is supported by the new generation of Bank
projects currently under implementation (Sana’a Basin, Groundwater and Soil Conservation, Urban Water Supply,
Irrigation Improvements, and Rural Water Supply and Sanitation). This approach is facilitating the dialogue with
the Government and is now focused on developing policies for: improved management of aquifer recharge; better
capture and use of run-off from rainfall; enhanced efficiency of both urban utilities and irrigators; expanded
coverage of safe water supply and sanitation in rural areas; and evolution of wastewater treatment and recycling
options that are appropriate for Yemen. The new approach focuses on the major elements below:
•
Building local consensus through a process of monitoring depletion rates, communicating the results to
stakeholders, and improving irrigation efficiency;
•
Institutionalizing the existing (informal) usage of pricing mechanisms to set the ground rules for transferring
water from rural to urban use;
•
Managing water and sanitation services at the lowest appropriate level, through the continued decentralization
of service provision to the local corporations and water user associations and private sector participation,
where feasible;
•
Providing water and sanitation services based on local preferences and willingness to pay; and
•
Redefining the mandates of the water authorities to one of regulating providers, facilitating investments and
disseminating knowledge, rather than being involved in direct service provisioning.
There have been signs of improvement: Investments in irrigation have shown that water use efficiency can be
considerably improved, and some water conservation has been achieved. A number of autonomous Local
Corporations have been created for urban water and a major urban water investment program is underway. The
rural water institution has been restructured, a rural water sub-sector strategy has been prepared, and demand
responsive approaches are being implemented.
Infrastructure
37. Roads. Much of the rural population (accounting for over ¾ of the total population)
lives in relative isolation due to geographical circumstances e.g. the rugged and
mountainous conditions in the northwest of the country and poor condition of the rural
roads network. By late 2004, Yemen has made good progress towards the PRSP output
19
Unmet need is the difference between the percentage of women who do not want to become pregnant in
the next two years or do not want to become pregnant at all, but are not using contraceptives (Svanemyr
(2006); Promoting the Demand for Family Planning in Yemen - an Assessment for the World Bank (draft)).
- 15 targets for the transport sector with 900 km/year of paved roads being added. Overall,
the length of the paved road network has doubled in the period between 1990 and 2003.
During the past years, funding for the road sector has been about US$100 million per
year, with roughly half coming from external sources. The capability to plan and
implement programs in the road sector has also seen improvement. The remaining
challenges relate to: insufficient coverage of rural areas with all-weather roads (only 28
percent of households); institutional challenges in particular, deficiencies in budget
allocation processes which are being addressed through a parallel system of Rural
Accessibility Planning which has proved successful in its pilot phase; and inadequate
maintenance of the road network due to underfunding (less than half of the required
US$26 million per year is available) and a backlog of road rehabilitation works.
38. Power. Yemen is the least electrified country in the MENA region with only about
40 percent of the total population having access to electricity; in rural areas, the
electrification rate is even lower at only about 20 percent. The state owned Public
Electricity Corporation (PEC) owns and manages generation plants which are old and in
need of significant rehabilitation. By the end of 2005, load shedding was over 20 percent
of peak demand due to lack of generating capacity and high losses from the transmission
and distribution network. The tariff structure provides a subsidy to a large part of the
consumers and tariffs have not increased regularly in the past years and generally fall
short of covering costs. Despite this, PEC’s financial position has improved somewhat
with limited investments and better collections; revenues covered 90 percent of operating
costs in FY04 as compared with 77 percent in FY00. The short-term priorities are:
increase in generation capacity through the installation of small diesel plants, major
overhaul of several power stations; and continued reduction of transmission and
distribution losses. For the medium-term, the Government will be generating additional
power using natural gas; a 741 MW gas fired generation is expected to be commissioned
in two phases by 2010.
39. Land. As a critical input into all economic activities (rural and urban), land
allocation and titling remains a major challenge for the Government where little progress
has been made in the recent past.
Moreover, a significant proportion of court cases
involve land-related disputes which stem from an inefficient public land administration
system and weak land titling and registration systems. Over the medium-term, reforms
will be needed to: strengthen and clarify the legal and regulatory framework concerning
land related issues; streamline and rationalize the roles and mandates of institutions
dealing with public land management; and provide an operational framework for
strengthening land titling and registration through a proposed series of pilot activities
intended to improve the land registration capture rate in the pilot areas.
40. ICT. Currently Yemen has limited fixed line infrastructure (with 4 percent
coverage as compared to the MNA average of 9 percent), somewhat better mobile
coverage (9 percent though the rate is among the lowest in the region) and very limited
Internet usage (0.51 percent of the population). Availability of services in rural areas is
even lower. Prices of international voice and Internet services are higher than in other
MNA countries. These problems arise from: monopoly of service provision for the fixed
- 16 network; and regulation being performed by the same Ministry which is a market player
in fixed and mobile service provision. The postal sector shows similar weaknesses:
monopoly service provision, no regulation and a chronic structural deficit. International
experience indicates that improving sector structure and regulatory reform could have
substantial impact on improving access to services and reducing end user prices.
Qat
41. Cultivation and chewing of qat is pervasive in Yemen. There are several negative
impacts: qat consumes one-third of the abstracted groundwater; household expenditures
are diverted from food consumption; time devoted to the daily qat chewing session
represents at least a 25 per cent productivity loss; and there are also adverse health
effects. However, qat is far too well integrated into the Yemeni economy and society for
significant reductions in its cultivation and use to occur in the short-term. The PRSP
focused on the impact of qat cultivation on the scarce water resources but stopped short
of defining a specific program to deal with this issue.20 Given lack of domestic
consensus on addressing this issue, priority needs to be given to re-engaging society on
the negative impact of qat.
Avian Influenza
42. While there have been no reported cases in the country so far, Yemen lies on the
main bird migratory routes between Central Asia, Eastern Europe and Africa. Poultry
meat currently represents 65% of total meat consumption with the local poultry sector
supplying more than half of the demand. A Rapid Assessment has been conducted and
results are being finalized. Assistance, if needed, will require a multisectoral approach
integrating animal health, public health and communication components.
Gender
43. Yemen has significant gender inequality and the Government has included progress
in gender equality as part of its key PRSP goals. Many of the activities in the Bank
program directly (e.g. increased classrooms for girls’ education) and indirectly (e.g.
increasing water availability which in turn allows girls to attend school) impact on gender
issues. The activities have led to some progress: between 1996 and 2004, the Gender
Parity Index improved from 0.39 to 0.66 for basic, from 0.27 to 0.45 for secondary and
from 0.21 to 0.35 for university education. There are still large remaining challenges for
the economic empowerment of women; the draft Investment Climate Assessment shows
that women constitute only 10 percent of entrepreneurs and 6 percent of the workforce.
Addressing the main constraints to growth of all businesses as identified in paragraph 23
will help women entrepreneurs even more as they have identified these constraints to be
even more binding to growth of their businesses.
20
Yemen PRSP, 2002.
- 17 B. Medium-Term Outlook
44. Economic growth picked up in 2005, but exchange rate and inflationary pressures
were present. Oil production declined by less than one percent as a result of further
drilling in existing wells, while overall GDP was boosted by higher activity in
agriculture, construction, and transport. The Yemeni rial experienced downward pressure
in mid-year, as the government struggled to pass several key reforms. Inflation was on a
downward trend during January-July, but spiked in August-October following increases
in domestic fuel prices.
45. As noted in Table 1 below, the short run situation looks manageable because of
high oil prices and one-off investment activities related to the construction of the LNG
plant. Although oil production is expected to decline, non-oil growth is expected to be
strong in part due to construction of the LNG plant. Inflation will remain at current
levels (around 15 percent) in 2006 before beginning to average about 12 percent for the
remainder of the CAS period. The central government’s projected budget deficit for
2006, at 3.0 percent of GDP, should not significantly complicate macroeconomic
management due to better than budgeted oil revenues and restraint on expenditure.
Table 1: SELECTED MACROECONOMIC INDICATORS
Real Sector (annual % change)
Real GDP
Real oil GDP
Real non-oil GDP
CPI inflation 1
Investment (% of GDP)
Total investment
Private Investment
Government finance (% of GDP)
Revenue (including grants)
Oil & Gas
Non-oil
Grants
Total expenditure and net lending
Overall balance (deficit(-)) (commitment basis)
Non-Oil primary balance
External sector (US $ million)
Current account
Exports of goods
Imports of goods
Service (net)
Gross reserves 2
Gross reserves (months of imports)
Current account balance (% of GDP)
Memorandum items:
Crude oil produciton (1000 barrels per day)
Average oil export price (US$/barrel) 3
2001
2002
2003
2004
2005 Est. 2006 Proj.
2007-10
4.6
1.3
5.2
10.7
3.9
0.4
4.6
6.8
3.1
(1.8)
4.0
11.9
2.6
(6.9)
4.1
12.0
3.8
(0.9)
4.5
14.6
3.9
(6.3)
5.4
15.7
3.7
(6.4)
4.8
11.8
18.9
11.8
20.8
13.4
22.1
13.3
23.0
13.8
22.3
14.0
29.0
14.5
30.2
21.8
35.3
25.3
9.8
0.3
32.8
2.6
(20.5)
33.6
22.3
9.7
1.6
34.8
(1.2)
(21.5)
30.9
22.1
8.5
0.4
35.7
(4.8)
(25.1)
32.0
23.1
8.1
0.7
34.2
(2.3)
(23.2)
38.1
29.0
9.1
0.0
40.5
(2.4)
(28.9)
36.1
25.8
9.8
0.6
39.1
(3.0)
(26.4)
29.9
16.8
12.5
0.6
34.9
(4.9)
(19.0)
3302
2771
(718)
3584
3083
(633)
3923
3557
(748)
4654
3858
(757)
6624
4338
(976)
7026
6198
(1220)
6028
6280
(1029)
3569
12.5
5.3
4056
12.1
5.4
4445
12.5
(0.1)
5108
12.6
1.9
5370
9.6
4.7
5762
9.8
(4.6)
3979
7.1
(6.0)
189
433
425
396
393
368
309
23.0
24.6
27.9
36.6
51.5
58.3
59.5
Source: World Bank and IMF Staff Estimates.
1/ Core CPI is defined as CPI excluding qat.
2/ Gross reserves less commercial bank & pension fund foreign exchange deposits at Central Bank.
3/ Oil price differs from WEO price as Yemeni oil is traded at a discount.
- 18 46. Medium-term prospects are more worrisome but can be managed through a set of
policy measures and reforms which will need to include rationalization of government
expenditure (particularly the reduction of energy subsidies and controlling the wage bill),
an increase in the tax effort, and structural reforms to facilitate the adjustment to lower oil
revenues, as well as to enhance the effectiveness and credibility of public financial
management, and boost prospects for economic growth. This package of measures is
under discussion and is expected to be reflected in the Second PRSP document.
47. Medium-term debt sustainability. Yemen currently has significant foreign
exchange reserves and a positive trade balance. However, with heavy dependence on a
single commodity, the projected decrease in oil production will translate into lower
foreign exchange revenues in the medium-term and additional debt will most likely need
to be raised domestically; Debt Sustainability Analysis undertaken as part of the
Development Policy Review reveals that Yemen faces a moderate risk of debt distress.
Under the baseline all the relevant debt distress indicators stay below their respective
thresholds. But, several stress tests show that: the baseline would be vulnerable to further
shocks to the country’s weak and barely diversified export base; lower than anticipated
future oil prices would lead to a rapid deterioration of Yemen’s prospects for external
debt sustainability; and fiscal sustainability could be easily imperiled by slippages in the
fiscal adjustment program.
- 19 -
IV.
WORLD BANK ASSISTANCE STRATEGY
A. Past Bank Assistance
48. The 2003-2005 World Bank Country Assistance Strategy for Yemen was designed
to support the Government’s first PRSP and the four pillars of the CAS were consistent
with the five key areas in the PRSP. Seven projects (and commitments of US$387
million) were added to the portfolio of projects under implementation. Over the period of
the previous CAS, disbursements remained fairly constant (at around 16 per cent or
approximately US$85-95 million per annum). The quality of the portfolio improved
significantly during the last year (with unsatisfactory projects and projects at risk as a
percentage of the portfolio declining from 20 percent in June 2004 to 6 percent in June
2005). Several non-lending activities were undertaken though only a limited number
were publicly disseminated.
49. Country Assistance Evaluation FY99-FY05. The CAE (undertaken by the
Independent Evaluation Group of the World Bank) covers the last two Country
Assistance Strategies and rates the overall outcome as moderately unsatisfactory. It
concludes that there was unsatisfactory progress on governance; moderately
unsatisfactory progress on the investment climate and on water resource management;
and moderately satisfactory progress on social sector/gender issues. The principal
lessons and recommendations are that the future Bank program should:
• learn local conditions by conducting adequate research and developing issue-specific
knowledge to have country specific solutions (e.g. as in the water sector);
•
moderate optimism by making more realistic assessments of ownership, speed of
implementation and likely outcomes;
•
upgrade governance as a central constraint to delivering public services and as a
cross-cutting theme in its program;
•
conserve water - Bank support to help conserve groundwater is essential;
•
counteract qat by helping to investigate the economic, social and resource
implications of producing qat and support education and public awareness campaigns.
•
improve population policy by assisting in accelerating the demographic transition in
Yemen.
- 20 -
50. CAS Completion Report. The CAS Completion Report (Annex 3) also indicates
that outcomes were unsatisfactory for governance and private sector development;
moderately unsatisfactory for environmental sustainability and moderately satisfactory
for the human development pillar. In addition to the lessons from the IEG CAE, there are
four other lessons drawn by the CASCR: 21
•
CAS Results Selectivity: Given that donor assistance to Yemen is extremely limited,
donor projects need to balance competing goals of delivering immediate results
(essential to build confidence in public service delivery) and improving the long-term
delivery capacity of Government’s systems;
•
Long-Term Partnerships: The optimal approach - adopted for education, water and
PFM - was to assist the Government in developing a sector strategy (through nonlending assistance); aligning donor support around the sector strategy and designing
IDA projects within this broader harmonization context;
•
Strengthening state capacity and accountability: In the context of weak capacity,
actions to move away from PMUs and mainstream implementation need to be
considered on a sector-by-sector basis taking into account the pace of actions to
strengthen fiduciary systems (procurement and financial management) and
implementation capacity (progress in sector level civil service restructuring). An
alternative approach is to formalize and provide greater autonomy to enclave entities
(e.g. the Social Fund for Development and the Public Works Project).
•
Greater Implementation Focus: For lending activities, new projects need to be: (a)
not too complex for the implementing environment; and (b) subject to rigorous
criteria to ensure that they are ready for implementation prior to effectiveness to
reduce implementation delays. For non-lending activities, a country level approach to
managing the portfolio of non-lending activities is required to reduce fragmentation
and ensure a focus on dissemination/leveraging support to major Government reform
priorities.
51. Despite the moderately unsatisfactory rating of the CAE and the unsatisfactory
rating of the CASCR, both evaluations recognized that there had been substantial
progress made in education and social development and that by not lending, the Bank had
assisted in the transformation of the fisheries sector (Box 3). Further, despite limited
impact achieved under the 2003-2005 CAS, many of the building blocks for the next
CAS were finally put into place during the last twelve to eighteen months of the previous
CAS. These included: public financial management; civil service reform; water resource
management; and support to urban economic development in the port cities particularly
in Aden. In these key areas, there are locally owned reform strategies and the challenge
for the next CAS would be on supporting implementation.
21
The lessons in the CASCR are consistent with international experience with gradual reformers as noted
in Fragile States – Good Practice in Country Assistance Strategies, World Bank, 2005.
- 21 -
Box 3: Key Successes under 2003-2005 Country Assistance Strategy
Basic Education: Fixing Government Delivery Systems. The significant improvements in the education sector
provide a good illustration of the optimal approach to achieving impact in Yemen. First, there was demonstrated
Government commitment: through budgetary allocations (6.8 percent of GDP or 22% of total government expenditures
in 2004) and strong leadership at the Ministry of Education. Second, donor harmonization is working well with the
education sector being the furthest along with a formal partnership of 12 donors which worked with the government in
drafting the Basic Education Development Strategy and, since 2005, has been reviewing the strategy annually. Multidonor financing arrangements are in place both through the global EFA-FTI Catalytic Fund; and through a country
specific multi-donor Trust Fund being implemented in conjunction with ongoing World Bank projects. Third, the Bank
invested heavily in the strategic planning and analytical phases and its work provided the basis for the systemic changes
(e.g. rationalizing teacher deployment and the inspectors’ corps in coordination with the civil service reform process;
building national capacity for education assessment and international benchmarking of the learning achievements of
Yemeni students; and utilizing school mapping in making school construction decisions). Fourth, Bank projects
supported clear and simple implementation arrangements with a focus on capacity building which has led to
satisfactory performance even in difficult implementing environments. This success has had spillover effects as a
similar approach has been adopted for secondary education, technical and vocational training, higher education and a
children and youth strategy.
Social Fund for Development and Public Works Program: Successful Enclave Approaches.
The Yemen Social Fund for Development was established in 1997 to strengthen the social safety net and adapt the
demand-driven approach in community development. The Bank has itself provided $165 million through three IDA
credits (two closed with highly satisfactory ratings and one under implementation since August 2004); led donor
coordination efforts to increase coverage of SFD activities; and played a role in assisting the SFD in improving quality
and efficiency of service delivery; decreasing unit costs of school construction; ensuring community participation; and
a demand driven approach to service delivery. An Impact Evaluation Study on SFD projects during 1998 – 2003
concluded that: the project targeting worked well with 40% of resources going to the poorest three deciles and only 4%
to the top decile; girls’ enrollment increased from 42% in 1999 to 58% in 2003; sick individuals receiving health care
rose from 55% to 68%; access to household tap water increased by 35%, distance for fetching water reduced by 19%
and time needed to fetch water by 14%; and rural roads projects reduced journey cost and time by 40%, daily in-andout-trips increased by 180%.
The Public Works Program was established in 1996 as a semi-autonomous implementing entity in the Ministry of
Planning and International Cooperation. The Bank has itself provided $120 million through three IDA credits (two
closed with highly satisfactory ratings and one under implementation since July 2004); led donor coordination efforts
and raised an additional $90 million from other donors to increase coverage of PWP activities. PWP has provided small
scale infrastructure and community assets to deprived and poor communities throughout Yemen, including schools,
health clinics, water harvesting and water supply/sanitation infrastructure, and paved roads. Over 7 million Yemenis
have benefited from PWP-financed activities in addition to thousands of temporary man days created through its laborintensive works (a minimum of 30% labor content is required for all PWP activities). The Bank’s Independent
Evaluation Group (IEG) has assessed the PWP as a highly successful project.
Fisheries Sector: Achieving Development Impact By Not Lending. The Bank had supported the fisheries sector in
Yemen through five loans up to 1999. However the sector framework was not conducive to maximizing the poverty
reduction impact of the sector with large foreign industrial vessels undertaking unsustainable exploitation of fish
stocks, low economic benefits with exports of only US$13 million and the crowding out of small-scale artisanal
fishing. On the basis of sector work (a Fisheries Sector Strategy Note), the Bank decided to postpone further lending
until the sector framework was changed. When the sector framework was changed with the discontinuation of
licensing in 2002 and 2003, there was a dramatic impact. Fish production from small-scale fisheries, fish exports, and
sector employment all started growing at double digit rates and by 2004 fish exports reached a level of about $210
million. In view of the more favorable policy framework, the Bank has recommenced lending under the 2006-2009
CAS with an IDA credit about $25 million.
- 22 B. Government’s Development Program and the CAS
52. The Government is currently in the process of preparing its Second Poverty
Reduction Strategy (2006-2010). Priorities in the new plan continue to have a high
degree of continuity from the previous PRSP and Development Plans.22 The strategic
focus of the Second PRSP can be clustered into: growth; improving human development;
and improving governance/fiscal sustainability. 23
53. The CAS is based on the Government’s Second PRSP. Since mid-2005, the
Government has undertaken extensive country-wide consultations in preparing its Second
PRSP. Further, the Government has widely discussed its main thinking with all
stakeholders particularly donors. These consultations have also benefited the preparation
of the Bank’s Country Assistance Strategy which was sequenced to follow the PRSP
preparation processes.
54. CAS preparation has involved the Government, civil society, the private sector and
donor partners. The Government established a CAS counterpart team which the Bank
has worked closely with throughout the preparation process. In November 2005,
extensive consultations were held in Sana’a and Aden with central and local government
officials, civil society, private sector and donors. Follow-up consultations were held in
early March 2006 with members of the newly appointed Cabinet to discuss and validate
the selection of strategic priorities under the new CAS. Several multilateral and bilateral
donors were designing their country assistance programs in late 2005/early 2006 and
there was considerable collaboration in the analytical and priority setting phases of CAS
preparation.
55. The Second PRSP document together with the Joint Staff Assessment is expected to
be presented to the Executive Directors in January 2007. It was considered prudent to
proceed with the CAS ahead of the JSA for three reasons: first, the priorities in the
Second PRSP are clear and are not expected to change as the document is finalized,
translated and then reviewed by Bank and IMF staff. Second, a recent Progress Report
on PRSP implementation has recently been circulated to the Executive Directors in May
2006. Third, given declining CPIA ratings and reduced IDA allocations, there is urgent
need to have a clearly defined strategy to prioritize World Bank interventions. Further,
early action would also allow the Government to seek alternative financing for activities
that the Bank is unable to finance.
22
The second PRSP will also serve as the 3rd Five Year Development Plan and in order to produce one
document, the period for both has been aligned.
23
Focus on growth is through pillars on stimulating economic growth; enhancing economic reform; and
integrating with regional and international economies. There is a pillar on improving human capital to
achieve the MDGs. Fiscal sustainability issues are identified under pillars on enhancing good governance;
and supporting decentralization for local and rural development. There is a pillar on strengthening
partnerships with the private sector, civil society and donors in order to implement the PRSP. Finally, the
empowerment objectives of a poverty reduction strategy are embedded within other goals.
- 23 C. Development Partners
56. Yemen benefits from support from a small group of bilateral donors (France,
Germany, Italy, Japan, the Netherlands, United Kingdom and United States) and
multilateral donors (regional financial organizations such as the Arab Fund for Economic
and Social Development; the Islamic Development Bank and the Saudi Fund; European
Union; OPEC Fund for International Development; United Nations agencies and the
World Bank). The International Monetary Fund does not currently provide financial
support but provides Technical Assistance and annually conducts Article IV
consultations. Donor support for meeting external financing needs has been modest at
around US$12 per capita. Annual donor inflows amount to around US$200 million (1.25
percent of GDP or less than 15 percent of development expenditures) and IDA
disbursements at around US$100 million (less than 0.625 percent of GDP or less than 7.5
percent of development expenditures). While it is likely that some donors, such as the
Arab Funds, DfID and USAID may increase their support over the CAS period, the level
of support is unlikely to return to higher levels that prevailed during the second half of
the 1990s.
57. Recent Decline in Aid Allocations. Several bilateral donors (including IDA) have
begun to utilize the World Bank computed Country Policy and Institutional Assessment
(CPIA) to calculate their aid allocations. The CPIA evaluates country performance on
four dimensions: economic management; structural policies; policies for social
inclusion/equity; and governance/public sector management. The CPIA rating for
Yemen declined between 2003 and 2004 primarily due to a reduction in
governance/public sector management ratings which resulted in a decline in aid
allocations; for example, Yemen’s FY06-08 IDA allocation declined to SDR 187.9
million for the three year period which represents a 34 percent reduction from its FY0507 allocation. The CPIA rating remained unchanged from 2004 to 2005. The major
issues that have led to lower CPIA ratings are being addressed through the actions
contained in the National Agenda for Reform (Box 1). Hence, if suitably implemented,
these actions may be expected to improve future CPIA ratings.
58. Donor Coordination. Given the small size of the donor community, donor
coordination efforts have been progressing well with the World Bank and the UN
Resident Coordinator chairing quarterly in-country donor coordination meetings. In
January 2005, several bilateral and multilateral donors (European Union, France,
Germany, Italy, Japan, the Netherlands, United States, World Bank, United Kingdom,
United States and United Nations) signed a harmonization agreement to implement the
February 2003 Rome Declaration’s commitments on harmonization. Further, in 2005,
Yemen was also selected among the initial group of pilot countries where the OECD
Principles for Good International Engagement in Fragile States are being implemented.
These principles can be clustered into four themes: a long-term focus on state capacity
and accountability; recognition of political, security and development linkages; close
partnerships between international actors to ensure delivery of results; and donor
organizational responses must be calibrated to the specific needs of countries. The United
Kingdom and the UN system have been supporting this effort. An Aid Harmonization
- 24 Assistance unit has been established in the Ministry of Planning and International
Cooperation and is now leading the Government’s donor coordination effort.
59. Sector/Theme Partnerships. In addition to country level coordination work, there
has been substantial progress in coordinating efforts at the level of sectors and themes
(Table 2). These partnerships are working well; all of the projects approved under this
CAS in FY06 have been co-financed by other donors and given IDA constraints, this will
continue to remain a central thrust of the Bank’s approach.
Table 2: DONOR PARTNERSHIPS
Sector/Theme
Civil Service Reform
Education
Financial sector
Health
Procurement
Public Financial Management
Public Works Program
Rural Roads
Social Fund for Development
Urban and Local
Development
Water
Other Donors Involved
Netherlands, UK
France, Germany, ILO, Netherlands,
UNICEF, UK, WFP
USAID
EU, Germany, Netherlands, UK,
UNFPA, UNICEF, US, WHO
Netherlands
France, Germany, Italy, Netherlands,
UK, UNDP, US
Arab Fund, EU, France, IFAD, Italy,
US
Arab Fund, IFAD, Saudi Fund, Qatar
Fund, EU and USAID
Arab Fund, EU, Germany, Kuwait,
IFAD, IsDB, Netherlands, OPEC,
Saudi Arabia, UK, US
Cities Alliance, UN Habitat, UNDP
Germany, Netherlands
Coordination arrangements
Ongoing coordination
Partnership Agreement signed in
2004. Joint Annual Reviews.
Ongoing coordination
Partnership Agreement signed in
2005.
Ongoing coordination
Partnership Agreement signed in
2006.
Ongoing coordination
Ongoing coordination
Joint Assessment Reviews
Joint Workshops/Coordination on
Decentralization, training
curriculum and delivery strategies
Joint Assessment Reviews
60. Recent Developments. Neighboring countries of the Gulf Cooperation Council
(Saudi Arabia, Kuwait, Bahrain, Qatar, the United Arab Emirates and the Sultanate of
Oman) are offering Yemen the long-term prospect of regional integration and substantial
short-term assistance is likely to be provided to develop the institutions, infrastructure
and human capacities during the extended transitional period of getting there. These
discussions are progressing well and the Government is planning to convene – with
assistance from the Department for International Development of the United Kingdom
(DfID) and the World Bank - a Consultative Group Meeting in November 2006 and an
Investor’s Conference - with IFC’s assistance – in February 2007.
61. World Bank Country Office. The Country Office plays a key role in donor
coordination. Further, in many sectors/themes, field based Bank staff have been taking
the lead on policy dialogue with the Government. There have been two major
constraints. First, difficulties with attracting internationally recruited staff to be based in
Sana’a – which is a problem affecting most donor partners. Second, administrative costs
associated with placing a large number of international staff in the field. Given the
- 25 potentially positive impact of day-to-day dialogue with the Government, the UK
Government will be financing, initially for a period of three years, four internationally
recruited specialists in the World Bank Country Office – in macro-economic
management, public sector management, education and water. The education specialist is
already on board and the remaining specialists would be in place by the end of 2006.
D. CAS Design: Pillars, Outcomes and Instruments
62. The CAS pillars are consistent with the key focal areas in the Government’s Second
PRSP (i.e. diversifying growth; human development; and fiscal sustainability). Further,
the CAS has elevated resource sustainability to a pillar; the issues (water and population)
are part of the activities under the Second PRSP and consolidating them under a pillar
emphasizes their critical importance for long-term sustainability. In order to prioritize
activities under each pillar, the analysis (under the Development Policy Review, Country
Social Analysis, Investment Climate Assessment, IEG Country Assistance Evaluation
and CAS Completion Report) was utilized to narrow down the issues (see Box 5).
63. Pillar One: Diversifying growth through better governance and better
delivery of public services. Based on the key constraints analyzed in paragraphs 21 to
28, this pillar would focus on four outcomes:
• Improving the business regulatory environment including: new business registration;
tax policy and administration; customs and inspections; and land titling and
registration.
• Improving road and power infrastructure – this outcome would also support the
human development pillar.
• Improving skills through technical education and vocational training and higher
education
• Improving regulatory frameworks and making appropriate public investments in key
sectors (rainfed and irrigated agriculture; fisheries; manufacturing; and gas sector).
64. Pillar Two: Improving human development through more efficient service
delivery and improved safety nets.
Based on the key constraints analyzed in
paragraphs 29 to 34, this pillar would focus on four outcomes:
• Improving access, equity and quality of basic education;
• Improving access and quality of health;
• Improving safety net programs; and
• Improving water supply and sanitation
65. Pillar Three: Increasing fiscal sustainability through improved public
expenditure management. Based on the key constraints analyzed in paragraphs 11 to
20, this pillar would focus on five outcomes:
• Improving revenue transparency
• Improving expenditure management (including through reducing fuel subsidies)
• Public Sector Reform
• Improving public procurement
• Improving public financial management
- 26 -
66. Pillar Four: Increasing resource sustainability through improved management
of water resources and reduced population pressure. Based on the key constraints
analyzed in paragraphs 35 and 36, this pillar would focus on two outcomes:
• improved water resource management
• improved control over population growth.
67. Short-Term Priorities on Economic Governance. The CAS recognizes the
importance of upfront actions to improve economic governance; these actions need to be
implemented immediately even though the outcomes may only be visible in the mediumterm. Across the four pillars, the following are the key short-term actions on improving
economic governance together with the rationale for their selection:
•
•
•
•
oil revenue transparency - would ensure better use of oil revenues and also lead to
increase willingness to be taxed.
improved expenditure management - would ensure that expenditure cuts do not
fray the safety nets, jeopardize the delivery of basic services or result in the
deferment of public investments needed to support private sector development.
