Poverty Reduction Strategy Paper (PRSP) 2003-2005

2.1. Population Problems…………………………………………………..………………………………………………….. 8

2.2. Water and Water Resources ………………………………………..………………………………………………….. 11

2.3. Human Resources ………………………..…..……………………..………………………………………………….… 15

2.4. Institutional Structure of the State ………..……………………..………………………………………………….. 18 CHAPTER 3: ECONOMIC DEVELOPMENTS AND THE REFORM PROGRAM ………………..…………. 21 1. Introduction ……………………………………………………………………………………………………………….. 21 2. The Economic Situation ……………………………………………..……………………………………………….. 21 3. The Economic, Financial and Administrative Reforms Program (EFARP) ….…………………… 24

3.1. The Outcomes of the EFARP ……………………………………..……………………………………………………. 25

3.2. The Impediments of the Reforms Program …………………..………………………………………………....… 27 4. The Private Sector …………..…………………………………………..……………………………………………… 29 CHAPTER 4: THE POVERTY S ITUATION IN YEMEN .……………………………………….….……….... 32 1. Introduction …………………………………………………………………………………………………………….. 32 2. Poverty in Yemen ……………………………………………..………………………………………….…………….. 32

2.1. Poverty and Economic Growth ….……………………………..……………………………………………………. 33

2.2. Features and Characteristics of Poverty …….………………..………………………………………………....… 35 2.3. Demographic, Social and Economic Characteristics of the Poor …….……………………………....… 36

2.4. Causes of Poverty and Factors Affecting the Probability of its Occurrence ……………………....… 38 3. Human Poverty …………………………………………………………………………………….…………………… 39 4. Poverty and the Environment …………………………………………………………..…….…………………… 43 5. The Social Safety Net …………………………………………………………………………….…………………… 46

5.1. Social Security Schemes ………. .……………………………..…………………….…………….…………………. 47

5.2. Programs Coinciding with the Economic Reform Program …………………………………..…………....… 47

5.3. Assessment of the Social Safety Net …………………………………………………………..…………....… 50

5.4. The Contribution of the Civil Society Towards Poverty Reduction ………..……………..…………....… 50 CHAPTER 5: THE POVERTY REDUCTION S TRATEGY ………..………………………….……………….... 53 1. Introduction ……………………………………………………………………………………………………………….. 53 2. The Goals of the Poverty Reduction Strategy (PRSP) ……………………………………….…………….. 54 2.1.The General Goals ………………..……………………………..…………………….…………….…………………. 54 2.2.Sectoral Goals …………………………………………………………………………………..…………....… 54 3. Relationship Between National and Millennium Development Goals (MDGs) ….……………….. 55 4. The Axes (Pillars) of the PRSP ……………………….……….…………………………………….…………….. 59

4.1. Achieving Economic Growth …………………...………………………………………………..….. 59

4.2. Human Resources Development. ……………………………………………………....………..….. 73

4.3. Improving Infrastructure ………….…….………….……………………………………...………..….. 79

4.4. Ensuring Social Protection …………….………….……………………………………………..….. 84 4.5. Administration, Good Governance, Participation and Cooperation ………………..….. 86

4.6. Participation and Cooperation ……...........................................................................…………..….. 90 CHAPTER 6: IMPLEMENTATION OF THE PRSP ………………..……..……………………………………… 93 1. Introduction ……………………………………………………………………………………………………………….. 93 2. Costs and Financing…………..……………………………………………….……………………………………..….. 93

2.1. Public Finances ……….……………………………….………………………………………………..….. 93

2.2. Development Requirements and Priorities of the PRSP ……….…………………………………..….. 94 3. International Cooperation ………………………………………………………………………………………….. 97 4. Risk Factors ……..……………………………………………………………………………………………………….. 98

4.1. Drought and Flooding …………………………….………………………………………………..….. 98

4.2. Fluctuation of Oil Prices ………………………….………………………………………………..….. 99

4.3. Foreign Assistance Holdup ……….…………….….……………………………………………..….. 99 5. Monitoring and Follow-up ………………………………………………………………………………………….. 100 6. A Mechanism for the PRSP Committee and Social Safety Net ………………………………………….. 102 ANNEXES . .…………………………………………………….……………………………………………….………. 104 v EXECUTIVE SUMMARY 1. The Government Commitment to Poverty Alleviation The government’s adoption of democracy and political pluralism is regarded as a strong base and true guarantee to ensure the citizens of a decent and dignified life, free of destitution and need, which is a basic right to all citizens. The commitment of the Government of Yemen (GoY) to poverty reduction has been enhanced by the plans and programs submitted by the successive governments before Parliament to obtain its confidence. The government’s latest program presented to the Parliament in 2001 reflects its commitment to effective contribution to human resources development and the necessity of alleviating the hard suffering of life specially those endured by the unemployed and those with limited income through enhancing the capacities and capabilities of such groups in production and participation in the development process in addition to the development of the social safety net. In collaboration with donors, the government explored the various conditions of the citizens, particularly the life hardships since 1992, by carrying out of a number of studies, household budget surveys (HBS), and poverty assessments to ascertain the causes and features of poverty, which are essential prerequisites for formulation of comprehensive strategy for intervention. Subsequently, several surveys, studies, and reports were undertaken, the most important of which include the 1994 Population Census, the 1998 HBS, the 1999 Poverty Survey and the 1999 Labor Force Survey. These surveys provided a good database for the analysis and diagnosis of poverty and subsequently for formulating effective policies and remedies for poverty reduction in accordance with the available capabilities and resources. In the preparation of the Second Five-Year Plan (SFYP) for Social and Economic Development, 2001-2005, the GoY also sought of making the framework of the poverty reduction strategy the core and the basic ingredient of the strategy and objectives of the plan. The overall objectives of the SFYP focused on achieving economic growth, poverty reduction, job creation, and ensuring social and economic stability. The Plan also has in its priorities the creation of a conducive environment for poverty reduction through empowering the poor, raising their capacities, expending their choices, and ensuing their effective participation through the State or through the government’s forging of partnership among public and private sectors and the civil society. The GoY crowned its efforts towards poverty reduction through its preparation, with the effective assistance of donors, of the Poverty Reduction Strategy Paper (PRSP). The PRSP is consistent with the objectives and policies contained in the Strategy Vision for Yemen 2025, the SFYP, the Millennium Development Goals (MDGs) and other domestic and international commitments, and has been prepared with a realistic and scientific methodology and with broader participation. 2. Development of the Poverty Reduction Strategy Paper (PRSP) The GoY started the preparation of the PRSP through the Interim-Poverty Reduction Strategy Paper (I-PRSP) that was approved, as an initial draft, by the Cabinet in April 2000. The I-PRSP was later finalized in line with the GoY’s program, the principles of the economic reforms program and the overall framework of the SFYP. The first draft of the I-PRSP was presented in seminars and workshops conducted for discussions of the Strategic Vision 2025 and the framework of the SFYP which were held at the Governorates’ level during June-October 2000. Government officials, leaders of the civil society, workers syndicates, NGOs, women and professional associations, academicians, political parties, the media and the private sector representatives, attended these workshops. Based on the outcomes of these workshops, the draft I- PRSP was revised and was then forwarded to the World Bank and the International Monetary Fund (IMF) in its final form in December 2000. The I-PRSP was presented at their respective Boards of Directors in February 2001 and both boards welcomed the GoY’s preparations of the I- PRSP and accepted it as good base for the preparation of the full PRSP. vi To ensure the preparation of a national PRSP in compliance with the applicable rules and regulations set for it and to ensure its consistency with the SFYP, a 21-member committee was formed for its preparation chaired by the Vice-Minster of the Ministry of Planning and Development (MoPD) and comprising representatives of all agencies and institutions concerned with poverty issues and under the supervision of the Minister of Planning and Development. 3. Broader Participation and Consultations in the Preparation of the PRSP The PRSP Preparation Committee adopted a mechanism to ensure continuous consultation with, and participation of, all concerned agencies to convey to these agencies the activities of the Committee and discussion themes and to, in turn, reflect the views of these agencies on the themes of the strategy, so as to have a comprehensive interaction. A time-oriented agenda was also drawn up for consultation activities in the headquarters of the respective agencies. These activities were organized for discussion of sectoral issues relevant to the PRSP. The program of the PRSP Preparation Committee also included holding a number of workshops and conferences in 2001 and 2002 with the participation of government agencies and the civil society organizations on poverty issues and problems. The second stage of the PRSP preparation process also included the organization of four workshops at the Governorate level after the initial draft was prepared. These workshops aimed at involving these Governorates (form within and from neighboring Governorates) along a detailed program that was prepared in collaboration with local authorities and regional universities, as well as with the donors for those regional workshops that were specified to include donors and international organization. A consultative meeting with donors on the final draft of the PRSP was also organized in May 2002. With regard to involvement of the poor and hearing their concerns and priorities, the PRSP Preparation Committee undertook a second survey in 20 districts where the poverty incidence exceeded 50% of total population as being characterized as pockets of poverty. This survey represents a vehicle for the participation of the poor in the formulation of the strategy and their preparation for a broader participation in the subsequent monitoring and follow-up of the implementation of the strategy. 4. Poverty in Yemen The 1998 HBS showed that 17.6% of the Yemeni population live under the food poverty line, whereas the percentage of the population who are incapable of obtaining all their food and non- food requirements (represented in food, clothing, shelter, health, education and transport) is 41.8%. These percentages reflect the gravity of the situation and living conditions of approximately 6.9 million people, who are suffering from the different dimensions of poverty, not to mention the other large numbers that are living close to the poverty line and are vulnerable to being dragged in to below the poverty line, besides the high poverty gap, which is estimated at about 13.2% and the severity of poverty, which amounts to 5.8%. Poverty in Yemen takes on a rural attribute, especially as the Yemeni people are, to a large extent, mostly rural dwellers, despite the rapid urbanization. Rural areas of Yemen embrace about 83% of the poor and 87% of those who suffer from food poverty, whereas 77% of the total population in 1998 was rural dwellers. The percentage of the rural population who are poor amounts to 45%, as compared to 30.8% for the urban population, in addition to the wide gap and severity of poverty among the rural population compared to that of the urban population. This attribute also shows that, according to the 1998 HBS, spending on food absorbs 54% of income in the urban areas, whereas it climbs to 67% in the rural areas, which reflects low incomes in the rural areas on one hand, and an even lower degree of spending on non-food requirements there on the other. In the same way that poverty is inequitably distributed between rural and urban areas, there is also an obvious disparity among the different governorates of the RoY, whereby half of the poor are concentrated in four governorates: Taiz, which has 18.7% of the total poor population; Ibb (with 16.2%); Sana'a Governorate (with 11.9%); and Hodeidah (with 10.2%). The highest poverty incidence rates are found in Taiz Governorate, where 56% of the population of the vii governorate is poor, followed by Ibb (with 55%), Abyan (with 53%) and then Lahj (with 52%). Poverty incidence is also high in Dhamar Governorate (49%), as well as Hadhramout, Al-Mahra and Shabwah (all with 43% of their respective populations who are poor), whereas the incidence is low in Aden (30%), Sa'ada (27%) and the Capital Secretariat (23%). The incidence is lowest in Al-Baidha (15% of the population of the Governorate). The 1998 HBS Survey results reveal a number of poverty features in Yemen and the characteristics of the poor. They survey confirmed the relationship between the family size and poverty as evident by the high average family size of poor families, reaching 8.2 persons compared to 7.1 for the average family size for the total population. The average family size for poor families in urban areas rises to 9.2 persons compared with 8.0 in the rural areas, and the dependency rate is high among poor families reaching 158 compared to 111 for better-off families. The incidence and depth of poverty are also higher in families with a higher ratio of children to adults. The results show that the sex of the head of the family does not significantly effect on the probability of falling into poverty. With regard to the social characteristics of poverty, the results show a strong relationship between the level of education and poverty where as 87% of the poor suffer from illiteracy or did not complete basic education levels. Poverty is further exacerbated and made more inclusive by the extent of inequity and disparity, which is aptly illustrated by low income levels, low productivity and seasonal unemployment, although most of the poor, in both rural and urban areas, are working. The 1998 HBS shows that the employment situation of the head of households and the sector where they are employed, each has an effect on the occurrence of poverty. At the national level, 84% of the poor are in families with an employed head of household, compared with 2.5% of the poor families with unemployed head of household and 13.5% of the poor families have non-productive head of household (housewife, students, handicapped, etc.). About 84% of the poor work within the private sector, of which 47.3% are engaged in agriculture, followed by services (35.9%) and then industry (16.8%). Workers’ remittances are a major source of income, with 8% of the population living within families that are recipients of such remittances, according to the 1998 HBS. When addressing human poverty, which is measured by a number of social indicators such as those related to population like fertility, infant and maternal mortality, and other such indices like illiteracy rates, enrollment in basic and secondary education, access of people to primary health care and potable water, in addition to the percentage of the population who have access to electricity; all these indicators reflect a low level of human development in Yemen, with a Human Development Index (HDI) of 0.468, which ranks Yemen the 133rd among the 162 countries that were classified in the World Human Development Report for 2001, in accordance with the HDI for 1999, thus placing Yemen among the least human-developed countries. Most of the these indicators show the urgent need to escape the limitations of access to basic social services, both in urban and rural areas, for males and females, and for the poor and non-poor alike with higher priorities for reduction of the three gaps discussed above. Regarding the environment and poverty, the increase in population and the spread of poverty lead to a strain on the natural resources, in general, and on soil, vegetative cover, and water resources in particular. This is paralleled by water denudation of land that accompanies floods and increasing neglect of rainfed agricultural land because of its poor returns. The expansion of urban and industrial centers at the expense of the natural environment, the trend towards irrigated agriculture and the costs associated with the use of organic and chemical fertilizers and pesticides increase the problems of water pollution, which in turn leads to the deterioration of the local ecological systems and the expansion of desertification, besides the negative impact on the climate changes and the increase of acid rains. 5. Causes of Poverty Poverty is considered the result of a set of natural and human factors, domestic policies and external factors that come together to create an environment conducive to the occurrence and viii spread of poverty and the increase in its severity. However, while many of the features of poverty resemble causes for its occurrence and expansion, there are major and direct causes that exacerbated the problem. The analysis of the linear regression equation undertaken using the 1998 HBS data, has shown that large family size raises the probability of falling under poverty; families with a large number of infants and children have a higher probability of being poor whether it is located in rural or urban areas; the probability of falling into poverty is reduced, with the head of the household being of an older age whereas the probability increases in families headed by widower or a widow; the employment situation affect, to a large extent, and the probability of falling into poverty whereas the danger of falling into poverty is reduced largely in families headed by a businessman or an self-employed person. The equation also revels that unemployment is not a major factor in determining poverty whether in rural or urban areas. Rural dwellers cannot afford to stay idle despite the fact most of them suffer from underemployment. Finally, geographical location is considered a critical factor in the probability of falling into poverty where there are big differences in the per capita share in government expenditure across the Governorates despite isolating other characteristics of the family. 6. The Social Safety Net (SSN) The idea of establishing a social safety net (SSN) appeared, and was enhanced, to reduce the contractionary and negative effects which coincided with the implementation of the Economic, Financial and Administrative Reform Program (EFARP) and the decline in government spending directed towards social protection in general and the government subsidy for basic goods and services specifically and their replacement with low cost targeted social programs for the protection of the poor and for improving their livelihood conditions. Therefore, the SSN in Yemen has been composed of two major groups which are: (i) programs and mechanisms that were set up as part of the requirements for the social infrastructure that aims to enhance social solidarity and to secure social equilibrium including, primarily, the civil and military service pension schemes, and; (ii) programs and mechanisms that aim to confront the adverse social and economic effects of EFARP on the poor and limited income groups. Despite the importance of the direct and indirect role of the SSN in alleviating poverty over the last recent period, however it encompasses only modest capabilities for combating poverty and for reaching effectively to the poor. The SSN still faces a number of difficulties and impediments that prevent it from achieving its overall objectives and reduce its effectiveness in reducing poverty and reaching the poor. 7. Contribution of the Civil Society in Poverty Reduction Yemen witnessed a large growth in the emergence and development of a modern civil society. The number of civil society organizations has risen from 270 in 1990 to 2,786 organizations in 2000. Civil society and community organizations also became numerous and diversified and their economic and social activities increased, in addition to the increase of the number of beneficiaries targeted by them. Most of these organizations operate in traditional areas, such as local community development, elimination of illiteracy, maternal and infant care, and cooperatives. Most of these organizations carry out their activities within a limited geographical expanse such as the local community, with a weak presence and dissemination of their services in the rural areas, where most of the population and the poor are dwelling. Over the past few years, areas of activity of civil society organization have developed to include efforts towards alleviation of poverty and to combating unemployment and provide job opportunities, besides providing educational and health services and working in environmental protection. Nevertheless, the impact of their activities in reducing poverty is still limited and of weak impact, as a result of the traditional methods followed by these organizations in carrying out their functions and their inability to innovate mechanisms and programs to enhance the voluntary spirit within the wealthy groups to increase the financing sources. ix 8. The Poverty Reduction Strategy Based on the causes and the factors that determine the probability of falling into poverty, and the results of the surveys and studies undertaken during the last two years, three major sets of factors lead to poverty in Yemen, which are as follows: • Decline in income and its association with the nature and extent of economic growth. • High population growth and the poor development of human resources and infrastructure. • Weak levels of social protection. The PRSP aims to achieve, through the adoption of interlinked and well-designed policies, measures and activities, mechanisms, to create an environment which is conducive for poverty reduction and the realization of specific and prioritized objectives including the achievement of economic growth, creation of job opportunities and provision of better basic services and secure an effective social safety net for the poor, under a responsible management characterized by efficiency and honesty and a mechanism that encourages participation and collaboration. In this strategy, the private sector is essentially charged with the task of achieving economic growth, with the government undertaking providing the physical and institutional structure, besides its continuous expansion, and improvement, of social services.

8.1. Goals of the PRPS The PRSP includes the development of specific goals that can be monitored and followed-up, as well as general policies and programs to achieve growth and provide services for the reduction of poverty. The GoY has set for itself, as part of its commitments with the international community and partners in development, a number of goals as reflected in the SFYP and the Strategic Vision 2025. The PRSP targets reduction of poverty by 13.1% during the period 2003-2005, to decline to 35.9% in 2005. This may be achievable through appropriate economic growth that will lead to increasing real GDP by about 4.7%, depending on the growth of the non-oil sectors by an annual average rate of 6.3% to ensure increases in GDP per capita and improvement in the living standards. This growth is expected to keep pace with effects of the population policies that seek to reduce the annual population growth rate to 3% by 2005. The strategy also seeks to achieve a number of sectoral objectives leading to overall poverty reduction.

