48015
Yemen Economic Update is a quarterly report produced by the World Bank
Country Office in Sana'a. It consists of several section covering major
political, social and economic developments. It also provides information
Inside this Issue: on ongoing World Bank operations in Yemen, and a list of conferences and
donor activities.
Summary
Recent Economic
Developments
Macroeconomic
Development
Structural Reforms and
Policies
Outlook
Economic and Sector SUMMARY
Dialogue Yemen's parliamentary election is set for April 2009.1 Last
New and Noteworthy fall, disputes over the electoral process have caused the main
World Bank Operations opposition party to announce its boycott of the coming
elections. Thereafter, opposition protests over the electoral
process have increasingly turned violent in some parts of the
country. A number of recent reconciliation efforts, most
notably by the US and the EU, seem to have been able to ease
the tensions and narrow the divide between the ruling
General People's Congress (GPC), and the main opposition
bloc, the Joint Meeting Parties (JMP). However, the likelihood
of holding broadbased elections on time is looking
increasingly uncertain, as time needed to recast some of the
disputed electoral registration processes is running out.
Holding successful elections on time will have significant
implications, not only for political stability but also to carry
some of the much needed economic reforms.
The Government is making progress in curbing AlQaida
The World Bank Group Yemen (AQY) activities. Following attacks on foreign
Sana'a Office interests and military installations last summer, the
Government initiated a largescale counteroffensive
campaign, leading to the capture and killing of a large
For more information about items in this number of key operatives of the group. The increased
Update contact Ali Alabdulrazzaq
(aalabdulrazzaq@worldbank.org) in the security efforts seem to have succeeded in curbing the
World Bank Office, Sana'a
activities of AlQaida in recent months.
1At the time of releasing this report, it was announced that an agreement has been reached with the opposition to postpone the elections
for two years, while carrying a comprehensive revision in the electoral system
The truce with the rebel Houthi group continued to hold, despite occasional flareups. In the wake
of the new peace deal, the Government announced measures to expedite the delivery of emergency
and humanitarian aid and the reconstruction of the wartorn area. However, such efforts have been
progressing slowly, being hampered by the continued instability in the regions.
Supported by higher oil prices, the economic performance in 2008 witnessed moderate overall
improvement. Preliminary results show some improvements in GDP growth, external and fiscal
accounts, but higher inflation. Earlier GDP growth estimates point to an increase to 4.9 percent,
underlying the continued good performance in the nonoil sector at about 9 percent and the slower
decline in oil production to about 3.3 percent (compared to 12.6 percent in the previous year). Higher
oil prices should also reflect positively on the fiscal and external sectors. With the average oil prices
expected to be some 34 percent higher than the pervious year and with the modest fall in domestic
crude output, the external and internal accounts should improve. Higher oil revenue and continued
progress in tax collection efforts should reflect positively on fiscal accounts. In the external sector, the
current account deficit is expected to shrink to about 1.6 percent of GDP as compared to about 6
percent in 2007. Inflation, however, and despite the slowdown in food prices in the second half, will
settle at above the PRSP goal of 10 percent.
Yemen's macroeconomic indicators are expected to deteriorate in 2009. Yemen is facing a number of
economic and political uncertainties in the year ahead. These are related to external shocks such as
the depressed oil prices, the turmoil in the world financial markets, and the instability in the horn of
Africa. Domestically, the Government faces a number of political challenges related to the
forthcoming parliamentary elections, the peace process in Sa'ada, and the continued threat from Al
Qaeda. The upcoming onstream of LNG production in mid 2009 will mitigate the impact of falling oil
revenue, thus helping to partially offset the impact on growth and other macroeconomic indicators.
As a result, the fiscal deficit is expected to widen to about 10 percent of GDP while growth is likely to
slow down to about 4 percent. With falling imports bill mitigating the near 30 percent decline in oil
exports revenues, the external current account is expected to show modest deterioration, resulting in a
deficit of about 2 percent of GDP. Inflation is expected to be among the few positive developments,
with the rate expected to drop to around 10 percent as headwinds from the global economic recession
will maintain commodity prices depressed.
The pace of structural reforms is expected to show more speed in 2009. The Government undertook
some reform initiatives in a number of areas in the last two years, including the civil service and public
financial management (PFM), the sales and income tax systems, anticorruption, and the social safety.
However, the pace of implementation has been slow. With the recent macroeconomic developments
and the sharp decline in oil revenue, a new sense of urgency is expected to encourage a faster pace of
economic reforms. Major reforms expected to be completed in the months ahead include the passing
of new laws on customs, income taxes, investment, and telecommunications, and institution of the by
laws of the land registration authority.
The poverty situation in Yemen in 2008 was affected by two adverse shocks First, the historic floods
in the South in October 2008 resulted in losses and damages of about 8 percent of GDP. The nonoil
GDP growth is estimated to have worsened by about one percentage point and the public cost alone of
rebuilding infrastructure could run up to US $400 million. Poverty in the more seriously affected
Hadramout Governorate could sharply rise if insufficient remedial action is taken. Second, the global
increase in food prices during the first half of the year as continued from the pervious year, has
contributed to aggravating the poverty situation nationwide. With an estimated 35% of Yemen
population living below poverty line, the increase in global food prices, estimated by 60 percent
between 2007 and mid 2008, is likely to have aggravated the poverty situation, particularly for the
poor in urban areas, and the landless, small and marginal farmers. Earlier estimates have put the
number of Yemeni who have fallen below the poverty level as a result of the price increase by at least
6 percent. Global food prices have moderated in the second half of 2008, but they remain high by
historic standards.
3
I . R E C E N T P O L I T I C A L A N D S O C I A L D E V E L O P M E N T S
The Government is making progress in curbing AlQaidaYemen (AQY) activities. Yemen
witnessed rising security threats from AQY in 2008. The fundamentalist group stepped up attacks
targeting oil infrastructure, foreign interests, and military installations. The most visible incident was
the suicide bombing of the US embassy in March, which claimed 16 lives. In response, the
Government initiated a largescale counteroffensive campaign, leading to the capture and killing of a
large number of key operatives of the group. In parallel with the military efforts, the Government
launched an ambitious nationwide program to control mosques and close some religious schools. The
increased security efforts seem to have succeeded in capping the activities of AlQaida in recent
months. However, the threat of Islamic fundamentalism in Yemen is not likely to go away soon. One
reason is the emerging signs of strengthened links between AQY and other branches of the
organization in the region, as evidenced by the recently released video tape showing two ex
Guantanamo Bay Saudi nationals joining the group as commanders. Another reason for concern is the
deteriorating economic situation, which could encourage more youth to join the group.
Reconstruction plans of the wartorn area in Sa'ada Governorate are moving slowly. In the wake of
the peace deal, announced unilaterally by the President in July 2008, the Government announced
plans to deliver emergency humanitarian aid and allocate YR10 billon for reconstructing damaged
areas in the governorate. The conflict has left wide destruction in civilian infrastructure like schools,
clinics and houses in the Sa'ada province. Additionally, during the height of the conflict this summer
some 100 thousand people were displaced from their homes. In response, the Government has set up
Saada Reconstruction Fund, which already launched subsidies to people affected as part of the first
phase of the rebuilding Saada. The total cost of the first phase is about $4.4 million distributed to 900
people by four payments to be allocated to rebuild damaged houses in the province. Its scheduled
second phase would assist 1289 people in a number of areas of the province. Despite these positive
developments, reconstruction efforts are moving slowly. This is attributed to the continuing unstable
security situation marked by intermittent skirmishes in some regions. Progress is also affected by the
shortage of public funds caused by falling oil revenues and the competing demands from the floods
incidence in the South.
Tribal infighting and kidnapping of foreign nationals continue to undermine the authority of the
Government in rural areas. Yemen witnessed a pickup in kidnappings of foreign nationals and
tourists in rural areas in recent months. In midDecember, three Germans were taken hostage by
tribesmen, and in earlyJanuary, another three South Africans were kidnapped by another tribal
group. Kidnappings by tribes are a common occurrence in Yemen, and are usually motivated by local
grievances related to infrastructure and welfare matters, or demands to release tribesmen convicted
for regular crimes. Kidnapping incidents, as in the two recent cases, ended up peacefully with
hostages unharmed. Overall, the continued kidnapping incidents in Yemen, especially coming in a
time of rising fundamentalist terror, is posing significant threats to the tourism industry. It is possible
that these incidents will increase, as the Government struggles to implement its current plans for
spending cuts.
4
The date for Yemen's parliamentary elections at April 2009 remains unchanged, despite the
continued deadlock. In October, the main opposition party announced its boycott of the coming
elections, therefore raising concerns over aggravating the already fragile political situation. Among
the main contentious issue is the opposition demands to change the 2001 electoral law so as to adopt
proportional voting and permit voters to cast ballots in their home districts rather than at work.
Opposition protests over the electoral process have increasingly turned violent in recent months. A
number of reconciliation efforts, most notably by the US and the EU, seem to have been able to ease
the tensions and narrow the division between the ruling General People's Congress (GPC), the main
opposition bloc and the Joint Meeting Parties (JMP). However, the likelihood of holding broadbased
elections on time is looking increasingly remote, as time needed to recast some of the disputed
electoral registration processes is running short. Meanwhile, a number of military, security and
government officials including nine ministers have resigned from their posts in late December in their
bid to run for the upcoming elections. Among the officials resigned are Deputy Premier for Defense
and Security, Legal Affairs Minister, Deputy Premier for Interior Affairs, Civil Services Minister,
Sana'a Mayor, Youth and Sport Minister, Education Minister and State Minister of the Parliament.
Holding successful elections on time will have significant implications, not only for political stability
but also to carry some of the muchneeded economic reforms. Currently, the opposition occupies 63 of
301 seats dominated by the ruling General Peoples Congress Party. The next elections for the
president, which were last held in 2006, will not be due until 2013.
Efforts to control sea piracy are yielding positive results. Maritime navigation in the southern part
of the Red Sea has come under increased threat of sea piracy in 2008, witnessing about 100 attacks on
freight and passenger vessels in waters adjacent to Yemen. The Government established a counter
piracy regional center in the southern part of the Red Sea, and received further international support
in this regard. A number of countries including the United States, France, Russia, and India have sent
naval forces to patrol the waters of the Gulf of Aden. Towards the yearend, these efforts seem to have
succeeded in curbing the attacks, which if left unchecked could damage Yemen's efforts to attract
foreign investment, particularly in the South that exports hydrocarbons and has ongoing plans for
offshore exploration. The likelihood of improved political situation in Somalia, following the recent
elections, should help to curb the incidents of sea piracy and also ease the pressures of illegal
immigrants to Yemen, which according to UNCHR sources have seen some 70 percent increases in
2008 to about 50 thousand persons.