This will need to include reduction in fuel subsidies which will also have an
impact on individual incentives for extraction of scarce water resources.
improved business regulatory environment including improving predictability in
macro-economic management, regulation, taxation and inspections.
improved institutional arrangements and public service delivery mechanisms for
groundwater resource management and controlling population growth.
68. CAS Instruments. The outcomes supported by the CAS would be achieved through
a number of instruments: a significant ongoing portfolio of IDA credits (approved under
previous CASs) will continue to be implemented under this CAS period; new IDA credits
would be provided during the CAS period; and a focused program of non-lending
services would also be provided. The use of a mix of instruments to support one
particular outcome is highlighted in Box 4 which describes the approach adopted to help
the Government with improving control over population growth.
Box 4: World Bank Support to Population Issues
The Bank’s involvement in the Population sector has included considerable analytical and advisory support
including a 2002 Population Policy Note on Demographic Trends, 2004 Technical Assistance to support the
preparation of the Government’s Five-Year Plan on population and reproductive health and assistance to the
National Population Council (NPC) in the costing of its three-year Population Action Plan. More recently, in
April 2006, the Bank completed a Yemen Population Policy Paper and a study on Promoting the Demand for
Family Planning in Yemen. The findings and recommendations from these outputs provide a sound basis for
understanding the underlying determinants of the high fertility rate as well as priority policies and actions needed
by the Government and the partner agencies to address the high population growth rate in Yemen. During the
CAS period, the Bank will restructure its on-going Health Reform Support Project to expand its support to
family planning and reproductive health programs, including a major investment in the contraceptive commodity
supply for 2008. In addition, the restructured project will also place greater emphasis on basic child and
maternal health programs that over the longer term will contribute to the reduction in total fertility rate through
reductions in infant, child, and maternal mortality rates. An updated strategy is expected to result from the
ongoing Health Sector Review and to form the basis for the planned Population II project.
- 27 Table 3: PREVIOUS LENDING PROGRAM AND IMPACT ON COUNTRY
DEVELOPMENT GOALS
Existing Portfolio at start of
2003-05 CAS
FY
appr
FY
close
Country Development Goals: 2006-09 CAS
Non-oil growth
Human
Development
Fiscal
Sustainability
Resource
Sustainability
Southern Governorates
1998
2006
X
Agricultural
Civil Service Modernization
2000
2008
X
Child Development
2000
2006
X
Basic Education Expansion
2001
2007
X
Rural Access Improvement APL I 2001
2006
X
X
Rural Water Supply & Sanitation
2001
2008
X
Irrigation Improvement APL I
2001
2007
X
Taiz Municipal Development &
2002
2007
X
X
Flood Protection
Health Reform Support
2002
2008
X
Higher Education
2002
2007
X
Port Cities APL I
2003
2007
X
X
Sana’a Basin Water Management
2003
2009
X
X
APL I
Urban Water Supply & Sanitation 2003
2008
X
X
APL I
Social Fund For Development III
2004
2009
X
Third Public Works
2004
2009
X
Groundwater & Soil Conservation 2004
2010
X
X
Basic Education Expansion
2005
2010
X
The table above shows that the earlier portfolio was heavily focused on the human development goal and
had a limited focus on the three other goals.
69. Existing Portfolio. At the start of the new CAS period (July 2005), the Bank had
17 active IDA credits in Yemen with an undisbursed balance of US$567 million;
approximately US$116 million has already been disbursed during the first ten months of
FY06. There is only one project (Health Reform Support) rated unsatisfactory for
achievement of Development Objectives as well as on Implementation Progress; after
extensive discussions with the Government, this project is being formally restructured to
reflect the revised strategic approach and better address implementation capacity
constraints.
70. New Lending. The total volume of lending based on Yemen’s IDA allocations is
declining. IDA allocations are determined utilizing a Country Performance Rating that
takes into account the country’s policy performance (as measured through the Country
Policy and Institutional Assessment); the country’s governance environment; and the
performance of the existing IDA portfolio. The FY06-08 IDA allocation was determined
based on Yemen’s calendar year 2004 CPIA ratings and 2004 portfolio performance.
Given reduction in 2004 Country Performance Rating, Yemen’s IDA allocation declined
to SDR 187.9 million for the three year period which represents a 34 percent reduction
from its FY05-07 allocation. Given that the FY07-09 IDA allocation is not yet available,
the lending program has been designed on the basis of earlier allocations and set at
US$100 million per annum or a total of US$400 million over the CAS period. The IDA
- 28 three year lending allocation will be updated annually and improvements (or
deterioration) in policy performance or portfolio implementation will directly increase (or
decrease) the amount of new lending.
Box 5: Learning from the 2003-2005 CAS
The design of the new CAS learns from the unsatisfactory results under the previous CAS.
While the four pillars are similar to the four pillars of the last CAS, there are important
differences:
• Priorities within each Country Development Goal are narrowed down and achievable goals
have been set. The IEG CAE and the CASCR commended the last CAS for having focused the
Bank’s broad priorities appropriately. This CAS takes the focus further down to fifteen key CAS
outcomes and results have been set commensurate with the Bank program.
• Short-term focus on critical reforms. There is a focus on short-term actions needed to stimulate
growth and improve economic governance. The Government’s program is being supported by
both lending instruments (an Institutional Reform Credit) and non-lending assistance.
• Readiness for implementation. At the start of the previous CAS, many activities were awaiting
the formulation of action plans. Under the new CAS, the Bank is supporting: (i) the National
Reform Program to improve governance which is already under implementation; (ii) sector and
thematic programs already under implementation for education, water resource management and
urban development; (iii) programs where design has been completed and implementation is about
to commence (public financial management, procurement, civil service reform). There are three
areas where program design needs to be completed: regulatory streamlining; improving the
reproductive health and population program; and improving the targeting efficacy of the safety
net system. Bank analytical support is being provided in all three areas early in the CAS period.
• Improving Government systems. There is a clearer recognition (particularly given IDA
constraints) that the best approach for results selectivity is to develop long-term partnerships with
other donors and to build state capacity through supporting programs to improve Government
systems (procurement, financial management and civil service reform).
• Implementation focus. While emphasizing the improvement of Government systems, there is
recognition that, in the short-term, implementation will occur largely through the Bank’s project
portfolio. Hence, the Government is improving portfolio performance with the assistance of the
World Bank’s Country Office; the Country Portfolio Performance Review process has been
rejuvenated. Close attention has been given by the leadership of the Ministry of Planning and
International Cooperation and the Ministry of Finance and at the Cabinet level. This emphasis
has already shown results; in the first ten months of FY06, IDA disbursements in Yemen
exceeded US$116 million (a disbursement ratio of 20.5 percent) as compared with a
disbursement ratio of 16 percent for the previous CAS period.
71. Lending selectivity and focus. The focus of the lending program for the CAS
period relative to the country development goals is shown below (Table 4). There are two
key constraints affecting selectivity. First, the limited annual lending allocation has led
to an average of three IDA credits being provided each year. Second, Yemen has a
relatively large portfolio of Adaptable Program Loans (APLs)24; during CAS preparation,
the Bank and the Government discussed the need for decisions on future phases of
existing APLs to be taken in an informed manner. 25 While it has been agreed that two
APLs would be consolidated, the Government has indicated its preference to proceed
with all existing APLs provided triggers to move to subsequent phases are met and the
merit of such phases is justified through project appraisal. While acknowledging the
24
Under such an instrument, the Bank and the Government agree to a longer-term program (an initially
approved project and one or two follow-on projects if specific triggers are met).
25
The discussions drew upon the findings of the Fourth Review of Adaptable Lending (July, 2005)
- 29 constraint this presents for the lending program, the Bank agreed that the original
objectives of these programs remain priorities in the context of the new CAS. This
heightened the importance of selectivity in any new lending beyond subsequent phases of
these APLs, and such lending will therefore focus on non-oil growth.
Table 4: NEW LENDING PROGRAM AND IMPACT ON COUNTRY
DEVELOPMENT GOALS
Country Development Goals: 2006-09 CAS
Lending assistance under
2006-09 CAS
FY
Fisheries
2006
X
Rural Access Improvement APL II
2006
X
Power Sector
2006
X
Rainfed Agriculture & Livestock
2007
X
Second Vocational Training
2007
X
Social Development
2007
Non-oil
growth
Human
Development
Fiscal
Sustainability
Resource
Sustainability
X
X
X
X
Institutional Reform Credit (DPL)
2007
Urban Water Supply APL II
2008
X
X
Rural Energy
2008
Girls Secondary Education
2008
X
X
Population II
2009
X
X
Port Cities APL II
2009
Poverty Reduction Support Credit I
2009
X
X
X
X
X
X
X
X
72. Portfolio Management. The Country Portfolio Performance Review process would
continue and would be expanded to cover both lending and non-lending activities. The
total volume of projects in the portfolio will decline from 18 at the start to 12 by the end
of the CAS period. This smaller portfolio will allow the Bank to focus its efforts and
will, over time, free up additional administrative budget resources for other activities –
particularly non-lending assistance. Further, by continuing with the same implementation
arrangements for several of the new projects (particularly for APLs), project
implementation is expected to continue smoothly without the start-up lags that were
experienced under many of the projects under the previous CAS.
73. Addressing fiduciary risks in Bank projects. Yemen is a high risk-weak control
environment country for fiduciary risks in Bank projects; the main fiduciary weaknesses
relate to accounting and reporting, budgeting systems, internal controls and procurement
and result from weak capacity (within project units and in external auditors) and high turn
over of fiduciary staff. Consequently, careful attention has been provided to fiduciary
aspects during preparation of all projects under the new CAS. Specifically, procurement
activities have been carefully reviewed and suitable low thresholds have been applied for
prior review to ensure that any risks are identified before contracting has been
undertaken. Similarly, reducing project’s complexity and ensuring that suitably trained
- 30 financial management staffs and systems are being put in place during project
preparation; projects are not considered ready for implementation until this has occurred.
74. Development Policy Lending. There are two development policy loans in the
lending program. The Institutional Reform Credit (in the second year of the CAS period)
would focus on improving governance (including for growth). The Poverty Reduction
Support Credit (in the last year of the CAS period) would commence programmatic
lending after an extensive program to reduce fiduciary risks has been undertaken and
after a rigorous assessment conducted to confirm that key fiduciary risks have been
lowered . Specifically,
• To assist the Government in dealing with the immediate reform agenda, the
Institutional Reform Credit would primarily support the Government’s National
Agenda For Reform (including actions on governance, public sector reform and
private sector development actions) as well as sector-specific actions supporting
improved governance. The emphasis will be on a credible program of prior actions
and establishment of specific financing needs for the program (e.g. with regard to the
costs of retrenchment in support of the civil service reform program).
• To assist the Government in dealing with the longer-term development agenda, the
Poverty Reduction Support Credits would be based on the Government’s Second
PRSP and its translation into a prioritized program in the context of a Medium-Term
Expenditure Framework planning process and strengthening of procurement and
financial management systems (in line with existing Government plans supported by
donor funding). An assessment of progress will be made in the context of several
upcoming pieces of Economic and Sector Work (PER, CFAA and CPAR) prior to the
final decision to move to programmatic lending in FY09. Four key fiduciary risks in
the Government’s systems would need to be reduced from current High Risk ratings
(budget transparency; internal auditing; preparation of final accounts; and external
auditing). As has been the case with PRSCs in other countries, in addition to the
overall emphasis on addressing fiduciary risks, each PRSC would focus in depth on
one or more sectors. Specifically, given the importance of rural water issues
(irrigation, groundwater management and water supply and sanitation), the First
PRSC would commence with this sector in FY09. Subsequently, beyond the CAS
period, the Second PRSC could have an additional focus on education sector. This
sequencing is determined in part by the closure of existing Bank projects providing
support in these two areas.
75. Non-lending assistance - Economic and Sector Work and Technical Assistance.
In designing the non-lending assistance, priority was given to Economic and Sector Work
which is considered to be part of the core country diagnostics and needs to be updated at
least once every four to five years. Further, given past fragmentation of the program,
further attention was given to narrowing down the list of studies and Technical
Assistance activities.
76. Non-Lending Assistance - World Bank Institute. Yemen is one of the WBI focus
countries in MNA and has therefore been receiving a higher level of support. The focal
areas are expected to continue including: human development (health; education and
- 31 children and youth); governance; and water. As in the past, the program of assistance
will be closely linked with operational activities undertaken under the new CAS (e.g. the
restructuring of the health sector reform project has been assisted through a Rapid Results
Approach workshop).
Table 5: ECONOMIC AND SECTOR WORK AND IMPACT ON COUNTRY
DEVELOPMENT GOALS
Economic and Sector Work
under 2006-09 CAS
FY
Development Policy Review
Investment Climate Assessment
Country Social Analysis
Poverty Assessment
Public Expenditure Tracking
Surveys
Taiz Urban Poverty Analysis
Gas Incentive Framework Policy
Note
Qat Survey and Policy Note
Social Protection Strategy
Public Expenditure Review
Country Procurement Assessment
Country Financial Accountability
Assessment
Overall Education Strategy
Transport Sector Policy Note
Gender Report
Early Childhood Review
2006
2006
2006
2007
2007
2007
2007
Country Development Goals: 2006-09 CAS
Non-oil
growth
Human
Development
Fiscal
Sustainability
Resource
Sustainability
X
X
X
X
X
X
X
X
X
X
2007
2007
2008
2008
2008
2008
2008
2009
2009
X
X
X
X
X
X
X
X
X
X
X
X
Table 6: PROPOSED TECHNICAL ASSISTANCE & IMPLEMENTATION SUPPORT
Technical Assistance Support
under 2006-09 CAS
PRSP Support
Statistical Master Plan
Qat
Strategic Communications
Procurement
PFM Action Plan
EITI
Land Management & Urban
Upgrading Pilots
Private Sector Support
Health Sector Review
Children & Youth Strategy
National Water Strategy
Environment
FY
2006-09
2006-09
2008-09
2007-09
2006-09
2006-09
2007-09
2008-09
2007-09
2006-07
2006-09
2006-09
2006-09
Country Development Goals: 2006-09 CAS
Non-oil
growth
Human
Development
Fiscal
Sustainability
Resource
Sustainability
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
- 32 77. The proposed lending and non-lending programs are summarized by goal in Annex
5; in addition to the CAS period, the Annex also lists the pipeline of lending and nonlending activities in the outer years (i.e. beyond the CAS period). This has been done for
three reasons. First, some activities are programmed for the year beyond the CAS but
will be in the fifth year of the PRSP (i.e. PRSC-II; PER- II and Transport Policy Note II).
Second, some important lending activities (Integrated Urban Development, Higher
Education and Solid Waste Management) could not be included under the CAS program
due to IDA constraints and are shown in the outer years. If IDA allocations should
increase significantly as the result of greatly improved performance or if projects
currently considered priority should not be prepared, then consideration would be given
to accelerating these projects. Finally, a non-lending activity on decentralization has
been kept in the outer years. While decentralization issues would be addressed through
other ESW (including the PER, the CFAA and CPAR), if the Government should seek
further advice on fiscal decentralization, then this task would be implemented in the CAS
period. This approach would avoid the problems under previous CASs where significant
fiscal decentralization related lending and non-lending activities were initiated but never
brought to closure.
78. IFC program. Yemen is one of IFC’s “frontier” countries in the MENA region,
and it is making an extra effort to develop the private sector as well as promote south-tosouth investments into Yemen. The main challenge has been finding strong local
sponsors who are able to implement large projects. IFC’s current investment portfolio is
a modest US$9 million for 3 companies; however, its portfolio is expected to grow in the
near future as, in FY06, a strong pipeline of projects in oil refining, ports, and
construction materials has been developed.
•
•
•
In May 2006, IFC approved an investment of US$50 million (US$45 million loan and
US$5 million equity) in the Ras Issa Refinery. The investment is in a 60,000 barrel
per day refinery, including the relevant offsite infrastructure on the Ras Issa peninsula
on the Red Sea coast. The project is in line with the Government’s newly created
framework to establish two new private sector owned and operated refineries to
efficiently supply the eastern and western markets of Yemen.
IFC is also considering an investment in a greenfield cement plant. The plant would
have a capacity of 1.2 million tons per annum, and would address a supply gap as
over 60% of the annual consumption of 4.0 million tons is currently imported.
IFC is also considering potential participation in a project for the expansion,
operation, and maintenance of the Aden Container Terminal and of the Ma’alla
Container Terminal.
In addition to the investment pipeline above, IFC’s focus in the future would be in the
financial sector, including leasing and microfinance. Finally, IFC is keen to support the
private sector’s participation in the development of the domestic gas sector including for
power generation (see paragraph 27).
79. In parallel, IFC has also increased technical assistance activities through the Private
Enterprise Partnership-Middle East & North Africa (PEP-MENA) and has placed staff in
- 33 Sana'a, co-located with the World Bank. The focus is on four main areas: financial
markets; SME development; gender; and Business Enabling Environment.
•
•
•
•
In financial markets, IFC has been active in leasing programs (including work with
the Central Bank on leasing registration and legislation and the organization of an
international leasing conference in-country) and is initiating microfinance TA to
support the initiatives of the second largest Yemeni bank to service this sector.
In SME development, IFC has focused on management training through Business
Edge, including Train-the-Trainer programs for companies in Yemen, Chambers of
Commerce, and the Social Fund for Development.
IFC’s gender program work has included a scoping and analysis exercise and is
preparing to launch a two-year TA program focusing on gender and entrepreneurship.
In Business Enabling Environment, IFC is initiating a “Business Start-Up
Simplification” project which will focus on simplifying administrative procedures to
start new businesses. This work is linked to the planned simplification efforts under
the Port Cities Development Program. In addition, the Government has requested
PEP-MENA assistance to improve the policy framework for private investments in
mining. This work would be carried out in close collaboration with other units of the
World Bank Group, and include assistance to the Granite and Marble Association to
strengthen SMEs in the industry.
80. Gender. The operational mainstreaming of gender issues in human development
will continue in the new CAS. Outcomes for education include a focus on gender equity
including increasing girl’s enrolment in basic education and increasing female
completion ratios in secondary education. Health and population outcomes also
emphasize improvements in maternal health. Further, though there are no separate gender
specific outcomes, improvements in water supply (particularly in rural areas) are also
likely to primarily benefit women and girls. The main focus of efforts for the economic
empowerment of women will be on addressing the top ranked investment climate
constraints; the ICA findings reveal that female entrepreneurs are affected to a greater
extent by these top ranked constraints. The IFC gender program will also provide
targeted support for the economic empowerment of women (paragraph 79). Finally,
through periodic stocktaking (e.g. as undertaken as part of the 2006 IEG CAE and in a
proposed FY09 Gender Report), the Bank would assess how well this mainstreaming is
working and make recommendations for improvement.
81. Qat. The CAS has addressed this difficult multi-sectoral issue differentially across
its many dimensions. First, CAS activities that focus on improving the economic
viability of other agricultural and off-farm activities – including through improving the
productivity of water use - will begin to narrow the profitability differential vis-à-vis qat.
Second, given that there is limited social consensus on the negative health and social
impact of chewing qat, the CAS will continue to invest in the long-term process of raising
social awareness of qat’s negative impacts. Specifically, a survey on qat use will be
undertaken and its findings will be used to re-engage Government and civil society on a
public dialogue on the impact of qat.
- 34 E. Country Financing Parameters
82. New Country Financing Parameters were introduced for use in the IDA portfolio in
Yemen as of October 2005. The new policy is expected to increase the flexibility of the
use of IDA loan proceeds, reduce transaction costs to the country and the Bank, and
enable harmonization of donor procedures around country systems. It rests on three
guiding principles: (i) the expenditures financed from IDA loan proceeds are productive;
(ii) the impact of operations financed under such credits on the borrowing country’s fiscal
sustainability is acceptable; and (iii) oversight arrangements on the use of Bank funds are
acceptable. Under the new financing policy parameters, the Government will have
flexibility in allocation of management and resources in: overall cost sharing; local cost
financing; recurrent expenditures; and financing of taxes and duties. Further details are
provided in Annex 7.
F. Lending Scenarios
83. Indicative scenarios and triggers. With the upcoming disclosure of CPIA ratings
and the new IDA14 grants system, Yemen’s IDA allocation would vary annually and
would be based on its annual Country Performance Rating (CPR). Consequently, the
amounts shown for FY07 and beyond are indicative only. Actual allocations will depend
on: Yemen’s performance relative to the performance of other IDA countries; the
amount of overall resources available to IDA; and changes in the list of active IDAeligible countries. Further, based on these new rules, the CAS would not contain triggerbased high-base-low cases for modulating the size of the financial envelope. However,
de facto such changes will occur through improvements to the CPIA and the portfolio
performance of existing IDA projects. It is anticipated that Yemen will use its IDA
allocations during the CAS period in their entirety provided that the implementation of
the Second PRSP remains broadly on track and in particular, the Government’s National
Agenda for Reform (Box 1) is appropriately implemented.
G. Results-Based Monitoring and Evaluation
84. Country level systems for poverty, economic and human development monitoring
are not yet robust. Consequently, a two-pronged strategy will be adopted to monitor
overall results under the Second PRSP and results under this CAS. First, a program for
improvement to country level systems has been developed (a Statistical Master Plan) and
the Bank will be providing Technical Assistance to ensure that the financing
arrangements are in place and subsequently to assist the Government in supervising the
implementation of this plan. Simultaneously, sector and thematic monitoring systems
have been or are being established in the context of World Bank (or other donor) projects.
The CAS results framework has ensured that the targets for intermediate outcomes can be
monitored based on existing systems or those that will be in place in the near future.
Hence, for example, education information systems are already in place to gather detailed
information on access and quality information whereas the system to monitor the
depletion of groundwater in key basin areas is currently being put in place and therefore
other intermediate indicators would be utilized until the new system is operational.
- 35 V.
MANAGING RISKS
85. Development effectiveness. Given the poor performance under the previous CAS,
low development effectiveness remains a continuing risk. The main measures being
taken to mitigate this risk have been noted earlier and include: an upfront focus on
improving governance (particularly through the National Agenda For Reform); more
realistic targets in the CAS; and closer monitoring of the lending portfolio (which is
already beginning to show results in FY06). In addition to top-down accountability, the
Bank program will also utilize strategic communications to increase demand from
communities and civil society constituencies for greater development effectiveness.
86. Safeguard and fiduciary risks. At the country level, fiduciary risks remain high
and key mitigation measures have already been designed and are under implementation
(i.e. procurement and public financial management reforms). Implementation will be
closely monitored during the CAS period by both the Bank and the Government
particularly as improvement in fiduciary systems is a key requirement for programmatic
development policy lending. At the project level, all new projects are reducing fiduciary
risks by: ensuring sound implementation arrangements and specific capacity
strengthening prior to the commencement of project implementation; use of specific
disbursement arrangements and tailoring of Statement of Expenditure threshold; and
significant percentages of project procurement being subject to prior review. Finally,
there is increased monitoring by Bank fiduciary staff based in the Country Office.
87. Macro-economic risks including medium-term debt sustainability and single
commodity risks. As discussed in the Medium-Term Outlook section, as oil revenues
will decline there will need to be a commensurate adjustment process in order for
Government to maintain macro-economic stability. Measures will need to include:
increasing
non-oil
revenues;
decreasing
non-essential
expenditures
and
reducing/eliminating fuel subsidies. The World Bank and the IMF are assisting the
Government in identifying and implementing an appropriate package of measures. There
may, however, be resistance to implementing reform measures – as was the case in July
2005. While the risks remain high, the CAS design does address many key aspects of
making the reforms successful (focusing on growth to increase the fiscal base; public
expenditure management to gain greater efficiency from existing expenditures; and
improving social protection for the vulnerable). There also could be spillover effects on
external debt sustainability. As noted in paragraph 47, under the baseline scenario for
debt sustainability analysis, all the relevant debt distress indicators stay below their
respective thresholds. However, stress tests show vulnerability to: lower than anticipated
future oil prices (representing single commodity risks); and further shocks to the
country’s weak and barely diversified export base.
88. Reform payoffs materializing. The medium-term projections assume that the
Government’s program will result in increased investments from private sector investors
(both local and foreign) responding to a more favorable investment climate. Similarly,
the projections also assume that higher levels of donor assistance will result from
improved CPIA ratings. Even if the Government implements its program well, there are
- 36 risks that the market response may be limited due to factors outside the Government’s
control or that donors may not increase aid levels from their currently low levels.
89. Regional/Internal Security Risks. There are risks that regional or internal security
conditions could put country development objectives at risk by leading to social
instability, interruption of Government reform programs or fiscal unsustainability due to
increased expenditures on defense and internal security. Further, such conditions would
also impact on the Bank’s ability to implement its programs and/or result in security
related cost escalations. While these risks are not considered significant at this time, they
will be closely monitored throughout the CAS period.
Paul Wolfowitz
President
by Graeme Wheeler
Managing Director
Washington, DC
May 17, 2006
Improve water supply
and sanitation
Improve safety net
programs
Improve access and
quality of health
Improve access,
equity & quality of
basic Education
Pillar 2: Improving
Human Development
Through More Efficient
Service Delivery &
Improved Safety Nets
Improve
Expenditure
Management
Improve
Public
Financial
Management
ANNEX 1
Improve
Public
Procurement
Public Sector
Reform
Improve control over
population growth
Improve Water Resource
Management
Pillar 4: Increasing resource
Sustainability
Pillar 3: Increasing fiscal sustainability through improved public expenditure management
Improve
Regulatory
framework &
make public
investments
in selected
sectors
Improve skills
(TVET &
Higher
Education)
Improve
Revenue
Transparency
Improve road &
power
Infrastructure
Improve
business
environment
Private sector increases levels
and productivity of investment
Pillar 1: Diversifying Growth through
better governance and better
delivery of public services
Poverty Reduction
YEMEN CAS RESULTS CHAIN
-1-
ANNEX 2
Increasing non-oil growth
as measured by growth rate
of non-oil GDP
(i) (a) Improving Business Regulatory Environment: New Business Registration
High minimum capital
Reduction of minimum
Revise laws and regulations to reduce cost and time
required to establish a new business
requirement (2700% of per capital requirements to
capita GDP); high cost
regional average and time
Implement streamlined systems procedures and
(240% of per capita GDP)
to register to less than 30
revise regulations if necessary by December 2007
days
and time (63 days) to
register
(i) (b) Improving Business Regulatory Environment: Tax Policy and Administration
Exemptions and poor tax
Increase in revenues
Amended tax code and Introduction of new Tax
administration (widespread reported for tax purposes
Code Procedures Act in conformity with
evasion leading to
from 45% (in last ICA)
international norms:
corruption and low level of
Conduct comprehensive review of corporate tax
actual revenue collection).
policy and incentives
(i)(c) Improving Business Regulatory Environment: Customs and Inspections
Lengthy customs
Increased efficiency (4 days - Government policy on standards and frequency of
processing time (8 days)
customs clearance and 50% inspections
and excessive number of
reduction in number of days - Implementation of customs reform program
inspections (16 days per
of inspections)
year)
(i) (d) Improving Business Regulatory Environment: Land Titling and Registration
Weak property rights
Improved property rights
Revise land registration law to better define
protections and high levels for land as measured by
process and make it legally conclusive;
of conflict and fraud
20% increase in land
Strengthen administration of land allocation and
registration capture rate and registration starting with urban areas
20% decrease in land
Initiate systematic land titling in pilot areas
related court cases in two
Improve legal framework to facilitate greater use of
pilot cities
land as collateral
Livestock Development,
Institutional Reform Credit,
Vocational Training II,
Power Sector, Rural Energy
Access, Rural Electrification
and Renewable Energy
Development (GEF),
PRSC-I
New Activities
Lending: Rural Access
APL- II, Fisheries,
Rainfed Agriculture and
Ongoing Activities:
Lending: Port Cities
Development APL I, Higher
Education LIC, Southern
Governorates, IIP APL I,
Sana’a Basin Water
Management, Rural
Access APL Phase I, SFD III
Non-Lending:
Investment Climate
Assessment, IFC PEPMENA Advisory Services,
FIAS
Country
Issues and
CAS Outcomes/
Milestones
Bank Program and
Development Goals Obstacles
Indicators
Partners
PILLAR 1: DIVERSIFYING GROWTH THROUGH BETTER GOVERNANCE AND BETTER DELIVERY OF PUBLIC
SERVICES
YEMEN 2006-2009 COUNTRY ASSISTANCE STRATEGY: CAS RESULTS MATRIX
-1-
2
1
Non-Lending: Gas Incentive
Framework Study,
Technical Assistance for
Land Registration,
Investment Climate
Assessment Update
Improved policy framework and institutions in road
construction and maintenance through: introduction
of output based contracts for road maintenance
(950 km of primary and secondary roads); plan
prepared for development of road sector
contractors and consultants; establishment of
modern road management system.
Public investments in rural roads
Donor Activities: EU
fisheries project, IFAD
Agriculture, Islamic
Development Bank power
sector project, French
support & expected US
support to judicial sector
reform, Yet-to-be- identified
Donor Trust Funds for Land
Bank Program and
Partners
Milestones
(ii) (b) Improving Power Infrastructure 2
More reliable power supply Improved legal and regulatory framework through:
Legal framework raises
on main grid as measured
accountability and
(i) regulatory arrangements to be established after
transparency issues &
by higher customer
new Electricity law approved by Parliament; (ii)
discourages private
satisfaction, smaller
National Rural Electrification Strategy by end
fluctuations and reduced
investment
2006; (iii) Renewable Energy Strategy (in 2006)
Lowest electrification rate
supply failures (per baseline and Action Plan (in 2007).
in MNA region (40%) and
& targets defined in Power
Investments in model service delivery systems in
in rural areas (20%).
Project)
rural electrification to start thereafter.
Significant Renewable
Improved electrification
Pilot/demonstration schemes on wind energy and
Energy resources remain
rates for rural areas
PV based Solar Home Systems.
unutilized.
Demonstrated use of
Public investments in grid power supply.
renewable energy
(iii) (a) Improving Skills Through Technical Education and Vocational Training
Public investment not
Employer-responsive
Financial and economic analysis of the sector
conducted.
matching demand or
training programs in public
recurrent funding capacity; training institutes.