8.2. Axes (Pillars) of the PRSP The GoY and its partners in development recognize that poverty reflects more than just the insufficiency of income or the provision of the basic needs of the population. Rather it also shows facing suffering and lack of capacity to express opinions as well as lack of representation, capacity build-up and empowerment. Everyone also recognizes the need for cooperation and partnership between the Government, the private sector, civil society and the international community in order to achieve the general goals of the PRSP without competition and racing. In this context, the PRSP sets out four main axes (pillars) for intervention: Achieving Economic Growth Human Resources Development Improving Infrastructure Ensuring Social Protection To ensure achieving the objectives through the policies, measures, and actions plans, the proper execution, supervision and monitoring require an approach that supports the four axes, which is a precondition and a proper environment for achieving the success desired and to sustain its results. This approach is reinforcement of governance and prudent management, in addition to broadening the scope of participation and collaboration. Poverty reduction policies are distinguished by the fact that they proceed coincidentally within a broad consistent and harmonious front and take in the order of priorities for intervention and the urgent measures in the middle period (2003-2005) and also takes into consideration the long-term period of the Strategic Vision 2025. x

8.3. Implementation of the PRSP The PRSP was based on the directions of the SFYP with regard to the priorities with a special focus towards poverty reduction efforts. Public expenditures during the three years of the PRSP were prepared under the macroeconomic framework of the strategy that strives to achieve high and increasing economic growth rates within a sustainable fiscal policy in the medium and long- terms and in the light of estimated external financing and the absorptive capacity if the economy. Furthermore, the need to increase expenditure allocations for the social sectors and infrastructure was taken into consideration to contribute towards poverty reduction. The forecasts of the PRPS are built on expected decline in oil revenues, increased non-oil revenues and rationalization of public expenditures to minimum growth levels to ensure containment of the fiscal deficit. Total current government revenues (including grants) are expected to decline in the coming three years to reach 29.5% of GDP by the end of the PRSP period as a result of expected decline in oil and gas revenues from 20.3% of GDP in 2003 to 16.2% by 2005. GoY’s policy for revenue mobilization and development, particularly for non-oil revenues, is based on the most efficient utilization of available economic resources and adjustment of the tariffs for public services on economic basis. The government is currently working on the development of the tax system through the application of the Generalized Sales Tax (GST) and raising the efficiency of tax administration and collection. In the public expenditure side, the medium-term expenditure framework reflects the adoption of the policy of expenditure restraints in the light of expected decline in government revenues. In particular, current expenditures are projected to decline from 28.2% of GDP in 2003 to 25.4% in 2005 despite the expected increases in wages and salaries, goods and services, maintenance and operations and debt services while transfers and subsidy allocations are expected to decline sharply. These indicators reflects government’s effort to raise the efficiency of the civil service, retrenchment of excess public sector employees, reducing disguised unemployment while raising salaries and wages for employees in the administrative apparatus of the State in addition to rationalization of spending on non-developmental activities. The above-projected expenditures and revenues imply realization of a fiscal deficit throughout the three years of the PRSP with the intention of not allowing the deficit to reach unsafe limits, at most 4% of GDP in 2004. The budget was also based on the fact the deficit will be financed from real sources to avoid any inflationary pressures caused by deficit financing. The fiscal framework includes a continuous increase in development expenditure reaching 7.8% of GDP in 2005. Development expenditure targets sectors relevant to poverty reduction and improving the livelihood of the population especially in the rural areas and providing them with the basic social services. Social spending, including education, health and social welfare, is projected to reach around 13.2% of GDP in 2005. The PRSP includes the preparation of lists of investment programs and projects that are necessary to realize the objectives outlined in the strategy. These programs and projects have been identified at the sectoral level as either ongoing or new projects with investment costs taking into consideration the impact of these programs and projects on job creation, the increase in the number of beneficiaries and relevant measurement as percentage of the basic objective. Implementation duration for each project or program and the breakdown of the expected investment for the period has been estimated during the period before the implementation of the strategy (pre-2003) and broken down by the three years of the implementation of the strategy i.e., 2003, 2004, 2005 consecutively. In case project implementation exceeds the period of the strategy implementation, the remaining total sum is also calculated. The total cost of projects under the PRSP amount to YR 413.4 billion during the next three years of which YR 18,891 million will cover the cost of new projects representing 4.6%, compared to YR 394.7 billion for ongoing programs and projects. Local financing is estimated at 73% of the total. The remaining cost will be covered from foreign financing sources, of which most has been secured. Furthermore, since the GoY is seeking to realize the MDGs without which Yemen would xi lag behind in development, it is necessary to secure financing from donors for new projects that still lack funding in addition to the assistance in additional programs and projects that would help reduce the gap between the current situation and the MDGs. 9. Directing International Aid Towards Poverty Reduction Yemen has relied on bilateral donors and regional and international multilateral donor agencies on the basic human services that have direct impact on the daily life and activity of the people. Such priorities match up to a large extent with those of the donor countries and financing institutions, which target the contribution in the improvement of the livelihood and strengthening the capacities of individuals in all fields especially those that are basic to poverty reduction. The GoY due to insufficient domestic resources will remain incapable of financing of strategic projects related to basic infrastructure and social services let alone the implementation of the PRSPs, which should eventually realize the obje ctives for prospective human development. Dependency on grants and loans in addition to technical assistance will largely remain. According In addition, the GoY in collaboration with the donor community seeks to optimize the financial resources effectively and its distribution to ensure maximum benefits for human development programs and poverty reduction. 10. Risk Factors The set of economic, financial and administrative reform measures adopted by Yemen since 1995 has led to positive results. These were clearly reflected in the improvement in macroeconomic indicators and the stabilization and opening up of the national economy. The economic base remains weak though and prone to risk. Therefore, it becomes rather difficult to control all circumstance and factors that could accompany the implementation of the PRSP especially that Yemen is prone to internal shocks more specifically drought and flooding in addition to external factors especially fluctuation of oil prices and holdup of foreign assistance. 11. Monitoring and Follow-Up The program for the preparation of the PRSP included a review and an evaluation of the Poverty Information and Monitoring System (PIMS) established in 1998 in collaboration with UNDP aiming at strengthening the poverty information infrastructure, provision of a comprehensive, precise and modern information system on poverty through data collection and analysis to help in placing policies and remedies. The project completed during the last three years the first and second stages in addition to the completion of the 1999 Poverty Survey and the building of capacities in design of questionnaires and systems and data collection and analysis. The PRSP contains a proposal to restructure the duties and roles of the various government agencies involved in poverty analysis and monitoring in a framework of database system and comprehensive monitoring and the use of the aid and assistance provided by doors. At the same time, the proposal call for remedying lack of coordination between those agencies and the link of various activities of the SFYP and the PRSP as the need arises. Similarly, as an important part of the preparation and implementation of the PRSP requires coordination of policies, objectives, program and projects related to the strategy though an effective and suitable mechanism, the National Committee for the Social Safety Net is proposed to remain as a supreme coordination committee while the tasks of coordination, follow-up, evaluation of policies and programs are proposed to be allocated to the PRSP Committee and the Program of Information and Follow-up in the Ministry of Planning and Development to ensure linkages of the various database system and the monitoring of poverty with a technical mechanism for the Social Safety Net along a detailed program and an action plan that will be formulated in due course. xii CHAPTER 1: DEVELOPMENT IN YEMEN AND THE POVERTY REDUCTION STRATEGY 1. Introduction Over the ages, with the exception of some short intervals, Yemen has suffered from poverty in all of its different characteristics. In fact, the structural causes of poverty are more apparent in the Yemeni case, as manifested in scarce water resources, limited area suitable for agriculture, rugged terrain and geographical features of the country in general, besides the poor human capacities and the lack of elements of political stability during most of the past centuries. Since the 1970s, the economic and social development programs in Yemen focused on upgrading living conditions of the people, through construction of basic infrastructure, expansion of social services and support to agriculture and industry. Owing to the poor bases from which economic activity in the country began, most of these development programs may be considered to be within the framework of the efforts to alleviate poverty. These programs have been helpful, notwithstanding the obstacles that confronted them in raising the standard of living in general, and resulted in obvious progress in the various human development indicators. Nevertheless, the road is still long, especially after economic conditions took on a downward trend, starting in the late 1980s, and the shocks that the economy was exposed to in the early 1990s, which resulted in a decline in the Gross National Product (GNP) per capita from US$ 701 to US$ 318 during the period 1990–1995. The establishment of the Republic of Yemen (RoY) on the 22nd of May 1990 was a step forward towards achieving political stability, although the elements and ingredients of stability were not to be completed until the foundations of unity were fully set in after the failed secession attempt following the Summer War of 1994. The Government of Yemen (GoY) sought to confront the economic imbalances by adopting an Economic, Financial and Administrative Reform Program (EFARP), which commenced in 1995, and which is considered to be a crucial factor in achieving economic stability, vitalizing the economy, raising incomes and creating new job opportunities. The First Five-Year Plan for Economic and Social Development, 1996–2000 (FFYP) included a multitude of components for economic, financial and administrative reforms, besides focusing on the required policies and programs for the alleviation of poverty, in its broader concept, including provision of education, health and other basic services. In 1996, the GoY, in collaboration with the United Nations Development Program (UNDP), embarked on the preparation and adoption of a comprehensive program for poverty alleviation and job creation, comprising advanced visions and effective components that delve into all aspects of policies, data and information, local community development, micro-credit, productive families, human resource development and finally deal with labor market issues. The preparation of the Second Five-Year Plan for Economic and Social Development (SFYP), 2001–2005, coincided with the GoY discussions with the World Bank and the International Monetary Fund (IMF) in the first quarter of 2000 on the next stage of the EFARP and with the new trend of both international organizations towards adoption of the Poverty Reduction Strategies as contractual and instrumental programs that rest on continuing economic, financial and administrative reforms on one hand and which take into consideration the need to remedy the adverse effects that arise from such reforms on the other. The SFYP’s document constitutes a reference framework for the macro, sectoral and regional development plans in the medium-term, and also provides interim remedies for the existing development challenges, based on a comprehensive and detailed assessment of the 1 development progress realized under the FFYP and the EFARP, which began to be implemented in 1995, in addition to the Strategic Vision 2025. During the preparation of the SFYP, the GoY sought to make the framework for poverty reduction the axis on which SFYP revolves, and to have the general objective of the SFYP focus on the generation of economic growth, poverty reduction, creation of job opportunities and ensuring economic and social stability. The SFYP was thus directed towards reflecting the determinants and foundations for the poverty reduction strategy paper (PRSP) and to make the PRSP an integral part of the process for the preparation of the Plan, as well as a basic component for the Plan's strategy and objectives accordingly. Similarly, and in view of the direct relationship between labor, production and poverty, the SFYP’s document for the first time, devoted a separate chapter to manpower and labor market issues. An absolute conviction also prevailed that achieving the overall objectives of economic and social development can only be attained by enabling local communities to set the course and harvest the fruits of development and through having communities participate in preparing, implementing and monitoring development plans, programs and projects. Planning and execution at the local level takes into consideration the particular features of local communities and reflects better the issues and needs because of the direct association of local governments with respective communities and populations. Accordingly, planning and implementation at the local level becomes a mechanism for improving and upgrading the adequacy and effectiveness of poverty reduction strategies and programs. Therefore, the implementation of the SFYP depends on having all the official and community efforts, at both the central and local levels, in full partnership with the private sector, civil society organizations in addition to the donors, in the preparation of programs and projects and when proceeding with their implementation, follow-up and assessment. 2. Government Commitments Towards Poverty Reduction The first and fundamental commitment of the GoY towards combating poverty stems from adherence to the Religion of Islam, as a belief, source of legislation and a way of life, which calls for the elimination of poverty and guaranteeing equity in the distribution of the nation's resources and well-being. The Islam belief is manifested in the worship requirements, led by the imposition of Zakat; one of the five Pillars of Islam. The commitment of GoY towards poverty reduction is also apparent in its legal and political commitment as embodied in the Constitution of the State, which sets out the rights and duties of both the government and the citizens, and which guarantees all citizens a free and dignified life, void of deprivation and destitution, as a fundamental right. The adoption of democracy and political pluralism is considered a strong basis and a guarantee for the continuity and sustainability of these rights, by considering them as obligations to be fulfilled. The commitment of GoY towards poverty reduction was further enhanced by the programs, which successive governments presented to the House of Representatives (Parliament) in order for the latter to give its vote of confidence. The last Government program, which was presented to Parliament in 2001, reflects the commitment of the GoY towards effectively contributing to human resources development and the need to alleviate the hardships of life faced by citizens, especially the unemployed and limited-income groups, through more attention to, and care for, reinforcing the capacities and means for these groups in production and in participation in development, in addition to the development of the Social Safety Net (SSN). The government's commitment towards combating poverty is further reinforced by the objectives and policies included in the SFYP for poverty reduction, especially through upgrading the capacities of the poor and expanding the sustainable schemes that support the poor, and increasing the opportunities and options available to the poor and their effective participation. 2 Government’s commitment towards poverty reduction is also confirmed by the ratification of most of the international conventions and agreements, starting with the International Declaration of Human Rights, the International Convention of Civil and Political Rights, the Social Economic and Cultural Rights Charter, and those treaties dealing with the removal of all forms of discrimination against women, protection of children and labor, etc. Yemen also took part in the World Summit on Social Development, which was convened in Copenhagen in March 1995. Yemen considered the resolutions of this Summit to be an integral part of the national commitments, especially, with respect to combating poverty, which became the core of economic and social development policy of Yemen. A renewal of such commitments followed with the high level participation of Yemen in the Third Millennium Summit in September 2000, where poverty, narrowing the gaps between the rich and poor countries, concern for the hardships of women, enabling and strengthening the role of women occupied a major portion of GoY interpositions in the Conference. Yemen also considered the results and resolutions of this Conference as additional obligations that must be fulfilled accordingly. Practically, the commitments of the GoY towards poverty alleviation became clear with the undertaking, starting in 1992, of a number of studies, household budget surveys (HBS), and poverty assessments to ascertain the causes, features and determinants of poverty as a necessary prerequisite for setting out the practicable remedies to confront poverty in a comprehensive and strategic way. Other studies, surveys and assessments followed, of which the most notable are the 1998 HBS, the 1999 Poverty Survey and the 1999 Labor Force Survey, in addition to two national Human Development Reports issued in 1998 and 2001. The serious attention of the GoY towards combating poverty was topped off by taking on the task of preparing and adopting a PRSP, with the effective assistance of donors. The PRSP, which is consistent with the policies and objectives of the Strategic Vision 2025, the SFYP and the Millennium Development Goals (MDGs) and other local and international commitments, is prepared on scientific and realistic bases and through broader participation. The implementation of the PRSP, starting from 2003 for duration of three years, will overlap with the last three years of the SFYP (during 2003–2005) to confirm the linkage between the objectives and policies of the SFYP and the PRSP, to help in its implementation and to facilitate the subsequent follow-up and monitoring. 3. Development of the Poverty Reduction Strategy Paper (PRSP) Several meetings were held and communications were exchanged, between the Ministers of Finance (MoF) and Planning and Development (MoPD) and the relevant representatives of the IMF, the World Bank and government officials, in the first quarter of 2000, to discuss the orientations, work program and requirements for the preparation of the PRSP, which has now become an essential prerequisite for obtaining concessional financing and facilities from the respective institutions. Agreement was reached that the PRSP would be prepared in two phases, which are: (i) preparation of the Interim PRSP (I- PRSP), which would give a general framework for the PRSP, and (ii) preparation of the final and complete version of the PRSP. The GoY began to prepare the I-PRSP through a Ministerial Committee and a team of national experts, which completed the draft I-PRSP in March 2000. This was presented to the Council of Ministers in April 2000, which approved the initial draft of the I-PRSP and designated both the MoPD and MoF to continue contacting the IMF and the World Bank and the international donor agencies and organizations to reach agreement on the final version of the I-PRSP consistent with the general program and orientation of the GoY, the objectives of the EFARP and the general framework of the SFYP. The GoY, through the I-PRSP confirmed that the policies and the procedures recommended for reducing poverty should be elucidated within the framework of the SFYP, so that it will in turn become an integral part of the Plan. 3 Accordingly, the initial I-PRSP was presented at workshops and seminars that dealt with the Strategic Vision 2025, and the macro-framework for the SFYP, which were held at the regional level during June-October 2000, and were attended by government officials, leaders from civil society, labor federations and non-governmental organizations (NGOs), women's and professional associations, academicians and representatives of political parties, the media and the private sector. Since the participation of the poor is considered a major element in the preparation of the PRSP, a survey for the Voices of the Poor was undertaken in three areas where the poor are concentrated, in order to draw out their views in a more scientific and systematic manner. Subsequently, an updated I-PRSP was completed and presented to both the IMF and the World Bank for the first time in October 2000 to reflect the extent of participation that was arranged during this period on one hand and, on the other, to review the macroeconomic framework of the I-PRSP in light of the developments in the international prices of oil and progress achieved in the implementation of the EFARP. The final version of the I-PRSP was forwarded in December 2000 to the World Bank and the IMF and was presented to their respective Boards of Executive Directors in February 2001, both of which expressed their delight with the preparation of the I-PRSP and approved the I-PRSP as a sound basis for the preparation of the full PRSP. They also stated that they were pleased with the intent of the GoY to proceed with the preparation of the full PRSP within the framework of current planning work in progress. As a result of the continuous consultation with the World Bank Office in Sana’a, it was agreed that a regional PRSP Workshop would be organized in July 2001, to provide and introduce technical knowledge and expertise to the Yemeni side, through the participation of specialized experts in the preparation of the PRSP. The workshop provided an opportunity for achieving the following: (i) launching the SFYP document as a base for the preparation of the PRSP; (ii) identifying the strong and weak points and the fulfilling and partnership aspects, based on the I-PRSP; and (iii) formulate a time-targeted action plan for the preparation of the PRSP with a specific action plan agreed with the donors for (ii) above. Participants in the workshop, which was inaugurated by the Prime Minister, included all government entities, donors, members of the various committees of the Parliament and the Shura (Consultative) Council, civil society organizations that are engaged in poverty work and human rights, in addition to representatives of international financing institutions. The workgroups of the Workshop came out with a diagnosis of the poverty problem and identification of its causes and determinants, as well as appropriate objectives and policies for poverty reduction. The Workshop concluded with a number of recommendations, including: (i) the importance of wider participation in the preparation of the PRSP to ensure its successful implementation; (ii) the need for coordination among all concerned government agencies during the implementation of the PRSP, especially between the MoPD and the MoF, and particularly in setting priorities for government spending; and (iii) the participation of donors in the preparation of the PRSP also deemed to be of the utmost importance, as this will be of help in clarification of the required remedies and will reinforce the effectiveness of the policies and interventions contemplated in the PRSP. To ensure that the PRSP is prepared in line with the criteria and rules delineated for it and to ensure consistency with the SFYP, a 21–member committee was created, under the Chairmanship of the Vice-Minister (MoPD), for the preparation of the PRSP under the supervision of the Minister of Planning and Development. All the primary agencies concerned with poverty issues have been represented in the committee. A time-linked agenda was also set for the preparation of the PRSP to take into consideration the GoY’ commitments to donors, especially in light of the preparation of the World Bank’s Country Assistance Strategy (CAS). 4 The PRSP Preparation Committee was entrusted to take into consideration the following documents: (i) the I-PRSP; (ii) the SFYP which includes the framework of the PRSP; (iii) the Poverty Alleviation Plan prepared by the Poverty Alleviation and Job Creation Program; (iv) comments and recommendations on the I-PRSP, especially the remarks and suggestions that were included in the Joint Staff Assessment (JSA) of the World Bank and IMF; and (v) the output of the workshops on the PRSP and the forthcoming workshops and seminars that will be arranged. 4. Participation and Consultations The PRSP preparation process included arranging and holding a number of seminars and workshops with wider participation to achieve the maximum benefits by incorporating the views of all sectors, categories, donors, civil society, local authorities, etc. and to inform these groups of the GoY’s strategy for poverty reduction and its link to the SFYP as well as making use of the suggestions and recommendations which will be made during the consultations for the benefit of the PRSP preparation team. Representatives in the PRSP Preparation Committee were directed to maintain contacts with their respective agencies and to convey to them an outline of the activities of the committee as well as themes to be covered under the strategy, and in return, they should convey to the Committee the views of these agencies on such issues, to ensure continuous consultations. A time-oriented agenda was also drawn up for consultation activities in the headquarters of the respective agencies. These activities were organized for discussion of sectoral issues and strategies relevant to the PRSP to broaden the scope of participation, and to benefit from the various points of view originating from these government agencies. These activities were conducted over the period from 20/12/2001 to 21/1/2002, with the attendance of senior officials of government ministries and agencies and other concerned personnel, as well as the participation of some of the donors and local and foreign NGOs, under the supervision and with the participation of the PRSP Preparation Committee and in line with the preparation program (see Annex 3). The MoPD also sent out letters to all Government agencies, Parliament and the Shura Council, and civil society organizations including political parties to increase their involvement in the process through participation in the seminars and conferences, which the PRSP Preparation Committee was planning to organize for discussions on specia lized and sectoral issues. Similarly, within the framework of involving and consulting with the donors during the preparation of the PRSP, donors and foreign NGOs working in Yemen were invited to a consultation meeting on December 10, 2001. There, the Minister of Planning and Development outlined the GoY’s commitment for the preparation of the PRSP and the importance placed to this task. He also reviewed the phases that have been completed in the course of the preparation, focusing on the need for the participation and contributions of the all entities and activities in the process. All the attendants at the meeting expressed their appreciation of the role of the GoY and the steps taken in this respect. Participants highlighted the importance of emphasizing in the strategy gender issues as well as the importance of subsequent monitoring and follow-up. The second phase of the PRSP preparation program included holding four conferences in a number of governorates according to a detailed program that was prepared in coordination with the local authorities and regional universities, as well as with the donors in some of the workshops in which donors were involved, in addition to other consultation meetings with donors. These activities aimed at involving major governorates, where the conferences were arranged, to absorb participants from these governorates as well as from the adjacent governorates and from the Parliament and Shura Council. Each conference comprised 3–4 concomitant work-groups. The workshops reviewed economic and social developments in Yemen and highlighted the background and features of poverty reduction strategies, and 5 reviewed the orientations and policies of the GoY and linked them to the elements entailed in the PRSP proposal and the goals and policies upon which it would be built. The objectives of the concomitant work-groups in each of these conferences was to discuss selected issues related to the PRSP, starting with the causes and differences of poverty between the different governorates, to the role of the private sector, civil society and local communities, the importance of agricultural development, the environment, etc., in addition to discussing the relationship of some issues, such as human rights and gender and the pivotal role they play in the success of poverty reduction policies (see the agenda for the conferences and workshops in Annex 3). The seminars revealed that there were many viewpoints and numerous inclinations, some of which agreed with the GoY approaches, especially those related to giving priority to social and basic services, infrastructure and to the importance of agricultural development, while at the same time there were also different orientations and viewpoints made in these workshops, particularly the views on the performance of EFARP, trade liberalization, the question of protectionism, government employment and lifting the subsidy for diesel fuel, which many considered to be an essential cost element for the feasibility of agriculture. There were also some opinions that considered the call for partnership with the private sector and civil society as implying that the GoY was abandoning it duties and responsibilities. Similarly, and notwithstanding the fact that there was agreement on the factors that lead to poverty, opinions differed during these conferences and seminars, on the ranking of these factors, in terms of their importance at the governorate level, and on the causes of poverty. The preparation of the PRSP also entailed the arrangement of several seminars and work groups during both 2001 and 2002, with the participation of the government entities and active NGOs, in order to deal with different aspects and numerous issues of poverty. Leading these activities was the preparation and arrangement of the National Conference on Qat, organization of which took more than a year before it was held in April 2002. The importance of this Conference stems from the fact that it dealt with a very sensitive issue, which is a priority issue, in view of the effects of Qat on several aspects of both life and the economy as well as on the different aspects of poverty. The PRSP program still includes four awareness workshops during June to cover those governorates that did not host regional conferences. Both the PRSP document and the government policies will be discussed, with special focus on poverty reduction. Furthermore, the role of local authorities in the implementation of the strategy shall be highlighted. Similarly, and within the framework of linking the relevant issues with the strategies related to poverty, the World Bank contributed by providing a Poverty Update based on the 1998 HBS, while the IMF assisted in preparing the Macroeconomic framework and the medium- term expenditure review. Also, an agreement was reached with the UNDP to undertake a study on the 20/20 Initiative, which comprises the general framework for embodying the needs of primary social services and the achievement of a substantial increase in investment in these services coupled with donor cooperation with national governments to allocate more resources, improve efficiency of expenditures for their practical application. These social services are deemed to be vital major stimulants for reducing and breaking the vicious poverty circle. The initial results of the study were reviewed in different workshops, one of which was held with the PRSP Preparation Committee, in order to benefit from the issues that were put forth in the workshops and to take in account the appropriate recommendations within the approaches and policies of the PRSP. GoY, along with the World Bank, is also currently working towards the preparation of a Rural Development Strategy concurrently with the preparation of the PRSP. The significance of the rural strategy is obvious, not just for its relation to poverty issues, but also when considering that most of the population live in rural areas and thus require that development strategies be accorded a rural attribute. The rural 6 strategy is also being prepared through broad participation and with numerous workgroups specialized in the preparation of action plans for such a strategy. At the district level, these outcomes rely on detailed charts and maps for the different indicators, which will be used as the basis for setting forth an instrument, within the tools of the PRSP, by which to identify development and poverty reduction programs and projects accordingly. These outcomes are considered also inputs in the implementation, evaluation and follow–up of the PRSP over the next few years. With regards to involvement of the poor and learning about their conditions, the PRSP Preparation Committee, along with the UNDP and the British OXFAM, undertook a new round of field visits to 20 districts, which are considered pockets of poverty because poverty incident exceeded 50% in these districts. The visits provided an opportunity to listen to the voices of the poor in these districts, with regards to all aspects of their lives. The visits also represented the involvement of the poor in the preparation of the PRSP and in preparing them for broader participation in the implementation and evaluation phases. The PRSP document incorporates the concerns and priorities of those poor people. 7 CHAPTER 2: THE CURRENT CHALLENGES 1. Introduction Although three decades have passed since Yemen embarked on its development course, it is still, however, classified as being among the 20 least-developed countries of the world due to its limited institutional and human resources, which result in poor productivity and accordingly a poor standard of living. An examination of the conditions of Yemen at the commencement of the 21st Century reveals, in many aspects, the existing challenges and the need for dealing with them seriously by setting forth clear and urgent strategies and policies. The high population growth and its impact on all the aspects of life, of which the most important are the rise of poverty, the continuation of the illiteracy challenge, the poor rates of school enrollment, lack of consistency with the development needs, and the poor coverage of health services are all considered factors that make the status of human development a basic challenge that cannot tolerate further delay or procrastination. Similarly, water scarcity, which Yemen also suffers from in addition to the problems in its imbalance, poses a challenge that requires seriousness, urgency and setting forth the required remedies to confront it. Other challenges, such as the poor performance of the administrative apparatus of the Government, which hinders progress and development, also show the need for facing up to these issues and giving them the attention and priority that will lead to the alleviation of their negative short, medium and long–term impacts. 2. Major Development Challenges