Floods and heavy rains hit Yemen in October 2008,
Figure 1. Allocations to Yemen's floods recovery
causing one of the most serious natural disasters to
the country in the last decade. Wadi Hadramout
valley and AlMahra were the hardest hit areas by GoY 200
floods which killed some 90 people and displaced an KSA 100
additional 20,000 to 25,000 others. Overall, about
700,000 persons--over 50% of the total population in Others 14
the affected areas--have had their livelihoods UAE 35
Arab Fund
destroyed or significantly affected, of which two WB 35
135
thirds lived in Wadi Hadramout. Prompt and
generous assistance from the Government,
neighboring countries and the humanitarian community provided has prevented a high number of
5
deaths and suffering among the survivors. So far, international donors have committed pledges
amounting to $320 million--with additional $200 million allocated by the Yemeni government2.
Estimates by the World Bank suggest damage of about $1.64 billion, of which 22 percent is tied to
public infrastructure. It is worth noting that the disaster in Yemen has affected the economy in a very
special manner, concentrating its effects on the following sectors of economic activity, presented in
order of decreasing importance: the productive sectors (agriculture, livestock, fishery, industry,
commerce and tourism), the social sectors (shelter, education and health), infrastructure (transport,
power, water and sanitation, and telecommunications) and several other crosssectoral activities (the
environment, religious facilities and cultural heritage). This fact classifies this event as a productive
social disaster, rather than one in which destruction of infrastructure is the preeminent effect.
Yemen is taking new steps to narrow the gender gap. Yemen ended up last on the 2008 World
Economic Forum (WEF) list of countries in closing the gender gap. The list indicates the level of
economic, health, political and education inequalities between men and women in 128 countries
surveyed. In recent years. Yemen has made progress on women health and education fronts, but still
lags behind in relation to political and economic inequalities. In an effort to broaden female political
participation, the Government announced on several occasions plans to allocate 15 percent quota for
women in Parliament. However, this proposal did not materialize as conservative MPs showed
strong resistance. In early 2009, a new law was passed establishing maternity leave rights for women
employed in the public and private sectors. More recently, the Parliament passed a new legislation
setting marriage age at 17 (but allowing court judges the liberty to rule marriages if "in the best
interest of a child"), while establishing strict penalties for violators. Parliament also passed
amendments that would allow women greater legal protection in relation to marriage and
motherhood while providing them with the right to alimony and recognition of the mother as the sole
guardian of her children, as well as imposing some restrictions on the right of men to polygamy. On
broader human rights issues, Yemen's maintenance of Juvenile Death Penalty as one of only four
countries implementing this penalty reflects the slow progress the country is making in spite of recent
efforts by the ministry of Human Rights to improve the Juvenile jurisdiction. The upcoming
parliamentary election is expected to bring renewed efforts to improve gender and human rights.
2In late December, the Cabinet approved the establishment of a special fund to reconstruct areas damaged by floods in Hadramout and al-
Mahra. The Fund, which officially will start operations in mid February 2009, has already handed over a quarter of the ready sites for
rain-affected people.
6
I I . M A C R O E C O N O M I C D E V E L O P M E N T S
The price of crude oil seems to have bottomed at Figure 2. Brent� Europe Spot Prices ( $/bbl)
about $40 per bbl. During the second half of 2008, oil 140
prices witnessed a sharp and steady decline from 130
120
their July peak of $146 per bbl, reaching a four 110
year low of $32.4 per bbl in late December. Prices 100
90
stabilized, thereafter, averaging about $42 per bbl 80
70
in the first six weeks of the year. The sharp retreat
60
in the second half of 2008 was due to falling global 50
40
demand, with an estimated reduction of 1 to 2 30
percent. Oil prices are likely to show less volatility Jan-08 Jan-09
for the remaining of the year, as the reduction in
demand associated with the continuing global recession is likely to be offset by OPEC cuts in
production (which by February 2009 has made cuts amounting to 4.2 million bbls). Despite
the sharp fall in the second half of the year, international crude oil prices have averaged about
$97 per bbl in 2008, nearly 34 percent higher than a year ago. For Yemen, the average price of
crude oil exports in 2008 has averaged about $95 per bbl as compared to $73 per bbl in 2007. 3
Table 1. Oil Production, Trade, and Consumption (in million bbls unless otherwise indicated)
2006 2007 2008 * % change 07 % change 08
Crude oil output (gross) 133.3 116.7 109.4 12.5 6.3
Crude oil output (net) 130.4 113.3 107.8 13.1 4.9
State's share inc. royalties 85.7 72.7 71.4 15.2 1.8
Companies share inc. cost oil 44.7 40.6 36.1 9.2 11.1
Exports of crude oil 1/ 105.5 83.1 78.1 21.2 6.0
of which: Government share 63.7 42.4 44.5 33.4 5.0
Sales of crude to domestic refineries 35.4 33.5 37.8 5.4 13
Domestic refinery consumption of crude oil 22.5 27.0 25.0 20.0 7.4
Consumption of refined products (million tons) 5.3 5.7 6.1 7.5 7.0
Source: Ministry of Oil and Minerals, CBY, and WB estimates.
1/ sum of companies share of production and government share in exports as published by CBY
Government revenue from oil exports in 2008 went up by 42 percent, mainly reflecting higher
prices. While total Yemeni crude oil production slipped by some 6 percent in 2008 (as compared to
earlier projections of 3.3 percent), government share of exports (in bbls) went up about 5 percent
increase (total government take that includes crude processed in local refineries remained
unchanged) over the previous year. This apparent discrepancy reflects, in part, the buoyant state of
oil prices during the year, which have contributed to reduce allocations to oil companies for their
cost recovery. In general, the concession agreements in Yemen follow the standard practice which
allows the operating companies to recover their exploration and development costs annually as a
portion of produced oil defined in terms of costs.
3Yemeni exports comprise two major crudes: Marib light crude (API 49) which currently trades at par or with a slight
premium to Brent and the heavier Masila Blend (API 32)which sells at a discount of about $2 per bbl.
7
Table 2. Government Share of Crude Oil Exports, and Sales for Domestic Refining
Year (million barrels Value of exports Implicit export
Exports 1/ Domestic Total (million $) price ( $)
2000 71.9 31.1 103 1969 27.4
2001 68.9 30.0 98.9 1585 23.0
2002 65.1 26.2 91.3 1600 24.6
2003 65.4 26.9 92.3 1828 27.9
2004 61.7 24.8 86.5 2260 36.6
2005 60.5 26.1 86.6 3115 51.5
2006 63.7 22.5 86.2 4013 63.0
2007 42.4 27.0 69.4 3088 72.9
2008 44.5 25.0 69.4 4396 98.9
% change in 08 4.9 7.5 0.0 42.4 35.6
Source: The CBY Monthly Review 1/ including YCOI and Aden refinery. 2/ oil transferred to Aden and Marib refineries.
Nominal GDP in 2008 is estimated at $27 billion,
Fig 3. Real GDP Growth in Yemen, 200208 (in %)
about 10 percent higher than the previous year.
In real terms this represents a growth rate of 4.8 15
percent as compared to 4.7 percent a year ago. The 10
2008 growth rate underlines a 3.3 percent decline 5
in oil GDP that is offset by some 9 percent growth
0
in nonoil activities4. It should be mentioned that 2000 2001 2002 2003 2004 2005 2006 2007 2008
-5
the current GDP estimates for Yemen are
undergoing major revisions which include -10
rebasing from 1990 to 2000, changing the -15
estimation methodology for the contribution of the Oil Non-oil sectors Real GDP(2000 base)
informal nonoil, and revising the GDP deflators.
Figure 4. Yemen: Monthly Price Indices, 2007�08 Figure 5. Major Global Price Indices
(% change over the same period last year) (in nominal $US [2000 = 100])
500
40
450
35 400
30 350
25 300
250
20
200
15
150
10 100
5 50
0 0
Jan-07 Jan-08 2006M1 2006M7 2007M1 2007M7 2008M1 2008M7 2009M1
Energy Non-energy commodities Agriculture Metals and minerals
All-items I. Food and Non-Alcoholic Beverages
Despite easing in the second half of the year, the overall inflation rate is expected to increase in
2008.5 For the period January�June 2008, the allitems price index increased by about 13 percent over
the previous six months, and by about 20 percent over the same period last year. Inflation rate peaked
in March 2008 and then started to moderate slowly thereafter, reaching to about 11 percent in
December 2008 (as compared to the same month a year ago). The decline since the second quarter has
4 These estimates do not take into account the higher than expected decline in oil production and the possible slowdown in
the economy towards the year end in conjunction with the global financial crisis
5 Recent data released by the CSO indicate an average inflation rate for 2008 reaching about 19 percent as compared to less
than 10 percent a year ago. The data remains provisional and likely to undergo revisions that would incorporate more recent
weights than the currently used weights that use the year 1999 as a base.
8
been driven largely by lower international food prices. Overall, the inflation pattern in Yemen seems
to reflect the trends in global price indices, which have leveled off during the second half of the year.
International commodity prices witnessed a sharp correction during the second half of 2008, ranging
from 20 percent for food commodities to about 40 percent for nonenergy and metals commodity
groups.
Preliminary data indicate that the overall Table 3. Summary of Fiscal Accounts 2007-08 (in billion YR)
2007 2008
fiscal balance in 2008 will result in a Budg.* Prel.
smaller deficit than earlier projections. Total revenue and grants 1429 2081 2057
According to latest data released in Hydrocarbon revenue o/w: 948 1539 1494
Crude oil exports 486 853 853
February, the 2008 deficit is now estimated LNG exports 0 0 0
to run at 4.3 percent of GDP, less than the Non-hydrocarbon revenue 467 477 467
Tax revenue 315 360 367
budgeted deficit of 7 percent (and also less Income 153 194 204
than the 6.3 percent realized in 2007). The Goods & services 163 166 163
narrowing deficit occurred despite the Non-tax 151 117 99
Grants 15 65 97
passing of a supplementary budget to cover Total expenditure & net lend. 1738 2458 2289
additional expenditure related to higher fuel Current expenditure 1336 1957 1867
subsides and hikes in wages and salaries. Wages and salaries 495 592 569
Goods and services 167 167 161
The improved balance reflects savings in O & M 35 28 25
some current expenditure items and capital Interest obligations 97 127 129
Subsidies and transfers 517 1014 953
spending. Subsidies 410 818 765
Transfers 107 196 188
Other 25 29 30
Capital expenditure 278 434 375
Net lending 76 67 47
Overall balance 309 377 232
* including supplementary budget
Owing to the lower oil prices, the 2009 budget projects a widening deficit to about 8 percent of
GDP. The budget, issued in early November 2008 under the assumptions of oil price of $55 per bbl
and a GDP growth rate of 9 percent, focused the bulk of adjustment efforts on the fuel subsidies,
which amounted under the combined original and supplementary budgets of 2008 to 818 billion YR.