Skills Development Fund with operational
private sector involvement
Strengthened private sector
autonomy under private sector leadership.
negligible; lack of effective capacity to identify, finance Increased involvement of employers in new premechanisms for employer
and meet in-service training and in-service training programs.
participation.
needs (baseline and targets
to be established under
Second Vocational Training
Project)
CAS Outcomes/
Indicators
(ii) (a) Improving Road Infrastructure 1
Long time and high cost of Improved rural access as
measured by reduced
transport lead to lack of
access to markets, high
isolation for 1 million
cost of consumables and
persons in rural areas
(per baseline and targets in
inability to access social
services
Rural Access Program)
Issues and
Obstacles
Outcomes support both growth and human development outcomes
Outcomes support both growth and human development outcomes
Country
Development Goals
-2-
Country
Development Goals
CAS Outcomes/
Indicators
Milestones
(iii) (b) Improving Skills Through Higher Education
Approval of a strategic plan and multi-year
Higher education not
Higher education reform
strategy developed with
development program
delivering quality
professionals.
changes in finance,
- Development plans and linked program budgets
for Sana’a and Aden universities
Lack of strategic vision.
governance and quality
assurance mechanisms fully
Constraints on universities
to improve service quality.
articulated
(iv) (a) Improving Regulatory Framework and Public Investments in Key Sectors: Irrigated Agriculture
Effective Participatory Irrigation Management
Low productivity resulting
Increased productivity of
associations for spate irrigation established through
from inadequate
irrigated agriculture in
maintenance of and low
90,000 hectares of spate
formation of Scheme Water User Federations and
farmer involvement in and
irrigated lands (per baseline Water User Associations
Public investment in spate rehabilitation
contribution to spate
and targets in Irrigation
irrigation
Improvement Project)
Increased efficiency of and higher returns to
agricultural water use in the Sana’a basin.
(iv) (b) Improving Regulatory Framework and Public Investments in Key Sectors: Rainfed Agriculture and
Livestock
Low revenues from rainfed Increased household
Improved local policy framework and institutions
agriculture resulting from
revenues for supported rural through efficient livestock services delivery,
low yielding seed varieties; families through cash or in
effective seed growers associations, functioning
lack of organization to
kind benefits from
rural producer groups and functioning paraproduce and market crops
agriculture & livestock
veterinary professionals in 5 governorates.
or livestock products (fresh (baseline and targets to be
or processed) and lack of
defined in implementing
livestock quality services
RALD project)
(iv) (c) Improving Regulatory Framework and Public Investments in Key Sectors: Fisheries
Low productivity due to
Increased productivity as
Improved policy framework and implementation
lack of planning, research,
measured by average fish
arrangements through 9 Governorate Fisheries
fisheries management,
size and prices for fish (per
Management Plans; 70 fish auction sites are
infrastructure and
baseline and targets in the
managed by local cooperatives; and increased
institutional capacity
Fisheries Project).
investment in 20 fishing sites.
(iv) (d) Improving Regulatory Framework and Public Investments in Key Sectors: Gas Sector
Lack of clarity in property
Improved legal and
Improvements in legal and regulatory framework to
rights over gas extracted
regulatory framework
encourage greater private sector participation in
and lack of gas markets.
exploration, production, distribution and domestic
utilization of gas.
Issues and
Obstacles
-3-
Bank Program and
Partners
CAS Outcomes/
Indicators
Milestones
(iv) (e) Improving Regulatory Framework and Public Investments in Key Sectors : Urban Manufacturing
Job creation does not keep
Private sector commitment
Improved policy framework and institutions in
pace with high urban
to developing at least one
industrial estate development through regulatory
growth of 7%
industrial estate
framework for Industrial Estates
Strategic investments in port cities clusters
Issues and
Obstacles
Bank Program and
Partners
Improving Human
Development as measured
by progress towards
achieving relevant
Millennium Development
Goals
40 percent of Social Fund for Development
resources go to lowest three income deciles
In project intervention areas:
% of deliveries attended by skilled birth attendants
increased by 5% (from a baseline of 22%).
% of households with at least one insecticidetreated net (ITN) increased by 5 % (baseline to be
established during HRSP restructuring).
Increased physical access to and utilization of
maternal and child health services (baseline and
target to be established during HRSP
restructuring).
Non-Lending: Technical
Assistance on Children &
New Activities
Lending: Social
Development, PRSC-I
Non-Lending Activities:
Water Technical Assistance,
WBI
Lending Activities: Child
Development, Basic
Education Expansion, Basic
Education Development,
Health Sector Reform
Support, Third Social Fund
for Development, Third
Public Works Project, Urban
Water Supply APL Phase I,
Rural Water Supply and
Sanitation
Improving access, equity
Although enrolments have
and quality of education &
been increasing steadily,
universal access goals still
training as measured by:
not achieved. Significant
- Increasing gross
gender disparities
enrolment ratios to 84%
- Increasing ratio of girls to
especially in rural areas
and among disadvantaged.
45% of enrolments.
Quality remains poor and
- Grade 9 female
illiteracy rates rank among
completion ratios increased
highest in world.
to 50%
(ii) Improving Access and Quality of Health
Lack of access to and use
Improved access to and
of basic health services,
utilization of basic health
especially due to the poor
services and public health
quality of maternal and
programs focused on
child health and
maternal, reproductive and
reproductive health
child health. as measured
services, and inadequate
by:
design and implementation % of fully immunized
of public health programs
children 12-23 months
to address priority
increased by 5% (from a
communicable diseases
baseline of 50%).
affecting the health of
Contraceptive Prevalence
mothers and children.
Rate increased by 5 %
(baseline to be established
during HRSP restructuring).
(iii) Improving Safety Net Programs
Safety net programs are
Improved safety net
limited in scope and
targeting as measured by
Construction of 3,293 schools;
Rehabilitation of 2,100 schools;
Retrofitting 3,292 schools for the handicapped;
Student-teacher ratio (public schools) increased to
28:1;
Non-wage expenditures increased to 20% of
recurrent spending;
Inclusive education mission statement developed.
Ongoing Activities
(i) Improving access, equity and quality of Basic Education
PILLAR 2: ACCELERATING HUMAN DEVELOPMENT THROUGH MORE EFFICIENT SERVICE DELIVERY AND
IMPROVED SAFETY NETS
Country
Development Goals
-4-
Country
Development Goals
CAS Outcomes/
Indicators
coverage and need
targeting improvement
Lack of a comprehensive
understanding of the crosscutting nature of disability
issues
amount of resources
transferred to lowest three
income deciles and
improved targeting
categorization
Strategic framework to
address disability issues
(iv) Improving Water Supply and Sanitation
Low access to water and
Improving access to urban
sanitation services
water supply and sanitation
services by 20%
Access to improved water
services increased from
68% to 73% in rural areas.
Access to improved
sanitation services
increased from 20% to 30%
in rural areas
(v) Children & Youth
Children & Youth Strategy
to provide integrative
framework
Outcomes for children &
youth are included in
relevant HD outcomes
(vi) Gender
Improved gender parity as
measured in other HD
outcomes above
Issues and
Obstacles
-5-
Donor Activities: EU,
Germany, Netherlands, UK,
UNFPA, UNICEF, US,
WHO, Arab Fund, Kuwait,
IFAD, IsDB, Netherlands,
OPEC, Saudi Arabia and
US), WFP, France, ILO
Local water and sanitation corporations established
and financially viable in Sana’a, Taiz, Hodeidah
and Mukallah
New Rural Water Supply & Sanitation (RWSS)
Strategy, based on Demand Responsive Approach
(DRA), approved.
Long-term national RWSS investment program
ready for implementation.
Water User Associations in 5 governorates
efficiently managing rural water supply schemes
Improved gender outcomes from various Bank
projects in relevant programs
Children & Youth Strategy is implemented through
various Bank projects in relevant programs and
Early Childhood Development Strategy & Plan and
Youth Employment Plan prepared by 2008.
Youth, Technical Assistance
on Disability, Social
Protection ESW, Gender
Status Update (FY09), WBI
Bank Program and
Partners
6.8 percent increase in income from short-term
employment through PWP program
Milestones
Increasing fiscal
sustainability as measured
by reduced non-oil primary
fiscal deficit
Take necessary steps for Yemen to join the
Extractive Industries Transparency Initiative and
thereafter meet EITI publication requirements
Improved medium-term expenditure planning in
line with PRSP
Improved periodic evaluation of outcomes of
public expenditure
Reduce subsidies to and contingent liabilities of
public enterprises (particularly Public Electricity
Corporation)
Reduce government contribution for spate
irrigation to zero
RWSS schemes are recovering user charges for
adequate O&M
(ii) (b) Improving Expenditure Management: Reduced fuel subsidies
Fuel subsidies are high (at
Reduced subsidies in line
Reduced incentives to over-extract water by further
10% of GDP)
with macro-economic
reductions in diesel subsidies (for irrigation)
framework in PRSP
(iii) (a) Public Sector Reform – Central Government
Low government
Improved ability to manage HR database including biometric verification and
effectiveness and pervasive human and financial
linked to payroll is operational
corruption resulting from
resources through the
HR resource strategy identifying functions and
ineffective management
development of a mediumoptimal number of civil servants.
systems, large and
term human resource
New wage structure reducing compression &
underpaid civil service,
strategy.
increasing wages within fiscal affordability
unfocused mandates and
Net reduction of Govt.
Organization structures streamlined and business
ineffective business
employment by 5% .
processes improved in seven pilot ministries
processes in government
Improved service delivery
New center of excellence training institution to
ministries and agencies.
in seven ministries
help with change management process.
measured through service
New Law on anti-corruption and Financial
(ii) (a) Improving Expenditure Management
Lack of a Medium-Term
Improved public
Expenditure Framework
expenditure outcomes:
linking budgets to PRSP
- Medium-Term
High proportion of funds
Expenditure Framework
approved through
consistent with PRSP
supplementary budgets
- improved budget
Expenditure outcomes not
comprehensiveness and
systematically tracked
transparency (as measured
by PEFA indicators)
(i) Improving Revenue Transparency
Publication of oil revenue
Publication of oil and gas
data is undertaken without
revenue data in line with
formal oversight by civil
EITI requirements
society
Non-Lending: Public
Expenditure Review, EITI
Technical Assistance, PFM
TA, Procurement TA, WBI
New Activities:
Lending: Institutional
Reform Credit, PRSC-I
Non-Lending Activities:
Water Sector TA
Ongoing Activities
Lending Activities: Irrigation
Improvement Project APL
Phase I, Rural Water Supply
and Sanitation, Civil Service
Modernization Project,
Port Cities Development
Program, Public Works
Project III, Taiz Municipal
Development & Flood
Protection Project
Country
Issues and
CAS Outcomes/
Milestones
Bank Program and
Development Goals Obstacles
Indicators
Partners
PILLAR 3: IMPROVING FISCAL SUSTAINABILITY THROUGH IMPROVED PUBLIC EXPENDITURE
MANAGEMENT
-6-
Country
Development Goals
Disclosure Bill approved; independent national
anti-corruption entity established; National
Corruption Record functioning; Hotline to report
cases of corruption and protect whisteblowers
Manuals/guides for government services and fees
published
Full implementation of biometric system
Well functioning civil service fund for
retrenchment of surplus workers
Implementation of pilot ministry re-engineering
studies in 2-3 key ministries and customs
delivery surveys
Strengthened institution
managing public sector
reform process
(iv) Improving Public Procurement
Lengthy procurement
Improved public
processes, payment delays, procurement processes as
conflict of interest,
measured by
- legally established and
inadequacy of complaint
mechanism to report
well functioning
potential fraud/corruption
restructured and
cases and weak capacity
autonomous HTB
- UNCITRAL type
arbitration provisions
adopted
- public disclosure of
procurement decisions and
financial disclosure by
National Procurement Manual and Standardized
Bidding Documents approved for use by all public
agencies
Monitoring and tracking system to enhance
timeliness and transparency of tendering process.
Public Tender Law amended to restructure the
High Tender Board to separate regulatory and
policy functions; incorporate UNCITRAL
provisions; and institutionalize public disclosure of
procurement, financial disclosure of officials and
reporting of conflict of interest.
Procurement skills capacity building commencing
in FY07
Completion of updated city masterplans and
multiyear capital investment plans in Taiz,
Hodeida, Mukallah and Aden by December 2006
Adoption of National Training Program Strategy &
Curriculum for Local Administrations by
December 2006; and capacity building plans for 50
local councils.
Taiz local government capacity to deliver basic
services (Asset Management Unit operational, solid
waste management strategy operational Dec 2006)
15 Local Council Buildings built and furnished by
December 2006.
Milestones
CAS Outcomes/
Indicators
(iii) (b) Public Sector Reform – Local Government
Weak local council and
Improved Local
administration capacity to
Administration planning
fulfill functions under the
capacity as measured by
Local Administration Law
preparation of plans for
(2000)
2007 and availability of
Poor urban planning
administrative premises by
resulting in sprawl and
2007
higher cost of
infrastructure services.
Issues and
Obstacles
-7-
Other Donors:
Netherlands, UK Cities
Alliance, UN Habitat, UNDP
France, Germany, Italy,
Netherlands, UK, UNDP, US
Bank Program and
Partners
Country
Development Goals
CAS Outcomes/
Indicators
procurement officials
(v) Improving Public Financial Management
Improved public financial
management including
- account preparation and
internal auditing;
- external scrutiny and audit
Progress to be measured
utilizing PEFA indicators
Strengthening of
Accountancy and Auditing
Profession (as per ROSC
recommendations).
Issues and
Obstacles
-8-
Public Debt Management Bill approved
External auditing law amended to ensure COCA’s
independence from the executive branch.
Mechanisms established to have COCA reports
released to the public
Implement Public Finance Management strategy
Full implementation of Accounting and Financial
Management Information System (AFMIS)
Implement ROSC recommendations, after
discussion, including improving legal framework
consistent with International Standards
Milestones
Bank Program and
Partners
Increasing resource
sustainability
(i) Improved Water Resource Management
Groundwater being
Increased number of water
extracted at rates higher
basin committees and
than aquifer recharge
community-level user
Insufficient involvement of associations participating in
communities in local water water conservation; and
resource management
increased investment in
Flash flooding in Taiz with irrigation improvement
loss of life and property
technologies in all basins
[baselines and targets to be
computed during the CAS
cycle through on-going
LEN activities].
Reduced impact of flash
flooding on citizens,
property and infrastructure
in Taiz (per baseline and
targets in Taiz Mun. Dev. &
Flood Protection Project.
(ii) Improved control over population growth
Lack of access to
Contraceptive Prevalence
contraceptives, low status
Rate increased by 5 %
of women and high female
(baseline to be established
illiteracy rate.
during HRSP restructuring).
Share of girls in grade 1012 enrollments increased to
37%
Population milestones described in Pillar 2, CAS
Outcome 2.
Secondary Education Strategy is adopted;
Program developed to increase supply of female
teachers for rural areas.
Life skills and other applied subjects included in
secondary curriculum.
Establish a groundwater management framework
and institution to manage local water resources
sustainably through capacity building of
government institutions and community groups
Accelerate aquifer recharge in Sana’a basin by
slowing water table declines
Improve water use efficiency and increase farmer’s
returns to water through adoption of water saving
technologies, rehabilitation of small to medium
spate irrigation schemes, terrace rehabilitation,
bank protection works and other water and soil
conservation activities
Improved soil conservation and water harvesting in
rainfed areas
Completed drainage investments in City of Taiz.
Other Donors:
Germany, Netherlands
Non-Lending: Girls
Secondary Education
Strategy, WBI
New Activities:
Water Sector TA
Lending: Population II,
Girls Secondary Education,
PRSC-I
Ongoing Activities:
Lending: Sana’a Basin
Water Management APL
Phase I, Groundwater &
Soil Conservation, Taiz
Municipal Development &
Flood Protection, RALD,
TA, Health Reform Support
Non-Lending: Health Sector
TA
Country
Issues and
CAS Outcomes/
Milestones
Bank Program and
Development Goals Obstacles
Indicators
Partners
COUNTRY DEVELOPMENT GOAL 4: INCREASING RESOURCE SUSTAINABILITY THROUGH IMPROVED
MANAGEMENT OF WATER RESOURCES AND REDUCED POPULATION PRESSURE
-9-
-1ANNEX 3
CAS COMPLETION REPORT
Country: YEMEN
Date of CAS: August, 2002
Period covered by CAS Completion Report: FY03-05
CAS Completion Report Completed by: Afef Haddad and Gaiv Tata, with contributions from
from Core CAS Team members
______________________________________________________________________________
I. INTRODUCTION
1.
This document reviews the experience implementing the International Development
Association’s (IDA) Country Assistance Strategy for the period FY2003-2005 (Report 24372YEM) dated August 6, 2002 which was endorsed by the Board on September 5, 2002. The
document assesses the effectiveness of IDA’s strategy in (i) aligning its objectives with Yemen’s
long-term strategic goals; (ii) setting relevant, measurable and realistic CAS outcomes; and (iii)
achieving its expected outcomes in an efficient and sustainable way. Furthermore, this document
evaluates IDA’s performance in designing its strategy taking past assessments and lessons into
consideration (such as IEG Evaluations); and presents a set of lessons for subsequent CAS
design. In addition to discussions with the country team and government counterparts, this
assessment is based on reference documents such as the CAS, Project Appraisal Documents,
Implementation Status and Results Reports, supervision reports (Aide-Memoires, and Back-tooffice Reports), reports related to Economic and Sector Work, Implementation Completion
Reports, and IEG reports and Project Assessments.
II.
YEMEN’S LONGER TERM STRATEGIC GOALS
2.
The 2002 CAS focused on supporting the main objectives of the Second Five Year Plan
(SFYP) for the period 2001-2005 and Yemen’s First PRSP for the period 2003-2005. Yemen’s
First PRSP defined the country’s key development challenges as: (i) high population growth,
particularly its geographic distribution away from water resources, the problems of urbanization
and poor labor market demand, limited opportunities for women, and the rapid rise of child
labor; (ii) water scarcity, exacerbated by population growth, and poor waste treatment, and the
related negative impact on agriculture; (iii) weak human resources, linked with poor health
conditions, lack of education standards and adequate vocational training, and lack of capabilities
and opportunities for women; and (iv) weak institutional capacity of the state including
overstaffing, that led to a heavy wage bill, corruption, and weak judiciary system.
3.
The PRSP proposed four strategic pillars of intervention: (i) Achieving economic
growth through following macro and micro-economic policies suitable for poverty reduction,
and also through job creation and expansion of the economic opportunities of the poor by
addressing the structural causes of poverty, focusing on its prevention, and providing sustainable
means of livelihood; and through conserving, protecting the environment, and improving water
availability, distribution, and management; (ii) Developing human resources by managing
population growth through increased awareness of reproductive health and family planning,
improving primary health care, in rural areas in particular; controlling endemic diseases that
-2represent major reasons for continued poverty; improving literacy rates, especially for women;
and promoting technical and vocational training; (iii) Improving infrastructure through
enhancing potable water supply, increasing electricity coverage for rural population, and
improving rural roads; and (iv) Ensuring social protection through social safety nets and social
security programs, particularly the pension programs.
III. YEMEN’S PROGRESS TOWARDS ACHIEVING ITS DEVELOPMENT GOALS
4.
The long term strategic goals for the country remained relevant throughout the CAS. The
Government’s First PRSP Progress Report (for 2003 and 2004) – and the associated Bank/IMF
Joint Staff Assessment - acknowledges that only limited progress was made towards achieving
the long-term development goals. However, despite that achievements in the first two years have
not been positive across all objectives, the government has made a good start in linking financial
resources to development plans and establishing monitoring and evaluation mechanisms to
review and revise their plans, as needed. There have been some successes in meeting targets for:
basic education enrollment (for both boys and girls), road rehabilitation and maintenance, power
supply and expanded coverage for social protection. The main goal of reducing the percentage
of the poor by 13 percent is not likely to have been met. Missed targets also include: GDP
growth, mortality indicators for infants, children and mothers, and access to water, roads and
electricity. As the main reasons for the weak performance, the Progress Report identified:
dampened investor interest in the region following the second Iraq war; internal security
concerns; and a slowdown in economic reforms. While concurring that the very slow pace of
structural reforms was the main cause of the poor progress under the PRSP, the JSA also
identified insufficient action in public sector management and governance as impediments to
growth.
Table 1: KEY INDICATORS OF PRSP PROGRESS
Goal
Indicator
Base in 2000 Target in 2005 Actual 2004 28
Reduce poverty
Increase real GDP
Control of Population Growth
Health services
Education Enrolment
Increase Water and Sanitation
Poverty Incidence (total)
Real GDP growth rate
Population Growth rate
Coverage rate
Basic Education Enrolment
- urban ( percent of pop with access)
- rural ( percent of pop with access)
Percent of pop. with access
Km of roads built
Km of roads rehabilitated
No of beneficiaries
GDI
41.6
5.1
3.5
50
62
64
-30
Increased Electricity Service
Expansion of the Roads Network
Social Welfare & Assistance
Gender Gap
450160
0.428
35.9
5.4
3.0
65
69.3
69
65
40
1250
2586
600610
40.1
3.5
3.0
63
68.9
62.4
34.0
37
1436
7873
650000
0.427
5.
Changes in major assumptions. There were two major assumptions made in the CAS
which did not materialize to the extent predicted: reduction in oil’s contribution to GDP and
fiscal revenues; and the pace of decentralization of service delivery to governorates and local
governments. First, oil prices moved up starting in 2004 and the higher prices led to better GDP
28
Most recent data available per Yemen PRS Progress Report for 2003 and 2004.
-3and fiscal outcomes than expected. However, the high oil prices in Yemen also reduced the
sense of urgency that was perceived domestically regarding the impending growth and fiscal
crisis and led to greater resistance to reform. The package of reform measures remained before
Parliament for a long period of time and when approved in July 2005, right after the end of the
CAS period, were only partially implemented. Second, the CAS was designed under the
assumption that broad consensus had been achieved around the decentralization agenda
embedded in the 2000 Local Government Law, which was described as having “set in motion a
radical shift of power from the central government to local authorities governed by councils
elected in February 2001”. In fact, though local councils were elected in 2001, the fiscal
decentralization that was required to underpin the devolution of power to the local councils did
not progress much at all. Further, there were clearly issues with regard to the Bank
recommendations on decentralization not being acceptable to the Government, particularly the
Ministry of Finance.
6.
Recent achievements. Since the end of the CAS period, progress has been made in
macroeconomic reform, public sector reform, and public financial management. In addition, the
government adopted in January 2006 a National Agenda for reform consisting of good
governance measures. Those achievements have not been factored into this evaluation
because they occurred after the CAS period.
IV.
ASSESSMENT OF PROGRESS AND ACHIEVEMENTS OF COUNTRY
ASSISTANCE STRATEGY OUTCOMES
7.
Consistent with PRSP’s pillars, the 2002 CAS focused on one main objective that covers
all four pillars: sustainable poverty reduction. To achieve this objective, the Bank’s strategy
was structured around four main pillars: (i) improving the delivery of public services through
stronger economic governance; (ii) strengthening the enabling business environment; (iii)
building and protecting human resources; and (vi) sustaining and protecting natural resources.
A.
Assessment Methodology
8.
While the CAS was prepared prior to the current emphasis on results based approaches, it
contained 65 program indicators/benchmarks. In the context of the glossary currently in use with
regard to Results-Based CASs, the indicators/benchmarks in the CAS are a mixture of CAS
outcomes (i.e. country results deemed achievable in the CAS period and which the Bank expects
to influence through its interventions) and milestones (progress markers of CAS
implementation). Based on the information contained in the CAS, this evaluation has
attempted on an ex-post basis to demarcate the indicators into CAS outcomes and
milestones, including cross-sectoral outcomes, and to build a Results Chain based on the
text of the CAS and the Program Matrix. It should be noted that the CAS did not include a
system for Monitoring and Evaluation of each CAS outcome, and several indicators of success
that were identified in the CAS were imprecise or missing baseline and target values (e.g. one
indicator was: water table declines are slowed or reversed), which made it difficult to evaluate
the achievement of each pillar compared to CAS baselines and targets. Consequently, where
indicators are inadequate or missing, the evaluation can only make qualitative judgments on
progress.
-4-
9.
This evaluation:
•
•
•
•
uses the Results Chain (Appendix 1) established during CCR preparation to discuss the
achievement of each one of CAS outcomes as part of one of the four proposed pillars;
discusses the overall progress made under each pillar and the relevance of the lending
and non-lending instruments to the pillar;
discusses in detail whether, how, and why the assistance program did or did not achieve
each of the CAS outcomes; and
draws lessons of experience under each pillar and provides recommendations for the
new CAS.
10.
As with regards to the instruments that will enable the achievement of CAS outcomes, it
should be noted that the CAS document mapped some activities to more than one pillar; in this
case, the activity is discussed under the pillar to which it was considered to contribute the most.
In deciding on this primary classification, this evaluation utilized Annex A1 of the CAS and
mapped CAS activities to their primary theme based on MNA regional strategy.
B.
Assessment Summary
11.
Overall, performance under the 2002 CAS is rated Unsatisfactory. The following
table summarizes the ratings for each Strategic pillar and outcome:
12.
It is important to note that unsatisfactory performance should not be interpreted as a need
to dramatically change the priorities of the next CAS but be viewed as the result of an
appropriately focused strategy which suffered from a number of shortcomings that the new CAS
should take into consideration and address, to make it more successful. Those shortcomings are:
(a) ambitious targets (both in the PRSP and the CAS); (b) Inappropriateness of the
assistance program given the outcomes sought; (c) delayed implementation of the lending
program; (d) delivery of key activities in the non-lending program during the last year of
CAS implementation; and (e) discrepancy between planned objectives and actual
achievements. Specifically,
(a) Ambitious targets. Many of the targets set were extremely ambitious given the size of the
CAS program. It would appear that the CAS took on the targets specified in the Government’s
PRSP but in the absence of full funding, these targets were difficult to influence and achieve. In
addition, targets for reducing poverty and improving service delivery in percentage terms could
be considered to be ambitious even in the context of a stagnant population but in the context of
one that grew by over 1.5 million people during the course of the CAS period, the challenge was
even greater.
-5-
(b) Inappropriate instruments. In several cases, the instruments were either inadequate or too
modest to achieve the outcomes sought. For example, the Bank’s support to the Government in
improving macroeconomic stability was only through Economic and Sector work, which is
insufficient. Similarly, given the ambitious program to improve the regulatory environment
which is listed in the CAS, the Bank only provided support through an Investment Climate
Assessment – which is merely a diagnostic tool for analyzing private sector development
constraints.
(c) Slow implementation. There were considerable delays in implementing ongoing and newly
approved projects. There were delays resulting from procurement packages not being ready at
the time of credit effectiveness which led to slow start-up; delays resulting from the slow pace of
the procurement process itself due to the need to involve institutions responsible for Government
procurement into the procurement activities at the project level, and to the weak procurement
capacity; and delays resulting from a complex design given the local implementation capacity.
(d) Fragmented and delayed non-lending program. Some key think pieces that influenced
Government strategic choices (e.g. the Public Financial Management Reform; the Country Water
Resources Assistance Strategy; the Urban Land Policy and Administration Note) were delivered
late in the CAS period and others (the Development Policy Review and the Investment Climate
Assessment) slipped beyond the end of the CAS period. Hence, the impact of these activities on
influencing systemic changes had to be rated low during the CAS period but their availability
should allow for a greater focus on implementation during the next CAS.
(e) Discrepancy between planned objectives and actual achievements. This is partly due to
over-optimism related to country’s implementation capacity; and partly due to the fact that, in
many instances, recommendations made by the Bank were not systematically implemented,
either due to disagreements at the technocratic and policy levels or due to non-approval by the
legislature. The discrepancy between planned objectives and actual achievements is also partly
due to the fact that, despite its selectivity, the strategy was not implemented in an efficient way
that aligns tasks with CAS objectives given the resources allocated and given the high-risk
country environment. The subsequent CAS should be more realistic than the previous CAS
in its risk assessment. It should build constituency for changes through an effective
communication and outreach strategy, and should describe how the implementation should
be organized given the scarcity of resources. In addition, it should be built on the country’s
readiness and commitment to move the assistance program forward.
13.
Rapid Implementation versus Institutional Development. Despite the slow
implementation noted earlier, the Bank portfolio made liberal use of Project Management Units
(PMUs) though some projects did attempt to work with Government institutions directly (e.g. the
Port Cities Project used Local Development Departments). There were two major reasons for
the use of PMUs: first, adequately addressing fiduciary requirements; and second, the inability
of the Bank – under its own guidelines - to compensate civil servants which, coupled with lack
of progress on civil service reform, (particularly continuing low pay) would have resulted in
limited motivation for implementation. The alternative also utilized was the use of two enclave
-6entities – the Social Fund for Development and the Public Works Program. These projects,
which are legally established enclaves that bypass the constraints affecting the mainstream
civil service, demonstrated the potential for efficient service delivery in a low capacity
environment. However, their experience is not more broadly replicable due to cost
considerations and further, as these institutions have grown in scale, the challenge of
coordinating with Government ministries has grown.
Table 2: SUMMARY RATINGS
CAS Strategic
Pillars/Ratings
CAS Outcomes
I. Improving the delivery of
public services through
stronger economic
governance: Unsatisfactory
Improved enabling environment for civil servants and
enhanced fiduciary accountability of government at the
central and local levels.
Skilled and more credible Judicial System that leads to
enforcing service delivery standards.
Better revenue and expenditure management.
II. Strengthening the enabling
business environment:
Unsatisfactory
Better investment climate through macro stability,
improved business regulatory environment, enhanced
security, more secure property rights, improved access
to finance; and through improved physical
infrastructure (water, power & roads).
Reducing the role of the state in commercial activities
including the financial sector.
Increased access and quality to education at all levels,
with emphasis on girls and women.
Improved coverage and quality of health services.
Cross Sectoral Outcomes:
Contribution of Infrastructure to Health and Education
Safety Nets
Community Development
Gender
III. Building and Protecting
Human Resources:
Moderately Satisfactory
IV. Sustaining and protecting
Natural Resources.
Moderately Unsatisfactory
Improved conditions for water availability in place,
through strengthened water depletion mitigation
measures.
Efficient mitigation measures against depletion of other
natural resources (petroleum and coastal fisheries) and
against pollution in place.
-7-
Table 3: SUMMARY OF KEY STRENGTHS AND SHORTCOMINGS
Strategic
Pillar I.
What Worked?
Why?
What did not Work?
Why?