2.1. Population Problems

2.1.1. Population Growth Over the last three decades, Yemen witnessed a rapid population growth, which was reflected in the increase in total population by more than two and half times during the period, and its rise from 12.8 million in 1990 to 18.4 million people in 2000. Yemeni society is characterized by an almost equal gender distribution as well as a young age structure, where the age group of 0–15 years old encompasses 48.8% of the total population, which leads to the enlargement of the base of the population pyramid and to a large average family size (7.4) and to raising the economic dependency ratio to 477 for every 100 economically active persons in 2000. Providing such a population structure with social services represents a heavy burden on the society, in addition to increasing the pressures on the labor market. Population policies, over the past period, the relative improvement in the education and health sectors in general, and the increased awareness among the public on population issues, have yielded a noticeable overall improvement in demographic indicators and characteristics, such as the reduction of fertility to 5.9 live birth for each women, the number of crude births to 41.2, the crude mortality rate to 9.8 deaths for every 1,000 births. The specialized relevant surveys show the significantly strong relationship between educational levels of women and the fertility rate, since the actual fertility rate reaches 6.9 among illiterate women as compared to 3.2 among mothers who completed basic education. These surveys also show the high fertility in the rural area (7) as compared to that of rural areas (5). Despite the retraction of the population growth rate from 3.7% to 3.5% over the last decade, however, it is still one of the highest population growth rates in the world, whereby the population is expected to reach 21.7 millions by 2005, and to more than 43 million people in 2025, if growth continues at the current rate. This population growth is absolutely incompatible with the available economic resources, and therefore, it limits the potentials for economic growth and social development, not to mention the pressures, which this creates, on education, health, food and the environment. 8

2.1.2. Geographical Distribution and Internal Migration Population is distributed as 26.5% in urban areas and 73.5% rural areas, over an area that is approximately 460,000 km2 , with a population density, which does not exceed 40 persons per km2 , which mostly consists of small agglomerations that do not exceed 500 persons. About half the population live in the governorates of Taiz, Ibb, Sana'a, and Hodeidah together comprising half of the population, whereas the populations of the least populated governorates, which are Al-Mahra, Al-Jouf, and Marib together do not constitute 3% of the total population. This reflects the concentration of the population in a few governorates, and in urban areas, and the dispersion of the population in the rural areas. The distribution of the population agglomerations in the mountains, valleys and coastal areas, and in small entities, while at the same time that are scattered and far apart, leads to difficulty of access of these communities to essential services, especially in light of the scarcity of resources. The population concentration in the Central Highlands, and the small number of people living in the Western and Eastern Plains leads to appearance of disparity between the population distribution and the availability of resources, which is refle cted, for example, in the increase of the pressures on the groundwater in the Central Highlands. Similarly, although the urban areas are still relatively small, urbanization, however, is accelerating and raises concern due to the rapid increase in migration from the rural areas and the large rate of growth of the urban population, which reached 7% per annum, compared to a total population growth rate of 3.5% per annum. The urban growth rate of the Capital Secretariat is 9% per annum, which, by itself, constitutes about 28% of the urban population of Yemen. The limited resources and services in the cities, and their inability to confront the continuing population growth, which leads to confusion in the provision of essential and supplementary service and the appearance of shanty housing that does not contain the simplest requirements, exemplify the urban problems. These cities require urban planning and expanding road networks in order to transfer the transport sector from an impediment to a source of growth. Rural-urban migration leads to increase in the burdens on women, the elderly people and children in agricultural work and the neglect of agricultural land, the destruction of the mountain farm terraces.

2.1.3. Population and the Labor Market Labor market in Yemen faces major challenges stemming from the rapid population growth and the young age-structure of the population; both of them lead to rapid increase in the labor force by rates exceeding the already high total population growth rate. The number of the population who are of working age (15 years old and over) rose from 7.6 million in 1995 to around 9.3 million in 2000, i.e., by an average annual growth rate of 4.2%. Similarly, the increase in the number of university graduates, the high percentage of children not enrolled in the educational and training system, and the high drop out rate, in addition to the trend of individuals, especially among females, to seek employment to improve their standards of living –all resulted in increasing the new entrants to the labor market and the increased participation rate, which in itself is considered a challenge facing the ability of the national economy, and primarily the private sector, to provide the job opportunities that are adequate for absorbing these people and absorbing the presently unemployed workers. The labor force is expected to rise by a rate of 3.8% a year during the period from 2000–2005, thereby requiring 170,000 new annual job opportunities. Underemployment, weak capabilities, and poor management of manpower resources are the most apparent problems of the labor market in Yemen. The labor market also suffers from unemployment in all its forms, whereby undisguised unemployment has risen and the number of unemployed individuals increased from 277,000 in 1994 to 469,000 in 1999 and to 509,000 in 2000, according to the projections for the SFYP, thus raising the unemployment rate from 9 8.3% to 11.5% and 11.9% of the total labor force respectively. Unemployment among women is 8.2% as compared to 12.5% among males. Underemployment (wage earners and self- employed for less than 35 hours a week) reached 25.1% including mostly seasonal, casual and part-time employment, particularly in the rural areas. Those underemployed are characterized also by weak capabilities and low productivity as well as low wages, which affect their living standards and result in the expansion of the poverty incidence. The large rush to enroll in universities in general, and in liberal arts and theoretical studies in particular, le d to a rise in the number of unemployed graduates, in view of the limited available opportunities for them in the government administrative apparatus and their degrees and specialized fields being unsuitable for the needs of the private sector, which refle cts an enormous waste in human capital and its productive capacities. The excess of graduates of the technical and vocational institutes and centers as well as universities is estimated to be 22.1% of all the unemployed, with the majority being high school graduates and holders of degrees in social studies and anthropology. During the next five years, it is estimated that 150,000 students will graduate, who will compete for approximately 55,000 job opportunities, leaving more than 95,000 graduates unemployed. BOX 2.1: WEAKNESSES OF EMPLOYMENT O FFICES Unemployment was not just confined to new entrants to the labor market, who are The statistics from the employment offices show a reduction in the demand for labor due to various graduates and dropouts from education and reasons, the most significant of which are the poor training system, but included also those who quality of the service provided by the employment were laid off their jobs for various reasons. offices and the lack of notification by businesses on Data shows that the percentage of any job vacancies. These statistics show that the number of job seekers registered with these offices unemployed who were previously employed reached 15,146 in 2000, with an average of 700 for rose from 29.7% to 62.8% between 1994 and each office. Only 3,070 were employed directly by 1999. In general, the unemployment rate for employers, wh ile 12,076 remained unemployed. the age group from 15–24 years old is the This means that each office served only 2,016 highest rising from 17.9% to 18.6%, which persons throughout the year, at a rate of eight jobs a day. This is a poor rate, which reflects the weakness calls for the adoption of policies and programs of the services provided by these employment for the employment of young people, both offices, due to their weak structuring and the males and females. inadequacy of their financial and human resources. The situation is further exacerbated, when we find that the educational level of labor reflects an obvious deficiency in the scientific and technical skills and capabilities, as the illiteracy rate among workers amounts to 48% (37% for males 83% for females), and that 66.2% of the total unemployed are illiterate or are just able to read and write, which indicates the high percentage of drop-outs from the educational system, who become job seekers every year. Thus, this group of the unemployed faces significant difficulties to get integrated into the market and thus falls into the vicious poverty circle. If it is obvious that the unemployed are also poor, then they are bound to engage in work in the informal job sector, which is considered a major reason for the widespread nature of this sector in Yemen. The labor market faces challenges of the expansion of the informal sector, which absorbs about 65% of the total employed labor in 1999. This sector consists of a limited number of activities and is narrow in scope. The informal sector is also characterized by lack of social protection and poor productivity that exacerbates the problems of poverty.

2.1.4. Population and Gender The rate of women participation in economic activity, which did not exceed 22.7% in 2000 as compared to 69.2% for females, notwithstanding the increase of this rate from 17.9% in 1995, due to the increase in the number of graduates from the educational system and the increasing dependence of women participating in production and work in order to face up to poverty. The participation of women is concentrated in the traditional fields, especially in agriculture, 10 where productivity and returns are poor, and accordingly so is income. The number of female workers has risen by 331,000 female workers, during the period, with the agricultural sector taking in 90.6% of such an increase, followed by the Government services sector by 6.3%, with the remaining percentage distributed among the other productive and service sectors. This situation reflects the shortage of job opportunities available to women outside the agriculture sector and the poor contribution and participation of the female workers in services, which leads to continuously finding them in the traditional and less rewarding occupations, which accordingly also limits their contribution and participation in the development process in general, as well as maintaining the gender gap. Although there are a several factors that limit the participation of women, such as the prevalence of negative social and cultural values of life due to nurturing that focuses on traditional misconceptions with respect to the role of women and the poor application of effective laws and legislation on women which are essentially based on equality of both sexes. However, the widespread illiteracy, deprivation from education, the poor quality of educational attainment of women are considered the major constraints against broadening the participation of women in the economy, and in society in general, and stands in the way of the equitable benefit from the fruits of development. The rate of participation of females from poor families is 5 percentage points less than that from non-poor families, where as this difference among males is 4 percentage points. This reflects that females are given greater opportunities in non-poor families than their counterparts in poor families in most facets of economic activity, especially as the illiteracy rate, especially as the rate of illiteracy among the employed from poor families amounts to 59.8% of all the families, as compared to 50.8% of those employed from amongst non-poor families.

2.1.5. Child Labor Child labor, within the age group from 6–14 years old, increased from 240,000 children in 1994 to 327,000 children in 1999, with a high average growth rate of 6.4%, which reflects the expansion and severity of poverty and the reliance of poor families on child labor. Female child labor constitutes 51.4% of total child labor, according to the 1999 Labor Force Survey. Although 49.5% of the child labor force has not enrolled in education, there are still 39.5%, who are enrolled while still being employed, as compared to 11%, who were previously enrolled. Child labor is concentrated in the rural areas (95%); activities related to agriculture (92%), and general services and sales in permanent and mobile trading outlets (5%). About 91% of these children work with the family without pay, and for hours that range from 15-34 hours per week, whereas 8% of these children are self-employed or work for a cash or material wage. The causes and reasons for child labor vary from helping the family (71%), poverty of the family, unemployed parents, or a deceased family provider (15.3%), to other reasons led by the lack of enrollment in education and the lack of desire and failure to proceed with education (10.4%) and ending with the desire for self attainment (3.3%).

2.2. Water and Water Resources The growth in population is accompanied by a natural restriction and challenge which is manifested in the critical and multi–faceted water crisis. Yemen is situated within a dry and semi–arid area, where the average annual rainfall ranges from 500–800 mm in the Highlands, 50–100 mm in the coastal strip, and below 50 mm in the Eastern regions. The per capita share of the recoverable water resources amounts to 137 m3 as compared to a per capita share of 1,250 m3 in the Middle East and the world average of 7,500 m3 . Accordingly, the per capita share in Yemen is less than 11% of the per capita share in the Middle East and North Africa 11 region and less than 2% of the world average. These figures place Yemen on the bottom of the ladder of the nations that are under the international poverty line.

2.2.1. The Imbalance in Water Resources Water studies have clearly shown the imbalance between the available resources and uses of water. Whereas the annual average of total rainfall is estimated to be 6.7 billion m3 , the surface water flow in the valleys (Wadis) is estimated to be 3.5 billion m3 . Rainwater is used to irrigate 47% of the cultivated area, whereas 11% of the cultivated land is spate irrigated. Whereas a small portion of the flowing surface water, through filtration, or during irrigation, seeps down to feed lower shallow water sediments in the short–term and ground water in the long–run, the surface water is either lost by evaporation or by flowing out into the deserts or out to the sea. The recoverable water is estimated to be around BOX 2.2: Q AT AND WATER 2.5 billion m3 , of which surface water constitutes Expansion in Qat cultivated area has directly 1.5 billion m3 and the ground water constitutes impacted the use of water resources. Some studies about 1 billion m3 . However, the total uses of have shown estimates of Qat water requirement water have increased rapidly to rise from 2.9 that differ under the various climatic conditions of billion m3 in 1990 to the present 3.4 billion m3 , the different regions. The annual estimated primarily distributed for agriculture (3.094 requirements of one hectare of Qat are between 3 3 600 m3 and 12,000 m3. Despite the uncertainty of billion m ), domestic uses (238 million m ) and the quantity of water required for Qat cultivation, other uses (68 million m3 ). The balance of the it is apparent that Qat is irrigated with more water available water resources and uses reflects that than it needs because of water mismanagement the annual gap has increased from 400 million m3 and inefficiency of water transmission and in 1990 to 900 million m3 in 2000. The problem irrigation techniques especially in the areas that becomes more evident, when it is seen that over depend on water for supplemental irrigation. 91% of water is used for agriculture and that a large portion of this quantity reflects the inefficiency of irrigation and the waste due to the use of antiquated methods that reduce irrigation efficiency, apart from the use of water to irrigate agricultural products that do not add any value to the society. Whereas, the total domestic use of water in the Sana'a basin amounted to 22.8 million m3 , the irrigation of Qat consumed 59 million m3 in the basin. This gap and depletion do not reflect systematic and similar effects among all water basins and water zones, where some of the zones are subject to greater depletion that reaches up to between 250–400%. In some of the basins, the situation calls for the Government to take urgent measures to preserve these basins, such as the Taiz, Sa'ada, Sana'a and the Abyan– Tiban water basins. As a result, many major cities suffer from water shortages, in a number of which the crisis has reached the point whereby some areas only get water on a few days in the month, such as the City of Taiz. The reduction of the ground water table by one meter reflects the depletion of water that took many long years for its formation, and its reduction by more than 100 meters over 20 years means the depletion of groundwater reserves that took over 400 years to accumulate. The fall of the groundwater table is accompanied by the deterioration of water quality and the rise of its salinity, which makes it non– potable or evenly fit for use in agriculture.

2.2.2 Population Growth, Expansion of Cities, and Urbanization Population growth is still very high, which indicates that the number of people will double over the next 19 years reaching 38 millions by 2026, which means doubling the pressure on the available natural resources, in particular water resources. If other water sources are not available, then the per capita share of water shall decrease from the current 137 m3 to 66 m3 by 2026, or at best 92 m3 . Water services are presently available to only 57.4% of the population and only 6.2% have access to sanitary drainage services, which are concentrated in the major cities only. The pressure on the water resources will not be confined to domestic use, but will also be accompanied by a horizontal expansion to crop agriculture and livestock 12 raising, all of which will rely on the same current sources of water, some of which are already undergoing depletion. Industrial growth, expansion of public and private services, such as parks, hotels, tourism, and other activities also require the provision of additional water, and in contrast, the increasing risk of water pollution, due to the increase in solid, liquid and gaseous wastes, raises the consumption of natural and industrial resources, in all their manifestations. If the cities are already witnessing poor quality of water and shortage of water and sewerage services, besides the deterioration of the environment and pollution, many of these cities will face severe water crisis in the future. In the rural areas, where most of the population is scattered among small agglomerations, population is densely concentrated in areas characterized by rugged topography and located directly atop of watershed areas, thus creating a number of problems, some of which are related to water pollution in the areas where water streams are formed which makes it almost impossible and costly to transfer water to such areas and provide them with water and sanitary drainage services. With rainfed agriculture now being inadequate to meet the needs of the rural family, while the expansion of irrigated agriculture is beset with shortage of both water and land, the future of development of these areas is confronted with many challenges.