These savings were anticipated to
Table 4. 2009 Budget composition n under various oil price scenarios
come from falling benchmark
2008 budget * 2009 budget 2009 budget @
international energy prices, and
(at $55 bbl) (at $40 bbl)
from new reforms aimed at Bil. YR % Bil. YR % Bil. YR %
improving energy efficiency and Tax Revenues 331 23.7 395 27.3 396 31.8
Oil Revenues 887 63.6 834 57.7 625 50.2
narrowing the gap between the
Other Revenues 110 7.9 138 9.5 145 11.7
domestic and international prices. Foreign Grants 66 4.7 79 5.5 79 6.4
The share of capital spending in Total revenue 1394 100.0 1447 100.0 1245 100.0
Wages & salaries 501 27.8 568 29.4 568 30.9
total expenditure shows little Goods & services 292 16.2 314 16.3 314 17.1
change from its level in 2008 at Subsidies & social 468 26.0 524 27.1 431 23.4
about 21 percent (although in Fuel subsidies 314 17.4 367 19.0 244 13.2
Unclassified 28 1.5 29 1.5 29 1.6
GDP terms it shows a slight Capital spending 507 28.1 498 25.8 498 27.1
decline to about 7 percent). Total expenditure 1802 100.0 1932 100.0 1840 100.0
Balance 408 485 595
Balance (% GDP) 7.5% 8.6% 10.7%
* does not include supplementary budget passed in October 2008
9
Table 5. Estimated savings in expenditure under Decree 467/2008
In view of the falling oil prices, the In Billion of budget of total
Cabinet passed a decree in late YR allocation (%) cuts (%)
December aimed at reducing expenses Wages & Salaries 3.9 %0.7 %5.3
and containing the negative impact on Costs of goods and services 40.3 %12.8 %55.2
the deficit. Already indicating a high Subsidies and social benefits 10.0 %1.9 %13.8
fiscal deficit of about 9 percent of GDP Unclassified expenditures 5.8 %20.0 %8.0
under the $55 per bbls oil price Capital expenditure 12.9 %3.2 %17.7
assumption, the 2009 budget would have Total 73.0 %3.7 %100.0
resulted in a widening of the deficit to Source: MOF
about 11 percent if oil price projections were lowered to $40 bbl. This is notwithstanding other
possible adverse implications of lower hydrocarbon revenue caused by delays in the startup of the
LNG plant, shortfalls in tax revenue as a result of the economic slowdown, and possible delays in
donors disbursements. Earlier announcements made in the media regarding Decree no. 467/2008,
indicated that the aim was to bring a 50 percent acrosstheboard cuts in expenditure (with the
exception of wages and salaries). However, as further details emerged, it was revealed that the Decree
will reduce expenditure by some YR73 billion only (i.e. 3.7 percent of total expenditure or about 1.28
percent of GDP). Combined with the impact of lower oil prices to $40 per bbl, these new cuts will
result in lowering the budget deficit from 10.7 to 9.4 of GDP (assuming an average oil price in 2009 of
$40 per bbl.).
Decree 467/2008: A Brief Outline
In mid December 2008, the Cabinet issued Decree 467/2008, amid concerns over falling oil prices and widening the fiscal
deficit in the upcoming fiscal year. The Decree is designed primarily to bring reductions in nonpriority expenditures.
Among the main expenditure items affected by Decree are the following:
Wages and salaries: To remain unchanged except for bonuses
Goods and services: to be cut by 50% unless for utility services, rents and food and clothing for the military
Operations and maintenance: To be cut by 50%
Subsidies and transfers: Cuts of 50% made to Grants to SOEs and others Social benefits government employees
Capital projects: to freeze all new projects not co-financed by donors.
The decree also contains some directives aimed at enhancing revenue collection and cutting some other expenditure items
without setting up specific quantitative targets. Among these measures are the following:
Accelerate the application of Biometric System and the reporting of the violating cases to the Ministry of Finance.
Accelerate arrangements to retire employees who reached one of two limits for different job levels.
Halt implementing the Salaries and Wages Strategy steps that could create new financial burdens.
The implantation of the Decree is to be reviewed every quarter and amended in accordance with developments in the oil
market. It should be mentioned that the Decree in its current format is fragmented and lacks many specifics, which would
make the task of estimating its final impact problematic and subject to some guess work. In this sense, it would have been
more conducive to start with a specification of the desired level of change in expenditure and revenue, and then have
worked out the details.
The current account balance is expected to show some improvement in 2008, following the notable
deterioration in 2007. The deficit in 2007, estimated at 6 percent, came after a long trend of positive
current account balances and steady growth in the country's foreign reserves. The deterioration was
largely influenced by falling oil exports by about 9 percent (oil has more than a 90 percent share in
commodity exports) and the surge in imports bill. The latter reflects rising global inflation and
increased imports of equipment for the ongoing liquefied natural gas project. The deficit is expected
to narrow in 2008 to about 1.6 percent of GDP on the strength of hydrocarbon export revenues and the
moderation in imports growth.
10
Table 6. Components of CAB 200709 (in US$ million) . Fig 6. Current account balance 1999-2008 (% of GDP)
2007 1/ 2008 2/ 2009 2/
15
Trade balance 440 1153 596
Exports of Goods 7050 8626 6312 10
Hydrocarbons 6264 7771 5395
Imports of Goods, f.o.b. 7490 7473 5716 5
Services Balance 1144 1030 1092
-
Net Income receipts 1350 2138 1492 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Net current transfers 1426 1482 1298 (5)
Current Account Balance 1508 533 690
Current Account (% GDP) 6.1 1.6 1.7 (10)
1/ preliminary 2/ Projected
Foreign reserves continued to rise, albeit at a Figure 7. Monthly CBY foreign reserves and
slowing pace, reaching $8.17 billion at the end of crude oil prices 2008
November 2008. This represent some 6 percent 9.0 1 50
increase over the beginning of the year and 8 .5 1 00
8 .0
5 0
equivalent to a comfortable 11 months of imports. The 7 .5
7 .0 0
rise in reserves is almost solely accounted for by high D ec -Jan- F eb -M ar-A pr-M ay-Ju n- Jul- A u g-Se p -O ct-N ov-
oil prices over the period. As oil prices began to cool 07 0 8 08 0 8 08 08 0 8 08 0 8 08 08 0 8
off in the second half, the growth rate of reserves Int. re se rve s O il p rice
showed moderation, particularly as the CBY
continued to draw down to maintain a stable exchange rate.
Table 8. Public Debt at end of Period (million of US$)
Reflecting the smaller fiscal deficit, Yemen's Change
net public debt showed modest nominal 2007 2008 %
increase of about 4 percent in 2008. Public 1. Net Domestic Debt 1,612.7 1,852.8 14.9
Banks (incl. CBY) 1,139.5 963.5 -15.0
debt originates from both domestic and
Non- Banks (Securitized) 1,590.2 2,233.0 40.0
foreign financing, with the former consisting Government Deposits at Banks 1,117.0 1,343.7 20.3
mostly of T bills held by domestic banks and 2. External Debt 5,820.2 5,886.2 1.1
nonbank investors. There is a small non� Multilateral Creditors 3,046.7 3,071.0 0.8
securitized debt, which has been declining Bilateral Creditors 2,773.5 2,815.2 1.5
steadily in recent years to less than 13 percent Total Public Debt 7,432.9 7,739.0 4.1
of the total stock of domestic debt in 2007. Treasury bills are issued at 3, 6 and 12 months maturities;
with current average yield close to 16 percent. About 60 percent of the T bills are acquired by Non
banks such as the Pension Fund, while the remaining 40
Table 7. Yemen outstanding external public debt
percent are held by local banks. Net public debt (in million US$)
(domestic and external) decreased from 30 percent of end 08 % chg.
GDP in 2007 to about 29 percent in 2008. The fiscal Bilateral 2,815 1.5
deficits in 2007 and 2008 were financed mainly by Paris Club Countries 1,758 1.2
NonParis Club Countries o/w: 862 1.9
drawing down government deposits at the central bank,
Saudi Arabia 356 4.6
and by borrowing from the domestic bank and nonbank China 181 4.1
sectors. Others 196 2.6
Multilateral o/w: 3,071 0.8
Yemens external public debt amounted to about $5.9 IDA 2,095 1.1
AFSED 646 14.0
Billion at the end of 2008. Relative to GDP, Yemens Grand TOTAL 5,886 0.4
overall external debt has been showing steady decline in Total as % of GDP 21.9
11
recent years, reaching about 22 percent at the end of 2008. All external public debt is owed to official
creditors, and is mostly on concessional terms. Just over half of this debt was owed to multilateral
creditors and the rest to bilateral creditors (of which $0.37 billion to Saudi Arabia and $.28 billion to
Japan). Among the largest new sources of external financing in 2008 are Arab donors (such as AFSED
and Saudi Arabia) and China. Notwithstanding the moderate financial needs in the short term, Yemen
faces fiscal sustainability challenges in the longer run, as its oil output continues to fall and as
alternative nonoil revenue remain underdeveloped. This would call for expediting structural reforms
to diversify the sources of revenues and reduce unproductive expenditure.
The exchange rate of the Yemeni Rials against the US dollar has been held steady in 2008,
averaging about 199.8. In an effort to minimize the inflationary impact of weakening dollar, the CBY
slowed down the depreciation of the domestic currency and maintained a relatively stable exchange
levels over the last two years. To implement this policy, foreign currency sales by the CBY had to be
stepped up during the year. With the current strengthening of the US dollar, falling global inflation,
and receding foreign currency earnings, the CBY is expected to resume in 2009 its past policy of 35
percent annual depreciation of the Yemeni Rial versus the dollar.