- Adequacy of pillar and
outcomes with PRSP
- Relevance to government
priorities
- Civil service reform
- Complexity of design
- Decentralization.
- Bank’s timely advice on oil
prices
Strategic
Pillar II.
- Better focus on removing
private investment constraints
than previous CAS.
- Changes in TTLs
- lack of ownership of fiscal
decentralization
- Relevance of proposed
assistance program.
- Private sector
participation
- Major instruments not
sufficient to achieve
outcomes
- Most proposed lending and
non-lending not delivered
Strategic
Pillar III.
- Education access
- Government commitment
- Reduction in gender
disparities
- Clear and Simple
Implementation Arrangements
with Focus on Capacity Building
- Institutional capacity
in health sector
- Improved health
facilities not being used
- Implementation
delays
- Complexity of design
(Health & Child
Development Projects)
- Qat issues still not
adequately addressed
- Some Planned analytical
work not conducted
- Weak Implementation
capacity (Health)
- Donor Harmonization and Resource Mobilization
- Bank Leadership in Supporting
Analytical and Strategic Work
- SFD and PWP efficiency (due to
incentives, autonomy)
Strategic
Pillar IV.
- Focus on groundwater
exhaustion
- Strategic focus and selectivity
- Analytical work: Water CAS
- Institutional framework.
C.
CAS Strategic Pillar I: Improving the delivery of public services through stronger
economic governance: Unsatisfactory
14.
This pillar included three CAS outcomes: Improved enabling environment for civil
servants (better salary and performance management), and enhanced fiduciary (including
financial) accountability of government at the central and local levels; Skilled and more credible
Judicial System that leads to enforcing service delivery standards; and Better revenue and
expenditure management.
15.
Pillar achievements as compared to CAS goals. Overall, limited or no progress was
made against the indicators established to measure achievements in these outcomes (details
for each outcome are discussed in the following sections). The number of civil servants increased
rather than declined by 30,000 over three years, real pay levels declined rather than raised and
decompressed; and civil service restructuring did not progress. Service delivery continued to
remain centralized and limited programs were undertaken for local authority capacity building.
-8Some training was undertaken for the judiciary but overall systemic changes were not
undertaken. Finally, aggregate fiscal indicators were partially achieved (fiscal deficit was 2.8
percent in FY04 as compared to a target of 4 percent) but indicators for social sector spending
did not increase by the substantial levels projected (share of social expenditures was 8.6 percent
in FY04 as compared to a projected 13.2 percent of GDP). Given limited progress, CAS
outcomes under this pillar cannot be considered sustainable and overall achievement made
under this pillar is unsatisfactory.
16.
Bank Assistance. As indicated in the following table, this pillar was expected to be
supported by two ongoing projects; three new loans (of which none were delivered) and nine
non-lending activities (of which only six were delivered).
Table 4: BANK ASSISTANCE UNDER PILLAR I
Ongoing
Lending at start
of CAS
1. Civil Service
Modernization
2. Legal and
Judicial
Development
Actual Lending
Actual
ESW/TA
Planned lending
not delivered
Planned ESW/TA not delivered
None
1. CFAA
2. Public
Financial
Management,
3. Procurement
Cap. Building
(IDF)
4. Budget/
Poverty impacts
of petroleum
pricing
5. Budget &
expenditure
streamlining
6. Public
expenditure
management
1. Local and
Community
Development
2. Civil Service
Modern. II
3. Poverty
Reduction
Support Credit
1. Monitoring and Evaluation
2. CPAR
3. Public Services Delivery
(IDF)
Outcome I.1: Improved enabling environment for civil servants and enhanced fiduciary
accountability of government at the central and local levels
17.
Improving the enabling environment for civil servants through the Civil Service
Modernization Project was relevant to the strategy and to the government’s concerns.
Complexity of design led to several implementation delays that hindered the full
achievement of the expected outcome. The project was too complex in light of the institutional
environment with separate demanding components under the Ministry of Civil Service and the
Ministry of Finance, respectively. It went into problem status and remained problematic through
most of the CAS period. In November 2004, the Bank indicated to the Government that if no
significant progress was achieved in the next six months, the project would be cancelled. The
Government made a credible effort to turn the project around and many delayed activities are
now being implemented which led to the project being upgraded. The government initiated
measures to improve accountability and oversight with an effort to establish a high-level steering
committee to oversee the link between the Accounting and Financial Management Information
System (AFMIS) and the broader reform agenda in the Ministry of Finance. Reengineering of
major agencies and creation of a biometric identification system, both prerequisites for civil
-9service rationalization have made progress. The civil service fund, to be used for severance
compensation, has been created. However, the development impact from this project (which has
been extended up to December 2007) did not materialize during the CAS period. As a result of
the earlier implementation problems, the Second CSMP (envisaged for FY05) was not prepared
during the CAS period.
18.
The objective of enhancing the fiduciary accountability of government at the local
level was not achieved. The Bank aimed at providing an operational framework for the
Government’s ambitious decentralization agenda with the aim of enhancing local revenue
collection and improving local budgetary planning and expenditure management. It also aimed
at incorporating more participatory and responsive approaches to community-level development,
as measured by improved local authorities’ financial management and accountability. The
District and Community Development Project (FY04) that was expected to support this effort
was dropped. The project was eventually designed in the form of a Learning and Innovation
Credit, but never advanced beyond the appraisal stage. A key aspect of the project design was
for the Credit to finance a portion of the operating and maintenance costs of 20 pilot districts,
which was intended to trigger additional resources transfers from Ministry of Finance (MOF).
However, MOF expressed concerns with this approach viewing it as a precedent on the basis of
which all other districts in the country might want increased central transfers to cover their
operating costs. Despite strong support for the project from the Ministry of Local
Administration, lack of Government consensus on the appropriate approach eroded support for
the Project and by November 2004, the Bank decided to drop the project.
19.
To support the decentralization agenda, the Bank assisted the city of Taiz in its
development29. Through Bank support, the city completed an updated city master plan. It
has developed and adopted a solid waste management strategy, improved management of
city assets (having established recently a new Asset Maintenance Unit) and has actively
engaged city residents through the launching of a public awareness campaign and various
other initiatives aimed at improving city services and reducing poverty. A newly-established
Task Force on urban poverty, including city officials, NGO representatives and the private
sector, was launched in June 2005 with Bank-support. Survey work is underway with the aim of
developing more appropriate and effective approaches to tackling urban poverty focusing, in
particular, on the role of the local city administration. Despite the lack of progress at the national
level, some 15 new Local Council buildings are being constructed and equipped under
Bank’s support in an attempt to help consolidate local-level administration.
20.
Non-Lending Activities made progress late in the CAS period and did not result in
the expected policy changes during the CAS period. A Multi-Year Review of Public Sector
Management under Decentralization was expected to be initiated in FY03. The objective of this
review was to lay the groundwork for capacity building in governance and identify some key
“entry points” and local “champions” to lead the effort. Eventually, in FY05, a report on Budget
Reform and Decentralization (FY05) was prepared. However, the Government did not agree
with the Decentralization chapter of the report and implementation actions were not undertaken.
29
Support was through the Local Government Capacity Building Component of Taiz Municipal Development
Project.
- 10 21.
Based on a an analytical piece on Public Expenditure Management processes in FY05,
the Cabinet approved the Public Finance Management (PFM) Reform Strategy on August
9, 2005, and established a Ministerial committee to oversee implementation of the PFM
action plan which is supported by a Memorandum of Understanding between the Government
and donors who would support implementation of the Action Plan. The adoption of the IMF’s
General Finance Statistics (GFS) 2001 budget classification system is part of the PFM action
plan and will be utilized in preparing the 2007 budget during calendar year 2006. While these
developments represent significant progress, given that the plan was prepared late and
approved after the end of the CAS period, there was no implementation.
22.
Following Bank’s advice under the Country Financial Accountability Assessment
(CFAA), the government has made some steps in addressing corruption by establishing an
anti-corruption commission.
However, the CFAA (FY05) suggested that increased
transparency in the activities of this commission is needed, along with a stronger message that
the government is against corruption and that it put in place measures to punish corruption. The
CFAA also suggested revisions to the Financial Law to provide for a modern internal control
framework in compliance with international standards, and full implementation of modern
internal audit across Government.
Outcome I.2: Skilled and more credible Judicial System that leads to enforcing service
delivery standards
23.
The assistance program for the judicial reform was extremely modest given the
outcomes sought. Only modest amounts of training were delivered (approximately 26 courses)
and the impact of these training activities could not be evaluated due to absence of baseline or
end of project surveys. Beyond training, the CAS had no support to improve other indicators of
improved judiciary performance. The training was conducted under the ongoing Legal and
Judicial Development Learning and Innovation Credit (LIC) of US$2.4 million – of which
eventually only USUS$1.9 million was actually disbursed. The LIC had been designed to be
followed up with an Adaptable Program Credit (APC) but the CAS did not contain any followup operations.
Outcome I.3: Better revenue and expenditure management
24.
Expected outcome was not realistic, but unplanned, proactive advice was timely.
The achievement of this outcome was expected to be measured through a significant shift in
public expenditures (by approximately 4 percent of GDP) to the social sector expenditures.
However, the outcome was supported primarily by public expenditure analysis which is not
sufficient to achieve a change in allocations by US$400 million (in 2005 GDP terms) over three
years. The Poverty Reduction Support Credit of US$70 million also envisaged for FY05 to
provide a quick disbursing budget support was not prepared given that the triggers for the high
case scenario (which focused primarily on governance and macro indicators) were not achieved.
25.
Following the increase of the fiscal cost of the domestic subsidy for fuel products to 6
percent of GDP by 2004, and based on Bank’s advice, Yemen increased its oil prices. The
Bank’s advice was based on an unplanned study on the Budgetary and Poverty Impact of
Petroleum Pricing (FY05). The main recommendations of this work were to slowly raise prices
- 11 while simultaneously implementing measures to protect the poor from the impact of the price
rises. While Yemen followed the Bank’s recommendation to increase oil prices, it did not
raise the prices gradually as suggested in the report, nor deal with the safety net issues. It
raised the price of diesel in one step from YR 17/litre to YR 45/litre without accompanying propoor measures designed to mitigate the social impact of price increase. These increases resulted
in demonstrations, riots, the loss of life and destruction of property, and the government rolled
back the price increase to YR 35/litre. Future adjustments to and the long-run elimination of fuel
products subsidy also remains uncertain as a result.
D.
CAS Strategic Pillar II: Strengthening the enabling business environment
Unsatisfactory
26.
The second major pillar of the CAS was to support Yemen in creating an environment
conducive to private investment that will create more jobs, and contribute to sustainable poverty
reduction. IEG’s 2001 CAE for Yemen was critical of the Bank’s strategy for improving the
investment climate. It stated that “a second weakness of the assistance strategy is the relatively
low priority given to removing constraints to private sector development, a priority for Yemen's
future”.
27.
The CAS addressed this concern by making private investment one of its major
pillars. To achieve the expected results, the CAS aimed at supporting the government in key
reform areas while addressing specific constraints that hinder the promotion of private
investment. The CAS, hence, sought to focus on improving security; macro-stability; improved
regulatory environment; improved land tenure; improved financial system; and improved
physical infrastructure.
28.
Pillar achievements as compared to CAS goals. In summary:
•
•
•
•
private investment to GDP ratio of 18 percent was not met, neither was the
commercial long-term lending rising by 50 percent. The indicator of rising the longterm lending by 50 percent is not justified as an important measure of achieving this
CAS outcome;
Inflation targets (of below 10 percent) were not achieved but the actual inflation
remained in a reasonable range of the target never exceeding 12 percent by June
2005;
progress was made in achieving infrastructure outcomes (for roads and power) though
private sector participation goals for the power sector were not met. Again, the
expected increase in electricity coverage (40 percent) and the goal of private
participation (introduced in the Sana’a Emergency Power Project in 1999) were
highly ambitious. By 2002, international experience clearly showed that private
participation in the power sector in Yemen was not a feasible option; and
there was limited progress in the financial sector with the passage of a Banking Law
amendment and anti-money laundering legislation.
29.
Bank Assistance. Two CAS Outcomes were sought under this pillar: (i) Better
investment climate through improving business regulatory environment, macro stability,
enhanced security and physical infrastructure (water, power & roads); and more secure property
- 12 rights and improved access to finance; and (ii) Reducing the role of the state in commercial
activities including the financial sector.
30.
In retrospect, the assistance program to achieve CAS outcomes was relevant. As
Table 5 indicates, this pillar was expected to be supported by three ongoing projects; three new
loans (of which only one was delivered) and thirteen non-lending activities (of which only seven
were delivered).
Table 5: BANK ASSISTANCE UNDER PILLAR II
Ongoing
Lending at start
of CAS
1. Sana’a
emergency power
2. Seeds and
Agricultural
services
3. Southern
Governorates
Agricultural
privatization
Actual
Lending
Actual
ESW/TA
Planned new lending not
delivered
Planned New ESW/TA
not delivered
1. Port Cities
Development
1. Sources of Growth
2. Urban Land policy &
Administration
3. Rural Development
Strategy Implementation
& Agri. promotion
4. ROSC-AA
5. Financial Sector
Dialogue
6. Restructuring Ministry
of Agriculture & Irrigation
7. Power sector reform
1. District and community
development
2. Power restructuring
and expansion (high case)
1. DPR(*)
2. Investment climate (*)
3. Integrated framework
for trade
4. Infrastructure for
mineral exports
5. Agricultural and
Maricultural Export
strategy
6. Tourism development
(*) DPR and Investment Climate were undertaken but not completed by the end of the CAS period.
Outcome II.1: Better investment climate through macro stability, improved business
regulatory environment, enhanced security, more secure property rights,
improved access to finance; and through improved physical infrastructure
(water, power & roads)
31.
The outcome was relevant to the country’s long-term strategic goals and to the
strategic pillar, but major instruments were not sufficient given the outcomes sought.
First, the Bank’s support to the Government in improving macroeconomic stability was only
through Economic and Sector work, which was insufficient. Second, given the ambitious
program to improve the regulatory environment which is listed in the CAS, the Bank only
provided support through an Investment Climate Assessment – which is merely a diagnostic tool
for analyzing private sector development constraints. Third, Bank’s contribution to non-oil
production and diversification was very modest.
32.
Outcome achievements under the CAS can be described as follows: In the Power
sector, the Bank contributed to addressing the sector's significant electricity shortages which was
extremely urgent given power supply bottlenecks, high energy losses, and poor maintenance.
Following Bank’s support, Public Electricity Corporation’s (PEC) overall energy losses were
reduced from 40 percent to 33 percent and the quality of service to consumers has
improved, as confirmed by the beneficiary survey carried out as part of the independent
Impact Assessment Study conducted as part of the Implementation Completion Report (ICR) of
the Sana’a Emergency Power project. Over a third of those surveyed expressed a willingness to
pay more for better electricity supply with fewer interruptions. The total incremental generation
capacity resulting from the project was about 35MW and will rise to about 40MW in mid 2006.
- 13 However, progress in sector reforms has been very modest and the objective of introducing
private sector participation was not fulfilled. The overall achievements under this assistance
were marginally satisfactory. In addition, since the high case scenario did not materialize, the
new Power Sector Restructuring and Expansion project was not delivered during the CAS
period.
33.
The development of the fisheries sector can be considered as a success story under the
CAS and came from the Bank not lending until the appropriate policy framework had been
put in place (Box 1).
34.
In micro-finance, the Bank contributed to laying the foundation of an emerging micro
finance industry, through the SFD. This is a major achievement in a country where the concept
and practice of microfinance did not exist prior to SFD’s inception and more impressively where
the client base (borrowers and savers) of micro finance programs established with SFD2 support
increased considerably. The SFD provided financial and technical assistance to 10 micro
finance programs which by the end September 2005 had 23,856 active borrowers and
26,815 savers, mostly women. About 72,970 loans totaling YR 2,180 million have been
provided. Loans averaged YR 27,000 which suggests that microfinance programs have been
effective in targeting the poorest and neediest groups. The total outstanding loan portfolio is
estimated at YR 456.51 million. Across the Micro Finance Institutions (MFI), portfolio at risk at
3-4 percent, with only two MFIs at 10 percent and three MFIs have reached perfect repayment
rates. Of the 10 microfinance programs, 50 percent have reached operational self-sufficiency
and there are good indications which suggest that the remaining programs, over time, are likely
to achieve financial sustainability.
35.
In Ports, and through its support to Aden, Hodeidah and Mukallah30, the Bank
contributed to enhancing their potential as engines of growth. It prompted national level
reforms, such as reinitiating the process of concessioning the Aden Container Terminal to
the private sector and adoption of an open skies policy in 2005. The open skies policy would
improve Yemeni city competitiveness by increasing air traffic volume and providing regional
and international carriers greater access to Yemen, particularly important for Yemen’s air cargo
shipment needs (fresh seafood) to European, Asian and Gulf destination markets. It also fostered
decentralization reforms, including devolution of master planning and private sector investment
project approval to the city level; assisted in integration of the Aden Free Zone and Container
Terminal into city investment and service provision planning; conducted a Gas Utilization Study
which is leading to a privately financed extension of the gas pipeline and power generator in
Aden; renovated city assets being utilized by functioning Governorate Departments; and assisted
in promoting public-private partnerships. Over US$85 million in new private capital investments
in Aden alone over the past year have created an estimated 1,800 new employment opportunities.
30
Adaptable Program Credit for Port Cities Development Project.
- 14 Box 1: THOROUGH ANALYTICAL WORK AND POLICY FRAMEWORK AS PREREQUISITES FOR
LENDING IN THE FISHERIES SECTOR PAY OFF
The Bank prepared a Fisheries Sector Strategy Note that pointed out that since 1994 the Government of Yemen
(GOY) had allowed licensing of 113 large foreign industrial vessels. These along with other vessels were leading to
the unsustainable exploitation of fish stocks. The report pointed out that the expansion had several undesirable
effects: official exports at about USUS$13 million was well below its potential, while the growth of poverty
alleviation oriented small-scale artisnal fisheries was being constrained. The report recommended that the
reduction of such excessive effort to sustainable levels should have a priority to allow fisheries stocks to recover.
Initially GOY was reluctant to change the fisheries sector policy which favored licensing of large numbers of
foreign industrial vessels. As the policy framework was not supportive of further investments in artisanal fisheries,
the Bank decided to discontinue lending to fisheries sector until an appropriate policy framework had been put in
place. Following internal discussions and a change of Minister in-charge of the Ministry of Fish Wealth, GOY
decided to discontinue giving out licenses to large foreign industrial fishing vessels in 2002 and by 2003 most old
licenses were phased out. This had an immediate and favorable impact on fish stocks. The fish production from
small-scale fisheries, fish exports, and sector employment all started growing at double digit rates and by 2004 fish
exports reached a level of about USUS$210 million. In view of the more favorable policy framework, the Bank
restarted fisheries sector lending in Yemen with an IDA credit about USUS$25 million in 2005.
36.
In the Agriculture Sector, Bank’s achievements in increasing private sector participation
were modest, though changes were made to legislation and institutional arrangements through
the issuance of the seeds law and its by-laws under the Seeds and Agricultural Services
Project. The main shortcoming was related to slippage in the program for privatization of the
major entities; though privatization has been approved, the transactions have not yet been
completed. However, The Southern Governorates Agricultural Privatization project is
expected to meet its development objectives though this is occurring 3 years later than the
originally planned closing date. Further, given the problems with the Government providing
land free of claims, this component of the project was downsized to around 10 percent of the
original land development area and the balance has been reallocated to spate irrigation and/or
cancelled.
37.
Bank’s achievement of outcomes through analytical work was modest. First, the Land
Registration ESW was undertaken in FY05 as planned and was entitled the Urban Land Policy
and Administration Note. It made recommendations for: improving the demand for the land
registration system and for reducing land disputes in the court system; and for improving the
management of state lands in urban areas. These recommendations were considered at a
workshop in September 2005 and a Task Force was assigned the responsibility of implementing
the action plan. Since that time a proposal to merge all land related agencies (public land
administration, land survey and registration, and mapping) into a single agency to enhance
efficiency in the sector was submitted, and the World Bank provided its input in December 2005
on the approach going forward. Second, the Report on the Observance of Standards and
Codes-Accounting and Auditing (ROSC, FY05) helped bring to the government’s attention
significant weaknesses in the Auditing and Accounting system. Among others, the ROSC
suggested the need to close the gap between the international standards and the actual auditing
and reporting practices. The Central Bank of Yemen issued guidelines to banks and auditors on
corporate financial reporting, but these guidelines were not in line with international
accounting standards.
- 15 38.
Two key non-lending products were delayed. First, the preparation of the
Development Policy Review commenced in FY05 but was not completed before the end of the
CAS period. Therefore its recommendations were not available for implementation during the
CAS period. Second, the firm survey underlying the Investment Climate Assessment was
undertaken in FY05 but the survey results and the final report were not completed by the end of
the CAS period.
Outcome II.2: Reducing the role of the state in commercial activities including the
financial sector
39.
With Privatization Support Project never becoming effective as it was not approved by
the Parliament, there was no appropriate instrument to provide significant support to this
outcome, except for one ESW that aimed at privatizing financial institutions. The Financial
Sector Dialogue which was satisfactory focused on (a) strengthening central bank capacity to
enforce regulations and the new prudential rules, (b) modernizing corporate accounting and audit
standards, and (c) supporting the government in privatizing public financial institutions. This
was a continuation of the reforms undertaken in the context of the successful Financial Sector
Adjustment Credit (1997-1999), mainly with respect to restructuring four public banks and
modernizing the payments system. The restructuring is still at its very early stages of planning,
and in this context, the Bank recently provided the government with terms of reference of the
financial audits of the banks, and the terms of reference for the operational restructuring.
E.
CAS Strategic Pillar III: Building and Protecting Human Resources. Moderately
Satisfactory
40.
Human Development Indicators in Yemen are very low and this pillar is relevant to the
country’s long-term strategic goals. The CAS supported and complemented government’s
strategy. While expecting the government to focus on public campaigns to reduce population
growth to the targeted 3 percent in 2005, the CAS focused mainly on basic education, and on
girls’ and women education, in particular (in Yemen, fewer than 40 percent of girls under 12
attend schools). In addition, the CAS envisaged building human capital through improving
health and nutrition; enhancing early childhood development; and improving access to
information and communication technology. However, despite its focus on education, the CAS
did not highlight the multi-sectoral dimension of this pillar in designing its interventions. For
instance, with the exception of the Child Development Project, the CAS did not highlight the
linkages between drinking water scarcity and the consequent chronic health and therefore
education constraints31.
31
In the case of Morocco, for example, where drinking water scarcity is also a major problem, an increased water
access of population from 20 to 50 percent in 27 rural provinces led to a reduction in water transport time. The
saved water transport time spurred a rise in girls’ primary enrollment from 30 to 51 percent.
- 16 -
41.
Pillar achievements as compared to CAS goals. Achievements under this pillar are
rated Moderately Satisfactory because of the major achievements in the education sector in
general (Box 2), and achievements in narrowing the gender gap in particular, and because of the
unsatisfactory achievements in the health sector. Gross enrollment rates of girls exceeded their
target and reached 62 percent in 2005 in targeted areas as compared to 51 percent in 1999-2000.
In secondary education, total rural enrollments increased by 38 percent in 2002-2003 (compared
to 1998-1999 baseline). However, while attention to access was adequate and resulted in
exceptional increases in enrollment rates in rural areas, attention to the quality of education was
modest and substantial work remains to be done. Despite the fact that quality of basic education
is expected to improve as a result of training 95 percent of the teachers (as compared to a target
of 80 percent), it is important to note that not enough teachers were assigned to rural areas.
Health outcomes were not achieved due to the ambitious design of the Bank’s assistance given
the weak local implementation capacity. Health service coverage was not expanded to 65
percent of the population, as projected; Government expenditure on health was only 1.5 percent
in 2003, lower than the targeted 2.2 percent of GDP; and fertility rates and child and maternal
mortality did not decline.
42.
Bank Assistance. The assistance consisted of nine ongoing projects, six new projects (of
which three were delivered) and twelve non-lending services (of which seven were conducted).
The following table lists the operations proposed to support pillar III of the CAS.
Table 6: BANK ASSISTANCE UNDER PILLAR III
Ongoing Lending at
start of CAS
Actual Lending
Actual
ESW/TA
1. Higher Education
2. Health Reform
Support
3. Basic Education
Expansion Project
(BEEP)
4. Child
Development
5. Social Fund II
6. Public Works II
7. Vocational
Training
8. Education Sector
Investment Project
9. Rural Access I
1. Basic
Education
Development
2. Social Fund III
3. Public Works
III (not
programmed)
1. Poverty Update
2. EPI and Public
Health Programs
3. Women in the
local economy of
Aden
4. Gender Note
5. Vocational
Training Strategy
6. Develop.
Information Center
7. Population
Policy Note
Planned new
lending not
delivered
1. Girls’
secondary
education project
2. Vocational
Training II
3. Rural Access II
Planned New ESW/TA
not delivered
1. Secondary Education
Review
2. Children at Risk
3. Violence against
women
4. Development Research
Forum
5. M&E capacity building
- 17 -
Box 2: WHY DOES THE EDUCATION SECTOR CONTINUE TO DELIVER RESULTS IN YEMEN AND NOT
OTHER SECTORS?
Lessons behind the Results on the Ground
Government Commitment: The Government of Yemen has historically given priority to education. The share of
GDP going to education increased from 5.2 percent in 1997 to 6.8 percent in 2004, with education accounting for 22
percent of total government expenditures. Strong leadership of the Ministry of Education has maintained the focus
on expanding educational access to the entire country, with particular attention to disadvantaged groups. While
equitable expansion remains a high priority, the government is committed to promoting sound strategies at all levels
to respond more flexibly to evolving demand for education and training.
Clear and Simple Implementation Arrangements with Focus on Capacity Building: In 1999, the education sector
assistance strategy of the Bank laid the foundations for the design of the BEEP, based on simple implementation
procedures. The preparation of the subsequent Basic Education Development Project (BEDP) was supported by a
number of studies, including a review of cost effective construction to enhance efficiency. The strong performance
of the BEEP and EFA-FTI Catalytic Fund in the most difficult districts is attributed in part to the clear and simple
implementation arrangements that have been put into place. The pace of implementation and relative transparency in
procurement were achieved through heavy investment by the project unit in ensuring that the rules of the game were
well understood and followed. In the 2004 Independent Procurement Review for Yemen, the BEEP was the only one
of the seven projects reviewed to be rated Satisfactory on general transparency. The same level of support continues
under the BEDP which covers 10 new governorates and for which the Ministry is recruiting procurement specialists
to train governorate staff. On a systemic level, efforts are on-going to rationalize teacher deployment and the
inspectors’ corps in coordination with the civil service work in progress; to build national capacity for education
assessment and international benchmarking of the learning achievements of Yemeni students; and to utilize school
mapping in making school construction decisions.
Donor Harmonization and Resource Mobilization: The education sector is the furthest along in Yemen in donor
harmonization and resource mobilization, with a Partnership Declaration signed by 12 donors. The education donors
worked as partners with the government in drafting the Basic Education Development Strategy and they review the
strategy annually with the government (the second annual exercise is planned for May 2006). There are two cases of
multi-donor financing arrangements: through the EFA-FTI Catalytic Fund; and through the multi-donor Trust Fund
resources (non-pooled funding by DfID and NL) under the Basic Education Development Project (BEDP). The
BEDP is a pre-SWAp operation which KfW is joining in 2006 and the Canadians have expressed interest in joining.
Donors participate in BEDP missions and meet monthly to review progress on donor harmonization. Yemen’s
success in joining the first group of countries to benefit from the EFA-FTI Catalytic Fund, followed by its
demonstrated ability to use the funds for educational advancements, enabled the country to build on its success and
qualify for two further grants. The country received a lot of international recognition, which fostered a positive trend
to deliver more. The continuation of the Ministry leadership has of course helped tremendously in maintaining the
momentum on achieving results.
Bank Leadership in Supporting Analytical and Strategic Work: The Bank has been the lead agency in the country
providing analytical support for the development of educational strategies which have been used as a basis for
systemic changes supported by the entire donor community. Intensive support was provided to the articulation of
the Basic Education Development Strategy and the development of Yemen’s Credible Plan, which formed the basis
for receiving financing from the EFA-FTI Catalytic Fund. The Bank has also been supporting the government’s
development of strategic priorities for vocational training, secondary and higher education. The resulting strategies
will form the basis for donor financing and support in these sub-sectors. The Bank is leading a study on the issue of
teacher absenteeism to support improved teacher management in the education system. The Bank is also leading
support to the Government to formulate a children and youth strategy and action plans to translate that strategy into
concrete actions as well as linkage with all sectors. In sum, the Bank’s role has been one of central importance both
for the development of policy and for attracting donor funding to augment IDA’s limited envelope.
- 18 Outcome III.1: Increased access to and quality of education at all levels, with emphasis on
girls and women
43.
The Bank program supported education development through Education Sector
Projects, the Child Development, Social Fund and Public Works projects. Both basic
(Grades 1-9) and secondary education (10-12) were supported and there was increased access (as
measured by enrolment rates) at both levels of education.
44.
Basic Education. The basic education sector was the first sector in Yemen to adopt a
Sector Wide Approach and over a period of several years, the Government defined its sector
strategy and donors began to align their programs with this strategy. The World Bank’s
contribution included: its support to the Government in implementing the sector-wide approach,
its assistance in fund raising from the Education For All Fast Track Initiative (EFA-FTI) and
other donors and through IDA projects.
45.
Outcomes achieved are summarized as follows: Gross enrollment rates of girls in four
targeted governorates reached 62 percent exceeding its target of 57 percent. Ninety-five percent
of teachers in grades 1-6 have participated in annual refresher training (vs. a target of 80
percent). A Girls Education Sector Department has recently been established in the Ministry of
Education, and 98 percent of the US$10 million grant of the Education For All Fast Track
Initiative (EFA-FTI) Catalytic Fund was spent satisfactorily within the twelve month period set
for implementation.
Table 7: PROGRESS ON BEEP OUTCOME INDICATORS
Progress on BEEP Outcome Indicators
Baseline
1999/2000
Gross Enrollment Rate for girls in grades 1 to 6 51 percent
Girls’ share in increased enrollments is at least 60 percent
Target
(2005/2006)
57 percent
60 percent
Progress as of
September 2005
62 percent
55 percent
46.