2.2.3. Water Management, Traditional Rights and Market Trends The shortfall characterizing water management, especially in the areas of evaluation, planning and allocation, does not lend any help towards setting priorities that are consistent with the scarce water resources and with the economic feasibility of their use, and in a manner that will ensure that the basic needs of the people are fulfilled and will prevent their quantitative and qualitative deterioration. These issues reflect the poor level of the institutional and legal systems of water sector, as well as the poor professional performance, inadequate controls and application of regulations, neglect of popular participation in the financing, management and maintenance of water projects, besides the lack of essential studies and information and the shortage of financing sources. These factors stand as an obstacle to raising the efficiency and rationalization of water use, and evaluation of the reality vis-à-vis the demand and supply situation for water. Similarly, the bias towards the supply side in the management of water, is not just confined to government management, but also goes beyond this to the management by individuals and the private sector as well, due to the ability to use water resources without charges. This inefficiency and poor performance of the sector is reflected more visibly in the poor efficiency of irrigation to 35%-40%, and the water losses in the potable water supply services, that go up to 31%. Originally, the traditional water rights were created for making use of water for the purposes defined for them, whether agricultural or domestic use, while public ownership was maintained. However, with the passage of time, this ownership turned into individual or family ownership inherited from generation to generation. This le d to the frequent division of water sources among the subsequent generations in keeping with the fragmentation of agricultural holdings, to the extent that they are now inadequate for provision of potable water. The competition for water rights and potable water needs and for domestic consumption gave rise to disputes, especially in the regions of scarcity. By the same token, such water rights are not responsive anymore, given the importance of water allocation to meet the basic needs for water. This situation further constrains the ability of the Government to direct the use of water towards the uses that are of greater benefit to the society, and creates a conflict between the Government functions of controlling and regulating such rights for the public interest and the absolute rights of ownership of water sources. Most likely, the competition for the underground water sources will increase, because of the differences in the ability of 13 beneficiaries to dig deeper and will create sectoral and individual disputes, that will make it difficult to reconcile between the public and private rights to water, which will lead to the inability of the relevant concerned entities to take the appropriate decision to control the deterioration of the water rights and to meet the needs of development. With the absence of a cohesive specific outlook to deal with all these issues, the water crisis will only exacerbate further and will lead to complicating the development efforts. The scarcity of water resources constitutes a real constraint to the expansion of development projects that depend on water, since most of the known potable water resources have already been tapped and are subject to rapid depletion. By the same token, the evolvement and development of other potential potable water resources will prove more costly, which will not allow such projects to maintain their economic feasibility. Treated wastewater is also considered a potential non-traditional water source that could be used for contributing to the expansion of vegetative areas, rangeland and forests and for the establishment of green belts to contain sand encroachment and to fight desertification. They can also be used economically to irrigate certain suitable crops, in a manner that does not pose any health hazards and which helps preserve the environment. There are nine sewage treatment plants already in Yemen, in a number of the major cities, all of which produce 92,000 m3 a day of treated wastewater (33 million m3 per annum), which constitutes 69% of their productive capacity. Such treatment is undertaken by oxidation tanks and activated sludge process. The efficiency of this treatment is poor, in view of the poor regulations of the sanitation drainage systems. Waste products of industrial plants, health facilities, automobile oils and lubricants are poured into the public sewerage networks, without undergoing any primary treatment at their respective facilities, thus placing heavy burden on treatment plants and incapacitate them to carry out the appropriate treatment that will lead to the safe use of treated wastewater. Some treatment plants also dispose their output to the sea (Hodeidah, Aden and Mukalla). Farmers, where such treatment plants exist, use wastewater irrespective if it was treated or not for irrigation and in an unsafe manner, especially during years of drought. This has been accompanied by the appearance of different environmental problems such as pollution of surface water and an increase in the salinity of agricultural land, when such wastewater is used intensively and when rainfall is delayed. Some of the specialized projects of the Ministry of Agriculture and Irrigation work towards setting up green belts and planting trees in some of the areas that are exposed to sand encroachment and desertification, relying on wastewater for irrigation. Agriculture faces the biggest challenge, since certainly agriculture is the most adversely affected, since the demand for water for agricultural uses is bound to gradually come down forcefully, with the growth of the population and the expansion of urbanization, in favor of demand for water for domestic and service uses and for industrial purposes. This is especially so, since productivity of water in agriculture is poor. Similarly, as water continuously becomes scarcer, only the rich people will become able to have access to water from more costly water sources, and thus will be able to invest in agriculture. The small and dispersed land holdings of the small farmers who are reliant on traditional water resources will be unable to pursue their search for more costly water and accordingly will be unable to compete. Subsequently, their role in the rural economy and in securing stable lives for the rural family will decrease, and with it the source of livelihood for the rural people will eventually also cringe. Such conditions will lead to the abandonment of agricultural land and migration from the rural areas, which threaten the geographical distribution of the population and threaten the rural economy. The rural labor force is also motivated to enter the labor market, the requirements of which they are unable to fulfill. This will also lead to increasing the pressure on water resources and increasing the severity and spread of poverty among new social categories. 14 If the provision of water services is now acceptable in meeting the basic needs for water and domestic consumption, its future growth and development, without control, will lead to the rise of additional aggravating problems that adversely affect both water resources and the lives of the people altogether. Trading in water, under a market economy will encourage switching of water uses from one purpose to another in pursuit of the highest financial returns, which in turn could give rise to a disruption of traditional water rights and will lead to a sudden change in the methods and ways of irrigation and in the lifestyles of people, especially in the regions of greater water scarcity. Since the water costs can go up to YR 1,000 per m3 , during drought periods, in some areas, the low income and the poor will not always be able to have access to water and accordingly will give rise to disturbing the equitable access to benefit from water. This method also threatens scarcer water resources because as each water resource is drying up, water merchants just relocate to another, with profitability being the only yardstick in this business.

2.3. Human Resources

2.3.1. Health and Health Conditions The existing Government health system since the 1970s is based on a traditional system for the provision of health services. This system consists of health units, centers and hospitals. This system has witnessed noticeable expansion over the last decade, as the number of health units expanded from 912 to 1,821, the number of health centers rose from 392 to 574, and the hospitals from 74 to 116 with bed capacity that is over 11,000 beds. The number of doctors during 1995–2000 also rose by an average rate of 7.3% per annum, and the number of nursing staff rose by 6.7%. However the number of people per doctor is still 4,810, whereas for the nurses it is 2,400 per nurse and the number of people per a hospital bed is 1,664. These rates are by all standards considered very poor, even when compared to developing countries and the other Arab States, such as Syria and Sultanate of Oman, where the same comparative figures are seven times higher than they are in Yemen. The Government health sector still suffers from poor service provision, quantitatively and qualitatively, due to the low expenditures on the sector, in general, and on investment and operations and maintenance in particular, and the inequitable distribution of facilities and manpower, which are concentrated in cities, until coverage of health service reached 80% in urban areas as against 25% in rural areas, besides the absence of rational use of the health services. Illness and death rates due to prevalent diseases are greater than the rates for non-endemic diseases. The situation becomes worse due to the population's lack of access to safe drinking water (40% of the population), due to the low percentage of coverage of the sewerage network, to which only 6.2% of the population have access, and from an environment that helps to make diseases and endemic ailments widespread, like malaria and schistosomiasis. The most widespread and most serious diseases in Yemen are diarrhea, malnutrition, side effects of pregnancy, severe respiratory diseases, malaria, schistosomiasis, liver diseases, and tuberculosis, with increasing of the AIDS carriers and infected patients. Extreme centralization in the health sector also resulted in affecting the regulatory and control functions of the Ministry of Health and Population, the weak capacities of regional health departments to plan and execute health programs and services to the people effectively and efficiently, apart from the poor participation of the local communities in the health system. Despite poor efficiency of the service and the resources, which are limited to start with, the lack of confidence in the primary health facilities at the village and district levels, inhabitants in those areas are compelled to by–pass the primary health facilities and resort to the Government health facilities at the governorate or central levels, which adds to the strain on the central services and the beneficiaries have to bear the high cost, brought on by the cost of 15 transport and to wait long to have access to the service, and in many cases the majority of the patients have to even bear their illnesses, if it does not get worse and more serious, especially for women that are unable to move from one area to another to have access to health services without having a male relative as accompaniment (mahram). The increase of demand for public general and specialized medical and health services and the inability of the government sector to meet the needs also led to the rise in the number of private hospitals and clinics, which became rapidly widespread, with an increase from the modest numbers in the early 1990s to 90 private hospitals and 550 private wards in 2000, with the concentration of most of them in the major cities, especially in the Capital Secretariat. However, the high cost of their services make them inaccessible to the majority of the people, not to mention that the poor control of these facilities, and the non–application of the regulations against malpractice, contributed to the general deterioration of the standards of quality of the service.

2.3.2. Education and Training The Constitution stipulates that educational opportunities should be equitably available to all citizens, so as to meet the desires of individuals on one hand, and the needs of the society on the other hand, in accordance with the economic and social plans. The unified RoY was established under chronic accumulated problems and difficult conditions led by: the high population growth; dispersed population in small communities located in areas with a diverse topography; widespread illiteracy, which was then estimated to be 64% of the population; in addition to the poor enrollment in basic education (57.6%), especially for girls whose enrollment did not exceed 37.6%; the high dropout rate that was more than 15%, especially in the lower grades of primary education. The Government directed its greatest attention to the educational issues, with an increase of expenditures for the education and training sector until they reached to an average of 18% of public expenditures during 1990–2000. These expenditures led to an increase in the ability of schools, institutes and universities to absorb more students, and thus to an increase in the total number of enrolled students in all educational levels from 2,453,000 students in 1990 (of which 29.1% were females) to 3,993,000 students in 2000 (of which 33.1% were females) and an average growth rate accordingly of 5% per annum for all students. The Government also adopted a National Strategy for Eliminating Illiteracy and for Adult Education, with the aim of eradicating illiteracy and freeing people from alphabetical and functional illiteracy. Nevertheless, the limited financial resources, which were allocated for fighting illiteracy and the poor role of civil society in combating illiteracy, led to the achievement of only partial results, which did not go beyond the elimination of illiteracy among the 290,000 male and female illiterate over the period 1995–2000. In view of the large numbers of the illiterate, who are not enrolled in the educational system, and the large number of drop outs, the matter of eliminating illiteracy and providing education for adults will undoubtedly remain a primary encumbrance for present and future development plans.

2.3.2.1. General Education Indicators show a clear deficiency in several aspects of general education, whereby the percentage of children who are outside the educational system reach 38% of total children, of whom 22.8% are males and 56.1% are females. Enrollment in schools in rural areas amounts to about 38%, compared to 80% in urban areas, whic h reflects a sharp difference in accessibility to educational services, which is even less for females in the rural areas. This difference goes back to numerous factors, of which the most important are: the scattered distribution of the population; the need to employ children; and the insufficient number of 16 schools available for girls or, in many cases, their far distance from the population agglomerations, not to mention the poor awareness on education for girls. Basic education, which takes in 83.8% of the total number of students and pupils in all the educational and training levels, also suffers from poor internal efficiency as illustrated by the high dropout and failure rates. Group observation studies indicate that, on average 8% dropout from basic education every year, to join the number of the students who are outside the education system and the illiterates. Studies also show that the average failures and repeaters comes to, on average, 11%, and accordingly, instead of having to spend 9 years to complete the basic education level, students take, on average, 15 years, with even longer periods for female students, which reflects financial and human waste of the utmost gravity. In addition to the foregoing, general education faces a multitude of distortions and difficulties, which are exemplified by curricula that do not keep pace with modern developments, the obvious inadequacy of school buildings and equipment quantitatively and qualitatively, and the poor contribution of civil society in the education process. The sector also suffers from a disparity in the average number of students per teacher, especially between rural and urban areas, the low number of female teachers and girls' schools in the rural areas, and the poor standards in the pre–qualification of teachers. Up to unification, the education system suffered from a shortage in the number of available teachers, which was covered by bringing in teachers from other Arab states. The large growth of public education led to the expansion of teacher rehabilitation and training programs within the framework of five programs directed at graduates of the basic education level, education colleges, intermediary institutes and the higher teacher institutes, in addition to the use of general secondary school graduates to work in teaching. These approaches – despite the obvious differences in the qualifications and the skills –resulted in the replacement of the non–Yemeni teachers and the creation of a surplus, in total, with the deficit for women teachers still continuing – 28.4% of the total teaching personnel – especially the rural female teachers. The Comprehensive Education Survey of 1999/2000 showed that 40% of the teaching staff were holders of secondary school certificates or better academic qualifications and that 60% have completed basic education, in addition to rehabilitation and training for one or two years, which shows that the majority of the teachers are lacking in the basic skills in education and teaching, which in turn is reflected in the quality of the output of the tributaries of the education system.

2.3.2.2. Vocational Training and Technical Education Interest in pursuing vocational training (after the basic education level) and technical education (after the secondary school level) is still poor, as the percentage share of students in both educational fields, from the total number of enrolled students in all educational levels and tributaries, amounted to 0.4%. The number of graduates from technical education was 1,456 male students and only 180 female students, i.e., one technical graduate for every 17 university graduates, whereas the proportion should be 4 technical graduates for a university graduate. The vocational and technical diploma carriers, in both the intermediate and high branches represent less than 2% of the total workforce in the national economy. The gender gap is also obvious in vocational training and technical education due to a number of impediments, which are linked with traditions and customs, poor awareness on the future roles of women in the achievement of development. Vocational training and technical education is confronted with a number of quantitative and qualitative challenges, such as, the low absorption capacity of the vocational centers and technical institutes, the predominance of theoretical subjects over practical aspects in their curriculum, their retarded follow–up on the developments and advances in their fields, and the unsuitable output to the needs of the production establishments and units of the private sector. 17 A small number of private sector firms have established their own institutes for training their own staff, while a large number of graduates and dropouts turned towards enrolling in the private training institutes, which are estimated to number 66 institutes, that focus on pre – qualification and rehabilitation programs in languages and secretarial training, with some of them entering into new fields, such as health, information technology, communications and programming.

2.3.2.3. University Education University education witnessed an increase in enrollment of about 16%, on average, during the period from 1990–2000. This growth was paralleled by an increase in the number of government universities, which grew from 2 universities, which include 86 colleges and 42,000 students, with 16.7% being females, to 15 universities (of which seven are public universities) with 130 faculties (or colleges) with 184,000 students (24.5% being females). The number of graduates from all the universities in 2000 came to about 17,836 male students and 6,600 female students, with 87.8% in the liberal arts and theoretical fields and 12.2% in the scientific fields, apart from 8,100 male and female students who graduated from the teachers' institutes. The government and private university education sectors both face numerous difficulties, that prevent it from undertaking its functions efficiently and effectively, which may be broken down into two major sets of difficulties: internal and external. The internal issues related to university education are exemplified by the typical structures and regulatory frameworks of the universities, with an obviously significant amount of duplicity and redundancy in the colleges and divisions of the universities and the predominance of the theoretical nature of most of the specialized fields and the methods and techniques for teaching, in addition to the absence of ongoing teaching units, the retardation of the university curricula in matching diversified cognition with its applic ation, and this also includes a severe shortage of teaching equipment and services (libraries, laboratories, workshops, etc.) and the prevalence of administrative centralization. Admissions to university education is lacking in declared specific policies, which means the separation of university admissions from the needs of development and of the labor market, in addition to lack of consideration of the absorption capacity and the available resources for admitting students and distributing them to the different faculties, the slow interaction of the private sector in determining its needs of graduates and in providing training services during study. Universities also complain of the shortage and poor distribution of teaching staff, poor resources to prepare and rehabilitate the teaching staff, the high students per teacher ratios, which reflect adversely on the students ability to acquire knowledge, not to mention the quantitative and qualitative shortage in the supervision, technical and administrative staff in most of the Yemeni universities.

2.4. Institutional Structure of the State

2.4.1. Reasons and Factors Behind the Inflated Government Administrative Apparatus The merger of the authorities, institutions and organs, as they had existed in both parts of Yemen, led to additionally inflating the administrative apparatus of the Government, in addition to the creation of units, the only purpose of which was to absorb the senior and administrative staff in the two former parts. This reflected on the financial and monetary conditions of the country, which, to start with, suffer from scarcity of resources, a weak productive base and structural deficiency and flaws in budgeting. This situation continued to exacerbate during the early years of the 1990s, as a result of the continuation of operations of a number of productive and service institutions, which were confronted with financial deficits and poor performance. 18 Public administration was BOX 2.3: T HE ADMINISTRATIVE DISTORTIONS also affected by a series of The situation of the administrative apparatus of the Government is major events during the apparently more difficult when the administrative deficiencies are period from 1990–1994, of summarized as follows: • Inflated organizational and functional structure of the Government. which the most important • Misallocation of manpower. was the return of some • Selection and appointment to public employment is free of 800,000 Yemenis from the competence and suitability. Gulf states following the • The failure of a large number of public and mixed sector enterprises. Second Gulf War, which • Conflicting and intertwining responsibilities among the ministries, and burdened the Government the respective authorities and corporations affiliated with them, and poor coordination amongst them. with the responsibility of • Duplicity (of functions) between the governorate leadership and the absorbing some of this ministry branches in the ministries and districts. returning labor in the public • Multiplicity and extension of lines of authority. sector, which bloated the • Absence of emplo yee files. administrative apparatus • Absence of the clear delineation of the government employment and distribution according to their organizational formations. with employees that were of • Lack of statistical data on government employees, their geographical limited qualifications and distribution and employment and qualification part iculars. low wages and for whom • Redundancy, excessive employment and ghost workers. there was really no need. Wrong employment policies continued and resulted in doubling of the numbers of employees in the administrative apparatus and in the public and mixed sectors over the first five years of the 1990s until the number of employees grew from 191,000 to 348,000 employees. The wage bill also inflated to reach about 10.3% of the GDP and 27.9% of total public expenditures. Although the average real wage of an employee in the government administrative apparatus declined from YR 4,385 per month in 1990 to YR 1,387 in 1995, losing about two-thirds of its value, apart from the high pressure between the maximum and the minimum. The civil service suffers from the misallocation of employees geographically, or in terms of the distribution of employees among the different government functions and services, whereby employees were concentrated in the major cities and, specifically, in the health and education sector. The civil service is faced with poor capacities and from a severe shortage in qualified personnel. The Employees Survey of 1998 shows that the employees having university degrees represent 16.3% of the total employees, while the employees without any educational qualification rose to 26.6% of the total number of 404,522 employees. Although the implementation of the EFARP has led to the adoption of employment policies by the government, which resulted in a decreasing rate of employment growth, with the increase in the size of the administrative apparatus of the Government and the public and private sector in December 2000 to 428,000 employees, who represent 11.8% of the total labor market. This number is still quite high, when compared to the services that it provides, besides not enhancing the financial positions of the employees and the efficiency of their performance.

2.4.1.1. Corruption Administrative conditions became worse, as a result of the augmentation of the various forms of corruption, in light of the poor application of the law, the absence of an integrated public administrative system, poor managerial competence, low wages, salaries and incentives, rigid centralization and redundant administrative procedures, the lack of employment classification and arrangement system and the absence of reward and punishment and accountability, which led to making the administrative apparatus incapable of keeping pace with developments, domestically and externally. Obtaining public employment has become, to a certain extent, 19 associated with corruption and nepotism, and the time, connections, and sometimes money and bribery, not to mention treating public employment as though it was a right and a privilege. As a result, the public employee obstructs most of the functions by (deliberately) delaying any processing of any transactions, in order to obtain additional payments, and, accordingly, make the poor the most unfortunate victims of corruption. Corruption, however, was also not confined to the low level employees alone, but also extended to the higher levels, exemplified by possession of major contracts, import licenses and other various forms of monopolistic acts. Corruption grew and broadened, given the increasing violations of policies, which gave rise to the intentionally fabricated and false gaps between demand and supply and the creation of opportunities for making illegal profits. There is no secret that it is the adverse effects caused by corruption, which were a major factor hindering investment, disrupting public confidence and adulterating the social resources, and accordingly retracting private investment and economic growth – except for investments in the oil sector.