Table 9. Pledge Allocations & Effectiveness By donor as of February 2009
Pledged Allocated Signed Disburse
(in million $) In percent of pledges (%)
I. GCC Bilaterals 2677 79.5 26.0 0.4
1 Saudi Arabia 1227 85.3 47.0 0.8
2 Oman 100 100.0 56.0 2.0
3 Untied Arab Emirates 650 76.9 12.0
4 Qatar 500 56.4
5 Kuwait 200 100.0
II. Multilaterals (Regional and International) 1932 86.5 46.0 3.2
6 Islamic Development Bank 200 100.0 16.0 0.3
7 Arab Fund 786 100.0 42.0 0.1
8 World Bank (IDA) 514 100.0 89.0 11.7
9 IFAD 70 41.4 23.0
10 OPEC Fund 20 100.0 100.0
11 Arab Monetary Fund 220
12 UN System 90 100.0
13 Global Fund 32 100.0 100.0
III. Bilaterals (OECDDAC and Others) 1106 60.7 40.0 22.6
14 European Commission 100 100.0 11.0
15 Germany 190 90.0 53.0 42.1
16 Netherlands 166 55.0 55.0 52.2
17 United Kingdom 230 100.0 66.0 24.8
18 France 160 46.0 26.0 5.6
19 Italy 12 100.0 100.0
20 Denmark 9 86.0 86.0 78.9
21 USA 21 48.0 48.0
22 Japan 38 31.6 18.0
23 South Korea 140 17.0 17.0
24 China 40
Total 5715 76.6 36.0 5.7
Source :MOPIC
Despite the good progress made on their allocation, the pledges made under the Consultative
Group meeting in London in 2006 have so far been slow to disburse. These pledges stood at about
12
$5.7 billion (including an additional pledges made after the CG meeting) with about 55% in the form
of grants and the rest in concessional loans. The share of GCC bilateral in these pledges amounts to
about 47 percent (or $2.7 billion). Good progress has been made allocating these pledges with about
78 percent already appropriated to specific projects. Disbursement, however, has been slow so far,
amounting to less than 6 percent by end of February 2009. This partly reflects the normal lag in the
implementation of projects, but the authorities also indicated some delays in coming to terms with
individual donors procedures. It is expected that disbursements will pick up significantly in 2009.
The growth rate of money supply witnessed some Table10. Monetary Survey (in billion YR)
moderation in 2008, averaging about 12 percent as 2006 2007 2008
compared to 14.4 percent in the previous year. Money Supply 1,414 1,651 1,878
Money 558 614 681
This has largely been influenced by the slowdown Currency outside Banks 413 426 473
in net domestic assets, with the growth rate of credit Demand Deposits 146 188 208
to the private sector falling almost by half to 18 Quasi Money 855 1,038 1,197
Time Deposits 191 283 389
percent as compared to 35 percent a year ago. In a Saving Deposits 93 104 114
uncommon move, the CBY eased in April the F. Currency Deposits 454 516 535
reserves requirement on domestic currency deposits Earmarked Deposits 55 69 93
Pension Fund Deposits 62 65 67
from 10 to 7 percent, while eliminating the 13
Factors affecting Money Supply
percent remuneration on reserves. Meanwhile, the Net Foreign Assets 1,675 1,734 1,857
reserves requirements for foreign currency deposits Central Bank 1,419 1,483 1,580
remained unchanged at 20 percent. It also o/w Assets 1,498 1,549 1,632
Comm. & Islamic Banks 256 251 277
exempted some bank liabilities from being subjected o/w Assets 275 278 309
to reserves requirements, therefore helping to ease Net Domestic Assets 261 83 21
liquidity. Towards the year end, the CBY lowered Net Claims on Government. 89 67 94
Central Bank 291 222 163
the benchmark minimum interest rate on bank
o/w Claims 3 0 106
deposits from 13 to 12 percent. The realignment of Comm. & Islamic Bank 203 289 257
interest rates on the Yemeni Rial came as another o/w Claims 203 289 257
step to reduce the cost of financing for imports and Claims on Nongovernment 269 375 511
Private Sector 266 359 424
the cost of lending in general. The CBY used its full Public Enterprises 3 15 87
allowance of Treasury bills to absorb domestic Other (net) 442 524 584
liquidity in the first nine months of the year, and Change in %
Broad Money 21.7 14.4 12.1
has since relied on its certificates of deposit (CDs) Net Domestic Assets 59.2 68.4 125.4
and additional foreign exchange auctions. Credit to private sector 17.9 35.1 17.9
Yemen is likely to weather the immediate impact of the current financial crisis, while the longer
run impact remains uncertain. A number of independent and official reports have analyzed the
implications of the current global financial crisis on Yemen. The reports concur that the implications in
the shortterm are limited, while in the longerterm they are inconclusive owing to the paucity of data
and uncertainty about possible length and severity of the crisis. The findings could be summarized as
follows:
a) Yemen has a relatively a small exposure to foreign banks and its domestic financial market remains
underdeveloped. The shortterm impact through the banking sector is expected to be limited.
b) Risks to the Government's foreign assets appear to be small as they are largely held in low yielding
deposits and secure bonds.
13
c) One of the main risks is seen through oil price shock and its impact on government revenue.
Currently, oil accounts for about a third of total public revenue. Yemen could weather the impact of
lower prices in the short run by liquidating foreign reserves (currently standing at about $8 billion or
11 months of import), and tapping into the domestic debt market. External financing, which relies
exclusively on concessional sources, is not likely to witness a large reversal in the short run despite
uncertainties regarding some of the bilateral donors.
d) In addition to its impact through public spending, the current global financial crisis could affect
growth (and balance of payments) through direct investment (FDI) and foreign remittances channels.
e) The current crisis is expected to Table 11. FDI flows to Yemen 2002-2007 (million US$)
reduce the flow of FDI, both in the oil
2002 2003 2004 2005 2006 2007
and nonoil sectors. The former will
FDI� non-oil 797 855 898 932 2438 2536
be affected by the lower return in the
growth (%) 21.6 7.3 5.1 3.8 161.5 4.0
sector, although moderating
FDI�oil 114 181 144 -302 1121 877
international costs for drilling and
growth (%) -15.6 59.1 -21.0 -310.4 -471.1 -21.8
exploration could be an offsetting
factor. In the nonoil sector, the crisis Source: CBY reports
is likely to lower FDI flows, which comes mostly from the Gulf and tend to concentrate in tourism,
real estate, and some manufacturing industries. It has to be mentioned that in the case of Yemen,
political stability plays a paramount role in shaping the level of FDI flows.
f) Yemen has a large expatriate population abroad, with many with established residency status in the
Gulf and elsewhere. The current crisis could have negative implications on the level of remittances,
though the magnitude is not certain. Currently, these remittances are estimated to amount to about 5
6 percent of GDP.
14
I I I . S T R U C T U R A L R E F O R M S A N D P O L I C I E S
Reforming the education system remains one of the key development challenges. Over the last
10 years, some improvements were noticed in areas such as schooling access, particularly in rural
areas, and narrowed gender gap. However, there are also signs that the Yemeni education sector
continues to suffer from a number of structural weaknesses underscored by low literacy rates and
poor quality indicators. The latter has been recently confirmed with the results of the 2007 Trends in
International Mathematics and Science Study (TIMSS), where Yemen came at the bottom of a list of
36 surveyed countries for respective scholastic abilities at the fourth grade level. Recognizing the
current shortcomings, the Yemeni Government with the help from international donors, is
awarding increased attention to the general education system. The National Basic Education
Development Strategy is well under implementation. In 2007, the Ministry of Education (MOE) has
introduced, for the first time in the country, program budgeting to basic and secondary education.
The MediumTerm Expenditure Framework (MTEF), covering 2007 � 2010, has been approved to
enable the MOE to better plan education development. To date, Yemen has achieved some
improvements in basic education, by introducing various innovative approaches. These measures
includes: (i) Conditional Cash Transfer to grades 49 girls. (ii) Whole School Improvement scheme.
(iii) Female teacher contracting. (iv) Establishing a Center of Measurement and Evaluation. (v)
Participation of more than 5,000 students in Trends in International Mathematics and Science
Studies (TIMSS) 2007 at grade four. (vi) MOE's leadership in designing coordinated policy for
school health and nutrition. In addition, (vii) tying teacher posts to school. While a supplydriven
model of subsector development was the main instrument during the past 5 years, MOE is now
paying attention to the demandside factors of enrollment and retention and to education quality
and learning outcomes. Despite a quality constraint in educational data, the enrollment is in an
increasing trend over the past decade. Efforts are also underway to develop an integrated education
vision. The initiative is led by the Ministry of Planning and in coordination with three education
ministries, as well as the Ministries of Finance and Civil Service. The task team is formed to
investigate the current education situation and subsector strategies through Country Status Report,
which will later feed into development of an integrated education vision. In the area of secondary
education, the Government approved the National General Secondary Education Strategy in 2007,
which focuses on improvement of quality and relevance, reducing gender disparity and regional
disparity in terms of access and completion, and institutional capacity building. The strategy also
addresses the role of the private sector as a provider of education at the post basic education level.
Recently, the Government has launched the Secondary Education Development and Girls Access
Project, financed by 5 donors, including the World Bank. In addition to general education,
increasing attention has been given to vocational and postsecondary education. Yemen's Technical
Education and Vocational Training Sectors are still very small, and thus far, the Government has
been investing substantially in expanding enrolment capacity. The new IDA operation will address
the needed reforms to strengthen the role of employers and the private sector and increase the
relevance, quality and efficiency of training programs. The Government also has a sound strategy
for development of higher education and is coordinating donor assistance to renew and update the
university system.
The Tax Authority announced intentions to enforce the full implementation of the GST system as
of the beginning of 2009. The current GST rate is set at 5 percent on all products except for some 40
15
items where the rate varies from 10 to 25 percent. Additionally, essential products such as wheat and
sugar, are exempted from taxes. The GST system had been approved in 2004, but it has been facing
stiff opposition from the private sector, who argued that its implementation would bring
unreasonable administrative and financial burdens, especially in the presence of a variety of other
forms of taxes and duties. After a number of compromises and rollbacks, the Government set early
2009 as the deadline for full implementation. According to the decision, the sales of all businesses
with annual volume exceeding YR50 million should be subjected from the beginning of the year to a 5
percent sales tax. However, the extent of compliance and implementation would not be known for
another few more months. The Tax Authority is currently reporting that about 500 new businesses
have registered in first two months of 2009, thus representing an increase of about 30 percent in the
number of large taxpayers that are required to register. Work is currently focused on simplifying the
administration of the GST and completing the identification and registration of the new taxpayers. The
tax will be collected in three phases. Phase one will be collected from customs or factories, phase two
will be collected from wholesalers, and phase three will be collected from retailers. Currently, the
implementation is in Phase two.
Efforts to reform the income tax system are progressing satisfactorily. Last year, the authorities
embarked on a revision of the income tax law in response to problems with the existing legislation in
terms of low efficiency of revenue generation, high rate of evasion, and significant disincentives for
investment. A new law has been prepared and awaiting parliamentary approval. It brings reductions
in income tax rates, while drastically eliminating exemptions. For commercial, industrial, and services
businesses, the tax rate is expected to be slashed from 35 percent to 20 percent (and to 15 percent for
businesses that meet the set criteria for employing Yemeni workers). It is also expected to bring
reductions in taxes on personal income from 16 to 10 percent. The Law will be presented to
Parliament during the second quarter of 2009, simultaneously with the new laws on investment and
customs. Ahead of its submission to Parliament, the Government has already prepared a set of
executive bylaws compliant with international norms that are ready for implementation. The
authorities have also embarked on a threeyear plan to strengthen the capacity of tax administration.
In this area, the FIAS team has been working actively with Government.