The new Basic Education Development project planned in FY04 was delayed but was
eventually approved in FY05 and will continue to improving enrollment and completion rates in
basic education with particular attention to girls’ education beyond the CAS period - it became
effective only in March 2005 and was implemented for only a few months before CAS
completion. In addition, 470,000 children were enrolled in Basic Education through the support
of the Second Social Fund for Development32; and an additional 26,317 children were enrolled
through the Second Public Works Project which constructed 825 classrooms.
47.
Secondary Education. The Bank contributed to a substantial expansion in secondary
enrolments particularly in girls’ secondary enrolments as noted in the Table 8.
32
SFD I closed at the end of June 2003 but was largely disbursed by June 2002 and therefore is not taken into
account for this CASCR.
- 19 Table 8: SECONDARY EDUCATION ENROLLMENTS
Rural
Enrollments in Grades 10-12
2002/03
Girls
Total
percent Girls
Urban
60,406
292,081
21 percent
2002/03
Girls
Total
101,218
257,282
percent increase compared to
1998/99
120 percent
54 percent
43 percent
percent increase compared to
1998/99
53 percent
38 percent
percent Girls
39 percent
11 percent
Enrollments in Grades 7-12
2002/03
Girls
Total
533,777
1,364,129
percent Girls
39 percent
Source: Education Sector Investment Project ICR
percent increase compared to
1998/99
224 percent
116 percent
50 percent
48.
The main IDA support in secondary education was provided through the Education
Sector Investment Project. The project helped improve girls’ access to secondary education
by creating 17,500 new places through the construction of classrooms and the training of
250 female teachers in math, science, and English. After overcoming initial implementation
problems due to complex and ambitious design and substantial restructuring, the project
eventually achieved results although it was extended and then closed in September 2004 – three
years later than the original closing date. The Secondary Education Review (FY04) which aimed
at identifying the needs for assistance at the secondary level, especially for girls, was delayed
until FY06. This review was a collaborative effort with the Ministry of Education, and the
priority for the Ministry's capacity in FY04-05 was to meet the demands of launching the new
Basic Education Development Project. In line with the timing of the sector work, the proposed
Girls’ Secondary Education Project (FY05), which was intended to support the expansion in
primary education to enable them to move to secondary education has been delayed till FY07.
49.
Vocational Training. The Bank succeeded in initiating the policy dialogue between the
government and the private sector on sector reforms and helped endorse a Vocational Training
(VT) strategy that makes VT system a demand-driven one in accordance with country’s needs.
In addition, the government issued a decree that provides more autonomy to the VT centers.
50.
The main IDA support for VT was provided through the VT Project which closed in
December 2003 and disbursed only limited funds (approximately US$1 million out of US$15
million) during the CAS period. The project focused on (i) strengthening the management of
the VT system by providing a major role to the private sector in policy-making, management and
financing of the VT system; and (ii) improving the quality and relevance of VT through the
enhancement of programs in existing centers33. However, the project was complex (involving
33
Due to delays in Government action, funding from the Dutch and the Japanese did not eventually become
available and a third component to reorient adult education and training (AET) programs for women through
- 20 several ministries) and focused on reforming the delivery system (which had not been the
previous focus). While the project enhanced the capacity for developing curricula and train
trainers, including training of handicapped people, within the industry, other crucial sectors such
as agriculture, commerce, and trade were not involved. Furthermore, private sector involvement
was limited; the expected establishment of women’s vocational training center was cancelled,
and adult education programs for women were not achieved.
51.
Bank’s contribution to improvements to Community Colleges led to achieving a high
employment rate of graduates. A tracer study of the first 100 graduates of the two colleges
financed by the Education Sector Investment Project showed graduate employment rates of more
than 80 percent, with a high satisfaction of employers with the graduates’ skills. Building on the
success of this initiative, the project established an institutional basis for further expansion.
52.
Improving the links between the supply and the demand for technical skills was the
main focus of a Vocational Training Strategy (FY04), and will be further accomplished through
the Second Vocational Training Project (FY07). The strategy was delivered in October 2004 and
the project was delayed from FY05 to FY07. The main issue raised during project preparation
was related to the approach to the institutional basis for the Skills Development Fund (SDF)
component of the proposed project. This was due to disagreements among stakeholders
concerning the governance and operating procedures of the Fund. The issue was finally resolved
with the Bank’s support at a Policy Forum in July 2005 and project processing has resumed after
the end of the CAS period.
53.
Higher Education. The CAS established an ambitious outcome indicator of a 25 percent
increase in enrollment in science, technology, and foreign languages with a view of supporting
capacity across public and private sectors, which was not achieved within the CAS period.
However, the Bank succeeded in developing a national strategy for higher education which was
then finalized beyond the CAS period and will be endorsed at a national workshop in early 2006.
The strategy emphasizes the critical role of higher education in relation to supporting economic
development of growth in Yemen as well as improving the quality of the education system itself.
The program to support this outcome was reflected in the modest Higher Education Learning and
Innovation Credit of US$5 million which became effective at the start of the CAS period
(September 2002). In addition to developing a national strategy for higher education, the project
aimed at building capacity and piloting a number of innovations to build the foundation, and
inform the design of a comprehensive higher education operation. However, the project faced
implementation challenges during its first two years of implementation (primarily problems with
retaining a project manager and lack of familiarity with IDA procurement procedures).
Outcome III.2: Improved coverage and quality of health services
54.
Implementation of health projects in Yemen has been challenging, and since 1989,
none of the five approved projects achieved their intended objectives, with the exception of
Health Development I (FY90 exit). Most of the projects had similar objectives and while a
limited amount of infrastructure, equipment, and training was provided, none of those efforts was
community participation was dropped as were plans under the second component for selective expansion of two
pilot centers.
- 21 sustainable and none of the projects had any substantial institutional development impact.
Achievement of this outcome was expected to be measured by: increase in health service
coverage (to 65 percent of the population); increase in Government expenditure on health to 2.2
percent of GDP; reduction in child and maternal mortality; and increase in contraceptive use and
reduction in fertility rates. The choice of these indicators needs to be reviewed from two
perspectives. First, given the primacy of the issue of population control, the narrow focus on
reducing fertility rates through higher use of contraceptives was inadequate. Greater focus
should have been undertaken to the multi-sectoral nature of the solution (e.g. the long-term
impact of girl’s education particularly secondary education in reducing fertility rates). Second,
the achievement of these indicators was predicated on a fundamental shift towards integration of
service delivery. This integration did not occur, largely because the health reform program
which was to provide the framework for integration was never adopted in earnest. Moreover, the
Government's decentralization program continues to challenge the ability of the Ministry of
Public Health and Population (MOPHP) to effectively manage the delivery of health services:
investment decisions are made by the local authorities, leaving the central MOPHP to equip,
staff, and run the facilities which may not be in areas considered priority by the MOPHP. Given
this lack of strategic framework, and the inability of the central MOPHP to control investment
decisions, the improvement in indicators in the PRSP progress report toward achieving coverage
targets (63 percent) may not reflect on the ground realities. Finally, the PER for the Health
Sector (2005) found Government expenditures on health to be 1.5 percent of GDP in 2003
(significantly less than the 2.2 percent of GDP target of the CAS program).
55.
Bank’s achievement of this outcome is currently unsatisfactory due to the ambitious
design of the ongoing Health Reform Support Project. The Bank’s project was expected to
provide a Package of Integrated Maternal and Child (PIMAC) health services to 1.5 million
people (in 8 districts in 4 governorates); and improve effectiveness of national public health
programs and resource allocation within the public health sector. With regard to PIMAC, to
which over 70 percent of the project resources were allocated, there were two implementation
problems: first, efforts to integrate services which had traditionally been provided through
vertical programs did not succeed. Second, translating selection criteria into agreement on the
actual districts where the project would be implemented took until September 2004 (i.e. two and
a half years into implementation). Given extremely slow progress and low disbursements (less
than 10 percent of the credit amount of US$27.53 million), the Mid-term Review of the project
in July 2005 was used as the basis for restructuring the component. A decision was taken to
scale back to selected vertical programs (including immunization), minimize investments in
facilities and limit integration of services at the point of service delivery and defer actual
program integration to a future Health Sector Review process. An organization and management
study to guide the overall development of the health system in project governorates/districts was
also recommended. While these restructuring decisions are being implemented, the project’s
implementation and development objective were still rated as “Moderately Unsatisfactory” in
February 2006.
56.
As noted earlier, the Bank attempted to include health, nutrition, water and education
within one project umbrella (The Child Development Project) in targeted districts in 6 selected
governorates. However, although the explicit recognition of the multi-sectoral linkages was a
laudable approach, the Bank has not succeeded in addressing the complexity of implementing
several diverse components through one single project. This resulted in unsatisfactory
- 22 outcomes and close to US$6 million (20 percent of the credit) being undisbursed when the
project closed as of December 31, 2005. This multi-sectoral approach should have been
established in a strategic and integrated manner in the context of the CAS framework as a whole.
The CCR attempts to address this aspect by highlighting some cross-sectoral outcomes in the
following section.
57.
Two other projects also contributed to health sector outcomes. First, SFD II was
involved with the construction of health facilities and it is estimated that close to an additional
one million people gained access to health units. However, given the problems with the
functioning of the health system, the gain from these additional facilities is questionable.
Second, PWP II financed construction of 92 rooms in health centers and modest amounts of
immunization against tetanus (475 women) and hepatitis (812 persons) and vaccination against
six childhood diseases (1550 children).
CROSS-SECTORAL OUTCOMES
Infrastructure Support to Education (Outcome III.1) and Health (Outcome III.2)
58.
In addition to the availability of education and health facilities, in the context of Yemen’s
isolated rural communities it was also necessary to focus on rural access roads. These access
roads assisted not only access to facilities but also access to markets for village agricultural
outputs as well as for incoming essential commodities.
59.
The first phase of the Rural Access Adaptable Program Credit (APC) which commenced
in 2001 and was to be implemented throughout the CAS period, is well on its way to achieving
its outcome indicators of piloting rural access roads in 4 poverty affected areas and developing
low-cost standards for rural roads construction. The intermediate outcome of developing
institutional capacity for rural roads program management has also been achieved. The project
was extended for 10 months (up to October 31, 2006). At the end of the ten year program, the
program was expected to reduce rural access times by 30 percent, costs of transport by 30
percent, prices of essential commodities by 15 percent and to improve poverty and gender
outcomes. The triggers for the second phase of the Rural Access Adaptable Program Credit
were not met during the CAS period.
60.
Bank’s achievement of infrastructure outcomes through the SFD and PWP is
satisfactory. First, the SFD’s impact on feeder roads was assessed as highly satisfactory ; SFD
II connected 76 networks i.e. feeder roads which provided access to primary and secondary
schools and health clinics. As a result of the project, travel time and costs were reported to be
reduced by 40 percent on average. The strong community organization structure in Yemen
and the major community participation dimension in this project will help sustain the
maintenance of the roads. Eighty-six percent of the beneficiary community of rural roads signed
an agreement on road maintenance of completed sub-projects. In addition, road maintenance
follow-up committees have been established. Second, through the PWP, more than 16 percent of
Yemen’s population corresponding to about 5000 communities are now benefiting from the
infrastructure improvements brought by the project. The impact of PWP on infrastructure
services is not only highly satisfactory but also sustainable. Assurances that future maintenance
of sub-projects will be provided were obtained before approval. The substantial institutional set-
- 23 up of the project and the significant community participation were fundamental for its
sustainability.
Safety Nets
61.
Under PWP II – 92000 person months of work were provided. SFD II promoted laborintensive activities and generated about 2.4 million person-days in temporary employment and
about 11,000 additional permanent jobs. The 2002 Poverty Report assessed that the targeting
impact of SFD improved between SFD-I and SFD-II with more funds reaching the poor.
However, the PWP funds were not as well targeted being spread across both the poor and the
non-poor.
Community Development
62.
The SFD benefited about 40 percent of the total population (7 million people) of which
49 percent are female, and generated 8,000 permanent jobs. By making poor communities as
part of the solution, SFD projects contributed substantially to meeting CAS outcome. SFD
undertook a participatory outcome-based approach to implement three main programs:
community development related to social development and infrastructure, capacity building, and
micro-finance. In essence, it is more about helping the poor help themselves rather than simply
focusing on providing assistance. SFD’s approach based on evaluations at every stage of the
project cycle to assess processes and outcomes and take timely and effective corrective
measures, helped achieve the intended results satisfactorily. SFD’s value-added lies in cost
effective innovations in school design, water harvesting, rehabilitation of traditional water
systems, and outreach to special needs groups.
63.
SFD II established a demand-driven mechanism that: improved the living conditions of
the poor through community development services and supported income-generating activities
through the development of small and micro-enterprises. The project targeted the poorest
households, with 17 percent of its resources benefiting the poorest decile, 31 percent benefiting
the poorest quintile, and 44 percent benefiting the poorest three deciles.
Gender
64.
Girls Education. The CAS helped provide the enabling conditions for Girls’ education
and contributed to reducing the gender gap, but sustainability remains an issue. In the SFD
beneficiary communities, girls’ enrollment rates were almost 20 percent higher than in the
comparison group, the proportion of girls enrolled increasing from 42 percent in 1999 to 56
percent in 2003. The Child Development project focuses on improving the ratio of girls to boys
enrolled in grade 1 reaching grade 6 by at least 15 per cent in the 6 pilot governorates and
improving the minimum level of learning of girls by at least 80 percent.
65.
Gender analytical work has made a significant difference in including gender issues
in the national dialogue. Through a Gender Assessment Note, it assisted the government in
developing a National Gender Strategy approved by the Prime Minister. Despite its use in the
national strategy, the Gender Note was never finalized and publicly issued. Gender issues were
also addressed in the context of other initiatives: for example, in the context of the Port Cities
- 24 Development project, a note was prepared on Women in Local Economic Development in Aden
and was published in December 2006. Similarly, in the context of IFC’s Private Enterprise
Partnership (PEP MENA) Program, a women entrepreneur’s training workshop was held in June
2005.
Children At Risk
66.
The grant to develop programs that will support Children at Risk (FY04) did not
materialize and the objective of implementing programs to deal with children at risk, including
housing for 2,500 homeless children and care centers for 6,750 was not achieved. However,
analytical work on children at risk provided the basis to initiate dialogue at a national level on
sensitive issues such as the magnitude and situation of child laborers, HIV/AIDS; and provided
the basis to begin the mainstreaming process and integration of specific activities for at-risk
children in the SFD and Basic Education Enhancement Projects.
Research and Knowledge Sharing
67.
With the support of the Bank and other donors, a Development Research Forum (FY03)
was to be established as an independent Think Tank to Monitor and Evaluate the PRSP, and
engage in policy research. None of those expected results was achieved.
68.
A Development Information Center (FY04) was to be established in order to bring
Yemen closer to the rest of the world in terms of information sharing, training, and research.
The Bank signed a three-year agreement with the National Information Center (NIC) to establish
a Development Information Network (DIN), specifically a Public Information Facility (PIF) where Bank publications would be made available to the public - and a Distance Learning Center
(DLC) - where training, meetings, etc. could take place over video conference with other
countries. The Bank also signed an agreement with the University of Sana’a to establish a Public
Information Center which is now operational. The DLC is not yet operational due to high
monthly costs which the Telecommunications Ministry would charge the NIC; this matter is still
to be resolved.
F.
Strategic Pillar IV: Sustaining and Protecting Natural Resources. Moderately
Unsatisfactory
69.
The CAS identified five major areas of intervention: addressing depletion of groundwater
through efficient irrigation technology and better management of groundwater; addressing the
loss of soil and watershed through extending modern techniques to rainfed farms and livestock
management, and through reduction of flood incidence; reducing pollution through regulation
and sanitation investments; mitigating the risk of depletion of fish stocks through better stock
management; and mitigating the risk of depletion of petroleum through power sector reform, and
through non-oil exports promotion. This evaluation focuses on the first three outcomes (which
are considered as one integrated set of water and sanitation outcomes) and on the fourth outcome
on fish resources. The fifth outcome on diversification (petroleum depletion and non-oil exports)
has been considered in the context of the investment climate outcomes. The CAS should have
integrated this outcome under pillar II of business environment.
- 25 -
70.
Pillar Achievements as compared to CAS goals. The institutional framework for
water sector development improved during the CAS period, although modestly. A water
law was passed and provided a legal basis for treating irrigation and municipal water as a single
source. Satisfactory progress towards sustainable water use through rehabilitation and
modernization of infrastructure, and through participatory irrigation management was made.
Exhaustion of groundwater and soil is being addressed appropriately, but it is too early to
evaluate the final achievement at this stage. In Urban Water Supply and Sanitation, availability
of piped water increased from once a week to once every four days, and urgent needs of 7,500
and 5,000 households for sewer and water systems respectively were addressed.
71.
Bank Assistance. The achievement of pillar IV outcomes depended on the success of
four ongoing projects, three new projects (all delivered) and five ESW activities (of which four
were delivered):
Table 9: BANK ASSISTANCE UNDER PILLAR IV
Ongoing Lending at start
of CAS
Actual
Lending
Actual
ESW/TA
1.Taiz Municipal
development
2. Rural water supply &
sanitation
3. Sana’a water supply &
sanitation
4. Irrigation Improvement
1. Sana’a Basin
Water management
2. Ground water &
soil conservation
3. Urban water
supply & sanitation
1. Country Water
Resources Assistance
Strategy
2. Coastal Aquifers
Development Strategy
3. Environmental
Safeguards
4. Rural Energy
(ESMAP)
Planned New
Lending not
delivered
None
Planned New
ESW/TA not
delivered
1. Fisheries
Management
Support
Outcome IV.1: Improved conditions for water availability in place, through strengthened
water depletion mitigation measures
72.
Water scarcity being a major environmental/sustainability challenge in Yemen is an issue
that has been known since the 1970s. The PRSP correctly noted that one of the key solutions to
raising incomes and reducing poverty is agriculture water use efficiency. As most of the water
used for irrigation is pumped out of the aquifer, the subsidized prices of diesel play a key role in
water over use. While increasing the price of diesel would normally be expected to move
farmers towards higher value added crops, the problem in Yemen is the dominance of qat as
probably the highest value added crops34. There was also the need to improve traditional
systems of rainfed agriculture in order to prevent the significant soil erosion that occurs. Hence,
the focus of the CAS on groundwater exhaustion was relevant.
73.
However, water conservation (primarily in the agriculture sector which accounts for 90
percent of water use in Yemen) needs to be accompanied by increasing water supply (and
importantly also sanitation) to a largely under-served population. This dual challenge is not
clearly acknowledged in the CAS outcome which focuses on water use outcome only. It is,
however, unclear how the human development outcomes could have been achieved without the
water supply and sanitation services. The scale of the water supply and sanitation problem is
34
This problem was highlighted in the Bank’s 1999 Agriculture Strategy document.
- 26 large; for example, in order for Yemen to achieve water and sanitation MDGs, substantial
increases in rural coverage will be necessary as shown in Table 10.
Table 10: WATER AND SANITATION INDICATORS AND MDGS
Rural water supply coverage
target
Rural sanitation coverage target
Population served
Water supply
Sanitation
Total rural population
Source: CWRAS, 2005
Base (2000-2003)
25 percent
MDGs (2015)
65 percent
20 percent
52 percent
3.4 million
2.8 million
13.8 million
13.6 million
10.9 million
20.9 million
74.
Achievements under this outcome can be summarized as follows: The institutional
framework for water sector development improved during the CAS period in part due to the
Bank’s assistance through its interventions. A Water law was passed in FY03 and provided
better clarity on the priorities and regulatory framework of the sector. The law also defined the
role of the National Water Resources Authority (NWRA) in water resources management, and
reinforced decentralization. However, although public awareness was judged to be high, the
impact on change in people’s behaviors was negligible due to subsidized diesel prices. A new
Ministry of Water and Environment (MWE) to unify agencies dealing with water issues was
created; the water sector was reorganized; and an expectation that the ongoing reforms would
have a higher impact was raised. The National Water Sector Strategic Investment Plan was
formulated in 2004 and provided a sector investment framework for the first time.
75.
The Country Water Resources Assistance Strategy (CWRAS, FY05) identified the
Bank’s proposed operational response to seven ongoing reforms: (i) Incentive structure; (ii)
Urban water supply and sanitation reforms; (iii) Water conservation in agriculture; (iv)
Improvement of public expenditure quality; (v) Decentralization, community partnership, and
self-regulation; (vi) Water policy and strategy; and (vii) Rural water supply and sanitation. The
Bank therefore has the opportunity to continue the dialogue on water issues beyond the CAS
period on the basis of sound analysis (CWRAS). Sector work and Monitoring and Evaluation
Framework for its implementation were good steps forward. Although it is too early to
assess the impact of the new CWRAS, it is worth noting that this is the first time the Bank
undertakes a program approach to the water sector in Yemen considering the linkages between
rural and urban uses, and institutional reforms.
76.
Public expenditures in the irrigation and urban water sector. On the expenditure
side, the Bank’s Public Expenditure Review (PER) had a positive impact on the quality of public
expenditures in the irrigation and urban water sector. Some results are noteworthy: with regard
to depletion of water, recommendations were made to eliminate public support for groundwater
in favor of investments in water use efficiency and in improving sustainable spate schemes; and
industry benchmarks were introduced for urban water. The PER concluded that many resources
were wasted in developing small dams whose design was not sound and did not improve basin
efficiency.
- 27 77.
Spate Irrigation. Through the Irrigation Improvement Project (FY01) the Bank is
making satisfactory progress towards sustainable water use in two spate irrigation schemes (in
Tuban and Zabid), covering 26,000 ha, through rehabilitation and modernization of
infrastructure, and through participatory irrigation management (PIM) with the
establishment of Water User Associations and Irrigation Councils. Sustainability of the
schemes would be ensured through Government budget and user contributions. Further, Bank’s
support is expected to increase agricultural productivity and rural incomes through
implementation of an intensive demonstration program. The Irrigation Improvement Project is
the first phase of an adaptable program credit (APC) to be completed by June 2006 and now
extended to June 2007. The second phase of the APC would be initiated when the triggers are
met and it would cover the remaining five spate irrigation schemes. The Southern Governorates
Agricultural Privatization project was also involved with the improvements to spate irrigation
structures, affected 3,530 hectares (and over 14,000 farmers), and erosion control and wadi
protection activities affected another 9,000 hectares benefiting 57,000 people.
78.
Groundwater and Soil Conservation. Although no measurable outcomes are available
at this stage, as Bank’s interventions started later than planned, it is noteworthy that the CAS
adequately highlighted the exhaustion of groundwater and soil as key issues, and that the
proposed assistance is relevant to addressing those issues. The ongoing Groundwater & Soil
Conservation project addresses the issue of aquifer exhaustion from excessive agricultural use
and the associated deteriorating recharge conditions in the watershed. This project’s
development objective is to help improve water use efficiency through: (i) introducing water
saving technologies (improved groundwater conveyance systems for 27,000 hectares and
localized on-farm irrigation for 1,700 hectares); (ii) increasing surface and groundwater
availability through rehabilitation of small to medium spate irrigation schemes, terrace
rehabilitation, bank protection works and other water and soil conservation activities; and (iii)
establishing a groundwater management framework and institution to manage local water
resources sustainably through capacity building of government water institutions and community
groups. The institutional component addresses some of the criticisms of the CAE and supports
the institutional development of key sector institutions such as the Ministry of Agriculture &
Irrigation; the Ministry of Water & Environment; and the National Water Resources Authority.
The institutional development activities supported include: demonstration farms and wells; the
establishment of an Irrigation Advisory Service; a public awareness campaign and the
establishment of Water User Associations. The project will be implemented through October
2009.
79.
The Sana’a Basin Water Management Project is an Adaptable Program Credit (APC)
operation, over 15 years, to be implemented in three phases. The Program Objective is to seek
long-term solutions and promote sustainable groundwater management in the Sana'a Basin.
Ultimately, given the recharge of the deep aquifer is very limited, the key goal is to extend the
life span of the aquifer through reductions in groundwater abstractions through irrigation
efficiency improvements. The first five-year phase of the Project (approved in late FY02 and to
be implemented through the end of FY09) focuses on: increasing the efficiency of agricultural
water use within the Sana'a Basin; and accelerating aquifer recharge to allow for a gradual shift
to a less water-based rural economy. The objectives will be attained through the following
components: (i) demand management and irrigation improvement; (ii) supply management and
recharge improvement; (iii) institutional development and capacity building (improving the
- 28 analytical data base for water resources management); (iv) information and public awareness; (v)
environmental management and mitigation program; (vi) project management and monitoring;
and (vii) follow-on-project preparation. The objective of this project is also relevant to the CAS
and PRSP, and addresses CAE’s concern as it focuses on demand management and on
institutional capacity building, through the improvement of the analytical and database for water
resources management. Despite some implementation delays, the project’s outcomes are
likely to be achieved on the grounds that irrigation improvement efforts are in place and
farmer demand for efficient irrigation technology is rising. There is however a concern that
the equity in benefits for the irrigation investments to poor farmers may not be addressed.
80.
Rural Water Supply and Sanitation. Bank program for the Rural Water and Sanitation
sector was implemented through the ongoing Rural Water Supply and Sanitation Project (RWSS,
approved in FY2001), and the activities under the SFD II, Public Works II and Child
Development Projects.
81.
The RWSS Project introduced a demand-driven and participatory approach designed to
ensure RWSS schemes coverage in six governorates; and assisting the government in
strengthening local capacity. The project has been extended by eighteen months to June 2007
and is likely to achieve its development objective for construction and/or rehabilitation of 130
RWS projects serving a total of 400,000 people in six governorates. The associated rural
sanitation and hygiene education are more modest and also likely to be achieved.
82.
Similarly, the SFD II also funded water harvesting schemes. However, its projects have
been less successful in improving the well-being and economic integration of its target
population. Women and children still have to collect and carry water from most of SFD II water
schemes, and the water from open cisterns and dams is unsuitable for drinking without
treatment35.
83.
Urban Water Supply and Sanitation. Three projects supported this outcome: the
Sana’a Water Supply and Sanitation Project (SWSSP) which closed in June 2003; Taiz
Municipal Development Project; and the Urban Water Supply and Sanitation APC Phase I.
Under Sana’a Water Supply and Sanitation Project, Bank’s intervention contributed to:
increasing the availability of piped water from once a week to once every four days;
reducing unaccounted for water; and addressing the urgent needs of 7,500 and 5,000
households for sewer and water systems respectively. It also contributed to transforming the
Sana’a Water and Sanitation Authority into an efficient and technically and financially well
performing corporation but the corporation could not comply with the project’s revenue
covenants. However, its progress laid the ground to corporatize other branches of the Authority.
Due to lack of specific attention to water resources management, IEG rated the outcome of this
intervention (SWSSP) as Moderately Satisfactory36.
84.
Bank’s assistance under the Urban Water and Sanitation Project APC (UWSS, FY03)
sought to achieve four objectives: a significant increase in water supply and sewerage services in
project cities; establishment of a sectoral regulator and local corporations in Al-Hodeida, Al35
Source: SFD II ICR
“abstraction of groundwater was 1.5 times recharge, and the water table was declining at about 6 meters per
annum.” PPAR on water.
36
- 29 Mukalla and Taiz; increase in private sector participation in Sana’a; and improved eligibility of
the project cities for on-lending under the second phase of the project. The assistance remains
relevant to the CAS and PRSP. The project is currently undergoing its Mid-Term Review and is
reviewing the impact of accumulated implementation delays, and the progress towards the
triggers to move to phase 2 of the APC.
85.
Flood Protection. Over the past three years, the loss of life due to flooding has been
reduced by 50 percent in Taiz and eliminated altogether in project-affected areas. Damages to
residences have been reduced by 98 percent over the past three years and damages to businesses
reduced by 50 percent city-wide. Those achievements were accomplished through the Taiz
Municipal Development and Flood protection Project that financed 8 km of flood protection
structures to protect city residents and businesses from seasonal flash floods.
THE ISSUE OF QAT
86.
This was a difficult issue with many implications – on water use, on health and on
productivity of the workforce – and the 2001 CAE criticized the Bank for not taking sufficient
actions on the qat issue. The CAE noted that “IDA could have argued that qat production should
be neither protected nor subsidized; it could have urged import liberalization for qat as part of
trade liberalization”. The PRSP did not identify the production and consumption of qat as an
issue except with regard to the high usage of irrigated water. In line with the PRSP, the CAS
program matrix did not identify any direct actions on qat production and consumption37. The
only project to directly address this issue was the Groundwater and Soil Conservation Project but
its contribution was limited to excluding qat farms from those farms that could benefit from
project activities. The new CAS should address this question more substantively. The challenge
is that there is little social consensus in Yemen around the need to address this problem and it is
likely that an extended period of changing social attitudes may be necessary.
Box 3: QAT CHALLENGES
Qat plays a major economic role in the Yemeni economy. Qat’s contribution to GDP of 10 percent, including direct and indirect effects,
equals two-thirds that of oil. One-third of agricultural GDP, the main source of income in the rural Yemen, is from Qat. Qat is the second
largest employer, employing one in every seven working Yemeni, even surpassing employment in the public sector.
The negative effects of Qat are grave. It depletes scarce water resources, deprives agricultural exports, lowers domestic savings, wastes
human resources, and damages health. Since Qat is an irrigated crop with unmatched profitability, one-third of all ground water
abstraction for all other uses (agricultural, industrial and residential) is utilized for Qat cultivation. The area under Qat has expanded 13fold in the last three decades, displacing areas that could have been planted with exportable coffee, fruits and vegetables. If the
expenditures on Qat were to be saved, savings would have been higher by 5 percentage points of GDP. If the poor families put the
money spent on Qat to good use, the percentage of poor would be lower by 6 percentage points. The culture of spending extended
afternoon hours chewing Qat is inimical to the development of a disciplined work ethics, with nearly one-quarter of usable working
hours wasted. The adverse health effects of Qat are many: high blood-pressure, under-weight children (when pregnant women chew
Qat), and cancer (from pesticide residues).
Overcoming the obsession of chewing Qat is a critical and complex task for Yemenis. It is far too well integrated into the Yemeni
economy and society to be abruptly ended without serious short-term adverse effects. Beyond prohibiting chewing Qat in government
offices, the government and all other stakeholders in development must set up a campaign and rehabilitation policy that help Yemenis
realize their full development potential.