2.4.1.2. Control, Accountability and the Courts The deficiencies in the functions of the Government were not confined to the administrative aspects, but rather extended beyond it to include the control function, where effective protective arrangements for control against corruption and for disclosing and tightening the noose around corruption. The organizational environment in the units having control mechanisms also were subjected to the BOX 2.4: FACTORS BEHIND WEAK LEGAL AND JUDICIAL very same deficiencies and weaknesses, S YSTEM and therefore lost the ability and the • Poor qualifications of some judges and members of the means of exposing violations and general prosecution and the lack of judicial training. corruption for taking the needed internal • Poor controls in the courts and the general prosecution. • The lack of full adherence to the application of the enforcement measures in the provisions of the Laws for Litigation, for Punitive administrative units, and for determining Procedures and for Corroboration and Civil Execution. the negative impacts that arose • The spread of misconceptions and the improper accordingly, so as to help make the mechanisms for the relations between the courts and the necessary reforms and to ensure that general prosecution. errors and excesses are staved off and • Lack of judicial police force and adequate protection for members of the judiciary. prevented from recurring. Confidence in the courts is reduced by the cases and issues related to corruption itself. The judicial system in past recent years faced obstacles and difficulties, the most significant of which were, inadequate laws and legislation, because they differed in their orientations and tracks, they did not keep pace with the future role of the Government, their generality in setting punishments and penalties, the procedures for issuance of procedures and laws are not yet completed, lack of effective coordination with regards to enforcing laws, and the administrative units have yet to prepare their particular punitive rules and procedures. The judicial system is confronted with the ineffectiveness of its authorities and organs, exemplified by the prolongation of cases and lack of rapid processing of cases and the failure to execute some of the court rulings. The administrative and financial courts also face difficulties and problems in dealing with public property and public employment cases, due to its recent creation, lack of the needed experience and the minimum cognizance of the concepts of judicial proceedings for administrative and financial cases, of the rules of financial control and accounting and auditing principles, that are issued in the form of laws, procedures and regulations or in the form of normally recognized principles. Finally, the financial punitive legislation are considered deficient due to not encompassing most of the violations and assaults on public property and public employment, in addition to the fact that those punishments which are executed are not considered as adequate. 20 CHAPTER 3: ECONOMIC DEVELOPMENTS AND THE REFORM PROGRAM 1. Introduction Since the early 1990s, Yemen faced several shocks, mainly through two major factors manifested by the reunification of the two parts of Yemen in May 1990, and the heavy economic costs that came with it, and the Second Gulf War (1990-1991), which resulted in the return of over 800,000 Yemeni emigrants from the Arab Gulf states, and the suspension of foreign aid to Yemen by these and other states. This resulted in economic difficulties that pulled Yemen down into a bottomless pit and compelled the GoY to adopt a comprehensive reform program. 2. The Economic Situation During the first half of the 1990s, the performance of the economy was subject to several retrogressions, which resulted in the retraction of non-petroleum GDP, and an absolute reduction in GNP from US$ 9,019 million in 1990 to US$ 5,431 million in 1994. Such changes, and the decline of GNP per capita from US$ 701 in 1990 to US$ 367 in 1994 subsequently led to the deterioration in the standard of living of people, and with the reduction of income levels, both the unemployment rate and the inflation rate also rose, as well as the demand for basic goods and services, which caused severe pressure on the economy. The roots of the problem go back to the government’s adoption of an expansionary fiscal policy during a period of declining revenues. The public budget recorded a high deficit, reaching 14.9% of GDP in 1994, which was financed by the local banking system, primarily with the CBY lending to the GoY through issuance of money, thus leading to an indecorous growth of money supply. Similarly, the Balance of Payments recorded a large deficit, reaching US$ 709.7 million in 1994, despite the large increase in oil exports in 1993 and 1994. This situation reflects the weak export base, with oil exports constituting more than 90% of total exports and the heavy reliance on imports, especially food imports and the continuous decline in workers’ remittances to Yemen. The credit worthiness of Yemen was also shaken due to the inability of the GoY to service its external debt, which has accumulated over the salability period that prevailed in the region as a result of higher oil prices. As a result, the GoY was compelled to resort to heavy domestic borrowing. GoY’s external debt exceeded domestic debt, when it reached 177% of GDP as compared to 52% of GDP for domestic debt in 1994. This resulted in an increase in the cost of servicing external debt. Notwithstanding the concessionary terms of the loans to Yemen, external debt service reached 28% of total exports in 1990, rising to 52.8% in 1994, and thus constituted an obvious challenge to the economic and social development in Yemen. Social and economic BOX 3.1: MACROECONOMIC INDICATORS, 1990-1994 • Large fiscal deficit, which reached 14.9% in 1994. developments in Yemen during • Waste of most public resources in non-targeted subsidies. 1990-1994 reflected the impact of • High inflation rates which exceeded 50% as a result of deficit a number of economic and social financing. factors at the national, regional • Sluggish economic growth and investment and rise in capital and international levels, which flight. were not consistent with, and • Sharp deterioration in the value of the Rial and existence of multiple exc hange rates. supportive to, sustainable • Unprecedented spread of unemployment in all its forms. economic growth. The trends in • Deficit in the trade balance and balance of payments, increase of economic growth was foreign debt, and failure to meet international commitments. characterized by sluggishness and • Sharp deterioration in quality of basic social services. fluctuations and imbalances; with • Frozen relations with donor countries and international organizations. the real GDP growing at low rates 21 averaging 4.1%, during the period, which was slightly above the rate of population growth of 3.7%; i.e., a growth that does not lead to improvement in the standard of living of citizens. The picture becomes clearer, when we look at the trend in real non-oil GDP, which reflects the narrow base for economic growth, as it declined in 1994, to a negative growth rate, and during the period reached an average of about 4%, which is less than the overall GDP growth rate. This adds to the growth characteristics the features of instability and imbalance, because of the significant effect of oil production on GDP particularly in the last two years of that period. Economic growth trends during 1990-1994 also coincided with a number of macro- imbalances, in addition to the population increase of the unified economy, the return of the Yemeni emigrants, in light of constant but poor exploitation of limited resources, which reduced the chances for growth. Since the links between investment and savings are considered the most important determinants of economic growth, saving and investment rates in Yemen reflect structural deficiency, manifested in poor productivity and the high social tendencies for consumption, as well as the unstable conditions that prevailed during that period which did not stimulate the attraction of investment. The demand gap peaked in 1993 at 28.6% of GDP in 1993; i.e., it increased five-folds its rate of 5.7% in 1990. This high gap is attributed to rapid increase in total final consumption in comparison with a modest increase in total investment. Private consumption expenditure played a major role in increasing total final consumption expenditures due to the return of large numbers of Yemeni expatriates, which prompted the rise of this rate to 90.2% of GDP in 1993. Public expenditures also played a role in raising the resource gap (between savings and investment) as a result of its association with rising budget deficit. BOX 3.2: TRENDS IN M ONETARY AND FISCAL POLICIES Although the decline in public revenues DURING 1990-1994 was the major cause for the rise in fiscal • Adoption of expansionary monetary policies, which deficit as percent of GDP during 1990- was reflected in the rise of the budget deficit. 1994, public finance distortions became • Bias towards current, e specially salaries and wages, severer and aggravated with the decline in against investment spending. Thus the fiscal policy investment spending to 3.4% of GDP and was not conducive to high and sustained GDP 12.4% of public spending 1994, growth. • Deficit financing of the budget, which was accompanied by a low rates of GDP inflationary, contributed to economic instability and growth. Thus, the budget, during that period was unfavorable on the in vestment climate. was, in fact, a budget for current spending, • Fiscal policies focused on expenditures and did not with salarie s and wages absorbing a large address revenue mobilization. share of total spending due to the large, and • Public revenue structure was characterized by a number of flaws, the most apparent are the rapidly growing, size of the manpower in inefficiency of tax collection, systems and practices the civil service. Salaries, wages and that encouraged tax evasion, and the direct and associated benefits of the civil service, indirect exemptions, in addition to the existence of public sector and mixed sector grew during informal economic activities that is far from the reach the period by 27.6%, 22.5% and 24.9% of the tax system. • The tax system was based on pure fiscal respectively. 1 The increase in the number of considerations and did not reflect development new employees in these entities, however, priorities by affecting the incentives for saving and rose only by an annual average of 13.9% investment. and led to the reduction of the annual • Fiscal policies did not support and encourage human increase in wages to 11.3%, accompanied development, if we look at the share of expenditures allocated to primary social services. by an inflation rate of 38%, which resulted • The existence of multiple exchange rates, which led in a deterioration of real wages of to high yielding profits from speculation and the employees from YR 65,775 for 1990 to YR misuse of foreign currency reserves. 1 There are no indicators of the salaries and wages in the (formal) private sector for this period. They, however, they usually change with the changes in the salaries and wages of the civil service and the public and mixed sectors, in t he same direction, with a relatively higher margin reserved for the private sector. 22 27,774 in 1994, with a rate of retraction of 57.8%. The result of all this was that, by the end of BOX 3.3: S OURCES OF INCOME FOR GOVERNMENT 1994, economic conditions have reached a EMPLOYEES level that threatened of an eminent Due to reduced wages, many sought other sources of catastrophe due to unsustainable economic income, as the 1998 HBS revealed that the average imbalances. The GoY was left with no wage of an employee did not exceed 55.3% of the total income needed by his dependents. Income derived alternative, but to adopt, and proceed with, from self-employment was 17.2%, followed by income the implementation of an economic reform from other sources such as inheritances, dowries, program (EFARP) that aims to remedy such awards, gratuities, etc. amounted to 13.1%, then comes imbalances and achieve economic stability property income, such as rentals, stock dividend and interest on deposits, and finally income from current and hence to restructure the national transfers, such as retirement pensions, insurance economy to suit the adoption of the free compensation, internal transfers and transfers from market mechanisms. overseas (5.3%). The structure of the national economy was not isolated from all these developments, as the contributions of the economic sectors to GDP changed during this period. The contribution of the agriculture sector was reduced from 24.2% of GDP in 1990 to about 22.6% in 1994, in contrast with a marked increase in the contribution of manufacturing, including oil refining, from 9.3% in 1990 to 13.9% in 1994, while the contribution of the extraction industry remained constant at 13.6% of GDP during the period, despite the large increase in oil production mainly because of decline in oil prices. However, the important feature in the structure of the Yemeni economy is the dominance of the services, the contribution of which rose to 53.2% in 1994 from about 46% of the GDP in 1990. Business and financial services sector grew during the last two decades to meet the needs of the private sector, whereas transportation and communications services grew as a result of the infrastructure projects, which were undertaken by the GoY. In BOX 3.4: CRITICAL PROBLEMS FACED BY THE YEMENI Summary, the situation showed a ECONOMY picture of an economy increasingly • Low standard of living due to lower GNP per capita. dominated by the services and oil • High unemployment in all its various forms. sectors, given the limited role of • Dependence of the national economy on oil. manufacturing, which was growing • Limited sources of foreign currency in the economy. languidly, whereas the agriculture • Imbalance of the government budget. sector, on which about three-quarters of • Deficit in the current account of the Balance of Payments. population live at subsistence level is • High Foreign Debt. characterized by lack of dynamism. With respect to the labor force, in addition to the increase in the size of the labor force, which is considered as a natural result of the population growth, as the number of laborers reached 3.3 millions according to the 1994 population census, the labor market is also characterized by the large size of the informal sector, which includes the self-employed and the employed without wages with the family or other parties. The activities of the informal sector are the largest absorbers of labor, especially unskilled labor, which is usually associated with agriculture, personal and social services, retail trade, transportation, and the economically unclassified economic sectors. The agriculture sector is the cornerstone, in terms of providing job opportunities, despite the reduction of its share to 53%, compared to a growing share for the services sector, which absorbs 33% of the labor force (17% for government services alone). Manufacturing, however is considered as having limited potential for providing job opportunities, not only when compared with the other sectors, but also, in terms of its contribution to the GDP (4% and 10.7% respectively). The low absorption of labor in this sector is primarily attributed to the technology employed by modern manufacturing enterprises that is capital-intensive in nature. It should be noted that the increase in the size of the labor force is partially attributed to the increase in the of the share of women in the labor force, which realized an annual average 23 growth rate of 8.2 %, thus reaching 17.7% in 1995, which reflects the increasing trend of women engagement in employment, as they seek to improve their conditions and the living standards of their families. Hence, the percentage share of females in the labor force rose to 20.3%, where most are engaged in agriculture, which absorbs 85% of female la borers, followed by government services, which recorded an average increase of 7.4% per annum in the number of women employed over the past period, and then the manufacturing sector, where females were able to attain an average increase amounting to 4.1% per annum. 3. The Economic, Financial and Administrative Reform Program (EFRAP) It was clearly evident, ever since the proclamation of the unification of Yemen in 1990, that the economic structure of the newly unified state required attention to the problems associated with a partitioned economy, notwithstanding the similarity of the economic conditions prevailing in both parts to a large extent, in terms of the trend in economic growth, which was characterized as being unsustainable, and in terms of the narrow base for national income and the appearance of economic imbalances. It was imperative that GoY had to review the basis and foundations for building the economy and to revise the priorities for economic and social development, given the often unfavorable local, regional and international conditions. As it sought to deal with the basic problems, with which the Yemeni economy was beset, and with the cooperation of the IMF, the World Bank and a number of other donors, the GoY then drew up a comprehensive program for stabilization and economic reforms (EFARP). This program aimed to improve the standard of living of the people by halting the deterioration at the macroeconomic level, and hence, moving to a phase of continuous economic growth. Accordingly, EFARP focused on two major axis, the first one representing stabilization policies, sought to restore the overall economic balance and to control inflation, whereas the second axis dealt with structural reforms, which would set the economy on a course that will achieve medium-term and long-term growth. When drawing up the EFARP, the GoY took into account a number of issues, of which the most important were: (i) the fiscal dimension and the effects resulting from reforms, for which some emergency measures were taken in order to alleviate the adverse effects on the groups that were most vulnerable to such effects; (ii) expansion of the role of the private sector in the areas of investment, production and employment; (iii) raising productivity; and, (iv) administrative capabilities for implementing the measures and policies of the program. The GoY started implementation of the EFARP in 1995 by adopting a new budget for that year and by the implementation of some of the measures for economic stabilization and restructuring, as it proceeded to announce the first set of reform measures for the achievement of economic stability and the removal of structural imbalances in the economy. These measures, in general, aimed at the improvement of public revenues and the reduction of expenditures by price corrections. Through such measures, the GoY worked towards controlling inflation also, the rate of which dropped, in that same year, to 45%, whereby later, unemployment, the estimates of which varied, was to be tackled. Other numerous measures were also adopted and taken along this direction, which included trade liberalization, privatization, and reform of the public sector enterprises and the improvement of the regulatory framework. Although the EFARP worked towards laying down the foundations for an economy that is characterized by a low inflation rate, while at the same time enjoying the ability to bring about steady growth, nevertheless it still temporarily leaves adverse effects on the operations side and on the income of some of the groups that are more susceptible to such effects. Therefore, the GoY sought to limit and curtail such effects on the low-income group, as it included, for example, the gradual removal of subsidies, especially on wheat and wheat flour. Similarly, the program included the establishment of a Social Safety Net covering all the groups that are incapable of acquiring assistance through the Social Welfare Fund (SWF) that 24 provides cash assistance to the poor. At the same time, the GoY took numerous, albeit limited, measures to improve the lives of the affected and low-income groups like increasing expenditures for services, such as education and health and the establishment of the Social Fund for Development (SFD) for financing primary service projects and the Public Works Project (PWP), which is concerned with small projects that are labor intensive, with a view towards providing temporary job opportunities, as well as setting up other funds and projects.

3.1. The Outcomes of the EFRAP The evaluation of the EFARP rests on two major criteria. The economic criterion focuses on the ability of the economic policies to achieve economic stability that is essential for achieving sustainable economic growth. The social criterion is concerned with the effects of the stabilization policies on (social) human development. The assessment should also include reference to the policies, measures and instruments that have been implemented and to the setbacks, and their causes, that the EFARP encountered.

3.1.1. The Favorable Outcomes As a start, it should be made clear that the high GDP growth rates, which were realized during the period from 1995-1997, are attributed, primarily, to the increase in the proceeds of oil exports due to the use of a free exchange rate for the Rial. Similarly, the stabilization and reform policies implemented since 1995 aimed for the reduction of the imbalance between domestic expenditures (total demand) and output (income), primarily by reducing local expenditures, more expressly on consumption expenditures. Indicators have shown the success of such a policy, as final overall consumption declined until it reached 77.3% of GDP in 1997, which resulted in shrinking both final private consumption and final public consumption. Investment expenditures, as a percentage of GDP, also witnessed a slight increase, during the same period, where it grew from 22.1% in 1995 to 23.4% in 1999, and then it declined to 19.2% in 2000. The primary success for the implementation of the economic reform program is exemplified by the reduction of the major macroeconomic imbalances, where the budget deficit, the growth in money supply and the inflation rate all came down, and by the same token, the foreign currency reserves grew, the now floating exchange rate of the Yemeni Riyal became stable, and the balance of payments relatively improved. The first group of EFARP measures, which aimed at the improvement of public revenues and the reduction of expenditures, through numerous pricing corrections (adjustments), yielded a reduction of the fiscal deficit to 5.2% of GDP in 1995, compared to 14.9% in the previous year and the achievement of a surplus of 7.1% in 2000. This improvement in the public budget is attributed to the increase of oil revenue proceeds, as oil revenues rose rapidly, as a percentage of total public revenues, from 19.4% in 1995 to 74.9% in 2000, as a result of the increase in world oil prices, and to the reduction of subsidies. In contrast, expenditures restraint focused on cutting subsidy on food, petroleum derivative products and basic services, as the subsidy bill declined from 10.2% of GDP in 1995 to 5.8% in 1997 and then to 0.6% in 2000. The EFARP aimed for letting monetary policy have a role in reducing inflation and to achieve the relative stability of the exchange rate by controlling the growth of money supply. This was realized by the reduction of government local credit on one hand, raising the interest rates on deposits and credits and issuance of the treasury bills on the other. The result of this was the reduction of money supply (domestic liquidity) from 31.6% in 1994 to 8.6% in 1996, before returning to a high increase, estimated to be 25.1% in 2000. The rate of change of the consumer price index (CPI) was also reduced from 49.2% in 1994 to 30.6% in 1996 to 2.2% in 1997 and then rose again to about 4% in 2000. Note that the inflation rate was reduced to a greater extent, during the period from 1995-1997, which coincided with lower excess demand, since the pressure that was put to curtail overall demand had the strong effect of 25 curbing inflation pressures and reducing the percentage of absorption of domestic expenditures (demand) to GDP from 120.3% in 1995 to 102.4% in 1997, then it went down to 91% in 2000. Indicators also point to improvements in the foreign sector, due to the reduction in the balance of payments deficit, as a percentage of GDP, from 13%, in 1994 to 2.4%, in 1997, and to a surplus of about 18.9% in 2000. The surplus in the overall current account, however, was reduced from US$ 249.6 million, in 1994, to US$ 22.3 million in 1997, and then rose again to US$ 2.06 billion in 2000. A considerable improvement was also achieved in the reduction of the debt burden, especially with respect to the foreign debt, as the GoY was able, through the Paris Club Agreement in 1997, to restructure its foreign debts, on Naples terms (67% of debts waived). In the following year, GoY was able to obtain a full exemption of 80% of the Russian debt, which amounted to 60% of Yemen's external debt and to have the remaining 20% thereof become subject to the Naples Terms. The outstanding balance of Yemen's foreign debt was reduced significantly from US$ 8.32 billion in 1995 to US$ 4.93 billion in 2000 with a consequent reduction in the debt service (loan principal installments and interest due) from US$ 1.096 billion in 1992 to US$ 193 million in 2000, which comes to 4.5% of total exports. This amount is still a heavy burden on the capabilities of the national economy, considering the increase of the external debt as a percentage of GNP from 61% in 1997 to 66.8% in 2000. It is also expected that the next few years will witness a rise in debt service as the repayments payable on the new loans become due accordingly.

3.2.2. The Adverse Effects of EFRAP Despite the favorable aspects of the program, BOX 3.5: T HE DECLINE IN THE S TANDARD OF LIVING OF GOVERNMENT EMPLOYEES cited-above, it is imperative that some of the expected adverse effects of the reform The growth of public expenditures on salaries and program should also be shown, such as the rise wages and other associated benefits at an average rate of 24.3% a year over the period from 1995-2000 led in prices, which at times, will exceed the to a rise in the average employee's wage by an annual increments in income, besides the poor growth average of 18.6%, given that inflation was estimated in employment opportunities. People’s to be about 11.1%, which supposedly would lead to a standard of living deteriorated because of the real improvement in the wage by about 6.7%. However, t he disparity in the wage structures between decline in the purchasing power of the Rial, the civil service and the mixed sector and between the and the disparity in the wage structure led to different employee levels has curbed from ensuring lack of any significant increase in real income an increase in real increase, worthy of mention, for for most of the civil service employees. most of the civil service employees. Similarly, while admitting that trade liberalization has led to relative revitalization of foreign and domestic trade, the implementation of foreign trade liberalization measures so quickly, and comprehensively, led to the impairment of some of the productive capacity, given the poor competitiveness of domestic products. The poor economic growth also affected the ability to provide new job opportunities, whether in the private or public sectors, as the Government has abandoned its role as an employer of last resort. Undoubtedly, the measures for the gradual reduction of Government subsidies for primary commodities and services were bound to have an obvious impact in aggravating the effects of the inequitable distribution and the deterioration of the conditions of the limited income groups and the poor. The subsidies have, for more than a decade, served as a form of safeguard for maintaining real standards of living of these groups, notwithstanding the penetration and abuse by those who are not entitled to benefit from them and the negative effects that come with the inefficient allocation of resources that usually characterize subsidies. Furthermore, what made matters worse, is that the withdrawal of the Government from undertaking this role comes, in light of the retraction of real wages and consumption, the rise in unemployment and the deterioration of the quality of public services – all of which 26 serve, in essence, to fundamentally increase the severity of the effects of the EFARP on the limited income and the poor.