Yemen continues to lag in the area of customs processing and trade facilitation. According to the
Logistics Performance Index (LPI) of 2007, Yemen ranked 113 globally (out of 178 countries), and 8 in
MENA (out of 11 countries surveyed). In addition, according to the Doing Business Survey 2009, the
cost of trading across borders for Yemen remains very high ranking the country at 126, which is
worse than the regional average. In 2007, ASYCUDA PLUS, an automated information system for
customs data, has been implemented in all major sea and airports. Currently, the system covers 97
percent of Yemeni imports. Plans to implement an advanced web version of the system, ASYCUDA
WORLD, in 2008 have not materialized, owing to the delays in donors financing. Current ASYCUDA
system is accessible for other agencies like the tax authority, CSO, and the central bank and some three
hundred commercial companies. In addition, electronic manifest system has been approved for 35
major shipping and freight companies. The improvement in custom valuation and clearance processes
aided by ASYCUDA should eventually help in reducing the cost of doing business. The inspection
system for containers by using xray has been implemented in seven main customs checkpoints.
Customs business process reengineering project, started in 2005 with the aim of improving efficiency,
16
is moving ahead satisfactorily. In the past, tardy processing of customs refunds is reported as an
issue.
In recent months, the Government initiated steps to reduce fuel subsides. Soaring oil and fuel
prices in 2008, has helped to push the subsidy bill to an unprecedented $3.5 billion, equivalent to
about 12 percent of GDP, thus exceeding individual development spending, wage payments and
social expenditures. It also led to the appearance of shortages in the domestic market especially for
diesel, LPG and electricity. To deal with this situation, the Government intimated a comprehensive
plan to phase out fuel subsides to households, while implementing a number of interim measures that
have primarily targeted the nonpoor. In the first instance, and given the current high levels of
poverty, the Government is pursuing a plan to enhance the social safety nets as a prelude to the
phasingout of fuel subsides. The plan also includes steps to improve energy efficiency in the areas of
power generation and distribution (savings can be achieved by switching from oil to gasbased
generation, and by improving distribution efficiency and revenue collection) and in petroleum
refining sectors. Meanwhile, seeking to narrow the price gap, the Government has already undertook
some partial measures since early 2008 related to LPG, electricity for commercial use, diesel for
industrial use, and unleaded gasoline (see table 12).
Table 12. Domestic Prices of Fuel and Electricity in Early 2008 and Recent Reform Measures
Item Price in early 2008 (in Action taken since early 2008
YR/l, unless indicated
otherwise)
Diesel for 35 In August 2008, liberalized diesel prices for large industrial users, (with consumption
transport and exceeding 20,000 liters per day), who account for about 4% of diesel consumption. In
other uses February 2009, the Cabinet announced a decision to lower the threshold to 5000 liters/day.
Gasoline 60 Introduced unleaded 90-octane gasoline (imported) in February 2009 with a new price of 80
YR/l. Consumption of this grade of gasoline remains very small.
LPG 400 (YR/cylinder) Increased price of LPG cylinder by 25% to YR500 in the beginning of 2008.
Kerosene 35 No change
Jet fuel 36 No change
Diesel to PEC 17 No change
HFO to PEC 25 No change
Electricity 17 (YR/Kwh) Price charged to business users was increased from 17 to 30 YR/Kwh in Dec 2008.
Households and small businesses (unregistered) continue to pay a maximum of 17YR/ Kwh.
Yemen continued to experience power shortages. In the aftermath of the summer 2007 riots, the
Government made pledges to deal decisively with power cuts and expedite plans to expand power
capacity and coverage to rural areas. Yemen is one of the least electrified countries in the region with only
42 percent of the population (87 percent in urban areas and 23 in rural areas) having access from the
national power grid which is subject to frequent power cuts. In an attempt to meet the demand in the
shortrun, the Government sought purchases from independent power producers (IPP). The measure
proved to be too costly as the volatile diesel prices led to an escalation in the total bill. Also with delays in
payments from the Public Electricity Corporation (PEC) side and uncertain fuel supplies, some IPPs were
forced to suspend their sales. Another part of the strategy was to expedite the expansion plans that use
natural gas for power generation. Yemen has currently two such projects in the pipeline, which once
completed, could add an additional capacity of 730 million MW to the existing 700 MW of diesel fueled
capacity by 2011. The two projects are Marib I and II in Marib province where natural gas is produced.
Marib I, with a capacity of 340 MW, is nearly complete with delays of more than one year. Marib II is
expected to be complete in 2011. Yemen has also two other projects in the design stage, Maabar and Belhaf,
17
which remain uncertain regarding the sources of financing and the availability of natural gas. It is worth
mentioning that despite the current power expansion plans, no allocation (certification) of natural gas
has been made to any of the projects. In related news, the Parliament ratified the Electricity Law of
2009, which sets a new regulatory framework for the sector, particularly with issues related to the role
of private and foreign producers and government procurement guidelines.
Table 13. Planned Expansion in Gaspowered Electricity Generation in Yemen
Plant Capacity Gas consumption expected date Status of implementation
MW (Tcf for 25 years) of completion
Marib I 341 0.68 Second quarter Power plant complete, but inoperative due to delays
of 2009 in substations
Marib II 400 0.80 2011 Bidding and procurement procedure revised and
completed and is now under evaluation
Maabar 400 0.80 unknown Completed feasibility study only. Financing from the
private sector is uncertain and might be covered by
public funds/borrowings.
Belhaf 400 0.8 unknown Same as Maabar.
Yemen is facing an alarming water crisis. Yemen has already one of the world's lowest rates of per
capita water availability (125 m3/person/year as compared to MENA average of 1250 m3/person/year).
It has no perennial surface water and depends entirely on rainfall, groundwater, and flash flooding.
The scarcity of water resources is aggravated by the rapid depletion of ground water, which has
recently been exceeding the recharge rate in the country's major basins and causing the water levels to
witness rapid decline (e.g. the rates of annual groundwater (GW) decline in Sana'a and Saada basins
are about 47 and 56 m, respectively). The bulk of GW is consumed by agriculture (90 percent), while
domestic usage accounts for only 8 percent. The rapid increases in water consumption are expected to
cause per capita water availability to dip below 100 meters per year in the near future. Moreover, the
uncontrolled mining of GW is creating problems of equity, an unsustainable "bubble" of agricultural
prosperity, and competition between urban and rural for the resource. The main causes of the rapid
GW depletion in Yemen could be summarized as: a) the rising demand as population grows and
marketled agriculture develops; b) the weak institutional framework that has promoted expansion
rather than efficient use and sustainable management; and c) the weak capacity of governance. To
arrest the GW decline, the Government must remove various subsidies to agriculture production
(such as those for diesel fuel, agricultural interest rates subsidies, import restrictions on some fruits
and vegetables, and qat, and apply proper charges to water resources to reflect their scarcity. In
addition to removing price distortions on water resources and other inputs to agriculture, the
Government needs to take other regulatory measures to encourage farmers to adopt conservation
agriculture and efficient modern irrigation (e.g. piped conveyance system, and sprinkler, bubbler, and
drip irrigation). Most of these measures have been outlined in National Water Sector Strategy and
Investment Program (NWSSIP 2005 2009). However, the outcome of the Strategy has been mixed due
to inadequate resources and implementation. It is worth noting that the World Bank is currently
preparing a Water Sector Support Project ($90 million) to cofinance the Water Sector Support
Program ($341 million) under the NWSSIP.
In the financial sector, the authorities initiated a number of reforms in 2008. These reforms
include (i) Passage of a deposit insurance law and establishment of a deposit insurance corporation; (ii)
Amendments to the 1994 Islamic Banking Law to eliminate restrictions on foreign ownership and
18
allow commercial banks to open an Islamic branch (under discussion in Parliament); and (iii) A
microfinance law to allow the establishment of non-banking financial institutions (in Parliament). The
Government intends to further the reform in the financial sector in the next two years. Plans call for
establishing a credit registry bureau, a corporate governance code, and a stock exchange and a
securities and exchange commission. The CBY also intends to boost its internal capacity in enforcing
existing prudential standards and regulations on the banking sector.
The mining sector is expected to undergo significant reforms. Given the diminishing oil resources
and the need to attract foreign capital and technology, reforms in the mining sector, which represent
one of the country's most promising industries, are needed urgently. A pending legislation will
replace the existing mining law, and in so doing will significantly modernize and standardize sector
regulation in accordance with international best practice. This, despite the need to complement the
Law with provisions to limit the environmental damage and the use of water and timber by investors.
Following the ratification of the Law, the authorities are expected to focus on redesigning the
administrative procedures, licensing and mining regulations. In a related story, progress in the Jabali
Project, the biggest ongoing private mining venture with an estimated cost is $214 million, was
announced to be on track and ready for completion by early 2010. The project is expected to produce
some 800 thousands tons per year of lead and zinc, and have sizable employment generating impact.
It is also expected to result in secondary regional benefits such as improved infrastructure and
services. The implementation of the new sector's reforms as well as the success of Jabali mine project,
which is likely to promote investment in Yemen and should encourage international exploration and
mining companies to develop the countrys untapped resources.
Faced with dwindling oil revenue and growing financing needs, the Government is planning to
boost the role of private sector in the provision of infrastructure. A PublicPrivate Partnership (PPP)
Unit has already been established in the Ministry of Planning to guide the process. The Government
is currently preparing a strategy and a law on PPP with support received from the IFC. The new law,
which will complement existing laws on procurement and privatization, will establish the legal
framework to address the procedures for preparing, tendering and implementing PPPs including the
allocation of responsibilities and decision rights concerning PPP within the public domain. As such, it
will provide guidance to all stakeholders involved and to ensure transparency in the establishment
and implementation of PPPs. In general, successful development and implementation of PPP is
driven by three main factors: a) A clear policy and legal framework stating the objectives of PPP, the
methods for their achievement and the implementation mechanism. b) A wellestablished institutional
framework that defines in a transparent manner the responsibilities and decision rights among
various public agencies. c) An effective financial framework that incorporates clear financing schemes
including the role of risk mitigating insurances and the cost recovery mechanisms. While in theory,
implementing these measures sound straightforward, successful implementation of PPP in Yemen
could face a number of challenges, particularly given to the past experience with the privatization
program, the weak administrative capacity in the public sector and the underdeveloped nature of the
domestic financial sector. A recent study prepared by IFC suggests that the Government should
approach PPP by adopting a medium term program that includes priority sectors and projects and
reform actions in areas such as subsidies, capital markets and capacity building at various agency
levels. Among the specific proposals put forward by the study is the establishment of two separate
entities, one that focuses on promotion, knowledge building and training, coordination, program and
19
policy development, and project preparation; and another, as an Infrastructure Development
Company (IDC) for PPP that focuses on procurement and investment activities.