Source: DPR, 2006
37
Production of qat accounts for one third of agricultural GDP, and absorbs a significant quantity of Yemen’s
scarce water.
- 30 -
Outcome IV.2: Efficient mitigation measures against depletion of other natural resources
(coastal fisheries) and against pollution in place
87.
Under this outcome, the Bank conducted an environment Safeguards Review that aimed
at strengthening the capacity of the Ministry of Environment.
88.
The Fisheries Management Support and Agricultural and Maricultural Exports studies
were not delivered as planned, and the expected delegation of coastal stock management duties
to cooperatives and associations, along with the training programs were not achieved.
V.
A.
MEASURING BANK PERFORMANCE
Quality of Products and Services
A. 1: Volume, Lending Instruments, and Costs
89.
The CAS projected IDA credits with a total Base-case amount of US$410 million.
Actual IDA credits during FY03-05 totaled US$387.4 million representing 6 investment projects
out of the planned 11 projects, and 1 not initially planned investment project [Public Works III].
Of the 6 projects, 1 was an Adaptable Program Credit [Urban Water Supply and Sanitation].
Although 5 projects were not delivered, the small gap between the planned IDA amount and the
actual amount is explained by the increase in the credit amounts of 2 projects [Groundwater and
Soil conservation; and Second Basic Education Expansion], and by the addition of the Public
Works III project. 3 projects were rescheduled for FY06-07 and 2 projects were dropped [CSMP
II; and District and Community Development]. The total cost of dropped projects stood at
US$300,000 with the District and Community Development project contributing US$220,000.
Average preparation costs were the highest in the region in FY03 (at US$619,000), but
declined in the following years of the CAS period to below MNA’s average costs.
A. 2: Analytical and Advisory Services (AAA)
90.
The CAS highlighted the need for an increased focus on knowledge products and services
to support long-term reform programs mainly in the area of public sector governance, and
advocated the initiation of the Programmatic Non-Lending Services. Several activities were
planned in the CAS, however the lack of a monitoring system to track their delivery and
dissemination made it difficult to get an accurate evaluation of the actual number of AAA and
their impact. In the new CAS period, there is room for improvement in dissemination and
internal record-keeping.
91.
Most of the actual non-lending activities made progress late in the CAS period and
therefore did not achieve their expected results; however, several unplanned activities were
undertaken. The unplanned “Budgetary and Poverty Impact of Petroleum Pricing” study made a
significant impact, albeit with some disconnect in implementing the study’s recommendations.
Other achievements made through AAA are in the Public Finance Management (PFM), anticorruption, and gender. A PFM reform strategy was approved by the cabinet and a Ministerial
committee was established to oversee the implementation of the PFM action plan; an anti-
- 31 corruption commission was established following the CFAA’s recommendations; and analytical
work on gender helped the government develop a National Gender Strategy. However, 2 key
products were delayed: the Development Policy Review and the survey results of the Investment
Climate. In addition to focusing on the strategic relevance, coherence, and cross-sectoral
integration of the AAA, the new CAS should also ensure that inputs and processes are
adequate, that timing is appropriate for maximum impact, and that dissemination and
follow-up take place and are adequately monitored.
A. 3: Responsiveness to Clients
92.
The Country Office in Yemen played a major role in coordinating CAS activities and
following-up on portfolio performance. However, experienced Task Team Leaders need to be
closer to the client to support implementation of reforms. Most complex projects such as the
Civil Service Modernization and Health projects, could have benefited from a greater
presence in the field. Total staff in Yemen declined from an average of 26 during CAS99
period to 19 at end CAS02, but the presence of fiduciary staff was strengthened by the
assignment of an International Procurement Specialist. In the area of portfolio management, the
Country Manager in Yemen and other staff are members of a Country Portfolio Performance
Review (CPPR) follow-up committee involving senior officials from the Ministry of Planning
and International Cooperation, and the Ministry of Finance.
A. 4: Coordination with Development Partners, Harmonization, and Trust Fund
Activities
93.
Donor support to Yemen stood at around US$200 million during the FY03-05 period and
IDA resources constituted roughly half of this amount. Other donors included the Arab Funds,
European Union, Germany, the Netherlands, the United Kingdom, and the UN system. The
relatively small number of donors and the focus of each donor on particular sectors/themes (e.g.
the water sector dominated both German and Dutch assistance) facilitated a high degree of
collaboration between donors. Donor experiences with project implementation in particular
sectors were largely similar to those reported in the CAS completion report.38 While the IMF did
not have a PRGF program, it regularly undertook Article IV consultation and was involved with
providing a substantial program of Technical Assistance which progressively diminished by
FY2005. 39
94.
Harmonization around government strategies focused on education, water and public
financial management, and accelerated at the country level towards the end of the CAS period in
the context of the Fragile States Initiative. The new CAS will benefit from greater
harmonization efforts as all donors are preparing their strategies at the same time.
95.
Thirteen Trust Fund activities with a total amount of US$125.7 million became effective
during the CAS period aiming at supporting project preparation, capacity building, and project
implementation.
38
This was revealed through donor meetings during the first round of CAS consultations as well as was based on the
following evaluation reports.
39
An evaluation conducted by IMF’s Independent Evaluation Office rated the TA as unsatisfactory.
- 32 A. 5: Portfolio Performance and Risk Management
96.
Portfolio performance improved over the CAS period. At end-FY05, Yemen’s
portfolio (17 projects) was the second largest in MNA, with two major sectors (Water Supply
and Sanitation, and Education) accounting for 40 percent of the commitments. Frequency of
CPPRs and follow-up to CPPR recommendations contributed to manage portfolio risks and
reduce commitments at risk from an average of 12 percent in CAS99 to 8 percent in FY05.
More focus on quality at entry and readiness for implementation resulted in a reduction of
effectiveness delays from 7.6 months before FY00 to 5.3 months during CAS02. The target in
2005 CPPR was to reduce effectiveness delays to less than three months. While Realism index
remained the same as in previous CAS period (83 percent), Proactivity declined from 72 percent
to 58 percent due to the long-term problem status of the Civil Service Modernization Project.
Disbursement ratios were above MNA’s ratios in CAS99 period, but declined from 17 percent in
FY02 to 15.8 percent in FY05, slightly below MNA’s ratio of 16.3 percent. It was reported that
heavy disbursement procedures hinder effective project management.
97.
Average Supervision resources increased from US$54,000 in FY03 to US$103,000 in
FY05, bringing the average resources for CAS02 period to US$77,000 slightly above MNA’s
average of US$73,000. The increase in supervision efforts did not result in an improvement
in supervision quality as IEG ratings for Bank Performance at Supervision show a decline from
92 percent in CAS99 to 62.5 percent in CAS02. However, the average six-year trend (FY00-05)
shows a ratio of 80 percent “Satisfactory”.
98.
Outcomes are Moderately Satisfactory but Sustainability is of concern. Yemen’s
percentage of “Moderately Satisfactory” to “Highly Satisfactory” Development Outcomes (75
percent) of projects that exited during CAS02 period is higher than the overall regional average.
The FY00-05 trend shows a similar result of 75 percent. When evaluating the success in
achieving development outcomes, it is important to note that, with the exception of Public Works
project with a “Highly Satisfactory” rating, all other projects that exited in CAS02 period were
rated “Moderately Satisfactory” for Development Outcomes. More efforts are indeed warranted
to achieve fully satisfactory results. Although Monitoring and Evaluation is rated “Satisfactory”
or “Moderately Satisfactory” in all ISRs, Performance Indicators to track the progress towards
the achievement of projects’ development objectives (PDO) need more clarity for better
measurement. In some cases, where indicators are well defined, they are not used in the PDO’s
rating explanation. In other cases, a long list of indicators makes it difficult to track the essential
intermediate indicators through which the PDO rating should be justified. Sustainability
declined from 75 percent in CAS99 to 67 percent in CAS02, bringing the Sustainability level
below the Bank’s average of 78 percent.
99.
Development Impact Risk is high since project implementation arrangements do not
support Institutional Development objectives. Despite recommendations emphasizing the
need to enhance the Institutional Development Impact of the Bank’s interventions in Yemen (e.g.
highlighted in IEG’s CAE99), the percentage of closed projects with “Substantial” Institutional
Development Impact declined further from 33 percent at the CAS99 period to 25 percent during
CAS02. The institutional development objectives are evaluated from two perspectives: first, the
extent to which projects focused on capacity building goals (for Government and public sector
- 33 entities, non-governmental and community-based organizations and the private sector) and
second, the extent to which project implementation was mainstreamed40.
33%
Inst Dev
Impact %
Substantial
IEG
Assessments
25%
CAS99
CAS02
75%
Sustainability %
Likely
67%
75%
Outcome %
Satisfactory
75%
0%
10%
20%
30%
40%
50%
60%
70%
80%
100. Of the seven projects approved during the CAS period, the three water projects all
focused on strengthening the role of community organizations (i.e. Water User Associations) and
the Urban Water Supply project also focused on strengthening the role of corporatized water
entities. The Social Fund and the Public Works Projects continued with established procedures
for community development as part of program delivery. The Port Cities Development project
focused on building the capacities of Local Economic Development departments in the cities
included under the program. The Basic Education Development Project includes activities to
support the restructuring of the Ministry of Education and to enhance community participation in
the education sector.
101. Implementation Arrangements. Enclave project entities performed two functions in
Yemen’s context. First, given weak fiduciary systems in Yemen, some units ensured compliance
with World Bank procurement and financial management requirements (some units were called
Credit Administration Units to highlight this role). Second, given the lack of progress on pay
reform and performance management initiatives under the Civil Service Reform program, there
were concerns that mainstreaming activities into relevant Government ministries and agencies
would lead to slow or limited implementation progress during the project period. This led to the
use of Project Implementation Units which made operational decisions and undertook or
managed implementation41. The evaluation focused on whether the designed use of the PIU
model diminished in new projects developed during the CAS period and the conclusion is that to
a greater or lesser degree all seven projects continued to use this approach. Two projects (SFD
III and PWP III) were designed to be implemented by legally enclave entities. The three water
projects (Urban Water, Sana’a Basin and Groundwater) were designed to be implemented
through the extensive use of PIUs. The Education project was mainstreamed to a large extent
and the Port Cities Development Project was designed to be implemented through the Local
40
Given weak fiduciary systems in Yemen, it is assumed that there was a continuing need during the CAS period to
enclave procurement and financial management activities in World Bank projects.
41
As the PAD for a project put it “ …the reason for this business approach is that the project starts-up rapidly
…..the PMU will be dissolved at the end of the project”.
- 34 Economic Development Departments of the concerned cities. With the exception of only one
project, all new projects did not include specific future arrangements for integration of the PIUs
into their line ministries to ensure sustainability and retain the capacity in the government.
A. 6: Fiduciary and Safeguards: Assessment and Recommendations for the New
CAS
102. Given the high fiduciary risk in Yemen, this CCR highlights the areas of improvement
and proposes specific recommendations for the new CAS.
Financial Management
103. The Financial Management (FM) Project Risk as per the Risk Management tool
(RapMan) is one of the highest in the region (41 percent). The main systemic FM issues are
related to Internal Controls, Staffing, Auditing and Reporting. The suggestions for the new
CAS include a comprehensive supervision plan to be prepared to include technical audits for the
projects on the watch list, and combined ex-post reviews and SOE reviews by the fiduciary team.
In addition, there is still a need to address country systems’ improvements.
Procurement
104. The limited capacity in project implementation was partly linked to the equally limited
capacity in procurement. Most projects suffered from: (i) inadequate staffing of the procurement
function, (ii) lengthy contract processing periods taking longer than bid validity periods, which
impacted bid prices and confidence of bidders; conflict of interest; and payment delays to
contractors and consultants. Recommendations for the new CAS include:
•
•
•
•
Lowering procurement thresholds, conducting joint Procurement and FM ex-post reviews
of contracts below the prior review thresholds to help ensure consistency; and introducing
technical/operational audits prior to the mid-term review of all projects.
Agreeing with the government on a Memorandum of Understanding that enforces a strict
adherence to procurement processing schedule and prevents delays in contract
processing.
Enhancing disclosure through more structured public postings of annual procurement
plans, procurement audit reports, and mid-term review reports.
Enhancing procurement post reviews with new techniques on fighting fraud and
corruption.
Safeguards
105. The Bank conducted a safeguards portfolio review, including a field review of risky
projects conducted over the CAS period, and provided Technical Assistance (TA) to the
Environmental Protection Authority (EPA). The TA aimed at (i) reviewing existing laws,
bylaws, and regulations, (ii) providing assistance in preparing sectoral guidelines, and (iii)
training EPA staff. At the project level, the review showed that many category B Project
Management Units do not identify specific staff responsible for implementation of safeguards
- 35 mitigation measures. In addition, Safeguards appear to be a high priority only in project
preparation, but not during supervision. Recommendations for the new CAS include:
•
Strengthening national Safeguards compliance through (i) improving line ministries’
capacity to comply with national laws; and (ii) direct support to the EPA to enhance its
capacity to monitor and enforce compliance.
•
Increasing supervision focus on Safeguards and enhancing monitoring and reporting on
Safeguards compliance.
B.
Building Capacity in Yemen: The role of World Bank Institute (WBI).
106.
The CAS acknowledged that the most formidable challenge to Yemen’s development is
weak institutional capacity; and it envisaged a more integrated approach to capacity development
calling upon the intervention of WBI as a full-fledged partner in support of the realization of
CAS objectives. In response, at the launch of the WBI Focus Country initiative in FY03, Yemen
was one of the countries to be selected as part of the pilot phase. This allowed the country to
benefit from customized and strategic support to the government’s capacity building needs
through the Country Team’s lending and non-lending program. The first two years under this
program, WBI took the opportunistic approach of inviting Yemenis to participate in regional and
global events that pertained to their development challenges. This served as an effective means
of orienting the participants to WBI’s programs, and allowed the institute to better understand
capacity issues in the country.
107. To further enhance the program, WBI consolidated its interventions and adopted a multiyear country focus program in FY05. The multi-year program for Yemen was closely aligned
with the FY03-05 CAS focusing on each of the four CAS pillars. The interventions provided
tailored knowledge sharing focused on decentralization and local government capacity building;
health sector reform; access to education through the “Education For All” program; Pension
management; and Water resources management in the context of developing the National Water
Strategy. Although WBI had planned to deliver a Financial Sector Capacity Enhancement
Program, the program was canceled due to timing and readiness in the country. WBI
complemented these programs with regional/global programs to facilitate exchanges of
knowledge and strengthening communities of practice.
108. While modest in size, WBI was able to make a number of achievements through the
multiyear country focus program. Evidence of the change is marked by a steady increase in
participation of Yemenis to WBI activities growing from an annual average of 68 participants in
FY03 to 398 in FY 06. The Level 1 evaluation results of three activities implemented in FY05
indicated the programs to be of relevance ranking above the FY04 benchmark of all WBI
programs. The results also indicated that the activities’ average “overall usefulness” to be at 80
percent, meeting the exact benchmark set for WBI FY 05 programs.
109.
Amongst the country focus multi-year interventions, deliveries include:
•
“National Water Sector Strategy and Investment Plan (NWSSIP) workshop” as
part of the MNA Region’s programmatic ESW assistance. The workshop met its
- 36 objective of presenting the final policy matrix for the national plan to key
stakeholders and providing a forum for discussion and development of a monitoring
and evaluation program for the water strategy plan. The workshop held discussions
on the advisability and feasibility of establishing a Groundwater Task Force to
oversee the rapidly diminishing groundwater resources of the country. A series of
facilitated working groups addressed the various key issues and provided a
framework for the establishment of a practical monitoring and evaluation program.
C.
•
Education program on Strengthening EFA Implementation which was delivered
through a series of 6 video conference events with the main objective of helping the
participants gain an understanding of the Fast Track Initiative (FTI) in terms of how it
operates, and changes it has faced since its inception in 2002. The program, delivered
in Arabic, also introduced participants to best practices from other countries.
•
The Senior Policy Seminar on Analyzing Health Sector Performance was
prepared in close collaboration with the Ministry of Health and the American
University of Beirut. The main objective was to support the MOH in thinking
through the formulation of its next 5-year plan and assist in prioritizing interventions.
High level government officials from various ministries and several donors attended
the seminar. The donors showed interest in the possibility of implementing the
different Flagship modules and customize them for Yemen.
•
Decentralization and Improving Governance: WBI conducted needs assessment
of training needs for local government in FY05. It will continue to assist the Ministry
of Local Administration on the development and implementation of its national
training program for building capacity of local administrations in FY06, in close
alignment with the Taiz Municipal Development and Flood Protection Project.
International Finance Corporation (IFC)
110. IFC’s portfolio during the CAS period included three operations but none of them was
approved during the CAS period: Radfan ceramics and porcelain manufacturing (FY 98), Aden
Company for Silos and Mills (FY 99), and Al-Ahlia Mineral Water Company (FY02). All
investments have contributed to employment generation and poverty reduction, in line with the
objectives of the 2002 Yemen CAS. The bottled mineral water produced by Al-Ahlia supplies
several cities in Yemen, including the capital city Sana'a, as a quality import substitution
product, and the operation contributed to creating 100 jobs.
D.
Multilateral Investment Guarantee Agency (MIGA)
111.
MIGA has had no activities in Yemen and none were under preparation during the
CAS period.
- 37 VI. LESSONS LEARNED AND RECOMMENDATIONS FOR SUBSEQUENT
CAS DESIGN
112. Yemen is considered to be a Fragile State i.e. it is among a group of countries where: (a)
state policies and institutions are weak making them vulnerable in their capacity to deliver
services to citizens, control corruption or provide for sufficient voice and accountability; and (b)
there are risks of conflict and political instability. Yemen is in the initial group of pilot countries
where the OECD Principles for Good International Engagement in Fragile States are being
implemented and an Aid Harmonization Assistance unit in the Ministry of Planning and
International Cooperation is leading this effort. There are twelve principles that can be clustered
into four themes. First, a long-term focus on state capacity and accountability is critical.
Second, political, security and development linkages are particularly important. Third,
particularly close partnerships between international actors are needed to ensure delivery of
results. Fourth donor organizational responses must be calibrated to the specific needs of fragile
states particularly with regard to acting faster and more flexibly, staying engaged for the longterm and addressing problems of aid orphans and aid volatility. Within the typology of Fragile
States, Yemen exhibits most of the characteristics of a gradual reformer. 42 A recent Bank-wide
review of progress in the implementation of CASs in Fragile States drew several lessons which
are similar to those identified under this Completion Report.
113. CAS Results Selectivity: Striking the correct balance. Given that donor assistance to
Yemen is extremely limited, donor projects need to balance competing goals of delivering
immediate results (essential to build confidence in public service delivery in a Fragile State) and
improving the long-term delivery capacity of Government’s systems. The Bank will need to
continue balancing two competing priorities:
•
Deploying its instruments to achieve the best balance between improving country
systems (and thereby leveraging Yemen’s own substantial resources) and, given
pervasive capacity and governance weaknesses, focusing on delivering more
immediate results through its own interventions;
•
Deploying its instruments to assist the Government in dealing with a shorter-term
growth (and fiscal crisis) and with long-term development challenges (improving
human capital and managing scarce water resources).43
114. It is noteworthy that in supporting the Government in improving country systems and in
addressing the shorter-term crisis, the Bank program primarily consisted of non-lending
42
The World Bank typically considers countries as Fragile States if the CPIA is below 3.0 and marginal Fragile
States if the CPIA is below 3.2. Yemen’s CPIA rating is slightly above the marginal level. The typology of Fragile
States consists of countries in deterioration; prolonged crisis or impasses; post-conflict or political transition; and in
gradual improvement. See Fragile States – Good Practice in Country Assistance Strategies, The World Bank, 2005.
43
The growth crisis (rapid depletion of oil resources) was to be addressed through enhancing non-oil growth through
improving productivity via short-term measures (improving the environment for private investment) and long-term
measures (improving human capital) and translating any given level of growth into higher per capita growth by
controlling population growth (an increase of 500,000 persons per year). The associated fiscal crisis was to be
dealt with through increased fiscal revenues from non-oil sources and decreased expenditures (both subsidy
reduction and wage bill management).
- 38 services44. The Bank’s lending program was focused on delivering more immediate results and
in addressing the long-term development challenges of improving human capital and managing
scarce water resources45. The new CAS would need to consider whether country system
improvements and addressing the short-term growth crisis requires lending assistance.
This could consist of making investments in productive sectors in urban and rural areas
(particularly for the poorer part of the population) and policy based lending to support
fiscal reform.
115. Developing Long-term partnerships: Working within the context of a Government
led program with other donors. Bank programs that have experienced some success in Yemen
have been supported through an appropriate sequencing starting with assisting the Government
in formulating a sector strategy and financing plan; working with other donors to ensure that the
plan is adequately funded; and providing IDA loans in the context of this financing plan. This
takes much longer than going directly to providing financing but attempts to deviate from this
sequencing have been less than satisfactory. The education sector is a good example of where
this sequence has worked although it has taken about five years to get from the broad vision to
successful implementation. The Public Financial Management (PFM) thematic area is another
good example; where a PFM Plan was approved by the Cabinet, endorsed and funded by key
partners and where the Bank’s CSMP will help to implement a key part of the plan. The water
sector is moving along a similar path with the NWSSIP, the CWRAS and intensive discussions
among donors to move to a coordinated financing plan and implementation approach.
116. Strengthening State Capacity and Accountability. In a Fragile State environment, the
Bank’s approach to mainstreaming its activities into Government ministries is an extremely
contentious issue particularly given the Bank’s international commitments to move away from
PIUs. On the one hand, experience clearly showed that in Yemen, it was only enclave institutions
that consistently delivered outputs (the Social Fund and the Public Works Program) and to a
lesser degree of consistency, PMUs delivered outputs. On the other hand, the Bank reacted to
criticism from OED and other in-country donors that it was not “building capacity” and
attempted in its newer projects to move to lighter coordination structures and transfer more
implementation responsibilities to the line ministries.
However, in the absence of clear
incentives for service delivery (both low pay and the absence of performance
measurement/incentive systems), projects that attempted to “mainstream” ran into problems. For
example, the Health Reform Support Project chose a lighter project coordination structure (an
IDA Credit Administration Unit) and attempted to implement activities through relevant
departments. However, civil servants who normally work only half the day, were expected to
stop moonlighting and focus on credit implementation for the entire day could not be motivated,
according to the Bank’s rules, through additional payments to keep them on the job. The
lessons for the new CAS are that actions to move away from PMUs and mainstream
implementation need to be considered on a sector-by-sector basis taking into account the pace of
actions to strengthen fiduciary systems (procurement and financial management) and
implementation capacity (progress in sector level civil service restructuring). An alternative
44
The Port Cities Development project and the Civil Service Modernization project (the latter being a large
Technical Assistance project) were the only lending activities supporting the growth/fiscal agenda.
45
Infrastructure investments (rural roads and power) were undertaken more in support of long-term challenges
rather than as an integral part of the growth strategy of the CAS. Similarly, the focus on secondary education was
not based on its impact on population control but as part of the long-term human development.
- 39 approach is to formalize and provide greater autonomy to enclave entities (e.g. the Social Fund
for Development and the Public Works Project) bearing in mind the need to ensure sustainability
of results.
117. Greater Readiness and Implementation Focus: non-lending products. In the
preparation of the CASCR (and in the IEG completion of the CAE and during the CAS
consultations in November 2005), it was noted that several pieces of Economic and Sector Work
had been initiated, reached a stage where the work was discussed with the Government
counterparts but the reports were never publicly disseminated46. Four problems were identified:
inadequate management of analytical and advisory services by the Bank which led to
fragmentation and lack of publication of several reports; recommendations made by the Bank
were not systematically implemented (either due to disagreements at technocratic or policy levels
or due to non-approval by the legislature); there was no process of periodically reviewing
progress in implementing policy recommendations before making new ones; and the Bank did
not effectively leveraged its Economic and Sector Work to influence key stakeholders outside
the Government through wide spread dissemination. The lessons for the new CAS are: to
ensure a clear process of managing the portfolio of AAA (in a manner similar to lending
with a country level oversight process similar to the CPPR); and to better utilize the
institutional infrastructure (the Public Information Centers (PICs) and the Development
Information Network), focus on disseminating individual reports and on the re-packaging
of key messages of reports into “popular versions” which can be more readily disseminated
to the population at large.
118.
Greater Readiness and Implementation Focus: Lending program. Most of the new
projects prepared during the CAS period suffered from over-optimism about their readiness to be
implemented: this related in part to under-designed projects (e.g. the Health Reform Support
project); complex projects (e.g. the Child Development Project which attempted to coordinate
education, health and water activities within the same project); or projects that had been suitably
designed but where necessary implementation pre-requisites (e.g. procurement bid packages)
were not adequately addressed. The lessons for the new CAS are to ensure a more systematic
application of available “readiness filters” particularly with regard to ensuring that
procurement packages are ready for issuance prior to project negotiations and Board
presentation.
119. Monitoring and Evaluation for Development Effectiveness. The CAS did not have a
Sound Results Framework that could be monitored to take timely corrective actions and ensure
results on the ground. In addition to designing a Results Framework, the new CAS should
explicitly set the mechanisms for Monitoring the framework, the responsibilities for reporting on
progress towards achievements of CAS outcomes, and the use of evaluation information for
decision-making.
46
The Bank’s external website leads users to less than 5 reports on Yemen for the CAS period.
Reducing the role of the state in
commercial activities including
the financial sector (II.2)
Skilled and more credible
Judicial System that leads to
enforcing service delivery
standards (I.2)
Better revenue and expenditure
management (I.3)
Better investment climate through
macro stability, improved
business regulatory environment,
enhanced security, more secure
property rights, improved access
to finance, and physical
infrastructure (water, power &
roads) (II.1)
Pillar II: Strengthening
the enabling business
environment
Improved enabling
environment for civil servants
(better salary and performance
mgmt) and enhanced fiduciary
(incl. financial) accountability
of government at the central
and local levels (I.1)
CAS Outcomes
Pillar 1: Improving the delivery of
public services through stronger
economic governance
CAS Strategic Pillars
Second Five Year Plan and
PRSP Objectives
Achieving
economic
growth
Cross Sectoral Outcomes:
Infrastructure support to
health & education
Safety Nets
Community Development
Gender
Children at Risk
Research & Knowledge
Sharing
Improved coverage and
quality of health services
(III.2)
Increased access and
quality to education at all
levels, with emphasis on
girls and women (III.1)
Pillar III:
Building and
protecting Human
Resources
…while enhancing the
education and
financial capacity of
the poor and reducing
their vulnerability
Appendix 1. CAS02 Results Chain
- 40 -
Efficient mitigation
measures against depletion
of other natural resources
(petroleum and coastal
fisheries) and against
pollution in place (IV.2)
Improved conditions for
water availability in place,
through strengthened water
depletion mitigation
measures (IV.1)
Pillar IV:
Sustaining and
protecting Natural
Resources
Country Development Goals
The 4 goals listed in the next
column aimed at supporting the
following challenges:
• High population growth,
particularly its geographic
distribution away from
water resources.
• Water scarcity and poor
waste treatment, and the
related negative impact on
agriculture.
• Weak human resources,
linked with poor health
conditions, lack of
education standards and
adequate vocational
training, and lack of
capabilities and
opportunities for women.
• Weak governance and
institutional capacity of the
state including overstaffing,
that led to a heavy wage
bill, corruption, and weak
judiciary system.
• Fast depleting oil reserves.
• High fiscal sustainability
risk.
Goals:
• Achieving economic growth
• Developing human resources
• Improving infrastructure
• Ensuring social protection
2002 CAS
Limited progress was made.
• Poverty incidence: from 41.6 to
40.1
• Real GDP growth per annum:
2.8 percent (compared to a target
of 5.4 percent)
• Population growth: from 3.5
percent to 3 percent
•
percent of pop. with access to
urban water: from 64 percent to
62.4 percent
•
percent of pop. with access to
rural water: from 55 percent to
33.8 percent
• Number of beneficiaries of
social welfare and assistance:
from 450160 to 600610.
Status at Completion (FY 05)
Appendix 2. CAS Completion Matrix
- 41 -
Lessons Learned and
Considerations for new CAS
• Limited resources and weak
governance have made it even
more challenging to address
the high population growth.
• Oil dependency aggravated
Yemen’s situation and will
increase its vulnerability even
more as oil revenues decline.
The new CAS should address
the non-oil growth and its
impact on the economy, and
continue its call for export
diversification.
• The slowdown of economic
reforms affected the
government’s ability to
achieve its goals.
• The government perceives
corruption as a serious issue
and is considering joining the
Extractive Industries
Transparency Initiative. The
new CAS should consider this
as an opportunity to address
governance.
(Given that the 2002 CAS did
not have a results framework
with clear outcomes and
indicators, the CCR
attempted to build a results
framework on the basis of the
text of the CAS and its
Annex1).
CAS Outcomes
•
•
environment for civil servants
and enhanced fiduciary
accountability of government
at the central and local levels.
Skilled and more credible
Judicial System that leads to
enforcing service delivery
standards.
Better revenue and
expenditure management.
Pillar 1. Unsatisfactory
• Number of civil servants
increased rather than declined.
• Real pay levels declined rather
than raised and decompressed.
• Civil service restructuring did
not progress.
• Service delivery remained
centralized. Some training
undertaken for the judiciary but
overall systemic changes were
not undertaken.
• Aggregate fiscal indicators
partially achieved (fiscal deficit
was 2.8 percent in FY04.
Indicators for social sector
spending did not increase by the
substantial levels projected.
Pillar 2. Unsatisfactory
• Private investment to GDP ratio
of 18 percent was not met.
• Commercial long-term lending
rising by 50 percent was not
met.
• Inflation targets (of below 10
percent) were not achieved but
the actual inflation remained in a
reasonable range of the target
never exceeding 12 percent.
• There was a progress in
achieving infrastructure
outcomes but private sector
participation goals for the power
sector were not met.
• Limited progress in the financial
sector with the passage of a
•
o
o
education at all levels, with
emphasis on girls and women.
Improved coverage and
quality of health services.