3.2. The Impediments of the Reform Program After reviewing the results of the reform program, we may then ask: Did the improvement in the macro-economic balances leave a positive impact on the requirements for economic growth? Is the overall economic environment more conducive and encouraging for a greater role for the private sector in stimulating economic growth? The EFARP does call for the achievement of economic growth under the leadership of the private sector, and realizes that to achieve this requires setting the overall economic framework and freeing resources, so that the private sector can undertake this role. However, the achievement of this is beset by many structural difficulties and hindrances. The economic reforms were not successful to the extent required, with respect to the achievement of economic growth, which remained like a waif throughout the past recent period. A significant share of this failure is attributed to the fact that the other administrative, judicial and institutional reforms were not accorded the same extent of implementation, and accordingly, reduced the significance of the economic achievements of the reforms. The administrative and also the judicial reforms were beset with certain hazards and challenges. The most important of these are widespread corruption, the need to reduce the size of the civil service and the retrenchment of excess employment. The reforms also created a strong resistance against change, due to personal interests coming into conflict with the adoption of greater transparency. In this context, the EFARP was unable to eliminate all the ghost workers and double BOX 3.6: DECENTRALIZATION AND LOCAL AUTHORITY dippers in the civil service and public While the administrative reforms were a major part of the sector. Similarly, the implementation of the EFARP, the orientation towards decentralization and the Civil Service Fund (surplus employees) adoption of local authorities is considered a reinforcing was delayed for a number of years, element of democratization as an approach to, and as a although the allocations for it were pillar of good governance. This orientation is based on appropriated in the public budget for 2000. involving all groups, at the local community level in shouldering some of the responsibility, considering they This led to a delay in freeing the are more familiar with their needs and more capable of government organs and institutions from solving the problems and diffic ulties they face the surplus employees, on one hand, and accordingly. The Local Authority Law No. (4) for the maintained several workers in the payrolls Year 2000 was enacted to set out the duties and authorities delegated to the local authorities at of failing public industrial enterprises, who governorate and district levels. The first local elections were not really working, but were still were held in February 2001, a s a practical and serious getting their pay from the government, thus step towards delegation of authority and passing on some burdening the government, while depriving of the responsibilities. This orientation is an initiative and the economy of productive capacities on ahas major mechanism adopted by the government, which put its stakes on its success in achieving sustainable the other. development and poverty reduction. The judicial reforms, which have been successful in putting in the basic requirements, such as improving the employment terms and conditions of the staff in the judicial system, the assessment of the performance of judges, relocating many of them, in keeping with the aim of upgrading efficiency and improving performance, besides putting some of them to retirement and referring some of those who abused the profession to the prosecution. Nevertheless, the modernization of the judiciary requires introducing and assimilating updated judicial methods, the creation and development of information systems, in addition to the establishment and reinforcement of the role of the Judiciary Enforcement Officers, all of which are matters which are actually still delayed until now. Therefore, the causes and factors for the deficiency of the administrative apparatus of the Government, corruption and the efficiency in the role of the Courts in Yemen remain basic challenges that stand in the way of achieving the developments required along the course of economic and social development. The privatization program, which faced some difficulties, such as the delay in the enactment of the law that regulates the process of privatization until 1999, which led to a delay in 27 carrying out divestiture and in reviewing the approaches, which the government has previously approved in some areas. The GoY also adopted the instrument for government funding for implementing the divestiture of some of the enterprises that are recommended for privatization, while it also confirmed and that it will proceed forward with the implementation of the program to achieve the objectives stipulated in the law and in accordance with the mechanisms and methods set forth accordingly. Similarly, the structure of public revenues still depends on short-term revenues, such as oil revenues, which are affected by world prices that are prone to fluctuations, by the level of production, by the GoY share of the exported oil and by the level of local consumption of oil products. Therefore, with the reliance on temporary sources of revenues looms the threat of the return of the disequilibrium in the public budget, unless there are structural reforms that focus on strengthening the other sources of government revenues. The policies on public expenditures, since the start of the EFARP also focused on limiting the increases in salaries and wages and rationalizing investment expenditures by limiting them to social priorities and infrastructure projects, in addition to reducing the current and capital transfers to public sector enterprises, which helped to reduce current expenditures from 81.3% to 76% of total public expenditures during 1995-2000. Some of the changes in setting the priorities for some public expenditure items can be seen over the period of the FFYP, despite some fluctuations, with the slight decline in the importance of government services, as compared to the growth of the relative importance of the social services, with the reduction of the shares taken by defense and security, from 39% in 1995 to 22.5% of total public expenditures in 2000. This was contrasted with the sectors associated with the development of the basic structures for human development, such as education and social services, the share of which reached an aggregate of 28.6% in 2000, although short of its share of 31.9% in 1995. Also, the relative importance of economic services declined to 23.8% in 2000 after achieving a big increase in 1997 compared to 1995, resulted from the growth in investments in electricity and water by an average real increase of about 8.8% per annum. TABLE 3.1: BUDGET PRIORITY (%) Item 1995 1997 2000 Government Services 47.5 38.3 39.1 Defense, Security and Order 39.0 23.8 22.5 Social and Communal Services 31.9 24.0 28.6 Education 19.2 15.0 17.7 Health 3.8 3.0 4.0 Social Security & Welfare 0.9 0.6 0.4 Economic Services 6.4 29.4 23.8 Public Debt Service 12.8 6.7 6.9 Total Functional Spending 98.6 98.4 98.3 Debt Repayment 1.4 1.6 1.7 Total Public Expenditure 100.0 100.0 100.0 While the public expenditures for education reached an acceptable percentage share of public expenditures, however the expenditures for health differ significantly from the level desired. During 1995-1997, the average public expenditures for education constituted about 18% of total public expenditures and about 6% of GDP. Despite the retraction of both of these percentages over the following two years to 16% and 5% respectively, it went on to rise again to 17.7% of public expenditures in 2000. These percentages were close to their correspondent percentages in some of the more advanced countries. However the public health sector was accorded the lowest share of the public budget, compared with the other sectors, where the average government expenditures on the sector ranged from 4.4% during 1990-1995 and 4.1% during 1996-2000, which is equivalent to 1.1% and 1.5% of GDP respectively. This percentage is much lower than what is allocated by several developing countries for this 28 sector. The low expenditures for electricity, water and sewerage is also noticeable, as the aggregate share for these sectors remained less than 1% of GDP during 1992-1995, and thus the reduction in the share for public health, electricity, water and sanitary drainage explains the continuation of the poor coverage rate of these services. Furthermore, although there was a significant nominal growth in public expenditures, resulting from the rise in the inflation rates and the slight relative increase in social expenditures, it still, however, shows a clear deficiency, besides the reduction of real per capita share thereof accordingly. The modesty of growth of real expenditures, especially for the health sectors, in light of the rapid population BOX 3.7: GROWTH OF PUBLIC EXPENDITURES growth, led to the retraction of the average per AT CURRENT PRICES capita share, especially when considering the Despite the manifold growth in public deterioration of the value of the Rial in the first expenditures at current prices, in all the sectors, half of the 1990s and the continuation of this these rates of growth do not reveal the true deterioration over the next half of the decade. The picture of the extent of adequacy of spending. In general, the real expenditures for these sectors reduction in the real value of social expenditures fluctuated between being constant and modest for education, health and social welfare had a rates of growth that were lower than the negative effect on the productivity of these sectors increases in current prices. Moreover, the use of as a result of the deterioration of the real value of the consumer price index (CPI) shows that the real value of spending on education and health wages and the reduction of the ability to operate, indeed declined during 1990-1996. maintain and replace machinery, equipment and instruments, and accordingly adversely affects the quality of education and health services in general. Therefore, the allocation of public expenditures still shows a bias against expenditures for basic social services, and does not meet the needs of investment expenditures and expenditures for operation and maintenance requirements. 4. The Private Sector EFARP aimed at redefining the role of the Government and the establishment of a partnership between the public and private sectors, by having the Government to take charge of instilling the foundations for security and law and order, as well as the institutional build-up and securing economic stability, completing the basic infrastructure and provision of public services. At the same time, the program sought to encourage and stimulate the private sector through incentives to lead the economic and social development process and to enter into the sectors that were monopolized by the Government, in addition to investment in education and health services. BOX 3.8: T HE ROLE OF THE PRIVATE S ECTOR IN THE FFYP The FFYP was a suitable base for the transmutation towards a larger role for the private sector, as it consisted of the fu ndamentals and policies for this change and the takeoff to new horizons and visions on the partnership between the private sector and the government in achieving the development goals. The bases for the private sector from the general economic goals of the FFYP may be summarized as follows: • Promotion of the approach of relying on the leadership of the private sector in economic life; • Improvement of the general climate for investment and provision of the requirements of a favorable investment climate; • Greater attention and more support to the private sector to direct investment in export related industries and activities; • Reform of the financial sector; improvement and expansion of the banking system and support to the conversion of commercial banks to the banks that provide comprehensive services; • Reform of the tax and customs system to facilitate procedures; • Implementation of the privatization program, revitalization of investment and the creation of a financial market; • Attraction of foreign investment and transfer of modern technology and expertise; • Encouraging the integration and merger of small and individual firms. • Involvement of representatives of the private sector in supreme committees, boards of directors of Government authorities and funds and in o fficial negotiations with fraternal (Arab) and friendly states. 29 Since enabling the Yemeni private sector to lead economic and social development will require a period of rehabilitation and development of the sector's capacities and capabilities, the FFYP ascertained this by not exaggerating the size of investments of this sector, which were estimated at 12.2% of planned overall investment only and 23.3% of all projected investments excluding oil and gas investments. Nevertheless, the role of the private sector in the economy cannot be ignored, as its importance lies in the role it plays, in terms of size and variety of its activities and the labor force that it absorbs. The contribution of the private sector ranges form 75% to 80% of non-oil GDP and the sector absorbed 89% of the total labor force, which was estimated at 3.8 million workers in 2000, compared to 428,000 in the civil service and the public and mixed sectors. The importance of the economic activity of the private sector can also be seen in other numerous aspects, including: (i) its dominance in the agriculture sector, which still employs 53% of the labor force and on which 75% of the rural population depend, and on its associated activities, for their livelihood; (ii) the private sector ownership of 97% of the (more than 33,000) manufacturing facilities, of which the small enterprises (1-4 workers) comprise the lion's share, with a percentage of 96%; (iii) the absolute control of the private sector in the trade, hotel and restaurant sector, in which about 455,000 workers are employed, or 12% of the total la bor force, and; (iv) the ownership of over 81% of the total capital equity of the banks operating in Yemen by the local and foreign private sector. BOX 3.9: LICENSED INVESTMENT PROJECTS Although agricultural activity in The number of investment projects licensed by the General Yemen belongs, in its totality, to the Investment Authority (GIA), since its creation, reached 3,956 private sector, the reason that the projects, at a total investment cost of over YR 702 billion. extensive investment opportunities in These projects provide about 128,000 job opportunities directly, which implies that the cost of one job opportunity amounts to agriculture were not taken advantage YR 5 million. Manufacturing projects rank first, with 2,003 of goes back to the many difficulties projects, followed by projects in servic es (957 projects), tourism faced by the sector, including the poor (521 projects), agriculture (373 projects) and fisheries (102 and retarded infrastructure, the poor projects). The projects in agriculture and fisheries together financing services and the scarce constitute 12% of all the projects, although these tow sectors are characterized by sustainability and the availability of foreign as water resources. In the area of well as domestic markets and by their bias towards the poor. infrastructure, the private sector focused, during the past period on implementation of infrastructure projects, which were financed by the public budget or by foreign assistance. Permitting the private sector to invest in communications is considered the first step that reflects a real contribution to infrastructure projects. However, notwithstanding the importance of this investment, there are only a limited number of job opportunities. In social services, such as health and education, the BOX 3.10: T HE ROLE OF ISLAMIC BANKS private sector began to operate in this field ever Islamic banks are characterized as being since the early 1990s. The number of private financial, economic and social corporations, which not only seek to increase their profits, hospitals now reaches 70, compared to 116 public but also consider themselves to be social hospitals, in addition to a large number of private projects, which make support to investment clinics. The number of private universities grew to subject to the existence of some social eight universities in the last decade. The private contribution of sorts. They also require work as sector also runs 162 schools throughout the country. an essential partner of capital and a source of sanctified gains, since money should not be Despite the significance of the role of the private allowed to acquire gains, unless it is sector in providing such services and their intermingled with real work. The social role of contribution in the creation of job opportunities, Islamic banks in Yemen focuses on goodwill their services are directed towards people of high and charity, with some benefit from goodwill income and these services are lacking a mechanism lending funds and the possibility of contributing to the collectio n of Zakat religious to provide some of these services systematically to duty and its distribution to its statutory outlets. the poor, who are incapable of affording their costs. The loans and credits of the commercial banks focus on financing and promoting of domestic and foreign commerce, which cause such credits to be characterized by short term and high 30 interest bearing. Therefore, craftsmen, industrialists and agriculturists resort to banks only when absolutely necessary, such as covering current production expenditures or upgrading production quality or facilities and then only to a limited extent. Obtaining such facilities requires different securities, especially collateral mortgages, which make the possibility of obtaining such facilities quite difficult for those with small enterprises. The situation is not much different for the Islamic banks, although they can be expanded and reinforced, within the existing financial resources available. The importance of the Islamic banks rests on their financing of small and micro enterprises, finding Islamic formulas for dealing with such projects and on the availability of resources that can be taken advantage of such as the returns from compulsory reserves. Among the reasons that prevent typical commercial banks and the Islamic banks from enhancing their roles in this respect are the absence of legal and regulatory procedures, which will enable them to regulate granting credit financing for small and micro enterprises, in addition to the large size of bad loans and the unfavorable way they are dealt with legally. Women take up a large percentage share of the work force in the private sector and with NGOs (28.3%), when compared with the Government sector and the public sector (9.3%). This is attributed to the large number of female workers in the agriculture sector, fisheries and grazing – notwithstanding that this is in the informal sector, which is estimated to come to 94.7% of the total number of female workers in the private sector and the NGOs. The percentage share of the female workers is lower in the rest of the activities, which are dominated by the private sector, such as manufacturing (17%), financial brokerage (16%) real estate and commercial projects (5%), wholesale and retail trade (3%) and hotels and restaurants (2%). The low participation of women in these activities is attributed to a number of factors, including the nature of work involved with the private sector, which requires specific skills and long hours, not to mention the privileges granted for such work, which the private sector prefers to grant to males only. Some entities also do not comply with the laws and legislation that grant women workers privileges and benefits, which thus results in limiting their participation in the labor market. Women, more so than men, are lacking in the capacities and skills required, due to the low levels of education amongst females and poor training and skills formation that is directed to women. Women workers also bear the double burden of reproduction and production, given the lack of institutions that support women workers, who are in the labor market, as some of them are compelled to leave their jobs and take on the task of rearing their children, whether temporarily, pending the growth of their children, or permanently. Therefore, Yemeni families prefer women to engage in professions like teaching, which is regarded as the most preferred vocation acceptable in the Yemeni society, which is followed by employment in community organizations and NGOs, which engage in activities that are related to serving women, children and the family. 31 CHAPTER 4: THE POVERTY SITUATION IN YEMEN 1. Introduction While human development indicators have clearly achieved noticeable progress during the 1970s and 1980s, due to significant rise in income especially in the 1980s, the 1990s –as a consequence of a number of domestic and external shocks- witnessed the dilation of poverty, where today it has become an economic and social problem that has troubled the Government, the society and the donors. Poverty is no longer confined to just income level or the ability to secure the minimum requirements of food, clothing or shelter, but it rather extends to include education, health and the other basic social services, which is what led to the emergence of the different dimensions of poverty. 2. Poverty in Yemen Three poverty surveys were conducted in Yemen in B OX 4 . 1 : W HAT IS P OVERTY AND W HO IS P OOR ? 1992, 1998 and 1999. However, it is impossible to trace Food poverty is insufficient income to the development of the poverty phenomena in Yemen by meet the basic essential food comparing the results of the three surveys because of requirements. Usually this need is determined by the cost of obtain ing the their non-comparability for methodological and technical minimum daily caloric requirements for reasons such as the non-availability of weights for the an individual. Absolute (upper) poverty 1992 HBS and the exclusion of seasonality elements in is insufficiency of income to meet the the 1999 Poverty Survey because of its implementation in requirements of food and non-food one-month period. The 1998 HBS is, therefore, needs, such as clothing, housing, educational, health and transport considered the base to be used in estimation of income services. According to the 1998 HBS, poverty and to carry out comparisons based on it in the the food poverty line is YR 2,101 per future. Nevertheless, the 1999 Poverty Survey provides a month per individual at the national large quantity of data and non-income indicators, and at level to meet the needs represented by 2,200 calories, compared to YR 3,200 the district level, which are helpful in analyzing and for the upper poverty line. Both poverty determining the dimensions of poverty, and in showing lines differ among governorates and the quantitative and geographical differences and between rural and u rban areas. disparities. The 1998 HBS showed that 17.6% of the Yemeni popula tion live under the food poverty line, whereas the percentage of the population who are incapable of obtaining all their food and non-food requirements (represented in food, clothing, shelter, health, education and transport) is 41.8%. These percentages reflect the gravity of the situation and living conditions of approximately 6.9 million people, who are suffering from the different dimensions of poverty, not to mention the other large numbers that are living close to the poverty line and are vulnerable to being dragged in to below the poverty line, besides the high poverty gap, which is estimated at about 13.2% and the severity of poverty, which amounts to 5.8%. Poverty and its development are not just seen through BOX 4.2: VOICES OF THE POOR poverty lines alone, but they could also be assessed "75% of the poor pointed out that their through the use of several social and economic living conditions are increasingly getting indicators. While economic growth and decline in worse from year to year, and that the population growth have helped in increasing real GNP income that they are getting from their productive assets and the proceeds of per capita from YR 31,775 in 1995 to YR 46,159 in such assets are very low". 2000, by an average growth rate of 7.7%, which could The Voice of the Poor, October 2000 suggest improvement in the standards of living, if equity in the distribution of development benefits is assumed, nevertheless, real final personal consumption per capita did not achieve any significant growth, where average growth did not exceed 0.7%, thus rising from YR 27,709 to only YR 28,644 during the same period. The difference in the growth of GNP and the consumption indicator reflects the imbalance in the 32 distribution of the fruits of economic growth during that period and in favor of the high- income groups. This is supported by the data from the 1998 HBS which point to disparity in income distribution, whereby 10% of the population with the highest incomes take up 25% of total consumption expenditures, while at the same time, the 50% of the population with high incomes spend 73% of total consumption expenditures. Similarly, the 6% of the population with the highest incomes take up 20% of total consumption spending. Accordingly, the purchasing power of the higher income groups is almost 2.7 times that of the lower income groups, which reveals the disparity and the gaps in purchasing power between the rich and the poor. Ginni coefficient, which is used to measure income distribution, reflects this disparity by a value of 34.4 in 1998. Tax indicators, which reflect the policies that are being followed, show that there is an imbalance in the distribution of the tax burden among the different groups of the society. At the same time that businessmen in the industrial sector soak up 87.8% of the value added of the sector, in contrast to 12.2% for labor, the taxes paid up by wage earners can go up to 43% of the taxes on corporate profits. The revenue collected from taxes of the civil service employees is 71% higher than the taxes collected from the profits of the business sector and, while the profits of the business sector are higher by many times than the amount of wages paid to the civil service employees.