I V. O U T L O O K
The economic performance in 2009 is expected to weaken. Yemen is facing a number of economic
and political uncertainties in the year ahead. These are related to global and regional issues such as
the level of international oil prices, the current turmoil in the world financial markets, and the
instability in the horn of Africa. Domestically, the Government is facing political challenges related to
the forthcoming parliamentary elections, the peace process in Saada, and the rising threat from Al
Qaeda. The coming onstream of LNG production in June 2009 will help to mitigate � but not
completely offset the impact of falling oil production and prices. As a result, GDP growth rate is
expected to remain relatively unchanged at about 4.3 percent, underlying growth rates in the oil and
nonoil sectors of about the same magnitude (i.e. 4.4 and 4.2 percent, respectively). The weakening
economic performance will also be reflected on the fiscal and external account deficits, which will
widen to about 9 percent and 2 percent of GDP, respectively. Inflation is expected to be among the
few positive developments, with the rate expected to drop to less than 10 percent in many years as
headwinds from the global economic recession will maintain commodity prices depressed. This
outlook does not take into account the possibility of lifting fuel subsidies during the year. The Central
Bank of Yemen is expected to resume its policy of slow depreciation of the Yemeni riyal versus the
dollar, but this will not have significant inflationary impact as the dollar is expected to maintain
strength against other major currencies in 2009.
Reforms are expected to continue in 2009. A midterm review of the DPPR is already underway. The
revision will cover the first two years and set the planning targets for the remaining period (that is,
until 2010). The revised plan will consider the changing circumstances that have emerged since the
inception of the Development Plan for Poverty Reduction (such as the persistence of poverty, the
outlook of oil production, and the continued rise of global inflation) and revise its scope accordingly.
Special emphasis is expected to be placed on strengthening economic diversification, improving
energy efficiency, and strengthening social safety nets. Reform efforts will particularly focus on the
areas of financial sector development, governance and anticorruption, decentralization, and the
general investment climate. Major reforms expected to be completed in the months ahead include
new laws on customs, income taxes, investment, and telecommunications, and the by laws of the land
registration authority.
Longer term outlook for Yemen offers more worrying prospect, particularly in view of the
challenges facing its main revenue earners, oil and agriculture, and the fast pace of population
growth. Oil production which currently accounts for about 60 percent of government revenue is
diminishing at a fast pace, while agriculture which employs more than half the workforce faces
widespread water scarcity and soil depletion due to extensive cultivation of qat and poor water
resources management. Yemen is seeking to empower the private sector, improve the investment
climate and encourage diversification and liberalization of the economy to attract capital, especially
from the Gulf. So far little success has been achieved in this regard as corruption and lack of
transparency and competition has limited the achievement of these objectives.
20
I V. E C O N O M I C A N D S E C T O R D I A L O U G E
I. Private Sector Development
Mining Policy Reform Project. In September 2006, IFC, PEPMENA signed an agreement jointly with
the Ministry of Oil and Minerals to support the Government efforts to develop the country's mining
industry. The Project is divided into three key phases: Diagnostic Assessment, Change / Redesigning,
and Implementation. The first phase has been completed successfully. A Working groups (WGs) and
subworking groups has successfully been formed and identified from all relevant stakeholders for the
second phase of the project to identify Legal and Fiscal texts, regulations, decrees, directives that need
redrafting. In early 2007, international and local consulting firms were contracted to carry out a
variety of assignments. A year later (2008), the project had produced its first solid results, including an
internationally competitive fiscal regime in the form of a mining tax section for the new Income Tax
Act. In addition, a Mining Law is being drafted, and licensing procedures are being rationalized. Next
steps will involve redesigning of Administrative Procedures, Mining Law/Regulation, designing of
National Mining Strategy and Review of GSMRB in parallel association with awareness raising
activities and lobbying discussions with parliamentarians to push new laws and fiscal changes
through legislative process. The mining code and executive regulation are on their way to cabinet for
approval and to be submitted to the parliament for final approval, as for the project's main objectives
was a mining package which has been delivered since November 2008.
II. Education and Health and Social Policy
A. Education
Towards the Development of an Integrated Education Vision A mission was conducted between
January 24 � February 3, 2009 by a technical team of the Education Country Status Report (CSR) to
discuss preliminary findings of the technical analyses. A workshop was held among government,
private sectors, and development partners to discuss issues on access and quality of education,
education financing, labor market relevance of education, and governance issues.
Basic Education Development Project A joint IDA, Netherlands, DFID, and KfW supervision mission
of the Basic Education Development Project (BEDP) took place during February 1018, 2009. The
mission discussed with the Government on the progress of the BEDP since the Midterm review in
April 2008 and the way forward.
Secondary Education Development and Girls Access Project The Secondary Education Development
and Girls Access Project (SEDGAP) has been launched by a launch workshop during February 79,
2009. The Memorandum of Understanding among development partners has been signed on
February 7th. A field visit to target governorates will be conducted by the MOE and DPs between
February 2126, 2009 in order to induce governorate ownership of the program.
Education For All Fast Track Initiative A preappraisal mission of Education for All Fast Track
Initiative (EFAFTI) Phase III Grant took place from December 1323, 2008. The mission agreed with
the Government and development partners in the main activities and implementation arrangement of
the FTI Phase III grant. The Government is currently preparing detailed monitoring framework and
action plans.
21
B. Health
In Health, the World Bank is providing finances to two new projects. As the current Health reform
Support Project ends on August 2009, the World Bank will finance two new health projects, to be
implemented by MOPHP: 1) The Schistosomiasis Project: The proposed project would support the
GoY's efforts towards the elimination of urinary and intestinal Schistosomiasis as a public health
problem in Yemen. The project objective is to decrease the prevalence and intensity of infection of
both urinary and intestinal Schistosomiasis among schoolaged children by 2015, in endemic regions
in Yemen. 2) The Health and Population Project: The project would support the GoY's efforts to
achieve the 4th and the 5th Millennium Development Goals in reducing child and maternal morality,
respectively. The project objective is to improve the quality and utilization of and integrated package
of preventive, clinical, and public health services by 2015 is selected regions in Yemen.
The Bank Continues to support the Health Sector review process. The Bank has submitted two draft
reports: 1) Yemen Health Sector Review: Conceptual framework and strategy option; 2) Modalities for
Financing Health in Yemen. These reports are providing input guidance to the review process.
C. Social Protection
� Third Social Fund for Development.
� The project builds on the successful first two phases of the SFD. It enhances poor and
vulnerable communities' access to social and economic services; continues to build capacity for
civil society institutions, selected local governments, selected central government agencies and
local consultants and contractors; and continues to support income generating activities to a
number of economically active poor and vulnerable communities. The Bank is playing a
leading role in coordinating among donors financing the SFD (currently there are 12 donors).
The project is progressing very well in achieving its development objectives and agreed
results. The Bank's Board approved US$15 million of additional financing to fill the financing
gap.
� In response to the food crises, the Bank has recently approved an emergency additional
financing grant (financed by the Global Food Price Crisis Response TF) in an amount of US$10
million to the Yemen Third Social Fund for Development Project. The support would consist
of two components: (i) cash payments to the needy through communitybased laborintensive
works; and (ii) implementation support and capacity building for the Social Welfare Fund to
expand and improve targeting and effectiveness, most significantly supporting the
implementation of a national survey to identify the poor and introducing proxy means test to
the targeting process.
� Social Protection Strategy. The Government is keen on having a good understanding of poverty
and vulnerability issues in Yemen and the best possible use of existing resources and institutions.
Based on the Government request, the Bank is leading the development of a new and
comprehensive Social Protection Strategy in Yemen. A WBI facilitated workshop was delivered in
May 2006 to identify the key areas of focus of such a strategy to engage main stakeholders in the
discussion. Subsequently, the preparation of a Social Protection Strategy was initiated and a
stocktaking report (phase I) was completed and delivered to Government in June 2007 and a
22
Strategy Framework and Options report (phase II) was delivered in June 2008. The Bank is
providing technical assistance during 2009 for the development of a strategy action plan derived
from the 2008 work, as well as the institutional arrangement for multisectoral coordination, and
monitoring of the strategy implementation. Ministry of Planning and International Cooperation is
leading this work with the participation of relevant sectors.
� Support to the Reform of Social Welfare Fund (SWF)
� The Bank is providing technical assistance as well as guidance to ongoing efforts for the reform
of the cashtransfer program towards more effectiveness and efficiency. The Bank support is
focusing on improving SWF targeting, by introducing proxy means testing; and supporting the
development of effective monitoring and evaluation system. These activities are well
coordinated with ongoing EC support to the SWF.
� The Bank is involved in a dialogue and project preparation for an additional finance to the
workfare program implemented by the SFD, and a temporary cash transfer (through the SWF)
to the poor hardy hit by the food price crises. The project will be financed through an EC Food
Facility Grant, and channeled to the World Bank through a Bankmanaged trust fund. The
grant amount expected is EURO 18.3.
� Implementation of Children and Youth National Action Plan to Advance Achievement of MDGs:
Following the approval of the National Children and Youth Strategy, the Children and Youth
Action Plan was prepared in collaboration with the relevant line ministries and based on the
recommendations of the strategy. The Bank is providing technical support to the implementation
and monitoring of the action plan. Bank's technical assistance is focusing on the development of
M&E for progress towards MDGs.
� Youth Employment Pilot.: This is a grant received from Japanese Fund for Social Development to
help initiate a pilot with specific focus on offering second chances in terms of job readiness
services and promoting job creation opportunities through introducing business incubation
services. More importantly, the development of business incubation services through this pilot
will help maximize the impact of the existing training and employment funds by utilizing the
loans / credits extended through these funds more effectively for job creation and sustainability
while contributing steadily to the reduction of overall unemployment rates.
� National Disability Strategy and Action Plan. A report "Transition Towards an Inclusive Future"
was delivered to the GOY in 2007. The TA provided a situation analysis of disability in Yemen and
a strategic framework to support the government in its transition from a social assistance to an
inclusive approach to disability. Significant outcomes were achieved during the course of this TA,
including: 1) defining the strategy framework which emphasizes inclusionary policies and
practices and integrating disability issues into mainstream institutions;(2) the identification of the
sectors of Yemeni society that need to be addressed by a national strategy; (3) consensus on a inter
agency technical committee on disability that will assume principle responsibility for the
development of the National Disability Strategy; and (4) a plan of action for the development of
the Strategy. Bank follow up support to the strategy development continued in 2008 within the TA
support to the Social Protection Strategy and continues in 2009 within Social Protection Strategy
implementation support.
23
V I I . N E W & N O T E W O R T H Y L A W S , D E C R E E S , A N D A G R E E M E N T S
The Cabinet
Approved a law for restructuring the Police Academy.
Approved a decree to open a higher medicine institute in AlRaima Governorate.
Formed an economic task force to monitor the impact of world financial crisis on Yemen's
economy.