Cross sectoral Outcomes:
ƒ
Rural Roads
ƒ
Safety Nets
ƒ
Community
Development
Pillar 3. Building and Protecting
Human Resources
o Increased access and quality to
o
through macro stability,
improved business regulatory
environment, enhanced
security, more secure property
rights, improved access to
finance; and through improved
physical infrastructure (water,
power & roads).
Reducing the role of the state
in commercial activities
including the financial sector.
Pillar 2. Strengthening the
enabling business environment
o Better investment climate
o
o
Pillar1. Improving the delivery of
public services through stronger
economic governance
o Improved enabling
Status at Completion (FY 05)
2002 CAS
- 42 -
Lessons Learned and
Considerations for new CAS
• Success of programs has been
linked with appropriate
sequencing starting with
assisting the Government in
formulating a sector strategy
and financing plan; working
with other donors to ensure
that the plan is adequately
funded; and providing IDA
loans in the context of this
financing plan.
• There is a need for donors to
balance competing goals of
delivering immediate results
(essential to build confidence
in public service delivery in a
Fragile State) and improving
the long-term delivery
capacity of Government’s
systems.
• There is a need to consider
whether country system
improvements and addressing
the short-term growth crisis
requires lending assistance.
• Actions to move away from
PMUs and mainstream
implementation need to be
considered on a sector-bysector basis taking into
account the pace of actions to
strengthen fiduciary systems
(procurement and financial
management) and
implementation capacity
(progress in sector level civil
service restructuring).
•
Gender
o
availability in place, through
strengthened water depletion
mitigation measures.
Efficient mitigation measures
against depletion of other
natural resources (petroleum
and coastal fisheries) and
against pollution in place.
ƒ
Pillar 4. Sustaining and protecting
Natural Resources
o Improved conditions for water
2002 CAS
Banking Law amendment and
anti-money laundering
legislation.
Pillar 3. Moderately Satisfactory
• Gross enrollment rates of girls
exceeded their target and
reached 62 percent in 2005 in
targeted areas as compared to 51
percent in 1999-2000.
• In secondary education, total
rural enrollments increased by
38 percent in 2002-2003
(compared to 1998-1999
baseline).
• Quality of education did not
improve.
• Health service coverage was not
expanded to 65 percent of the
population, as projected.
• Government expenditure on
health was only 1.5 percent in
2003, lower than the targeted 2.2
percent of GDP.
• Fertility rates and child and
maternal mortality did not
decline.
Pillar 4. Moderately Unsatisfactory
• Progress towards sustainable
water use was made.
• In Urban Water Supply and
Sanitation, availability of piped
water increased from once a
week to once every four days,
and urgent needs of 7,500 and
5,000 households for sewer and
water systems respectively were
Status at Completion (FY 05)
- 43 -
Lessons Learned and
Considerations for new CAS
•
There is a need to ensure a
clear process of managing the
portfolio of AAA, and to
better utilize the institutional
set-up, and a need to focus on
disseminating individual
reports through a strategic
communication and outreach.
Bank Performance
Country Issues
Weak government commitment and
frequent changes of officials.
Governance remains weak and
scores for corruption risk and
bureaucratic quality are declining.
Yemen is currently ranked 106 out
of 159.
Fiduciary risk is high.
Institutional capacity is low and
civil service is inefficient.
Bank Performance: 92 percent
Commitments at Risk: 7.5 percent
Realism: 50 percent
Proactivity: 50 percent
•
•
•
•
2002 CAS
The same issues are still
predominant but the government
is more open to reforms, and
more receptive to donors’
assistance.
addressed.
Mitigation measures against
depletion of other natural
resources such as coastal
fisheries, and against pollution
were not met.
IEG ratings for Bank Performance at
Supervision show a decline from 92
percent in CAS99 to 62.5 percent in
CAS02.
Commitments at Risk: 3.6 percent
Realism: 100 percent
Proactivity: 75 percent
•
•
Status at Completion (FY 05)
- 44 -
•
•
Frequent CPPRs and followup on CPPR
recommendations helped
improve portfolio
performance. The new CAS
should emphasize the need for
a close monitoring of the
portfolio through partnership
with the follow-up committee.
There is a need for better
dissemination and internal
The new CAS should:
• Build a constituency for
change though a
communication and outreach
strategy.
• Emphasize the need for a
close follow-up on the
government’s action plan
recently agreed upon
(National Agenda for reform)
and that focuses on
addressing key issues,
including governance.
• Emphasize capacity building
and target a more substantial
institutional development
impact of Bank interventions.
Lessons Learned and
Considerations for new CAS
Aid Coordination
•
Donor support stood at around
US$200 million during the FY03-05
period and IDA resources constituted
roughly half of this amount.
•
Donor coordination was structured.
Formal coordination among donors
has been intensified in the context of
the Poverty Reduction Strategy.
Subgroups for civil service reform,
water, health and education have
been set up and IDA chaired the
subgroup on governance.
Status at Completion (FY 05)
2002 CAS
- 45 -
•
•
The relatively small number
of donors and the focus of
each donor on particular
sectors/themes (e.g. the water
sector dominated both
German and Dutch assistance)
facilitated a high degree of
collaboration between donors.
The new CAS should
continue and expand the
harmonization efforts
especially that all donors are
preparing their strategies at
the same time.
Lessons Learned and
Considerations for new CAS
record-keeping of AAA.
- 46 -
Appendix 3: Planned Lending Program and Actual Deliveries
FY02-05
CAS PLANS (08/01/2002) Base Case
FY
2003 Urban Water Supply & Sanitation
Port Cities Development Program
Sana'a Basin Water Management
Groundwater & Soil Conservation
Subtotal:
2004 District & Community Development
Social Fund For Development III
Second Basic Education Expansion
Groundwater & Soil Conservation
Subtotal:
2005 Second Basic Education Expansion
Girl's Secondary Education
Second Rural Access Program
Second Civil Service Modernization
Second Vocational Training
IDA
130.00
23.00
40.00
35.00
228.00
30.00
20.00
60.00
0.00
110.00
0.00
30.00
22.00
15.00
5.00
Subtotal:
72.00
ACCOMPLISHMENTS (FY03-05)
IDA
130.00
23.40
24.00
Actual
Actual
Actual
Moved to FY 2004
177.40
Dropped
Actual
Moved to FY05
Actual
60.00
Name changed to Basic Edu. Dev. Prog.
Moved to FY07
Moved to FY06
Dropped
Moved to FY07
40.00
100.00
65.00
0.00
0.00
0.00
0.00
65.00
Additional Actual Projects:
45.00
Third Public Works (2/26/2004)
Total:
410.00
Total:
387.40
47
Appendix 4: Planned Non-Lending Services: FY03-FY05
CAS PLANS (FY03-05) Product
Economic Sector Work
FY03 Public Expenditure Management
Country Fin. Accountability Assessment
Country Procurement Assessment Report
Economic Monitoring
Investment Climate
Integrated Framework for Trade
Infrastructure for Mineral Exports
Power Sector Reform
Urban Land Policy & Administration
Gender Note
Country Water Resources Assistance Strategy
Rural Energy (ESMAP)
Fisheries Management Support
Public Financial Management
Not initially planned
Not initially planned
Not initially planned
Technical Assistance
FY03 Public Service Delivery (IDF)
Procurement Capacity Building (IDF)
Budget & Expenditure Streamlining
Financial Sector Dialogue
Tourism Development (IDF)
Violence Against Women (JSDF)
Development Research Forum
Development Information Center
M&E Capacity Building
Environmental Safeguards
Not initially Planned
Economic Sector Work
FY04 Economic Monitoring
Investment Climate Assessment
Infrastructure for Mineral Exports
Power Sector Reform
Poverty Update
Secondary Education Review
Vocational Training Strategy
Population Policy Note
Country Water Resources Assistance Strategy
Coastal Aquifers Development Strategy
Not initially planned
Not initially planned
Not initially planned
Not initially planned
Technical Assistance
FY04 Procurement Capacity Building (IDF)
Public Service Delivery (IDF)
Tourism Development (IDF)
Children at Risk (JSDF)
M&E Capacity Building
Economic Sector Work
FY05 Development Policy Review
Economic Monitoring
Investment Climate
Agricultural & Maricultural Exports Strategy
Country Water Resources Assistance Strategy
Urban Land Policy & Administration
Not initially planned
Not initially planned
Not initially planned
Not initially planned
Technical Assistance
FY05 Public Service Delivery (IDF)
Tourism Development (IDF)
Children at Risk (JSDF)
M&E Capacity Building
Not initially planned
Not initially planned
Not initially planned
Not initially planned
Not initially planned
ACCOMPLISHMENTS (STATUS)
Delivered
Delivered 06/30/04
Delivered
Actual carried out in FY 2005
Actual carried out in FY 2004
Delivered
Delivered
Rural Development Strategy Implementation and Ag. Promotion
Poverty Update (initially planned for FY04)
EPI & Public Health Programs
Delivered (Budget Reform and Decentralization, FY05) but not published
Ongoing
Delivered
Delivered 3/4/04
Restructuring Ministry of Agriculture and Irrigation
Not delivered in FY04 but Final delivery to client in FY06
Delivered
Delivered in FY03
Not delivered during CAS period but delivered in FY06
Delivered
Delivered
Delivered in FY05
Delivered (6/7/04)
ROSC - Accounting & Auditing
Gender Mainstream (3/31/04)
Gender Note (initially planned for FY03)
Sources of Growth
Delivered (10/10/03)
Ongoing but not delivered by end FY05
Undertaken in FY05 but report and results not completed by end FY05
Delivered
Delivered
Country Social Assessment (Final delivery To client 3/15/06)
Petroleum Pricing Reform (Final delivery to Client: 2/28/05)
Budget/Poverty Impacts of Petroleum Pricing
Women in the Local Economy of Aden (Final delivery to Client: 12/10/05)
Support to National Commissions (Draft delivery to client: 5/30/06)
Coordinating Environmental Health (Final delivery to client: 1/2/06)
Statistical Capacity Building (Delivery to client: 4/14/05)
Public Expenditure Management (Delivery to client: 5/31/05)
Household Budget Survey (Draft delivery to client: 6/24/05)
48
Appendix 5: IDA Portfolio Assessment
Number of projects under implementation
Average implementation period (years)
Percent of unsatisfactory projects by number
Percent of unsatisfactory projects by amount
Percent of projects at risk by number
Percent of projects at risk by amount
Disbursement Ratio (%)
FY03
18
3.8
5.6
4.4
11.1
7.5
16.4
FY04
19
4.0
21.1
12.4
21.1
12.4
16.2
FY05
17
3.5
5.9
4
5.9
4
15.8
-1-
ANNEX 4
YEMEN CAS 2006-2009: CAS Consultations
1
1.
As inputs into the preparation of the Country Assistance Strategy for
Yemen, the World Bank held four workshops in Yemen during the period November 1922, 2005. These CAS consultations with various stakeholders (Government, donors and
Civil Society) represent the first phase of the CAS preparation to be followed by further
consultations in March with a clear Bank program for support to the second PRSP. The
consultations are meant to provide a forum for participants to exchange views on how
they see the main priorities (social and economic) for the country over the next 5 years
and what role they envisage for the donor community in assisting Yemen.
2.
The participants. Nearly 150 people—almost everyone who was invited—
attended the workshops. Each workshop was confined to about 30-40 participants, a size
considered to be optimum from the point of view of active participation by everyone.
Participants were drawn from different categories of the stakeholders. In most cases, they
were selected on the basis of their ability to contribute to the discussion. The profile of
participants is shown in Figure 1 and by location the split was Sana’a (70 percent) and
Aden (30 percent). Government officials, at the central and local levels, were high and
middle cadre. The category “others” includes researchers and academicians,
businessmen, parliamentarians and members of the Shura Council, journalists,
associations and NGOs (local and international). A special effort was made to ensure
adequate representation of women in the workshops; with one in four being a woman.
Figure 1: Composition of Participants
Participation Composition
6%
6%
35%
28%
52%
43%
16%
Government
Donors
Others
Total Participation
1
14%
Academia
Government
Donors
Others
Academia
Survey Participation
This Annex summarizes the findings of a paper on the CAS Consultations prepared by Mustapha Rouis,
Country Manager.
2
3.
The Approach. Each workshop was organized in three parts: discussions of
the key factors shaping the context in which the CAS is being prepared, followed by
group discussions and exchange of views between participants; and then a survey. To
enrich the discussions, a number of background papers were prepared and circulated
before and during the workshops. The survey consisted of 6 sets of questions: priority
areas, obstacles to renewed growth and employment, engine of growth, role of the donor
community and the World Bank in particular, and questions related to the workshop
itself. Participants were asked to rank the priorities and rate the importance/relevance of
each variable. The survey was meant to be indicative and may not be statistically robust
(in design or selection of the sample). It was designed to analyze the information by
affiliation and location.
Key Conclusions From Discussions
4.
There are five critical areas for which there seems to be a broad agreement
to tackle under the CAS. These are: governance, capacity building, human development
and population, water management and macroeconomic stability. These priorities seem to
fit broadly within government’s overall priorities in the Development Plan/PRSP.
5.
Governance. There was a consensus among all participants that governance
and public sector management should be high on the development agenda. This
perception is consistent with the CPIA (2004) ratings and the ICA 2005, where
corruption was listed as obstacle number three to PSD. The CPIA rating is based on a
host of indicators, including corruption perception index by Transparency International
and various WBI indices. Several participants looked up for the Bank to help government
prepare a credible anti-corruption action plan. Others suggested building, as part of the
CAS, a strong monitoring and evaluation system. There has to be better government
accountability in the implementation of donor-funded projects.
6.
Donors and some government officials noted that the improvement of
governance would lead to more financial support by donors. IDA allocation and the
Millennium Challenge Accounts were two cases pointed, where poor governance led to
reduction in IDA allocations and to the postponement of Yemen’s access to the MCA
(Yemen missed the threshold). Where there was success, it was stated by some
participants that it was largely due to the strong commitment and integrity of the
individuals involved. Several participants felt that empowerment of the civil society for
playing a more meaningful role in advocacy and watchdog as well as providing support
to the community was essential.
7.
Macroeconomic stability. The need for maintaining macroeconomic
stability was said to be a pre-condition for economic renewal. Reducing inflation,
stabilizing the exchange rate, and mobilizing non-oil revenues were identified as key
policy areas. A number of participants emphasized the need to streamline the tax system
which is cumbersome and excessive. According to “Doing Business” report, Yemen is
one of only three countries in the world with a cumulative tax burden exceeding earnings.
This has induced tax evasion and pushed businesses into the informal sector. “It is not
3
profitable to work legally” as one participant put it. One participant stressed that macro
stability, while important, should not be carried out at the expense of political and social
stability and job creation. The causality runs both ways.
8.
Capacity building. Participants felt strongly about the need to better
balance between economic reform and institutional reform. Strengthening the civil
service, parliament, judicial system and land registration were listed as priority areas.
Private sector development will continue to be impaired if the institutional capacity
(public and private) is not adequately developed. Also, several participants emphasized
the need for government and donors to ensure that donor-funded projects are well
designed and ready for implementation and to establish a clear monitoring and evaluation
system.
9.
Human Development and Population. While Yemen has made good
progress on basic education, a lot remains to be done despite the fact that the country
spends over 8% of its GDP on education. Health is another area where progress has been
painfully slow. It is well established that investment in education leads to growth and
reduction in the fertility rate, which both would in turn lead to poverty reduction. Also,
investment in people would lead to strengthening the institutional capacity. A few
participants voiced concern about the fact that too much resources is going to HRD and
little to the real sectors and infrastructure. Others emphasized the need to invest more in
vocational training (Aden) as a prerequisite for PSD. The issue of population control was
accepted by most participants as an important challenge to be tackled if the government is
to be able to provide basic social services (education, health, drinking water, etc.)
10.
Water Resources Management. There was recognition by participants,
particularly donors that Yemen suffers from low endowments in water resources and
deficient use of those resources. Improvement in water demand management would
require significant support from the donor community, including the Bank.
Survey Results and Interpretations
11.
According to the survey results, the three top priority reform areas
identified by participants were: governance, security and human development in that
order of priority. These were followed closely by macroeconomic stability. The ranking
varies slightly across categories. For government participants macroeconomic stability
came ahead of security; for the civil society (“others”, including academia) macro
stability was ranked ahead of human development; and for donors water management
was ranked ahead of macro stability. This ranking is largely consistent with the
discussions, with the exception of the fact that institutional building and population were
listed among the priority areas in the discussions and security not.
12.
It is interesting to note that security was ranked relatively low on the scale
of priorities by donors. The civil society and the Aden participants rated security on the
top of the agenda. This is rather surprising as government has made good progress on this
score. It is quite likely that security here was interpreted in the broad since to include lack
4
of enforcement of the rule of law and weak judicial system. This issue did not surface
during the actual discussions; expect that it was mentioned as an impediment to private
sector development. But the ICA survey ranks “crime, theft and disorder” low on the list
of constraints to growth.
13.
According to the survey, the three major obstacles to Yemen’s economic
development were: weak commitment to reform, weak institutional capacity and lack of
security in the country. This ranking cuts across all groups, except donors, who
surprisingly put resource constraint ahead of security. It is also interesting that
government participants ranked lack of commitment to reform as the second most
important obstacle. This finding is broadly consistent with the findings of existing
studies as well as the first annual PRSP Progress Report. It should be noted, however,
that government has made good progress on improving security in the country over the
past three years. Regarding capacity building, most participants stressed the critical
importance of administrative reform (at the central and regional level), judicial reform,
and institutional support to parliament and local councils.
Conclusion
14.
There was a lively discussion, with active participation of almost every
participant. Participants were thankful to the World Bank for organizing such workshops
and suggested holding similar workshops in other parts of the country. The overall rating
of the workshops was 4.8 (1 being low and 6 high), with only a handful of participants
rating it less than 3. The local press reported about the workshops.
15.
The main messages expressed by most participants during the discussions
and through the survey which was conducted at the end of each workshop are:
• The economic outlook for Yemen is bleak and the main sources of growth and
employment are labor-intensive industries (SMEs), rural development and energy.
Tourism, fisheries and transport (Aden Container Terminal) were also mentioned;
• The top priority areas over the medium term are: governance (with emphasis on
PSD), institutional building (linked to human development), water resources
management, population, and macroeconomic stability;
• The three major obstacles to Yemen’s economic development are weak commitment
to reform, weak institutional capacity and lack of security;
• Improved design and readiness of Bank-funded projects were singled out as
contributing factors to slow pace of implementation;
• The perceived role for donor community is to provide institutional building (training,
TA) and analytical work. The role of the World Bank is perceived in the same way,
with the addition of lending; finally
• While there does not seem to be an information gap among the participants about
government’s economic reform program - a reflection of the fact that participants
were selected precisely because of their knowledge of the issues and capacity to
contribute to the discussions - there was a consensus that public awareness of the
scope and depth of government reform program is limited. Government needs to
intensify its effort to communicate with the people.
-1-
Annex 5
CAS Instruments: Contributions to Country Development Goals
1.
This Annex provides further details on the use of CAS instruments to support
each pillar and achieve the CAS Results identified in Annex 2.
Country Strategy, Analysis and Outcome Monitoring
2.
Some key activities are being undertaken which will have an impact across all
of the different CAS pillars.
• The Development Policy Review would be completed in FY06 and has informed both
the Government’s Second PRSP and the Bank’s CAS;
• There would also be ongoing support to PRSP implementation.
• The FY06 Country Social Analysis has also informed the country strategy work.
• Upon the conclusion of the ongoing Household Budget Survey, a National Poverty
Assessment would be undertaken in FY06 and the report completed in early FY07
and would be complemented by an Urban Poverty Analysis for Taiz (FY07).
• There would also be advisory support for the implementation of the Statistical Master
Plan which encompasses the monitoring and evaluation systems of the Government.
• A key challenge facing Yemen is that domestically there is little sense of urgency in
dealing with the impending crises. A key area of new support (starting in FY07)
would be to improve the outreach capacity of the Government to formulate and
disseminate reform messages domestically. The CAS preparation process has already
been utilized to facilitate dialogue on the key issues facing Yemen; this would be
reinforced during CAS implementation by engaging various audiences and
institutions. Concrete discussions would be held in the context of Bank lending and
non-lending programs (e.g. engaging civil society in dissemination of knowledge
products in order to facilitate dialogue on the key issues facing Yemen). The
objective will be to reach beyond traditional audiences and engage different
stakeholder groups by re-packaging messages in a manner that can be understood and
debated more widely.
• One issue on which the Bank will continue to provide support relates to an ongoing
contractual dispute between the Government and a foreign contractor under a now
closed IDA-financed project. An arbitration award was rendered in favor of the
contractor. With the support and encouragement of the Bank, a technical opinion has
been prepared by independent experts on the level of contribution that IDA could
finance out of the value of the disputed claims. The Government has accepted the
opinion and the Bank expects to continue its effort to support both parties in reaching
a satisfactory solution.
Growth
3.
Bank Program. The Bank program would consist of:
• Two existing projects which would continue to be implemented during the CAS
period with the Southern Governorates Agricultural Privatization project closing in
2
•
•
•
•
•
•
FY06 and the first phase of the Port Cities Development APL closing mid-way
through the CAS period.
An Investment Climate Assessment would be delivered in FY06 and inform the
priority setting process for private sector development issues.
There would be six new investment loans (Fisheries; Rainfed Agriculture and
Livestock; Rural Energy Access, Power Sector, Phase II of the Port Cities
Development APL and Second Vocational Training). These loans would address
constraints to growth noted earlier.
While the FY07 Institutional Reform Credit would primarily support the
Government’s National Agenda For Reform (including actions on governance, public
sector reform and private sector development actions), it would also include actions
supporting improved governance in the private, financial and other sectors.
Policy advice provided under the FY07 Gas Incentive Framework study would assist
the Government in ensuring that the rules of the game in this key growth sector would
be appropriately set to maximize growth and fiscal benefits.
Focused transport sector work would be undertaken in FY08.
Finally, periodic support would be provided to the Government in hosting events for
new investors highlighting Yemen’s investment potential.
4.
IFC program. Yemen is one of the “frontier” countries in the MENA region, and
IFC is dedicating an extra effort to develop the private sector in the country.
IFC’s current investment portfolio is US$9 million for 3 companies. In FY06, IFC has
developed a strong pipeline of projects in sectors such as oil refining, ports, and cement,
which could be committed between FY06-07. In addition to the investment pipeline
above, IFC’s focus in the future is in the financial sector, including leasing and
microfinance. In parallel with this investment program, IFC has also increased technical
assistance activities through PEP-MENA and placed staff in Sana'a, co-located with the
World Bank. The focus of the TA program in the country is on four main areas: financial
markets, SME development, gender, as well as Business Enabling Environment (BEE).
• In financial markets, IFC has been active in leasing programs (including work with
the Central Bank on leasing registration and legislation and the organization of an
international leasing conference in the country) and is initiating a microfinance TA to
support the initiatives of the second largest Yemeni bank to service this sector.
• In SME development, IFC has focused on management training through Business
Edge, including Train-the-Trainer programs for training companies in Yemen,
Chambers of Commerce, and the Social Fund for Development.
• IFC’s gender program work has included a scoping and analysis exercise and is
preparing to launch a two-year TA program focusing on gender and entrepreneurship.
• In coordination with the Bank-financed Port Cities Development Program, IFC is
initiating a “Business Start-Up Simplification” activity that would focus on
simplifying administrative procedures at the central Government level as well as the
implementation of reforms at the local level in selected port cities. PEP-MENA will
also be focused on responding to a Government request to improve the country’s
policy framework to promote private investment in mining, including assistance to
the Granite and Marble Association which would strengthen SMEs in that industry.
3
Human Development
5.
The program would consist of:
• Eight ongoing projects (with around US$250 million undisbursed at the start of the
CAS period) which would provide support to programs in basic education, health,
rural roads and social development and a small Learning and Innovation Credit for
higher education.
• There would be four new investment loans: Girls Secondary Education; a Second
Population Project (which would possibly utilize alternative delivery mechanisms
such as Community Driven Development interventions); the second phase of the
Rural Access Program; and a social development loan. With regard to the social
development loan, support would be provided to the highly successful Social Fund
for Development (SFD). Further, the institutional framework for provision of
infrastructure for basic services would be rationalized to eliminate overlaps between
line ministries, the Public Works Program and the SFD.
• Given the Government’s desire to contribute additional resources to the programs of
the Social Fund for Development, a portion of the local currency equivalent of funds
disbursed under the Institutional Reform Credit could be passed through to the SFD
for implementation of agreed programs.
• In the near-term, the non-lending focus will be on gaining consensus around the
health sector reform process which is also expected to support the Government in the
development of a Nutrition Strategy.
• In FY07, the Disability Situation Analysis and Strategic Framework carried out in
FY06 would be finalized and is expected to contribute to the development of a
National Strategy for Disability.
• The qat survey which is being undertaken in FY06-07 will be completed and its
findings used to re-engage on a public dialogue on the impact of qat.
• In the medium-term, based on the updated poverty data in the National Poverty
Assessment, the Social Protection Strategy would be reviewed and updated in FY07.
• With the completion of sub-sectoral analysis (basic education, secondary education,
TVET and higher education), the various pieces would be consolidated into an
Overall Education Strategy. In FY09, ESW on Early Childhood Development would
be undertaken.
• In FY09, a Gender Status Update is planned in order to take stock of progress in
improving gender outcomes.
• Throughout the CAS period, ongoing support would be provided to the Children and
Youth Strategy which the Government is implementing through mainstreaming into
the Second PRSP.
• Beyond the end of the CAS period, the Second PRSC would be expanded to the
education sector starting with basic education in FY10.
Fiscal Sustainability
The program would consist of:
6.
• An ongoing Technical Assistance project supporting the public sector reform pillar
which is projected to be completed mid-way through the CAS period.
An FY07
Institutional Reform Credit would support the Government in implementing (as prior
actions) the activities contained in the Government’s National Reform Program; these
4
•
•
•
•
actions encompass both public sector reform and private sector development.
Further, the IRC would support the implementation of the Civil Service Reform
program – particularly in financing retrenchment of civil servants. These activities
would be complemented with governance related technical assistance from yet-to-beidentified grant funding (from donors and potentially from Bank-financed grant
facilities). In case the above efforts should not result in the appropriate level of
funding, the Bank would revisit, in partnership with other donors, the need for further
support to civil service reform at the time of the 2008 CAS Progress Report.
Technical Assistance would be provided to Yemen in joining the Extractive
Industries Transparency Initiative and subsequently, in participating in the EITI.
Following up the Urban Land Policy and Administration Policy Note, Technical
Assistance would be provided to: strengthen the legal and regulatory framework for
land; support the Government’s effort to improve institutional arrangements relating
to public land management and land administration, and initiate land registration pilot
projects. The objective would be to complement these activities with (yet to be
identified) donor funding for any physical investments and technical
assistance/information system support.
A Public Expenditure Review would commence in FY07 and be completed by FY08;
the goal would be to assist the Government in evaluating sectoral expenditures (and
outcomes) and supporting medium-term expenditure planning processes. The Public
Expenditure Tracking Survey work – which has commenced in FY06 and would be
completed in FY07 – would supplement the PER.
Ongoing Technical Assistance on procurement reforms would continue under the new
CAS and assist the Government in implementing the significant agenda defined in the
National Agenda For Reform. With the completion of these activities, a Country
Procurement Assessment Review would be undertaken in FY08 to assess progress
and provide guidance on the next phase of the reform. Similarly, implementation
support will be provided under the CAS to the implementation of the Ten Year Public
Financial Management Strategy and associated Action Plan. An assessment on
progress would be made through a Country Financial Accountability Assessment in
FY08. The results of these assessments would also be utilized to strengthen
Government fiscal management and fiduciary systems in the context of the FY09
First PRSC.
Resource Sustainability
7.
The program would consist of:
• Six ongoing projects (with around US$250 million undisbursed at the start of the
CAS period) which would support the environmental sustainability pillar including
groundwater management, irrigation and urban and rural water supply.
• There will a new second phase APL provided for the Urban Water Supply and
Sanitation program in FY08.
• Further, rural water supply would be supported through a series of programmatic
development policy loans commencing in FY09 with the First Poverty Reduction
Support Credit. This would allow consolidation of currently separate projects
(including APLs) for rural water supply and sanitation, groundwater management and
irrigation programs.
5
•
•
•
In continuation of the work undertaken previously under two Global Environment
Facility (GEF) Medium Sized Projects, there could be follow-up GEF support to
integrated coastal zone management. The proposed GEF activity would be developed
in conjunction with the Port Cities Development Program to integrate global
environmental issues into local development planning and with the Fisheries Project
to improve sustainable management of marine resources.
There will be ongoing TA support to the implementation of the NWSSIP and the
Country Water Resource Assistance Strategy and to addressing selected issues (e.g.
desalination).
Finally, the Population II Project and the Girls Secondary Education Project
(discussed under the Human Development pillar) would also be important elements in
addressing resource sustainability issues.
8.
The proposed lending and non-lending programs are summarized in the Tables
overleaf. The Tables also show the pipeline of lending and non-lending activities in the
outer years (i.e. beyond the CAS period). This has been done for three reasons. First,
some activities are programmed for the year beyond the CAS but will be in the fifth year
of the PRSP (i.e. PRSC-II; PER- II and Transport Policy Note II). Second, some
important lending activities (Integrated Urban Development, Higher Education and Solid
Waste Management) could not be included under the CAS program due to IDA
constraints and are shown in the outer years. If IDA allocations should improve
significantly or if projects currently considered to be priority should not be prepared, then
consideration would be given to accelerating these projects. Finally, a non-lending
activity on decentralization has been kept in the outer years. While decentralization
issues would be addressed through other ESW (including the PER, the CFAA and
CPAR), if the Government should seek further advice on fiscal decentralization, then this
task would be implemented in the CAS period. This approach would avoid the problems
under previous CASs where significant fiscal decentralization related lending and nonlending activities were initiated but never brought to closure.
