Investment Critical to Yemen’s Transition, Says Post-Crisis Assessment
A comprehensive assessment of the post-crisis situation in Yemen reveals the need for urgent action to confront malnutrition with improved food security, to restore basic social services, and establish the conditions for economic growth and job creation.
The Joint Social and Economic Assessment (JSEA) prepared to inform the Government of Yemen’s economic planning highlights priorities for delivering positive changes in the daily lives of Yemenis as a critical guarantee for the ultimate success of the political transition process.
“With now more than half the population living below the poverty line, and nearly one million children under-5 acutely malnourished, this is not a time for ‘business as usual’ in Yemen,” said Wael Zakout, World Bank Country Manager for Yemen. “The Government of National Unity will need financial and other support to address immediate social needs, and run programs that generate jobs and growth. Donors and development partners are asked to provide exceptional assistance at exceptional times.”
The JSEA was undertaken at the request of Yemen’s Government of National Reconciliation and performed jointly by the World Bank Group, the United Nations, the European Union, and the Islamic Development Bank. Its main purpose was to assess the social and economic impact of the 2011 political crisis in Yemen, and to inform the government’s recovery plan, the Transitional Program for Stabilization and Development (TPSD).
“The JSEA represents a collective effort to jointly capture the most important socioeconomic challenges following the Yemeni crisis, and prepares the ground for a coordinated response by the international community in support of the Government’s Transitional Program for Stabilization and Development,” says Ismail Ould Cheikh Ahmed, United Nations Resident Coordinator.
“Improving the socioeconomic and development conditions will definitely complement the remarkable achievements made by Yemeni stakeholders in conducting the recent presidential elections, in undertaking a challenging security sector reform and launching a promising national dialogue process. Support from the international community remains, however, critical for the success of the transition.”
The assessment involved extensive consultations with a broad cross section of Yemeni society, including government and civil society, and drew on reports from a wide range of domestic and international organizations.
“Much as the transition process needs to be underpinned by visible improvements in living conditions, economic recovery is critically dependent on conflict abatement and reconciliation,” said Mohammad Ahmed Zubair, Principal Economist of the Islamic Development Bank and a contributor to the JSEA. “Only then, and bolstered by continuous implementation of the Transitional Program for Stabilization and Development will investment reach levels likely to catapult economic growth beyond the four percent observed over the past decade.”
The JSEA concludes that a growth rate between seven and eight percent will be needed to generate employment for Yemen’s many unemployed. This is almost twice the average growth rate of four percent that prevailed before the crisis. Even with decisive progress in the ability of the Yemeni Government to mobilize domestic public resources as well as target and manage spending efficiently, the needed growth acceleration will require additional external resources to finance the ensuing domestic investment.
This external financing requirement amounts to about US$2 billion annually over the next four years (not counting reconstruction costs) with the mix between private and public evolving over time as the country develops an enabling environment for private capital inflows.
“Targeted and prioritized capacity development interventions to expedite investment will be key for achieving results quickly,” said Ahmed Elsadig, Islamic Development Bank Country Manager for Yemen. “Current weaknesses can be overcome with the sorts of programs that encourage Yemeni agents, public and private, contractors and suppliers, to seek fostering or twinning arrangements with their counterparts in the GCC countries.”
Reforms in agriculture, services and industry are needed to unleash the country’s growth potential, ensure the effectiveness of public investment and attract private investment, while moving Yemen’s economy and exports beyond hydrocarbons.
“Creating employment, ensuring social protection and developing opportunities for sustainable livelihoods are particularly critical to address social needs and respond to acute grievances,” said Philippe Jacques, Head of the European Union Development Cooperation in Yemen. “Key issues to be addressed in this regard, are food security and nutrition, the basic needs of the most vulnerable groups, improving efficiency and capacity of the government, at the local and national level, to deliver services and manage budgets, as well as urgent actions for a rapid and equitable increase in job opportunities.”
The JSEA further emphasizes the need to invest in education, including vocational training programs, supporting future growth based on a better educated population, equipped with skills that are in demand by the private sector.
In addition to addressing immediate needs, the transitional government also faces a number of medium- term challenges which will require measures to promote the sustainable use of dwindling water supplies, and better access to electricity through improvements in infrastructure and investments in renewable energy.
At a recent donor conference in Saudi Arabia, the international donor community committed to supporting the transition process with pledges totaling US$6.396 billion. This will provide funding for both immediate and short term plans to improve living conditions and restart economic activity.
“Against this backdrop, it is crucial for the future of Yemen to collectively ensure an effective balance between political stability and security on the one hand, and economic growth, and human development on the other,” said Geert Cappelaere, UNICEF Representative. “Both dimensions are mutually reinforcing the transition of the country.”