Approved a law for additional allocations for the general state budget for FY 2008 amounting to
YR660 Billion.
Approved the communications and information technology law and the real estate possession
by nonYemenis law had been.
Emphasized that all government bodies should refer to the Ministry of Legal Affairs in cases,
which requires court ruling.
Approved the National Local Governance Strategy.
Approved a decree of land allocation for erecting new port in Socotra in Karma district
Reviewed the MOU of Yemen joining the cooperation protocol regarding fighting the
environmental pollution with hazardous and poisonous material.
Reviewed the set up of the official Yemeni Government website.
Reviewed the report of the current situation and prospects of land, sea and air transportation
sector in Yemen.
Approved an agreement for coastal fishing in Yemeni regional waters
Approved an Environment Management Plan for AlShori forest area in Kamaran Island, Al
Hodeidah Governorate.
Approved a cooperation agreement between Yemen and China in the field of culture.
Approved a decree for the formation of a preparation committee for the first national workshop
on the rights to benefit from ground water.
Issued Law No. 51/2008 for FY 2009 State Budget
Approved a decree for setting up General Authority for Regulations of Land Transportation.
Approved executive bylaws for Law 17/1994, for General Provisions of Violations.
Approved the 50% cut in 2009 General State Budget due to the fall in oil prices; salaries were
exempted from the cuts.
Approved referring amendments to Law 2/1991, regarding the diplomatic and consular services
Approved a decree on judicial fees.
Approved a report of the mechanism for the collection of taxes and fees imposed on tourism
facilities.
Issued Decree No. 293/2008, regarding establishment of Reconstruction Fund for Floods
Affected Area was issued.
Approved a oneday pay donation from all government, public and mixed sectors and private
funds employees in favor of Palestinians in Sector Gaza.
Approved a decree for national framework for biological safety.
Approved the Yemens accession to the Beijing 1999 amendment to Montreal Protocol, regarding
OzoneDepleting Substances.
24
Directed the Ministry of Transport, to prepare TOR and required documentation for selecting
another specialized company for studying economic and marketing situation of Sanaa
International Airport, for its upgrade; and selecting a company for its operation.
Issued a republican Decree No. 291/2008, regarding setting up General Authority for Regulating
Land Transportation Affairs.
Discussed proposed amendments to the Law No. 26/1996 for General Environment Protection
Authority.
Referred to special ministerial committee draft decrees regarding the amendment of some laws
pertinent to work of private companies in Yemen.
Referred to Economic Council draft decree regarding establishing the national committee for
food constitution or National Codes Committee.
Approved the action plan for 2009, which includes 367 subjects to be discussed during 50
ordinary cabinet sessions during the year.
Approved statute for national educational evaluation and standards center.
Discussed the private education institution situation, and formed a committee to establish their
compliance with Law No. 11/1999.
Approved bylaws for Tender Law No. 23/2007.
Approved a law for Yemeni Navigation Chamber.
Approved a credit agreement signed between Yemen and Kuwait Fund for Arab Economic
Development for 14 mln Kuwaiti Dinars towards operations of Social Fund for Development
Phase III.
Approved a loan agreement between Yemen and Korean Bank of Export and Import for
financing YemeniKorean High Technical Institute in the amount of $15.3 Million;
Approved a loan agreement signed between Yemen and Saudi Fund for Development towards
the funding of AmranSanaaDhamarTaizAden highway project for $125 Million out of its
total cost of $950 Million;
Approved a law on the Skills Development Fund presented by the Deputy Prime Minister,
Minister of Planning and International Cooperation; aim of the fund is to develop technical and
vocational capacities and enhancing work productivity in public and private sectors;
Approved a strategy for upgrading and improving civil status registry during 20082015 in
regulatory and institutional fields;
Endorsed terms of reference and necessary documentation for selection of a specialized
international company to manage Aden International Airport and operate its land services.
Approved a law for Protection of National Production.
Reviewed a National Strategy for Solid Waste Management 20092013.
Discussed the report of the security situation in the country.
Approved executive bylaws for the Local Trade Law No. 5/2007.
Discussed preparations of the National Human Rights Strategy.
Reviewed the report of the outcomes of the 66th conference of GCC.
Other Governments
Saada Reconstruction Fund approved its action plan for rebuilding damaged houses and
government facilities in several districts of Saada Governorate until August of next year. Per
assessment, around 8,697 facilities, houses and farms were damaged in Saada, and 749 in Harf
Sofian.
25
The Higher Tenders Committee approved 26 tenders at a total cost of YR14.5 Billion, for the
projects in the fields of road construction, media, electricity, technical education, health and
water.
High Tender Committee approved tenders for building 3,458 housing units at the total cost of
YR15.4 Billion in the framework of AlSaleh Housing Project for Youth with Limited Income.
Agreement was signed between National Water and Sanitation Authority in Aden and Hook
Company, for establishing AdenAbyan sewerage for $2.1 Billion, with 80% funded by KFW and
20% by the Yemeni Government.
The Ministry of Oil and Minerals formed a technical committee for formulation of oil, gas and
mineral sector national strategy.
The Ministry of Industry and Trade granted licenses to 238 trade companies with the capital of
YR52.9 Billion in 2008 compared to 232 companies with the capital of YR6 Billion in 2007.
The Private Sector
The Capital Secretariat announced a black list of names of the private companies and contractors
who do not adhere to stipulated provisions, these companies should be banned from entering
competition for new tenders.
Interax Petroleum Services Company granted Yemen YR15 Million for mitigating damages in
floodaffected areas.
Handover of Aden Container Terminal and Mualla Port has been completed between Yemen
Gulf for Aden Ports Corporation and Dubai Ports International.
An agreement was signed between Aden Fardous Company for Real Estate and Industrial
Investment and Italian Dimoon Company for construction of a fourstar hotel and tourist suites
complex at a cost of $20 million in preparation for Gulf Cup 20 Games.
An MOU was signed between Aden Free Zone and Saudi AlWad Corporation for setting up a
commercial complex on the area of 146 ha at the cost of $600 Million.
MOU was signed between Aden Free Zone and Bathwab Investment Company regarding
establishing a saltproducing project at a cost of $5 million with 50,000 tons capacity per annum.
A MOU was signed between Aden Free Zone and Bin Mahfouz Real Estate Development Group
regarding establishing a medical complex in AFZ.
A MOU was signed between Aden Free Zone and Venice Company for Real Estate and Tourism
Development regarding setting up a tourism complex at the amount of $10 Million.
An agreement for rehabilitation of Aden Salt Corporation was signed between Yemen Economic
Corporation and Kenyan KimoSalt Company.
An MOU was signed between Aden Free Zone and Italian SMI Company for building a sun
energy production plant at a cost of $300 Million with annual capacity of 200 Mega.
Agreement signed between Aden and Dubai Company for Ports Development for an extension
of storage yards project in Aden Container Terminal for Aden Free Zone at a cost of YR 1 Billion
to be implemented by Real Estate Shefa Company.
An MOU was signed between the Ministry of Fisheries and Asdaf AlYaman Company for
farming shrimps in the Red Sea coast at the amount $12 Million.
Small Industries Fund offered loans for 1,094 projects for YR939 Million in total from January to
September 2008.
The European Union has granted machinery and equipment worth $197,000 to the Tehama
Development Authority.
26
The Small Enterprise Development Fund in Ibb financed 131 industry, trade and services
projects at the total cost of YR 85 Million during 2008.
Seminars and Workshops
A regional symposium on The Role of Tribes was organized by the Yemeni Observatory of
Human Rights in cooperation with Canadian International Development Research Center
during October 68;
A workshop on Girls Education for mosque preachers was organized in AlHodeidah by the
Ministry of Endowment and Islamic Affairs in cooperation with UNICEF during October 89;
Training on Opposing Violence against Women for mosque preachers was organized in Aden by
the Ministry of Endowment and Islamic Affairs in cooperation with UNFPA during Oct. 1314;
A workshop on Health Education for NGOs was organized in Aden by the Reproductive Health
Program supported by UNFPA during October 1213;
Women National Committee in cooperation with UNFPA has organized a session on gender
dimensions and human rights methods in programming during October 1820.
Women National Committee has organized a training course on Fighting Gender Basis Violence
for journalists and media workers during October 2428.
Human Rights and Rural Women Economic Empowerment Program was launched by MADA
Foundation in cooperation with French Social Development Fund on October 20;
AlFardous Women Development Foundation has organized a training course on AIDS/HIV
prevention in Aden during October 1820.
Celebration of International Day of Anti Child Violence was organized in Aden by Safe
Childhood Center in cooperation with Swedish Save the Children on October 18;
An awareness campaign under the motto Stand Up and Take Action was launched by Yemeni
Coalition for Global Campaign Against Poverty during October 1719;
A workshop on Life Skills was organized by the Ministry of Education in cooperation with Arab
Education Bureau during October 2527;
A workshop on Importance of Public Funds Declaration was organized by the Supreme National
Authority for Combating Corruption on October 26.
The Supreme Elections Committee for Elections and Referendum launched Women
Empowerment Program for 20082010 with an objective of improving womens participation in
elections.
A workshop on Women Workers Protection was organized by the Development Center for
Culture and Combating Violence in cooperation with German Friedrich Ebert Stiftung
Foundation during November 45;
A workshop on Girls Education was organized by the National Womens Committee in
cooperation with Oxfam during November 78;
Two workshops on Raising Awareness among Youth on Civil and Political Rights were
organized by the Democracy Schools in cooperation with International Foundation for Electoral
Systems and UN Democracy Fund during November 912;
A workshop on Statistics and Information on Family Planning and Reproductive Health was
organized in Ibb by the Office of Public Health and Population in cooperation with UNFPA
during November 1213;
A workshop on Raising Youth Awareness on Civil and Political Rights was organized by the
Democracy School during November 2425;
27
A training course on integrating population issues into the annual plans, was organized by the
National Population Council in cooperation with UNFPA during December 25;
A training course on Disseminating Knowledge About the Risks of Child Trafficking, was
organized by the Democratic School in cooperation with UNICEF during December 24;
A workshop on Food Security Information System, was organized by the Central Statistical
Organization in cooperation with European Commission during December 35;
A workshop on Occupational Safety for Cement Industry Workers, was organized by Yemeni
Cement Corporation in cooperation with American Center for International Labor Solidarity
during December 1415;
Yemeni women delegation participated in the third regional conference of GCC Women
Parliamentarians and DecisionMaker in Oman during December 2123.
The Social and Democratic Forum has launched a project Women and Political Participation in
cooperation with Peoples General Congress and Joint Meeting Parties.