6
TABLE A: Proposed Lending Program by Fiscal Year
FY06
$mm
FY07
$mm
Rural Access
APL II
40
Rainfed
Agriculture
& Livestock
20
Fisheries
25
15
Power
Sector
50
Vocational
Training II
Social
Development
Institutional
Reform
50
Total
115
15
FY08
Urban
Water
Supply
APL II
Rural
Energy
Girls
Secondary
Education
100
$mm
FY09
$mm
Outer Years
1
50
Population
25
PRSC II
35
Port Cities
APL II
PRSC I
35
Solid Waste
Management
Integrated
Urban
Development
Higher
Education
15
100
40
100
TABLE B: Proposed Economic and Sector Work by Fiscal Year
FY06
Development
Policy Review
Investment
Climate
Assessment
Country Social
Analysis
FY07
Poverty
Assessment
Public Expenditure
Tracking Surveys
Taiz Urban
Poverty Analysis
Gas Incentive
Framework Policy
Note
Social Protection
Strategy
Qat Survey and
Policy Note
1
FY08
Public Expenditure
Review
Country
Procurement
Assessment
Country Financial
Accountability
Assessment
Overall Education
Strategy
FY09
Gender Report
Early Childhood
Education Review
Outer Years
Public Expenditure
Review II
Transport Sector
Policy Note II
Investment
Climate Update
Decentralization
Review
Development
Policy Review
Update
Transport Sector
Policy Note
Rural Land Tenure
Study
Outer years column includes activities that are expected to occur after the CAS period – some of these
activities are being deferred due to resource constraints (either IDA allocation or administrative budget)
and might be accelerated if such constraints are alleviated.
7
TABLE C: Proposed Technical Assistance & Implementation Support
by Fiscal Year
Activity
Overall Support
PRSP Support
Statistical Master Plan
Qat
Strategic Communications
Public Sector Management
Procurement
Public Financial Management Action Plan
Extractive Industries Transparency Initiative
Land Management & Urban Upgrading Pilots
Private Sector Development
Private Sector Support (including through potential investors’ meetings)
Human Development
Health Sector Dialogue and Consultation
Children & Youth Strategy
Disability Situation Analysis and Strategic Framework
Resource Sustainability
National Water Strategy
Environment
Fiscal Years
Throughout
Throughout
FY08-09
FY07-09
Throughout
Throughout
FY07-09
FY08-09
Throughout
FY06-07
Throughout
FY07
Throughout
Throughout
ANNEX 6
ANNEX 7
CAS Annex A2
Page 1 of 2
Yemen, Rep. at a glance
Yemen
M. East
& North
Africa
Lowincome
19.8
550
10.9
294
2,000
589
2,338
510
1,184
3.0
2.8
1.8
-1.3
1.8
2.1
42
26
63
75
46
69
52
83
98
68
..
56
68
45
..
88
69
100
104
94
..
31
58
79
44
75
61
94
101
88
POVERTY and SOCIAL
2004
Population, mid-year (millions)
GNI per capita (Atlas method, US$)
GNI (Atlas method, US$ billions)
4/28/06
Development diamond*
Life expectancy
Average annual growth, 1998-04
Population (%)
Labor force (%)
Most recent estimate (latest year available, 1998-04)
Poverty (% of population below national poverty line)
Urban population (% of total population)
Life expectancy at birth (years)
Infant mortality (per 1,000 live births)
Child malnutrition (% of children under 5)
Access to an improved water source (% of population)
Literacy (% of population age 15+)
Gross primary enrollment (% of school-age population)
Male
Female
Gross
primary
enrollment
GNI
per
capita
Access to improved water source
Yemen, Rep.
Low-income group
KEY ECONOMIC RATIOS and LONG-TERM TRENDS
1984
1994
2003
2004
GDP (US$ billions)
Gross capital formation/GDP
Exports of goods and services/GDP
Gross domestic savings/GDP
Gross national savings/GDP
..
..
..
..
..
3.8
21.0
51.2
13.6
27.6
10.8
24.4
38.0
20.5
23.5
13.1
23.3
38.6
25.9
27.1
Current account balance/GDP
Interest payments/GDP
Total debt/GDP
Total debt service/exports
Present value of debt/GDP
Present value of debt/exports
..
..
..
..
..
..
6.6
1.3
161.4
3.6
..
..
-0.1
0.5
47.7
3.2
34.9
69.5
2.0
0.5
42.4
3.4
29.4
60.5
1984-94
1994-04
2003
2004
2004-08
..
..
..
5.0
2.0
2.8
3.1
0.0
2.5
2.6
-0.5
-8.1
3.3
0.2
5.7
Economic ratios*
Trade
Domestic
savings
Capital
formation
Indebtedness
(average annual growth)
GDP
GDP per capita
Exports of goods and services
Yemen, Rep.
Low-income group
STRUCTURE of the ECONOMY
1984
1994
2003
2004
(% of GDP)
Agriculture
Industry
Manufacturing
Services
..
..
..
..
23.6
25.1
14.2
55.7
14.4
40.6
4.7
45.0
13.8
40.9
4.5
45.3
Household final consumption expenditure
General gov't final consumption expenditure
Imports of goods and services
..
..
..
67.6
18.8
58.7
62.4
16.7
41.4
60.3
16.2
38.3
Growth of capital and GDP (%)
60
40
20
0
-20
99
00
01
02
03
04
-40
GCF
1984-94
1994-04
2003
2004
(average annual growth)
Agriculture
Industry
Manufacturing
Services
..
..
..
..
4.4
5.6
7.7
4.6
-4.6
-7.8
-4.0
20.6
2.4
0.3
3.1
5.2
60
Household final consumption expenditure
General gov't final consumption expenditure
Gross capital formation
Imports of goods and services
..
..
..
..
3.6
6.3
5.4
1.5
2.0
3.2
16.9
8.1
6.1
6.3
4.9
0.6
-20
GDP
Growth of exports and imports (%)
40
20
0
99
00
01
02
03
04
-40
Exports
Imports
Note: 2004 data are preliminary estimates.
* The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will
be incomplete.
CAS Annex B2
Page 2 of 2
Yemen, Rep.
PRICES and GOVERNMENT FINANCE
Domestic prices
(% change)
Consumer prices
Implicit GDP deflator
Government finance*
(% of GDP, includes current grants)
Current revenue
Current budget balance
Overall surplus/deficit
1984
1994
2003
2004
..
..
49.4
25.8
11.9
12.6
12.0
16.0
Inflation (%)
40
30
20
10
0
99
-10
..
..
..
13.4
-11.5
-14.7
30.2
4.2
-4.8
32.0
7.3
-2.3
00
01
02
03
04
-20
GDP deflator
CPI
TRADE
1984
1994
2003
2004
(US$ millions)
Total exports (fob)
Crude oil (government share)
Crude oil (company share)
Manufactures
Total imports (cif)
Food
Fuel and energy
Capital goods
..
..
..
..
..
..
..
..
1,796
753
862
11
1,522
458
84
332
3,923
1,828
1,624
139
3,557
1,398
582
1,033
4,662
2,233
2,026
150
3,858
1,557
528
1,168
Export price index (2000=100)
Import price index (2000=100)
Terms of trade (2000=100)
..
..
..
61
114
54
102
103
99
132
110
120
Export and import levels (US$ mill.)
5,000
4,000
3,000
2,000
1,000
0
98
99
00
01
02
Exports
03
04
Imports
BALANCE of PAYMENTS
1984
1994
2003
2004
(US$ millions)
Exports of goods and services
Imports of goods and services
Resource balance
..
..
..
1,944
2,226
-282
4,226
4,608
-382
4,997
4,958
39
16
Net income
Net current transfers
..
..
-532
1,064
-827
1,201
-1,063
1,280
8
Current account balance
..
250
-8
256
2
Financing items (net)
Changes in net reserves
..
..
-398
149
591
-583
505
-761
-2
Memo:
Reserves including gold (US$ millions)
Conversion rate (DEC, local/US$)
..
..
357
80.8
4,445
186.2
5,108
183.0
1984
1994
2003
2004
3,001
0
294
6,125
0
780
5,375
0
1,568
5,473
0
1,701
Total debt service
IBRD
IDA
120
0
3
106
0
13
172
0
34
219
0
41
Composition of net resource flows
Official grants
Official creditors
Private creditors
Foreign direct investment (net inflows)
Portfolio equity (net inflows)
251
230
12
7
0
82
66
-5
16
0
129
58
0
6
0
73
44
0
144
0
59
45
1
45
3
42
33
37
7
30
6
24
47
89
23
66
11
55
210
92
26
66
15
52
Current account balance to GDP (%)
14
12
10
6
4
0
98
99
00
01
02
03
04
-4
EXTERNAL DEBT and RESOURCE FLOWS
(US$ millions)
Total debt outstanding and disbursed
IBRD
IDA
World Bank program
Commitments
Disbursements
Principal repayments
Net flows
Interest payments
Net transfers
Development Economics
*Ratios refer to central government finances alone and do not include subnational governments.
Composition of 2004 debt (US$ mill.)
F: 77
G: 298
B: 1,701
E: 2,538
C: 376
D: 483
A - IBRD
B - IDA
C - IMF
D - Other multilateral
E - Bilateral
F - Private
G - Short-term
4/28/06
CAS Annex B2
Republic of Yemen - CAS Annex B2
Selected Indicators* of Bank Portfolio Performance and Management
As of Date 04/20/2006
Indicator
Portfolio Assessment
Number of Projects Under Implementation a
Average Implementation Period (years) b
Percent of Problem Projects by Number a, c
Percent of Problem Projects by Amount a, c
Percent of Projects at Risk by Number a, d
Percent of Projects at Risk by Amount a, d
Disbursement Ratio (%) e
Portfolio Management
CPPR during the year (yes/no)
Supervision Resources (total US$)
Average Supervision (US$/project)
Memorandum Item
Proj Eval by OED by Number
Proj Eval by OED by Amt (US$ millions)
% of OED Projects Rated U or HU by Number
% of OED Projects Rated U or HU by Amt
2003
2004
2005
2006
Jul 05-Apr 06
18
3.2
5.6
4.4
11.1
7.5
20.0
19
3.3
21.1
12.6
21.1
12.6
16.5
17
3.4
5.9
4.0
5.9
4.0
15.8
18
3.7
5.6
3.8
5.6
3.8
19.8
1,251.4
54.4
1,605.4
76.4
1,898.9
94.9
1,915.0
85.0
Since FY 80 Last Five FYs
107
12
1,451.8
306.8
26.7
25.0
21.7
17.2
Note: Supervision Resources and Average Supervision Costs for FY06 are projected
a.
b.
c.
d.
e.
As shown in the Annual Report on Portfolio Performance (except for current FY).
Average age of projects in the Bank's country portfolio.
Percent of projects rated U or HU on development objectives (DO) and/or implementation progress (IP).
As defined under the Portfolio Improvement Program.
Ratio of disbursements during the year to the undisbursed balance of the Bank's portfolio at the
beginning of the year: Investment projects only.
* All indicators are for projects active in the Portfolio, with the exception of Disbursement Ratio,
which includes all active projects as well as projects which exited during the fiscal year.
CAS Annex B3
Page 1 of 1
Republic of Yemen: CAS Annex B3 - Proposed Lending Program
As of Date 04/20/2006
Proposed IBRD/IDA Base-Case Lending Program
Fiscal year
a
Proj ID
US$(M)
Strategic
Rewards b
(H/M/L)
H
M
M
Implementation b
Risks (H/M/L)
2006
Second Rural Access Improvement [approved]
Fisheries Res. Mgt & Conservation [approved]
Power Sector
Result
40.0
25.0
50.0
115.0
2007
Rainfed Agriculture and Livestock
Second Vocational Training Project
Social Development
Institutional Reform Credit
Result
20.0
15.0
15.0
50.0
100.0
H
M
M
H
M
M
L
H
2008
Urban Water Supply APL Phase II
Rural Energy Access
Girls Secondary Education
Result
50.0
35.0
15.0
100.0
M
M
H
L
L
L
2009
Yemen Population II
Port Cities APL Phase II
First Poverty Reduction Support Credit
Result
25.0
35.0
40.0
100.0
H
M
H
H
L
H
Overall Result
415.0
a. This Table presents the proposed program for four fiscal years.
b. For each project, indicate whether the strategic rewards and implementation risks are expected to be
high (H), moderate (M), or low (L)
M
L
L
CAS Annex B4
Page 1 of 1
Republic of Yemen: CAS Annex B4 - Summary of Nonlending Services
As Of Date 04/20/2006
Product
Completion
Cost
FY
(US$000)
Audience
a
Objective
b
Recent completions
Urban Land Policy & Admin
Water Sector Reform
Public Expenditure Mgt.
Women in Local Economy
Statistical Capacity Building (TA)
Rural energy (TA)
National Strategy Child & Youth
Petroleum Pricing Reform
Environment Capacity
Rural Dev. Agric.
Country Social Analysis
Secondary Education
2005
2005
2005
2005
2005
2005
2005
2005
2005
2005
2006
2006
125
71
125
3.5
39
21
88
102
13
53
150
100
Government, Bank
Bank, Government
Bank, Government, Donor
Bank, Government
Bank, Government
Bank, Government
Bank, Government, Donors
Bank, Government, Donors
Government, Bank, Donors
Government
Bank, Government
Bank, Government
Problem solving, Knowledge generation
Knowledge generation, Problem solving
Knowledge generation, Problem solving
Knowledge generation
Knowledge generation
Knowledge generation
Knowledge generation, problem solving
Problem solving, Public dissemination
Problem solving, Knowledge generation
Problem solving, Knowledge generation
Knowledge generation
Knowledge generation, problem solving
Ongoing
Education for All
Development Policy Review
Investment Climate Assessment
Country Assistance Strategy (CAS)
Assistance on Water Strategy Impl
Household Budget--2005/2006
National Disability Study
2006
2006
2006
2006
2006
2006
2006
123
200
300
100
65
80
25
Bank, Government
Bank, Government
Bank, Government, Donors
Bank, Government
Government, Bank
Government, Bank
Government
Knowledge generation, Problem solving
Knowledge generation
Knowledge generation, Problem solving
Knowledge generation, Public dissemination
Problem solving, Knowledge generation
Problem solving, Knowledge generation
Problem solving, Knowledge generation
Planned
Poverty Assessment
Public Expenditure Tracking Surveys
Taiz Urban Poverty Analysis & Strategy
Social Protection Strategy
Qat Survey & Policy Note
Gas Sector Incentive framework
Public Expenditure Review
Overall Education Strategy
Country Procurement Assessment Review
Country Financial Accountability Assessment
Transport Sector Policy Note
Gender Report
Early Childhood Development Review
Country Assistance Strategy (2010-2014)
Development Policy Review Update
Investment Climate Assessment Update
2007
2007
2007
2007
2007
2007
2008
2008
2008
2008
2008
2009
2009
2009
2009
2009
150
100
100
150
50
50
200
100
150
150
100
100
100
150
100
100
Government, Bank
Bank, Government, Donors
Bank, Government
Government, Bank
Government
Government, Bank
Bank, Government
Government, Bank, Donors
Bank, Government, Donors
Bank, Government, Donors
Government
Government
Bank, Government, Donors
Bank, Government
Bank, Government, Donors
Government
Knowledge generation, Problem solving
Knowledge generation, Problem solving
Knowledge generation, Problem solving
Problem solving, Knowledge generation
Problem solving, Public dissemination
Knowledge generation, Problem solving
Knowledge generation, Problem solving
Problem solving, Knowledge generation
Problem solving, Knowledge generation
Problem solving, Knowledge generation
Problem solving
Problem solving, Public dissemination
Knowledge generation, Problem solving
Knowledge generation, Problem solving
Knowledge generation, Problem solving
Knowledge generation, Problem solving
a. Audience = Government, donor, Bank, public dissemination.
b. Objective = Knowledge generation, public debate, problem-solving.
CAS Annex B5
Republic of Yemen - Social Indicators
Millennium Development Goals, 1990-20041,2
1990
1.Eradicate extreme poverty and hunger
Percentage share of income or consumption held by poorest 20%
Population below $1 a day (%)
Population below minimum level of dietary energy consumption (%)
Poverty gap ratio at $1 a day (%)
Poverty headcount, national (% of population)
Prevalence of underweight in children (under five years of age)
2. Achieve universal primary education
Net primary enrollment ratio (% of relevant age group)
Primary completion rate, total (% of relevant age group)
Proportion of pupils starting grade 1 who reach grade 5
Youth literacy rate (% of age group 15-24)
3. Promote gender equality and empower women
Proportion of seats held by women in national parliament (%)
Ratio of girls to boys in primary and secondary education (%)
Ratio of young literate females to males (age group 15-24)
Share of women employed in non-agricultural sector (%)
1994
1997
39.0
7.44
15.7
36.0
4.5
41.85
46.1
57.4
57.8
51.7
2000
2003
33.06
36.0
67.1
57.9
74.5
71.8
65.5
50.0
2004
65.5
67.97
9.3
8.0
7.4
6.7
1.0
60.8
60.3
6.1
4. Reduce child mortality
Immunization, measles (% of children aged 12-23 months)
Infant mortality rate (per 1000 live births)
Under 5 mortality rate (per 1000)
69.0
98.0
142.0
31.0
89.0
126.0
46.0
71.0
84.0
117.0
66.0
82.0
113.0
66.0
82.0
113.0
5. Improve maternal health
Births attended by skilled health staff (% of total)
Maternal mortality ratio ( per 100,000 live births)3
1400.0
23.0
92.5
0.1
43.3
23.0
92.5
0.1
43.3
6. Combat HIV/AIDS, malaria and other diseases
Contraceptive prevalence rate (% of women aged 15-49)
Incidence of tuberculosis (per 100,000 people)
Prevalence of HIV, (% of population aged 15-49)
Tuberculosis cases detected under DOTS (%)
7. Ensure environmental sustainability
Access to an improved water source (% of population)
Access to improved sanitation (% of population)
CO2 emissions (metric tons per capita)
Forest area (% of total land area)
GDP per unit of energy use (2000 PPP $ per kg oil equivalent)
8.Develop a global partnership for development
Aid per capita (current US$)
Debt service (% of exports)
Fixed line and mobile phone subscribers (per 1000 people)
Internet users (per 1000 people)
Personal computers (per 1000 people)
General indicators
Adult literacy rate (% of people aged 15 and over)
Fertility rate, total (births per woman)
Life expectancy at birth (years)
Population, total (millions)
Roads, Paved (% of total roads)
1
4.0
1.0
50.0
1.0
55.6
6.1
21.6
9.7
137.6
570.0
121.8
20.8
111.1
101.4
30.0
54.3
69.0
30.0
69.0
21.0
0.7
1.0
2.8
0.7
0.8
3.4
3.6
0.5
0.9
3.7
34.1
7
11.0
11.5
4
12.4
22.2
4
14.1
0.2
1.2
15.1
5
20.6
0.8
1.9
12.7
4
48.9
46.0
49.0
6.0
57.7
19.2
7.5
52.2
11.9
9.1
40.0
6.5
14.8
8.1
6.4
55.0
16.1
8.1
Data refers to the nearest available year.
The table is based on World Development Indicators Database of the World Bank.
3
No national data on maternal mortality available. Estimates derived from model..
4
Survey year: 1998. Refers to consumption shares by percentiles of population. Ranked by percapita consumption.
5
Data refers to 1998 Household Budget Survey (HBS) conducted in Yemen.
6
1999-2001 average.
7
UNESCO Institute of Statistics estimates, data for 2000-04.
2
0.0
17.5
11.5
3.7
12.7
4
7.4
6.0
57.7
19.8
12.0
CAS Annex B6
Yemen, Rep. - Key Economic Indicators
2000
Indicator
2001
Actual
2002
2003
2004
Estimate
2005
2006
Projected
2007
2008
2009
National accounts (as % of GDP)
a
100
14
46
40
100
15
41
44
100
15
39
47
100
14
40
45
100
14
41
45
100
14
39
47
100
14
38
48
100
14
36
49
100
14
35
51
100
15
34
52
Total Consumption
Gross domestic fixed investment
Government investment
Private investment
75
18
7
11
80
19
7
12
80
22
9
13
79
23
10
13
76
23
9
14
71
21
7
14
72
22
7
15
73
32
9
23
75
34
9
26
79
26
9
17
Exports (GNFS)b
Imports (GNFS)
42
37
37
39
39
40
38
41
39
38
45
39
42
42
36
41
30
40
30
35
Gross domestic product
Agriculture
Industry
Services
Gross domestic savings
26
20
20
20
26
29
28
27
25
21
Gross national savingsc
33
27
26
23
27
26
26
26
26
22
9514
9653
10314
11104
13031
14293
16399
17764
19212
20853
430
470
490
520
570
600
650
680
720
760
Real annual growth rates
Gross domestic product at market prices
Gross Domestic Income
4.4
4.6
4.6
2.9
3.9
5.3
3.1
3.5
2.6
5.5
3.8
10.7
3.9
6.4
2.5
3.0
3.0
3.5
4.5
5.3
Real annual percapita growth rates
Gross domestic product at market prices
Total consumption
Private consumption
1.3
(3.5)
(5.4)
1.4
8.8
7.8
0.7
0.6
(1.1)
(0.1)
(0.8)
(1.0)
(0.6)
2.9
2.9
0.6
6.5
0.1
0.8
4.5
2.0
(0.6)
(2.1)
2.0
(0.1)
1.3
1.5
1.4
0.7
1.5
Memorandum items
Gross domestic product
(US$ million at current prices)
GNI per capita (US$, Atlas method)
Balance of Payments (US$ millions)
b
4015
3805
3470
3302
3857
3584
4226
3923
4997
4654
6845
6624
7448
7026
6951
6415
6377
5825
6572
6339
Imports (GNFS)
Merchandise FOB
Resource balance
Net current transfers
Current account balance
3475
2635
540
1400
1266
3657
2771
(187)
1273
507
3989
3083
(132)
1384
534
4608
3557
(382)
1201
(8)
4958
3858
39
1280
256
5535
4338
1310
1171
709
7839
6198
(392)
1221
(794)
8275
6593
(1325)
1332
(1483)
8690
7031
(2313)
1350
(2190)
6894
5687
(322)
1380
(360)
Net private foreign direct investment
Long-term loans (net)
Official
Private
Other capital (net, incl. errors & ommissions)
(11)
(46)
55
(101)
217
92
94
32
62
69
39
53
57
(4)
126
(131)
126
58
68
596
193
96
44
52
134
(146)
89
61
28
(194)
1847
146
196
(50)
(968)
857
82
205
(123)
92
882
63
205
(142)
121
(288)
35
208
(173)
125
(1427)
(762)
(752)
(583)
(679)
(458)
(231)
452
1124
488
5.7
(1.9)
(1.3)
(3.4)
0.3
9.2
(2.4)
(7.5)
(12.0)
(1.5)
0.0
(2.6)
(36.5)
19.5
(0.8)
(0.8)
43.7
5.8
5.9
3.2
168.4
12.1
(1.2)
(0.8)
(13.8)
15.1
(2.0)
(2.8)
9.6
1.5
3.2
0.2
92.4
17.2
(9.8)
(10.6)
12.0
33.5
(2.2)
(2.9)
9.0
5.5
(1.8)
(2.9)
11.4
7.4
17.2
17.2
12.7
(18.8)
39.2
25.8
13.4
5.4
0.7
35.3
25.2
10.1
7.5
0.3
33.6
27.7
5.9
7.1
0.6
30.9
26.7
4.2
9.1
0.8
32.0
24.7
7.3
7.9
1.1
38.1
31.5
6.6
9.3
0.8
36.4
32.3
4.1
8.8
1.7
32.2
28.4
3.8
8.7
1.6
28.6
26.4
2.2
8.8
1.1
28.6
26.4
2.2
8.8
1.1
21.5
(13.4)
(7.1)
23.8
15.4
(25.7)
25.6
17.5
(16.1)
26.1
18.3
(5320.7)
26.2
19.6
(175.9)
23.5
9.4
(10.6)
22.3
18.4
100.0
25.0
19.4
78.0
24.2
10.3
81.0
23.4
13.7
61.3
Price indices( YR90 =100)
Merchandise export price index
Merchandise import price index
Merchandise terms of trade index
Oil price index
124
95
131.6
127.0
111
94
119.0
112.8
115
94
122.2
117.0
124
99
125.0
126.1
150
106
141.7
154.1
207
106
194.7
216.3
243
109
223.7
255.9
227
110
207.1
237.9
210
109
193.0
219.2
195
108
180.0
202.7
Real exchange rate (US$/LCU)f
64.0
62.5
62.4
58.5
56.3
53.4
Real interest rates
Consumer price index (% change)
GDP deflator (% change)
10.0
21.7
10.7
0.8
6.8
6.3
11.9
10.5
12.0
11.4
14.6
11.8
15.7
15.9
11.8
10.4
11.7
10.3
12.0
10.6
Exports (GNFS)
Merchandise FOB
b
d
Change in reserves
Memorandum items
Resource balance (% of GDP)
Real annual growth rates ( YR90 prices)
Merchandise exports (FOB)
Primary
Manufactures
Merchandise imports (CIF)
Public finance (as % of GDP at market prices)
Current revenues
Current expenditures
Current account surplus (+) or deficit (-)
Capital expenditure
Foreign financing
Monetary indicators
M2/GDP
Growth of M2 (%)
Private sector credit growth /
total credit growth (%)
a.
b.
c.
d.
e.
f.
e
GDP at market prices
GNFS denotes Goods and Nonfactor Services.
Includes net unrequited transfers excluding official capital grants.
Includes use of IMF resources.
Central government finances excluding subnational governments. FY08 and FY09 figures averaged across the two years.
"LCU" denotes "local currency units." An increase in US$/LCU denotes appreciation.
CAS Annex B7
Yemen, Rep. - Key Exposure Indicators
Indicator
Total debt outstanding and
2001
Actual
2002
2003
Estimate
2005
2004
Projected
2007
2008
2006
2009
4870
4973
5301
5335
5218
4959
5053
5129
5208
-167
53
126
96
89
146
82
63
35
219
146
143
162
227
242
275
270
243
141.7
51.1
6.4
85.9
129.8
50.5
3.8
88.8
126.7
44.2
3.4
87.3
107.4
39.4
3.3
88.2
75.5
34.0
3.3
88.1
67.7
30.5
3.3
87.9
74.6
28.6
4.1
88.1
82.6
26.7
4.3
88.0
77.2
23.4
3.6
88.0
62.4
65.3
61.6
66.8
52.5
1237
1384
1568
1701
1803
1873
1919
1979
2056
disbursed (TDO) (US$m) a
Net disbursements (US$m) a
Total debt service (TDS)
(US$m) a
Debt and debt service indicators
(%)
TDO/XGS b
TDO/GDP
TDS/XGS
Concessional/TDO
IBRD exposure indicators (%)
Preferred creditor DS/public
DS (%) c
IDA TDO (US$m) d
a. Includes public and publicly guaranteed debt, use of IMF credits and net shortterm capital.
b. "XGS" denotes exports of goods and services, including workers' remittances.
c. Preferred creditors are defined as IBRD, IDA, the regional multilateral development banks, the IMF, and the
Bank for International Settlements.
d. Includes present value of guarantees.
e. Includes equity and quasi-equity types of both loan and equity instruments.
CAS Annex B8
Page 1 of 2
YEMEN - CAS Annex B8
Operations Portfolio (IDA)
As Of Date 04/10/2006
Closed Projects: 116
Active Projects
Project ID Project Name
P070092 Taiz Municipal Dev & Flood Protection
P043255 Basic Education Expansion Project
P076183 Higher Education
P057602 Urban Water Supply & Sanitation [APL]
P085231 Second Rural Access
P076185 Basic Education Development Program
P050706 Civil Service Modern
P086886 Fisheries Res. Mngmnt & Conservation
P074413 Groundwater & Soil Conservation
P043254 Health Reform Support Project (HRSP)
P062714 Irrigation Improvement
P065111 Port Cities Development Program
P070391 Rural Access Improvement Program
P005906 Rural Water Supply & Sanitation
P064981 Sana'a Basin Water Mgmnt Project
P082498 Social Fund For Development III
P005902 Southern Gov Agric. Privatization
P082976 Third Public Works
Overall Result
Last PSR
Supervision Rating
Development ImplementaFiscal Year
Objectives tion Progress
HS
S
MS
MS
S
S
S
S
S
MU
S
S
S
S
S
S
MS
S
S
S
MS
MS
S
S
MS
S
S
MU
S
S
S
S
S
S
S
S
2002
2001
2002
2003
2006
2005
2000
2006
2004
2002
2001
2003
2001
2001
2003
2004
1998
2004
Difference Between
Expected and Actual
Disbursements a/
IDA
Cancel.
45.2
56
5
130
40
65
30
25
40
27.53
21.3
23.4
45
20
24
60
24.7
45
727.13
IBRD/IDA *
Total Disbursed (Active)
of which has been repaid
Total Disbursed (Closed)
of which has been repaid
Total Disbursed (Active + Closed)
of which has been repaid
Total Undisbursed (Active)
Total Undisbursed (Closed)
Total Undisbursed (Active + Closed)
261.25
0.00
1,569.44
213.13
1,830.69
213.13
501.10
6.67
507.77
a/ Intended disbursements to-date, minus actual disbursements to-date as projected at appraisal.
Note: The ratings of Project Implementation Progress (IP) and Development Objectives (DO) are classified as
follows: HS = Highly Satisfactory, S = Satisfactory, MS = Moderately Satisfactory, U = Unsatisfactory, MU =
Moderate unsatisfactory, and HU = Highly Unsatisfactory.
4.74
4.01
8.75
Undisb.
Orig. Frm Rev'd
19.27
14.13
4.88
112.13
38.24
62.66
14.92
24.93
35.58
27.95
12.94
19.93
8.30
11.62
21.48
40.01
0.28
31.82
501.10
13.71
5.58
3.38
56.04
0.50
3.97
12.73
12.58
10.29
10.73
12.30
1.34
8.98
5.55
19.40
4.64
1.48
183.20
3.21
-6.28
-0.17
6.25
2.07
-0.44
4.64
CAS Annex B8
Page 2 of 2
Republic of Yemen: CAS Annex B8
Statement of IFC's Held and Disbursed Portfolio
As of 12/31/2005
(In US Dollar Millions)
Held
FY Approval
Company
Loan
Equity
Disbursed
Quasi
Partic
6.86
1999
0.0
0.0
1.36
2002
Ahlia Water
0.0
Radfan
Total Portfolio:
8.53
Quasi
Partic
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
1.36
0.0
0.0
0.31
1998
Equity
6.86
0.0
ACSM
Loan
0.31
0.0
0.0
0.0
0.0
0.0
0.0
8.53