2.1. Poverty and Economic Growth The problem of poverty became very closely tied to poor economic performance and the domestic and external shocks, to which the Yemeni economy was subjected, especially during first half of the 1990s. This was generally reflected in a set of economic difficulties, such as the fiscal deficit, the Balance of Payments deficit, the inflationary pressures, the deterioration of the foreign currency reserves and of the exchange rate of the national currency, besides the administrative and organizational deficiencies. With respect to the period 1995-2000, which coincided with an average annual real GDP growth rate of 5.1%, and a population growth rate, ranging from 3.5% to 3.7% per annum, which implied an increase in the GDP per capita, the major part of that growth was realized in economic sectors and activities with limited forward and backward linkages, with the returns from such growth only in favor of capital intensive economic sectors, hotels, financial and insurance business, etc. During the same period, the agriculture sector was also confronted with changes that left their marks on poverty, with the production of cereals declining by an annual average rate of 3.5%, compared to an increase in cash crop production, which rose by an annual average of 9.7%, including Qat (5%). This indicates deterioration in the conditions of sustenance farmers and an improvement in the profitability of commercial agriculture. The disappointing economic growth in the 1990s, as a result of a number of factors, of which the most important were the absence of a B OX 4 . 3 : E CONOMIC P OLICIES clear development strategy, The economic policies pursued by the two parts of Yemen implementation of conflicting policies and prior to unification conflicted with each other, and both the reduction in investments, witnessed structural changes due to the unification notwithstanding the ambitious expectations process in the first half of the 1990s. This gave rise to of the FFYP, with regards to investments duplication and lack of clarity in economic policies, that were projected to amount to US$ 8.2 especially since the unified GoY adopted free economic policies and free market mechanisms, by which the billion, of which 73% was to come from Government was to abandon some of its functions, external sources, while it is worth noting leaving the reigns of economic leadership with the private that the investment climate in Yemen sector. These transformations led to features that left their during that period was not conducive for prints on economic performance and impacted on the effectiveness of policies, especially with respect to attracting local and foreign investments. economic growth, the labor market and the strategic The assessment of the FFYP shows that the sectors, such as agriculture and manufacturing. 33 share of foreign financing was only 36% of total investments, including investments in the oil sector, which is less than the 50% projected in the FFYP. The agriculture sector, which still represents the leading activity in the economy, considering its output which is estimated at 15.3% of GDP in 2000, and the job opportunities that it provides to 53% of the total labor force, and that three quarters of the rural population depend on the sector, besides the sector provision of a considerable part of their food requirements, is clearly and primarily subject to a set of natural and human determinants. Nonetheless, the sector managed to grow at an average 4.5% during 1990-2000, although productivity of the agricultural worker remains less than that of his counterpart in Saudi Arabia by fifteen folds and in Korea by seventeen folds and in Singapore by 62 times. BOX 4.4: NATURAL AND HUMAN DETERMINANTS OF AGRICULTURE Limited Cultivable Land: Cultivated land does not exceed 1.6 million hectares, which is 2.9% of the land area of the RoY, in addit ion to 2 million hectares of marginal land, which equals 3.7% of total land area. Scarce Water Resources: The rarity and scarcity of water is considered to be a major challenge contributing to the debility of the agriculture sector and to the spread of poverty in Yemen. Agriculture depends on rainwater, which irrigates 47% of the agricultural land, while 38% is irrigated from wells, 11% from spit - irrigation and 5% form springs. Yemen is exposed to drought and flood seasons. Fragmented Land Holdings: The cultivated area in Yemen is distributed between 1.2 million landholders, of which 60% are confined to the Central, Southern and Northern Highlands. These landholdings are distributed as follows: 20% have areas that are less than 2 hectares; 24% have areas that range from 2-5 hectares; and 5% have areas of 5-20 hectares. The fragmented and dispersed nature of landholdings is considered one of the impediments to the development of the agriculture sector, with landholdings that consist of one plot being only 16.3% of all landholdings, as compared to 58.4% consisting of 2-5 plots, 17.1% consist of 6-9 plots and 8.2% being landholdings of 10 or more plots. Population Growth and the Distribution and the Strain on Natural Resources: The rapid population growth over the last quarter of the 20 th Century started to put pressure on the natural environment and to threaten the ecological systems. The density of the population in the agricultural land has increased from 7 persons per hectare to around 11 persons during the period 1990-2000, which is reflected in the shrinkage of landholdings to smaller areas, that do not exceed 1.03 hectares per person, thus making agriculture unable to absorb the continuing population growth. Furthermore, notwithstanding the increase in water consumption, which jumped from 2.9 million m3 in 2000, the per capita share of water is continuously decreasing, as it came down from 240 m3 to 137 m3 over the same period. Rugged Topography and Limited Infrastructure: With the topography of Yemen having rugged features, this leads to difficulties for engaging in agricultural activities in many parts of the country, and to higher costs of agricultural production and marketing in the other parts. The area of rocky terrain and deserts amounts to about 30 million hectares. Tied to the amplitude of the country, the nature of its topography and the dispersion of the population is the poor and limited existing basic infrastructure, such as roads, electricity, water and sanitary drainage. Only a small segment of t he population that is served by the road network, and then only 10% of this network is paved. The public electricity grid is only accessible to 30% of the population, whereas only 57.4% of the population has access to potable water. Decline in productivity in the agricultural sector is attributed to numerous factors, of which the most significant are the use of antiquated techniques, the forms of ownership and fragmentation of landholdings, scarcity of water, the fluctuating prices, the pricing policy, the inadequacy of the inputs and support services, such as agricultural extension and research. Such factors have formed impediments to the dynamism of the sector with a direct impact on poverty. The low productivity in the sector was reflected in the wages of farm workers, where the monthly wages of laborers are 41% less than their counterparts in the manufacturing sector, 58% less than those in construction, and 67% less than hotel or restaurant workers. This disparity in the average wages, in addition to the high population growth, the characteristics of agricultural landholdings in Yemen have encouraged many people to migrate from the rural areas to seek work and to upgrade their standard of living. However, many of them were unable to fulfill their hopes in the cities and thus joined the ranks of the poor. The industrial sector, notwithstanding that both its mining and manufacturing sub-sectors contribute 41% of the GDP, only employees 4.5% of the total laborers in the national 34 economy. The extractive industries –more expressly oil and gas– come up with the lion's share of the output generated by all the industrial sector, with an estimated share of 88% of the value-added of the industrial sector. Manufacturing (excluding refining) witnessed fluctuation in growth due to the lack of a conducive investment climate. Nonetheless, it achieved an average growth of 5.2% in value-added during 1990-2000. This led to a stable contribution to GDP between 7.4% in 1995 and 7.2% in 2000. Such performance led to the inability to push for the achievement of sustainable growth and for the creation of job opportunities, aside from having a modest role in providing foreign exchange as a result of low manufactured exports.

2.2. Features and Characteristics of Poverty Poverty in Yemen takes on a rural attribute, especially as the Yemeni people are, to a large extent, mostly rural dwellers, despite the rapid growth of urbanization. The rural areas of Yemen embrace about 83% of the poor and 87% of those who suffer from food poverty, whereas 3/4 of the population in 1998 was rural dwellers. The percentage of the rural population who are poor amounts to 45%, as compared to 30.8% for the urban population, in addition to the wide gap and severity of poverty among the rural population, compared to that of the urban population. This attribute also shows that, according to the 1998 HBS, spending on food comes to about 54% of income in the urban areas, whereas it climbed to 67% in the rural areas, which reflects low incomes in the rural areas on one hand, and an even lower degree of spending on non-food requirements there on the other. TABLE 4.1: POVERTY INDICATORS IN YEMEN Total Rural Urban Food Poverty Line (YR/per capita/ per month) 2,101 2,103 2,093 Percentage of the Poor 17.6 19.9 10.0 Number of Poor People (millions) 2.9 2.5 0.4 Poverty Gap 4.5 5.2 2.1 Severity of Poverty 1.7 2.0 0.7 Upper Poverty Line (YR/per capita/ per month) 3,210 3,215 3,195 Percentage of the Poor 41.8 45.0 30.8 Number of Poor People (millions) 6.9 5.8 1.2 Poverty Gap 31.2 14.7 8.2 Severity of Poverty 5.8 6.7 3.2 Source: Estimates based on the 1998 HBS. In the same way that poverty is inequitably distributed between rural and urban areas, there is also an obvious disparity among the different governorates of the RoY, whereby half of the poor are concentrated in four governorates: Taiz, which has 18.7% of the total poor population; Ibb (with 16.2%); Sana'a Governorate (with 11.9%); and Hodeidah (with 10.2%). The highest poverty incidence rates are found in Taiz Governorate, where 56% of the population of the governorate is poor, followed by Ibb (with 55%), Abyan (with 53%) and then Lahj (with 52%). Poverty incidence is also high in Dhamar Governorate (49%), as well as Hadhramout, Al-Mahra and Shabwah (all with 43% of their respective populations who are poor), whereas the incidence is low in Aden (30%), Sa'ada (27%) and the Capital Secretariat (23%). The incidence is lowest in Al-Baidha (15% of the population of the Governorate). 35 FIGURE 4.1: POVERTY MAP IN YEMEN

2.3. Demographic, Social and Economic Characteristics of the Poor The findings of the 1998 HBS show many of the properties of the poor, which are similar, to a large extent, with the patterns that are observed in many other developing countries. The survey highlighted the following demographic characteristics: • A relationship between the family size and poverty, which is evidenced by the sharp rise in the incidence of poverty B OX 4 . 5 : H O W T H E P OOR S EE THE I MPACT OF P OVERTY ON T HEMSELVES among large families, with the The poor suffer from the severity of poverty in various forms, incidence of poverty declining to with a disparity in the effect according to their living conditions less than 1% in families and the factors that surround them. The views of the groups of poor people differed on the severest impacts of poverty, despite composed of 1-2 persons their unanimity, both males and females, on the most important compared to 50% in families of effects of illness, and the inability to meet the cost of treatment, 10 or more persons. The data the education expenses that deprive their children from education. also show an increase in the Hunger and malnutrition come in second place, in addition to the average family size in poor poor social solidarity amongst community members, and the emergence of family problems and break-ups. In different ways, families to 8.2 persons compared the poor expressed the impact of poverty on themselves, with to 7.21 persons for the national most men of the view that sickness is the most obvious and average, as well as an increase to important effect, exemplified by psychological ailments that 9.2 persons in poor families in indicates the severity of their suffering from being able to provide the needs of their families. Among such effects are being in debt, the urban areas compared to 8 as they are compelled to resort to borrowing to fulfill their food persons in the rural areas. requirements, medicine and any other essential needs, in addition • The dependency rate is high in to turning towards crime and deprivation, which is one of the poor families reaching 158, severest social consequence of poverty. The perceptions of compared to 111 for better-off women differed a lot as to the impacts of poverty on them, where they focused on the lack of money to meet their needs that families. The incidence and include processing of government transactions, such as for depth of poverty are also higher employment, and to afford the cost of transport. Women also in families that have a higher believe that poverty leads to early marriages for girls as a desire ratio of children to adults, where to reduce family size and to benefit from the dowries, while at the same time, it delays marriages due to the inability to meet the the incidence of poverty reaches cost of weddings. Women also pointed out that poverty affects 35% in families with more adults families severely, as they are compelled to sell or mortgage their than children, compared to 50% assets "If there is an illness a loan collateral might be in the of the families that have a ratio form of land", which in turn increases the risk of vulnerability to of children to adults between 2:1 worse forms of poverty. Poverty also leads to changes in the customs of the society, s uch as women having to go out to work to 3:1, and 66% of the families and engaging in work in the marketplace, which is viewed as who have ratio of 4:1 or more shameful in some societies. respectively. 36 • Families that have a head of household B OX 4 . 6 : L O W E DUCATION A TTAINMENT A MONG THE P OOR who is still of working age (26-64 years The poor are well aware of the importance and the old) have a higher rate of poverty, which necessity of education to imp rove their standard of living, considering that education provides them with comes to 43%, compared to 38% among qualifications and skills that allow them to obtain the families that are headed by a provider better job opportunities. Certain groups from the poor, who is less than 25 years old, and 39% which were visited in poverty pockets, confirmed the among families that have a head of lack of schools in their areas, or that the available household, who is more senior in age. schools were far away making it difficult for their children to enroll in them. The majority of the poor • There is a higher rate of poverty among people, however, stressed that despite the existence of families that have a widower as the schools for basic education they were unable to enroll provider, which is 43%, followed by the their children in them, because of their distant households that depend on a married locations, because they were coeducational, thus hindering the enrollment of girls or could not absorb provider (40%), and is lowest among all the children. They also believe that the absence or families headed by a divorcee. the lack of teachers is a reason for their children being • Results have shown the insignificance of deprived from continuing their education. The costs the head of household being a male or of education is also considered an obstacle, especially female, on the incidence of poverty, as the for families with many children “If someone has ten children he has a hard enough time feeding them, percentage of the poor, who are living in let alone get them in school". In additio n there are families with female heads of household, other reasons, such as the need for child labor. These does not exceed 5.4%, which reflects the factors affect women even more. division of the families, according to gender, for the population as a whole. The 1998 HBS results confirm existence of a strong link between poverty and the level of education. About 87% of the poor are among the groups that suffer from illiteracy or incomplete primary education, with the poverty rate among families that have an illiterate head of household high at 47.3%, followed by families with a head of household, who reads and writes or has completed primary education (38.6%), then the rate drops to 22% among the families with a provider who has obtained post secondary school education. In all, the rate of poverty among families headed by an individual with the highest educational attainment is 2.2%, compared to the poverty witnessed at about 95% among the families who are headed by a woman. Similarly, 86% of the poor families are rural dwellers that are headed by an illiterate individual. Poverty is further exacerbated and made more inclusive by the extent of inequity and disparity, which is aptly illustrated by low income levels, low productivity and seasonal unemployment, although most of the poor, in both rural and urban areas, are working. The 1998 HBS shows that the employment position of the head of households and the sector where they are employed, each has an effect on the occurrence of poverty. At the national level, 84% of the poor are in families with an employed head of household, as compared with 2.5% of the poor families with unemployed head of household and 13.5% of the poor families have non-productive head of household (housewife, students, handicapped, etc.).2 About 84% of the poor work in the private sector, of which 47.3% are engaged in agriculture, followed by services (35.9%) and then industry (16.8%). Workers’ remittances are a major source of income, with 8% of the population living within families that are recipients of such remittances, according to the 1998 HBS. The effects of these remittances are apparent through their role in reducing poverty, as the percentage of individuals who are recipients of remittances and who are living within poor families does not exceed 26%. In addition, such remittances represent 41% of the income for a million people in the rural areas and 39% of the income for 300,000 people in the urban areas. The findings also show that the most economically well off groups also benefit from foreign remittances even more so. 2 There are no differences in this type between rural and urban areas. 37 In Yemen, the number of income earners in each family is low, with the average number of employees in medium-sized families of 7.09 individuals not exceeding 1.84. Thus, vulnerability increases in those families that depend on a single income earner, due to the risk of illness or the loss of job by this single provider. Similarly, while there are one million sole income earners in their families, who have to provide for six million dependents, there are 200,000 families that do not have members engaged in productive employment, which means that there are a million individuals who suffer from chronic poverty. Similarly, a large portion of the population falls within groups that are vulnerable to poverty, due to the occurrence of natural, economic, and social shocks, such as loss of jobs, illness, old age, the occurrence of a drought, heavy floods, or any similar shocks. A simulation model for the different probabilities of the occurrence of any of these factors based on the 1998 HBS, shows that if one of these factors occurs and leads to a reduction of expenditures for each individual by 10%, the rate of poverty rises from 42% to 48.8% of the population (from 6.9 million people to 8.1 million people). The model also shows that in the event of a higher probability of occurrence of these factors causing a reduction of expenditure of each individual by 30%, this will then increase in poverty by a greater rate reaching about 65.8% at the national level, and even higher in rural areas, whereby two-thirds of the population would be living under the poverty line.

