2017年-世界发展银行全球_Private_Sector_Readiness_to_Contribute_to_Reconstruction_and_Recovery_in_Yemen___Yemen_Policy_Note_3_41页_2mb

Summary of Yemen Policy Note 3: Private Sector Readiness to Contribute to Reconstruction & Recovery in Yemen

Core Content

This document analyzes the impact of the ongoing conflict on Yemen's private sector and outlines key policy recommendations to support recovery and resilience. It highlights the critical role of the private sector, particularly micro, small, and medium enterprises (MSMEs), in Yemen's socio-economic framework and emphasizes the need for immediate and sustained support from both the government and international donors.

Main Viewpoints

• The conflict, which began in March 2015, has had severe economic consequences, including a record GDP contraction of 38% within 21 months and an inflation rate of 40% in 2015.
• The private sector, already weakened by pre-conflict challenges, has been severely impacted by physical damage, labor market disruption, restricted access to inputs and markets, and financial constraints.
• Trade, construction, finance, and agriculture are identified as key sectors for recovery and reconstruction, each facing unique challenges and opportunities.
• The private sector is a major source of employment and essential for providing basic goods and services, making it a vital component of socio-economic resilience.
• Donors and the government must take urgent steps to support the private sector through financial and technical assistance, trade financing, and institutional reforms.

Key Information

Impact of the Conflict on the Private Sector

• Physical Damage: Over 74% of surveyed firms reported physical damage within six months of the war, with 95% of closed businesses citing damage as a primary cause. The destruction affected commercial and manufacturing establishments, including food warehouses, markets, and infrastructure critical to daily operations.
• Labor Market Disruption: The conflict caused a significant decline in employment, with a 13% reduction in employment in Sana'a City, Al-Hodeida, and Aden. The most affected sectors were services and agriculture, with a 49.7% decline in agricultural employment. Displacement and insecurity have led to a 15.9% decline in labor force participation.
• Access to Input Materials and Markets: Trade routes and infrastructure have been heavily damaged, leading to restricted access to raw materials, spare parts, and goods. This has increased production costs and reduced local output. Agricultural inputs like seeds, fertilizers, and fuel are scarce, and livestock production has declined due to fodder shortages and lack of veterinary services.
• Access to Finance: The banking sector faces liquidity and solvency issues, with the Central Bank of Yemen (CBY) unable to guarantee trade facilities due to lack of foreign exchange. Non-performing loans (NPLs) have increased, and trade financing is constrained due to correspondent banking restrictions and lack of working capital.

Sectoral Analysis

Trade Sector

• The trade sector contributed 15% to GDP in 2014, with a trade deficit of USD 10.4 billion.
• Major trade partners include China, Thailand, Saudi Arabia, and the UAE for exports, and China, India, Turkey, and Saudi Arabia for imports.
• Key imports are food (50%), medicine (20%), and building materials (10%), while exports are primarily oil and gas (90%).
• Four of Yemen's seven major ports have been damaged, and three are not under the Government of Yemen's control, leading to delays and increased shipping costs.
• The Logistics Performance Index (LPI) for Yemen dropped significantly, indicating poor trade logistics and infrastructure.

Construction Sector

• The construction sector is historically significant in Yemen and is expected to play a major role in recovery.
• Construction employment increased in Aden due to early reconstruction efforts, suggesting potential for job creation.
• However, the sector has faced contract suspensions and cancellations, and qualified workers have left the market.
• Construction material costs have spiked, and imported inputs are severely limited, further complicating recovery efforts.

Financial Sector

• The financial sector is under severe strain, with liquidity and solvency issues, and a depletion of foreign exchange reserves.
• The CBY has lost almost all of its foreign exchange reserves despite IMF assistance.
• Correspondent banking relationships have declined, limiting access to international financial services.
• Microfinance institutions are under pressure due to repayment difficulties, and trade financing is a major constraint.

Policy Recommendations

1. Support the Construction Sector: Provide financial and technical assistance to help retain and rebuild manufacturing and reconstruction capacity. This includes enabling early reconstruction activities to drive employment.
2. Restart Trade Financing: Support the CBY to restore its ability to guarantee trade facilities and consider establishing an emergency trade financing facility if necessary.
3. Support MSMEs: Implement recovery grants for MSMEs to help them stabilize and continue operations.
4. Reconnect the Banking Sector: Work on re-establishing Yemen's banking sector's access to the global financial system.
5. Provide Investment Guarantees: Help mobilize private sector capital by offering investment guarantees and reducing financial risks.
6. Improve Trade Infrastructure: Address the damage to ports, roads, and logistics systems to restore trade flows and reduce costs.
7. Enhance Trade Facilitation: Reform trade institutions and adopt modern regulatory compliance practices to improve trade efficiency.
8. Promote Access to Information Technology: Automate transaction processing to improve trade logistics and reduce delays.
9. Strengthen Institutional Capacity: Reform the banking sector, improve regulatory frameworks, and enhance the capacity of trade facilitation institutions.

Conclusion

The private sector in Yemen is crucial for economic recovery and resilience. Immediate and targeted support is necessary to address the acute challenges it faces, including physical damage, financial constraints, and institutional weaknesses. Strategic investments in key sectors such as trade, construction, and finance can help restore economic activity and improve living conditions for the population.