Yemeni Network for Combating Violence against Women, conducted awareness raising
meetings for male and female participants in Ibb Governorate;
A workshop on Fighting HIV/AIDS, was organized by the National AntiAIDS Program in
Cooperation with UNICEF during December 1719;
A workshop on Leadership Skills for Youth, was organized by the Democracy School in
cooperation with Middle East Partnership Initiative during December 2123;
General Assembly of NGOs working for children took place during December 2122, for
discussing 20092012 working plan and shadow report on child situation in Yemen.
A workshop on Hazardous Work and Girls Labor, was organized by the Center for Child
Laborers Rehabilitation in cooperation with Sanaa Local Council, during December 2123;
An international conference on Drug Addiction Prevention, was organized by the Ministry of
Interior in cooperation with Middle East Research Center for Human Rights and Development
on December 2829;
National Womens Committee branch in Aden convened a workshop on Recommendations of
UN CEDAW Committee during January 1415.
A TOT workshop on Educating AIDSAffected People was organized in Aden by
Comprehensive Social Service Center in Cooperation with UNICEF during January 110.
A workshop on Protecting Women and Children during Natural Disasters was organized in
Hadramout by the Ministry of Social Affairs and in cooperation with UNICEF, UNHCR and
UNFPA during January 1415.
A training course on Microfinance for the CBY employees was organized by GTZ sponsored
YemeniGerman Private Sector Development Project during January2431.
Training course was organized by Womens Shadow Parliament for lobbying and advocacy
aimed at increasing womens political participation during February 13.
The Women National Committee appealed to all political parties and organizations in Yemen to
support womens issues on all levels especially in terms of womens political empowerment in
the light of upcoming parliamentary elections.
The Parliament passed a law setting a minimum marriage age at 17 and granting
women greater legal protection in issues related to marriage and motherhood, including right to
alimony and child custody in case of divorce.
A training course on Using Media to Serve Womens Issues was organized by the Yemeni
Womens Union on February 25.
28
A workshop on Upgrading Training Needs and Planning Human Development was organized
in Aden by the Investor Service Center during February 35.
66th Conference of GCC Health Ministers took place during February 34.
A conference titled Contemporary Media: Between Freedom of Expression and Abuse of
Religion was organized by the Ministry of Endowments and Guidance in cooperation with
World Islamic League during February 79.
A symposium on Invigorating Womens Political Participation was organized in Aden by the
Social Democratic Forum on February 7.
A workshop on Employment Skills in Middle East was organized by the Ministry of Technical
Education and Vocational Training in cooperation with the
British Council during February 1011.
A workshop on Causes of Failure of Investment Projects and Means to overcome them was
organized in Aden by the General Investment Authority in cooperation with German Private
Sector Development Project during February 1214.
A workshop to discuss New Draft Investment Law was organized by the Ministry of Planning
and International Cooperation in collaboration with the
International Finance Corporation (IFC) during February 1112.
A third training course for Youth Leaders was organized by Future Leaders Project run by the
Democracy School in collaboration with Middle East Partnership Initiative during mid February
A training course on Methods and Techniques of Implementing Social Welfare Survey was
organized in Saada by the Social Welfare Fund during February1316.
A training course on Management Skills Development was organized by the Ministry of Human
Right in cooperation with the European Union during February 1316.
Development Cooperation
Arab Gulf Program of UNDP (AGFUND) donated 562,000 Saudi Rials to support victims of
heavy rains in Hadramout and AlMahra Governorates.
Global Fund to Fight Aids, Tuberculosis and Malaria offered $27 Million to support Yemeni
National Malaria Fighting Program.
Kuwait Embassy in Yemen granted $30,000 to AlTahadi Society for Disabled People.
Republic of China granted $300,000 to support Yemens relief efforts in floodaffected areas.
The Arab Contractors Company provided $20,000 to the people affected by flood in Hadramout
and AlMahra.
The Arab Fund for Economic and Social Development (AFSED) extended $3 Million aid to rain
affected areas in eastern governorates.
AFSED pledged US$100 Million towards rebuilding floodaffected areas in Hadramout and Al
Mahra.
The Organization of Islamic Conference offered Yemen a grant of $250,000 to support flood
affected areas.
The Islamic Development Bank (IsDB) as donated YR150 Million to support the people affected
by the heavy rains in eastern governorates.
IsDB signed a loan agreement for US$42 Million to improve agricultural development in Abyan,
establishment of silos mill in Salif, and vocational literacy projects.
IFAD approved shifting development assistance to agricultural projects in Yemen for 2009 from
loans to grants.
29
Thee contracts were signed between the Ministry of Public Works and all of General Department
of Construction, AbdulAziz AlTam Corporation and AlAram Corporation for Construction
and Commerce for carrying out construction of 800 housing units in Aden at the cost of YR3.9
Billion.
Arab Bank granted YR50 million to support Yemeni government reconstruction efforts in the
rainaffected areas in Hadramout and AlMahra.
Germany offered $100,000 for alleviation of rain floods in the eastern governorates, in response
to the appeal by the President of the Republic.
Germany offered Euro36 Million grant, as extra assistance to help Yemen tackle soaring of global
food prices and finance water and sanitation projects;
Germany offered six grants for the total amount of US$56.2 Million to support programs in
water and education sectors. Germany allocated US$200,000 as urgent humanitarian aid to
Yemeni floodaffected areas.
Germany's GTZ signed a threeyear financing agreement with the Ministry of Education for
implementation of educational Projects for Euro 7.6 Million (and Yemeni Government will
provide YR 150 Million).
The United States pledged humanitarian aid to the floods affected areas, of $50,000 channeled
via World Food Program.
Japan provided inkind help worth $200,000 to people affected by rain floods in Hadramout and
AlMahra.
Japan granted Yemen $100,000 for improving educational environment in schools targeted by
the Bridge project for Girls Education;
Japan extended grants to two grassroots projects under the "Grant Assistance for Grassroots
Human Security Projects; including YR16 Million to improving environmental and public
health project in AlDhalea, and YR16 Million to improving water supply in Khamar in Shabwa.
Japan granted $800,000 to assist people affected by floods in the eastern governorates of Yemen.
Japan signed financing for $6.5 Million, for building five primary education schools in Yemen.
Japan provided relief materials worth $200,000 to the people affected by the floods.
Japan granted YR34 Million, for two projects under the Japanese scheme Grant Assistance for
Grassroots Human Security Projects", including YR17 Million for drinking water supply to Al
Sabrah area, and YR17 Million to construct a boy's school in Mawza area.
South Korea provided Yemen with inkind emergency aid of $50,000 to contribute to the
government's flood relief efforts.
South Korea for a soft loan of US$15.3 Million for establishing vocational training institute
The French Agency for Development signed an agreement for US$2.4 Million to support Animal
Wealth.
Netherlands allocated $1 million in aid to rainaffected eastern Governorates in Yemen, with
$500,000 to be channeled via World Health Organization as an urgent medical assistance, and
$400,000 in addition to $100,000 provided earlier will be channeled via Red Cross Committee.
Netherlands signed an agreement for an additional support for $36 Million for mother and child
health programs.
Netherlands Government signed an agreement with the Social Fund for Development for US$15
Million for supporting education sector.
The World Bank, Netherlands, UK and Germany signed a funding agreement for Secondary and
Girls Education Project for USD 103 Million.
30
Cyprus donated $50,000 to Yemen to support government reconstruction efforts in flood
affected areas.
The Donor Joint Progress Review Mission, concluded evaluation of projects and activities under
the third period of the Social Fund for Development, which confirmed that SFD continues to
make excellent progress in achieving its goals.
Donors pledged to grant US$248 Million to Yemen to support the National Water Program,
which costs US$400 Million.
UNHCR reported that donor countries have raised their contribution to refugees in Yemen from
US$4 Million to US$17 Million.
European Finance Bank is planning to invest around US$1 Billion in energy, mineral exploration,
cement and extractive industries in Yemen.
The EC allocated Euro 500,000 as humanitarian assistance to Somalian and Ethiopian refugees in
Yemen
The EC allocated US $19 Million to support reproductive health (US $9.5 Million) and (US $9.5)
to support juvenile justice, rule of law and administrative reforms.
OPEC Fund for International Development (OFID) signed a credit agreement for $ 18 Million for
Public Works Project.
Malaysian Company and Taiz Water Supply and Sanitation Authority a signed grant agreement
for US$ 267,700 to carry out a study for northwestern area sewerage project.
The Republican Hospital in Aden received medical equipment from the Chinese Health mission
at the total cost of YR 1 Million.
31
I I I . W O R L D B A N K G R O U P O P E R A T I O N S I N Y E M E N
The World Bank is currently financing 18
projects in Yemen, including supplemental Figure 8 : Sectoral Distribution of Ongoing Projects
financings, with a total commitment of USD
855 million. An additional USD 76 million Energy &
in grants were committed by the Bank Agriculture/R Transport
ural Sector 12%
through 29 separate Trust Funds, 15 of 11% Education
which are Bank-administered. Most of the 13%
21 lending operations are investment Urban Water
Supply/Sanita
projects, covering a broad range of Development
33% tion
economic and social sectors, including Health & 8%
Social
urban development, health and social Protection Public Sector
Management
protection, education, infrastructure (energy, 13%
10%
transport, water, and irrigation), agriculture
and fisheries, environment, and public sector.
Ongoing World Bank Operations in Yemen (as of December 31, 2008)
Table 14.
Project Name Close Date* Loan $ Disb. $ Disb. %
Groundwater & Soil Conservation 31Oct09 56.7 28.46 50.2
Rural Water Supply and Sanitation 31Dec09 42.44 25.23 59
Irrigation Improvement Project 30Jun08 21.3 20.13 95
Sanaa Basin Water Management 3Nov09 27 13.41 50
Fisheries Resources Management & Conservation 4Nov09 26.5 1.41 5.3
Port Cities Development 30Jun10 27.1 18.14 67
Taiz Muni. Dev. and Flood Protection 3Jul10 20.5 3.93 19.2
Rained Agriculture and Livestock 5Nov09 21.5 4.51 21
Third Public Works 1Jul10 77.8 44.63 57.4
II Rural Access Project 1Jan12 40.8 19.17 47
Rainfed Agriculture and Livestock project 30Jun12 20.0 4.33 22
Power Sector Project 31Dec11 53.6 1.00 2
Civil Services Modernization 30Jun10 34.3 25.82 75.3
Institutional Reform Credit (DPL) 30Jun10 50.9 26.9 53
Health Reform Support 31Aug09 34 29.15 86
Third Social Fund for Dev. 31Dec09 80 71.62 90
Safe Motherhood Voucher Program 1Sep09 6.2 0.0 0.0
Social Fund for Development III (supplemental) 2Jan10 10 2.00 20
Vocational Training II 31May13 15 0.0 0.0
Sec. Educ. Dev. And Girls Access Program 1Jun13 20 0.0 0.0
Basic Education Development 2Jun13 115 58.74 51.1
TOTAL 800.65 398.58 50
* corrresponds to original data
32