2.4. Causes of Poverty and the Factors Affecting the Probability of its Occurrence B OX 4 . 7 : C AUSES OF P OVERTY AS S EEN BY THE P OOR Poverty is considered the result of a set of All the male and female poor in the areas that were natural and human factors, domestic policies visited agree on four leading causes of poverty, and external factors that come together to including the lack of job opportunities that enable create an environment conducive to the them to earn livelihoods, the lack of ownership of occurrence and spread of poverty and the resources and assets, such as agricultural land. It was also apparent that the majority of these poor increase in its severity. However, while many communities depend on seasonal activities, which of the features of poverty resemble causes for reflect reduced job opportunities and the reduced its occurrence and expansion, it is still material returns, which keeps these communities in important to isolate the major direct causes a state of continuous need and destitute. The increase in prices and the scarcity of water resources which enhanced this phenomenon, and and drought come in second in rank, with respect to accordingly deal with the factors associated both males and females. Most men also gave similar with them as keys to remedying the problem importance to the poor productivity for limited and reducing its severity. Although the assets and resources possessed by the poor, such as features and characteristics of poverty their ownership of small landholdings, their vulnerability to catastrophes or to break up, as well reviewed in this chapter may not show the as the ownership of the means of production as a direct causal relationship of poverty, the result of their permanent struggle with the limited analysis of the linear regression equation resources, which they do possess that are inadequate undertaken using the 1998 HBS data (included to meet their sustenance needs. The majority of women, however stated that the size of the family is in the World Bank Poverty Update), has a major factor le ading to poverty, in addition to shown that most of these attributes are related illiteracy and the resulting inability to have access to to poverty at different levels, despite the job opportunities. disparities thereof between rural and urban areas. The equation derived the following results: • Large family size raises the probability of falling under poverty. • Families with a large number of infants and children have a higher probability of being poor whether it is located in rural or urban areas. • The probability of falling into poverty is reduced, with the head of the household being of an older age, which is even more apparent in the urban areas, whereas the probability increases in families headed by a widower or a widow. • Returns of education are high, whereby an assumed scenario shows that the elimination of illiteracy from the heads of households leads to the reduction in the poverty incidence by about 5.8% at the national level, by 6.4% in rural areas and by 3.7% in urban areas. 38 Completion of secondary school education leads to gains reaching 25% in rural areas and 42% in urban areas. The differences in such gains are attributed to the availability of greater opportunities in urban areas for skilled labor. There are also advantages that arise from a husband/wife that can read and write, compared to one who is illiterate, which can go up to 12% in the rural areas and 6% in the urban areas. • The employment situation highly affects the probability of falling into poverty, as the linear regression equation shows that the incidence of poverty is lower in families that are headed by a businessman or self-employed person. Similarly, there are really no systematic advantages for employment with the private sector in urban areas. The probability of being poor increases in families that are headed by a worker in the private sector compared with those headed by a worker in the public sector. Current transfers, especially from Yemeni expatriates, help in avoiding poverty. • The equation shows that unemployment is not considered an important factor affecting the probability of being poor in Yemen in both rural and urban areas. People in the rural areas cannot stay without work, although many of them face underemployment. Underemployment is considered more important, as the 1999 Labor Force Survey shows a rise in undisguised unemployment to 11.5%, compared to underemployment of about 25.1% of the labor force. Underemployment is noticeable in the rural areas, at 27.5%, compared to 19.7% in the urban areas, and among males who represent 78% of those who are facing underemployment. Analysis also shows that underemployment in the agricultural sector, turns into undisguised unemployment in urban areas, through migration out of the rural areas and over a number of years. • Geographical location is an influential factor in raising the probability of being poor, where there are large variances in the per capita share of expenditures among governorates, although numerous attributes of the household were isolated. For example, and according to the 1998 HBS data, a family in the Capital Secretariat is expected to spend 16.2% more than its counterpart in the urban areas of Ibb Governorate. This relationship highlights the importance of dealing with the regional properties rather than dealing with the attributes of the households, when setting polices for poverty reduction, which will help in enhancing pro-poor policies, such as investing in infrastructure. B OX 4 . 8 : T HE I MPACT OF G EOGRAPHICAL L OCATION ON P OVERTY The analysis of the results of the 1998 HBS showed the importance of the geographical lo cation in determining poverty. The “Voice of the Poor” study also showed differences in the ranking and importance of the causes of poverty at Governorate and even district levels. Despite the existence of general and major causes of poverty, causes of poverty clearly differ according to the geographical features of communities. In the border areas and some of the coastal areas the return of the Yemeni workers, as a consequence of the Gulf War, without or with scanty resources, led them to the pitfalls of p overty. In the agricultural areas, such as Sa'ada, Hajjah, Shabwah, Taiz and Al-Baidha, drought was noticed to be the influential factor in the poverty of these communities with the decline in job opportunities and productivity. In the urban and semi-urban areas, the major causes of poverty were exemplified by unemployment, lack of job opportunities and the lack of resources, with differences in the ranking of these causes, even within a single district. 3. Human Poverty Although the overall poverty line and its indicators take into consideration, the basic needs of the individual and his family, human poverty shows close semblance of poverty, through numerous social indicators, such as those related to population like fertility, infant and maternal mortality, and other indices like illiteracy rates, enrollment in basic and secondary education, access of people to primary health care and potable water, in addition to the percentage of the population who have access to electricity. All these indicators reflect a low level of human development in Yemen, with a Human Development Index (HDI) of 0.468, which ranks Yemen the 133rd among the 162 countries that were classified in the World Human Development Report for 2001, in accordance with the HDI for 1999, thus placing Yemen among the least human-developed countries. Yemen was also ranked 70 among 90 39 countries, with respect to the Human Poverty Index (HPI) with a rating of 42.5, which is a composite index of human deprivation. TABLE 4.2: COMPARISON OF S ELECTED INDICATORS FOR YEMEN AND THE GROUPS OF D EVELOPING AND LEAST-D EVELOPED COUNTRIES Indicator Yemen Developing Least Developed Total Males Females Countries Countries Life Expectancy at birth (years) 61.1 58.9 62.9 64.5 51.7 Infant Mortality (for every 1,000) 67.8 85.0 65.0 61.0 100.0 Child mortality (< 5 years) for every 1,000 94.1 112.0 97.0 89.0 159.0 Maternal Mortality (for very 100,000) 351 - 351 Fertility 5.9 5.9 3.1 5.4 Illiteracy (15 years and older) 55.7 31.2 73.5 27.1 48.4 Enrolment in Basic Education (%) 62.0 77.2 43.9 Health Coverage (% of total population) 50.0 .. .. Electricity Coverage (% of total Population) 30.0 .. .. Access to Safe Water (% of total population 40.0 .. .. Yemen for 2000 and latest date for comparator country groupings. It is noted that social indicators in Yemen, in addition to being low, also reflect a consistent pattern of gender differences. Numerous measures, towards achieving equitable distribution of the fruits of development and greater fairness between males and females, have helped in narrowing the gender gaps in many areas. The gap in life expectancy has risen in favor of females by 106.6%, and the educational gap, represented by enrollment in basic education has narrowed to 52.8%, and in secondary education to 35.3%, in addition to the increased participation of women to 22.7%, the percentage of women employees to total employees to 25.7%, which has helped in reducing the gender gap in the labor force to 31.1%. The diminution of the gender differences leads to improvement of the Gender Development Index (GDI) reaching 0.410 in 1999, according to the World Human Development Report for 2001, ranking Yemen 131st country among 146 states classified accordingly. The GDI for 2000 is estimated to be 0.428, in contrast to 0.129 for the Gender Empowerment Index (GEI). This last index showed a slight increase in two of its three composite indicators, with the percentage of positions occupied by women in the administrative apparatus of the State rising from 8.4% in 1994 to 15.8% in 2000. The indicator for employed women in professional and technical positions showed a paltry improvement, despite continuing to stay at an exiguous percentage of 1.2%, when compared to about 1.1% in 1994. The share of the parliamentary seats, numbering 301 in total, occupied by women during 1997-2003 were 2 seats, with a percentage of representation that is very low and not reaching even 1%. In general, most of the indicators still reflect a pressing need to escape the limitations of access to basic services, in rural and urban areas, for both males and females, and for the rich and the poor, with priority to be given to reducing the three gaps cited-above. For example, education, which is a basic requirement for economic and social development and an instrument for social vivacity and for poverty alleviation, is still limited with illiteracy rates reaching 31.2% among males and 73.5% among females, besides basic education still unable to absorb all children of schooling age (6-14), despite being compulsory, the enrollment rate not exceeding 62%, and 43.9% among females. The percentage is less than 28% in the rural areas. In secondary education, the percentage of females enrolled is about 25% of all enrolled students, and even less in the rural areas reaching only 14%. With regard to equity in access to enrollment in basic education, there is a bias against the poor, as the 1999 Poverty Survey results show that the enrollment rate for poor families amounts to 62.9%,compared to about 70.2% for non-poor families. The bias in favor of males is more apparent, at 73.45% for poor families and 80% for non-poor families, in contrast to a lesser percentage of about 51.7% for poor families and 59.8% for non-poor families. If we add to this the difference in the increase of the rate for dropouts amongst poor families and 40 between females due to the inability to shoulder the costs of schooling or to help the family in meeting the cost of living or for other reasons, the gap then is bound to be even greater.3 Deprivation from education and the low income pushes the poor families to direct their children to the labor market, which gives rise to child labor, or to engage in begging. This is a clear transgression on the rights of the poor and of children, whether it was their right to live dignified lives, or their political and legal rights. Child labor is estimated to have reached 158,834 males and 167,774 females, or a percentage of 5.1% and 17.2% respectively. The health situation is not any better, B OX 4 . 9 : H EALTH AND P OVERTY although the available data show an Spread of illiteracy a nd rise in the poverty incidence lead to the improvement in the health indicators spread of diseases and illnesses and the deterioration of and a rise in the coverage of health environmental conditions. Poverty, malnutrition and poor health services to only 50% of the awareness also work to raise infant mortality rates (67.8 per 1,000), mortality rate for children under five years old (94.1 per 1,000), population in 2000, of which only and the suffering of most children due to underweight and stunted 25% is in the rural areas, due to the growth. The 1998 HBS showed that 10.7% of average expenditures partial presence of primary health are allocated for the purchase of tobacco and Qat, in contrast to care there. The modest growth in only 2.3% of total spending allocated to heath care and services. health facilities and cadres with the Despite this, however, some studies and reports indicate that the citizen bears 75% of the overall heath care costs compared to 25%, ongoing campaigns for awareness being borne by the Government. Confronted with the increase of and immunization during the past poverty, reduced purchasing power of people, and absence of three years contributed to health insurance or health security, the reduced ability of the improvements in most of the health people to bear health care costs leads to rise in spread sickness and and demographic indicators. afflictions and the gravity of their repercussions. The low coverage and poor quality of health services also reflect the lack of equity in its distribution between the different governorates and between the poor and the rich as well. In terms of differences between the governorates, the 1999 Poverty Survey shows that one doctor in Al-Jouf Governorate has to treat 82,453 people, whereas this ratio in Aden Governorate does not exceed 1,643 persons and 1,500 persons in the City of Sana'a, In terms of the availability of health services for the poor and non-poor, the Survey shows that the percentage of families that have access to hospital service reaches 55.5% of the non-poor families, whereas this percentage does not exceed 14.2% for the poor families. The same bias in favor of the non-poor also emerges in the rest of the indicators, such as the clinical services (34.85 for poor families and 72.2 % for non-poor families), the health unit services (36.2% for the non-poor families and 29.3% for the poor families), the maternity and childhood centers (21.7% for non-poor families and 15.6% for poor families). Poor quality of the service and the lack of confidence in health facilities at the village and district levels, compel the inhabitants in those areas to bypass the primary health facilities and resort to the Government health facilities at governorate or central levels, which adds to the strain on the central services and the beneficiaries have to bear the high cost, brought on by the cost of transportation and waiting, and in many cases the majority of the patients have to even bear their illnesses, if it does not get worse and more serious, especially for women that are unable to move from one area to another to have access to health services without having a male relative as accompaniment (mahram). A large percentage of the Yemeni population also suffer from poor potable water supply services and a limited sanitary drainage networks in urban areas and complete absence in rural areas, which leads to the spread of diseases and illnesses, which are natural outcomes of poverty. Studies have shown an increase in the number of beneficiaries in the cities from 3 Group observation studies indicate that an average of 8% dropout from basic education every year, which implies that around 270,000 students in the school year 2000/2001 have left to join the number of non-enrolled children who are outside the educational system and the illiterates. 41 about 2.0 million in 1995 to 2.9 million in 2000, which is an average growth of 6.7%, which is what led to the rise in water consumption from 57 million m³ to 70 million m³, with an average growth rate of 4.2%. In the rural areas, the number of beneficiaries of water supply projects has grown from 6.8 million people in 1995 to 7.7 million in 2000, with an average growth rate of 2.5%. This led to an increase in the amount of consumed water from 270 million m3 to 306 million m3 , with an annual average growth of 2.5%. As a result, the coverage from public water supply networks in the cities roe from 53% in 1995 to 64% in 2000, and the coverage of water supply (pipes, wells and surface waters) throughout the RoY rose from 55% to 59%. Notwithstanding this improvement, disparity between the rural and urban areas, or among the governorates still exists. The 1999 Poverty Survey shows that families that have access to safe potable water (pipe network) reaches 98.2% in the Capital Secretariat, 81.4% in Aden Governorate, while it does not exceed 11.6% in Sa'ada Governorate and 3.1% in Al-Jouf Governorate. Among the poor and non-poor families, the data shows a very slight difference, as at the same time the coverage rate for the non-poor families reaches 81.6% in the cities and 22.3% in the rural areas, we find that it amounts to 79.2% for poor families in the urban areas and 20.2% in the rural areas. In sanitary drainage, there was a large expansion of the public networks for sanitary drainage in the cities, with the number of connections increasing at an annual rate of 19% during 1995- 2000, thus raising the number of beneficiaries from 448,000 to 1.1 million people over the same period, a total increase of 152% and an annual average growth of 20.3%. As a result the coverage increased from 56% to 66% in the major cities, although this did not reach 6.2% of the population of the country. However, the rural areas remained deprived of sanitary drainage services, except the noticeable increase in the number of houses that use a closed pit as a form of sanitary drainage. This is what led to the rise in the number of houses that have some kind of sanitary drainage from 17.1% in 1994 to 19.1% in 1999. At the governorate level the large disparity can be seen from the percentage of the families that have some form of sanitary drainage which reached 98.5% in 1999 in the Capital Secretariat and 97% in Aden, while the percentage did not exceed 12.5% in Hajjah and 9.1% in Al-Jouf. It is clear that the disparity is in favor of urban areas, major governorates and major cities in the provision of this service, however the bias in favor of the non-poor families is less severe, as the percentage of the non-poor families that have some method of sanitary drainage comes to 88.3% in the cities and 21% in the rural areas, as contrasted with 77.3% for the poor families in the cities and 14% in the rural areas. The electricity sector also witnessed an improvement of services, and the installed capacity for electric power rose from 693 megawatts in 1995 to 886 megawatts in 2000, with an annual average growth of 5%. This led to an increase in the amount of dispatched electricity by an annual average growth of 5.6% and an increase in the number of beneficiaries connected to the national grid from 524,000 consumers to 800,000 during the same period, or an increase of 8.1% per annum. This is reflected in the coverage rate of the national public grid rising to 30%, and accordingly an increase in the coverage rates from the different sources of electric power 45%. Nevertheless, this improvement does not take into consideration narrowing the disparity gap and the need for equitable distribution of electricity service among the different regions of the RoY. The 1999 Poverty Survey shows a clear disparity in the provision of this service among the governorates on one hand, and between the poor and the non-poor families on the other. While coverage reaches 98% in the Capital city and 96% in Aden, it does not exceed 25% in each of Sa'ada and Al-Mahweet and 14% in the Governorate of Al-Jouf and 16% in the Governorate of Hajjah. The bias in favor of the non-poor families is also apparent, where the availability of electric power for such families in both rural and urban areas reaches 92.7% 42 and 27.5% respectively, as compared to about 82.3% and 21% respectively for the poor families. Although roads are considered the lifeline of economic activity and for improving the standard of living, length of roads has increased from 5,052 km of asphalt roads in 1995 to 6,586 km in 2000 and from 2,360 km of paved roads to 3,915 km, with an annual average growth rates of 5.5% and 10.7% respectively, aside from the 60,000 km of dirt roads. This increase, given the high population growth (3.5%), the economic growth of 5.5%, and the commodity imports of 6.3% are considered to be limited, and rather extremely low, when considering the high demand for road service, the dispersion of the population and the distances separating production from consumption areas. The density of the roads, estimated at about 11 km for every 1,000 km2 of land area, clearly shows the low coverage rates which is also reflected in the low percentage of families that have access to paved roads not exceeding 25.4% throughout the country. This situation is a primary obstacle for the economic growth and improving the living conditions in the regions and governorates, especially the remote and distant areas. This limitation is not confined to the availability of roads in their various types, but also extends to show a clear disparity in their distribution between rural and urban areas and among the governorates. The 1999 Poverty Survey shows that the families that live near to paved roads reaches 81.4% in the urban areas, whereas this percentage does not exceed 7.5% in the rural areas. The percentage of families that are linked to paved roads comes to, at its highest, in the Capital Secretariat, 95% and 70% in the Governorate of Aden, whereas it does not exceed 6.2% in the Governorate of Sana'a, and 4.4% in the Governorate of Hajjah and 1.7% in the Governorate of Al-Jouf. As a result, areas of agricultural production, where the majority of the population dwells, are lacking this service despite its importance. 4. Poverty and the Environment The increase in population and the spread of poverty lead to a strain on the natural resources, in general, and on soil, vegetative cover, and water resources in particular. This is paralleled by water denudation of land that accompanies floods and increasing neglect of rainfed agricultural land because of its poor returns. The expansion of urban and industrial centers at the expense of the natural environment, the trend towards irrigated agric ulture and the costs associated with the use of organic and chemical fertilizers and pesticides increase the problems of water pollution, which in turn leads to the deterioration of the local ecological systems and the expansion of desertification, besides the negative impact on the climate changes and the increase of acid rains. The 1995 Environment Action Plan identified four major sectors, in which critical environmental problems that warrant to be remedied in the short and medium term. These four sectors are water, land resources, natural sanctuaries and waste management. Neither this Plan, nor the measures that came with it, linked the environmental problems in these sectors and the effect of environmental degradation on poverty in both rural and urban areas. In the water sector, the most obvious environmental problems are represented in the depletion and pollution of the water sources for different reasons, of which the most important are the excessive mining of underground water, insufficient recharge of water aquifers and pollution of underground water because of the permeation of wastes from garbage dumps or polluted waste water that are returned to underground basins in some of the oil extraction operations. Scarcity of water adversely affects the poor, as they are compelled, in the rural areas, to stingily use water, especially the aged, children and women, besides leading to the gradual loss of agricultural land and the extinction of livestock when severe droughts occur. Since women are the providers of water for domestic use, they are compelled to have to cross long 43 distances for this purpose, in addition to their responsibilities of grazing livestock, which might compel women to go to distant areas during droughts, which in turn, leads to overgrazing rangeland. All of that could also raise the rate of miscarriage among women. The depletion of underground water, especially in the coastal areas, leads to the salinity of wells, thus making the surface waters semi-saline and the poor are compelled to use such water for drinking. In the urban areas, where the poor, to start with, live in communities that do not have potable water, and do not access to proper basic services, they resort to pay large sums of money for water, which increases their financial burdens. Poor women, in both urban and rural areas are also compelled to use non-potable water for washing dishes and clothing or even for cooking, which affects the health conditions of their families, and thus decrease their productivity, and exposes them to severer poverty situations. With regard to land resources, the B OX 4 . 1 0 : T HE E F FECTS OF P OVERTY ON THE environmental problems are evident in soil E NVIRONMENT AND N ATURAL R ESOURCES erosion, loss of vegetative cover, deterioration The relationship between poverty and the environment is complicated, due to fact that the of agricultural land and rangeland and loss of poor are essentially reliant on the environment for such areas due to the expansion of their livelihood. At the same time, they are affected construction. Agricultural land in different by the methods by which environmental resources areas of Yemen is subjected to deterioration are exploited. Since natural resources, even if they due to numerous factors, of which the most are renewable, are usually limited and susceptible to deterioration, the improvement of environmental important are the rapid runoff flow of water in management and regulation of the management of the valleys (Wadis), sandstorms and the natural resources leads to benefits for the population excessive mining of underground water, in and to the poor in particular. It must be emphasized addition to the long successive drought that poverty does not necessarily lead to environmental deterioration, since the linkage periods. Desertification of agricultural land between both of them is complex and require an ranges from 3-5% per annum, whereas the accurate assessment. Population growth also does area of deteriorated land due to soil erosion is not necessarily lead to environmental deterioration, estimated to be 12 million hectares and although this might be so, in the beginning, with another 3.8 million hectares due to salinity. population growth, but what happens after that is The situation is further worsened as a result of more subject to the policies. the sand dune encroachment, which only exacerbates the desertification problem. The adverse effects of the deterioration of land resources and desertification in the rural areas are more apparent than in the cities because of the dependence of the poor on the land for their livelihoods. Women who are engaged in gathering wood and grazing are especially affected as such. Land area allocated for cultivation of cereals B OX 4 . 1 1 : E NVIRONMENTAL H E A L T H has dwindled down from 787,000 hectares in The number of illnesses due to the diseases that are communicated by polluted, swamp, or stagnant 1995 to 671,000 hectares in 2000. waters, and also as a result of the accumulation of Productivity of the hectare has also declined garbage from houses. The number of reported typhoid during the same period from 1.68 tons to cases have increased throughout Yemen, except in 1.62 tons for wheat, from 0.96 tons to 0.95 Taiz, Hajjah and Amran Governorates, from 7,811 tons for sorghum and maize, from 1.29 tons cases in 1998 to 8,287 cases in 2000, with the continuation of the spread of schistosomiasis, with to 1.14 tons for barley and finally from 1.3 17,000 reported cases in 2000 . tons to 1.14 tons for legumes. With respect to the natural sanctuaries and ecological bio-diversity, the varied topography of the country has helped Yemen to find a rich bio-diversity in the mountain and coastal areas and in its islands spread throughout the Red Sea and the Gulf of Aden. The Socotra Archipelago is matched, in terms of its importance and the diversified vegetation and animal life, by the Jalabajous Area, where an integrated plan has been drawn up for identifying areas and land belts for a number of protected land and marine sanctuaries in the area. In 2000, the Utama Region has been proclaimed a protected natural sanctuary. There are two additional projects for declaring Jabal (Mount) Bara'a and the Houf Forest as protected natural zones, in view of their representation of what remains from ancient tropical rainforests. Similarly, 44 preparations are underway for a project of two protected marine natural zones in the Island of Sakha and the Lake of the Volcano Khourshouran in Bir Ali area in Shabwah Governorate, in addition to making the Sharmat-Jathmoun Coastline a protected zone for sea turtles. B OX 4 . 1 2 : B IODIVERSITY IN Y E M E N The two major environmental problems in this field are There are 3,000 species of plants in exemplified by deterioration of natural sanctuaries and Yemen on land, of which 10% are loss of biodiversity, especially due to the poor exclusive for Yemen, whereas there are environmental awareness and control. Natural 850 species in the Island of Socotra alone, of which 254 species are exclusive to the sanctuaries witness overgrazing, especially camel island. There are also 28 land animal grazing for the Al-Shoura trees, in addition to firewood species that are affiliated with 24 families, gathering. Coral reefs and marine life are in general also as compared to 365 species of birds of threatened by the use of ground dragnets in fishing or which 13 are exclusive to Yemen. There the use of explosives, or even by land fills of coastal are also 118 species of reptiles and amphibians, compared to 3,700 species of areas, expanded construction, pollution from chemicals terrestrial invertebrates and more than that enter the sea with floodwaters and from the wastes 3,400 insects. With regards to the coastal of electric power generating stations. The first problem animals, the roving animals constitute 139 adversely affects the poor in the rural areas more than it species and the sponges 8 species, of which five are in Socotra and three are in does in the urban areas, where the effects are confined the Red Sea. The coral reefs in total to the loss of the aesthetic beauty of the natural constitute 200 species. There have been sanctuaries, such as the distortion or pollution of the 62 species of marine birds recorded of coasts, which, in turn, affects the income of which 14 are exclusive to Yemen and 70 beneficiaries of the environmental resources attractive species in Socotra of which six are exclusive to the island. There are 416 to tourists. The second problem, despite that it is still species of fish in the Red Sea and 169 limited, could however expand and thus make the species in Socotra and 62 species in the country lose the benefits of bio-diversity and create Gulf of Aden, in addition to 40 species of significant adverse effects on the environment. cartilaginous fish. TABLE 4.3:TYPES OF COOKING FUEL USED BY THE POOR Cooking Fuel Urban Rural Total Total Food Total Food Total Poverty Food Poverty Poverty Poverty Poverty Poverty Wood or coal 49 43 39 33 40 33 LPG 26 17 28 22 27 20 Kerosene 50 44 30 25 37 31 Electricity 35 30 33 26 33 26 Others 13 10 37 33 27 24 For waste management, there are five environmental problems of high priority: • Disposal or treatment of sanitary wastewaters and their adverse effects on rural and urban areas alike. • Disposal or recycle of solid waste, which is a more serious problem in the cities and adversely affects poverty in the rural and urban areas alike. • Lack of any management for dangerous wastes/toxic wastes and the absence of any monitoring at the inlets into the country, through which substances that, in the long run could lead to the deterioration of natural resources and increase the severity of poverty in rural and urban areas, besides the harm they could bring to the population in general. • Mismanagement of hospital wastes, mainly in cities, and could affect total population. • Abuse of pesticides and chemicals in agriculture, in general. This is an environmental problem, with its adverse effects originally in the rural areas, although the agricultural products, especially Qat, are consumed in larger proportions in the urban areas, and thus they affect the population as a whole. The marine and coastal environment are accorded second priority, as they are subjected to deterioration and pollution from land or marine sources, although most of the components of this environment are still clean and have not yet been damaged significantly by human activities along the whole coastline and throughout the islands. Fish production has risen from 45 86,000 tons in 1995 to about 135,000 tons in 2000, which is an average growth of 9.4 % over the same period. The major problem, which increasingly exacerbates the poverty problem among the fishing communities, is exemplified by excessive fishing by use of sea ground drag net boats, which have increased in number over the past few years, and which have harmed the reserves of marine life of high commercial value, such as shrimps and cuttlefish. These boats have also harmed the undersea natural refuges and coral reefs. The entry of large numbers of fishermen has led to excessive fishing in some of the coastal fishing areas, such as those for rock lobsters, and this has led to the depletion of this resource and the fall of the productivity of one fisherman units of fish per day to less than 20%, and for cuttlefish productivity to about 12%. The absence of monitoring and control systems exposes the fishing areas to pilferage by fishing boats that are not licensed or the abuse of fishing licenses, especially in the Gulf of Aden, Socotra Island and within the territorial waters and especially the economic waters. The lack of control that led to the misuse of licenses issued for pet fish has also contributed to the destruction of coral reefs. This is also the case for diving. The filling of the coastal areas and construction of tourism villages is undertaken without considering environmental assessments leading to heavy environmental damage and to depriving fishing communities from income sources and thus exacerbating their poverty. In the last few years, attention was accorded to environmental changes due to the increase of toxic gaseous emissions with the increasing use of different fuels, especially diesel, and the rise in the number of transport vehicles, whereby the consumption of fuels in 1999 reached 3.3 million tons, of which 29% was gasoline, 36% was diesel, and 29% heavy fuel. The emissions from cement plants exceed 90% of all the industrial emissions as local production of cement increased from 1,089 thousand tons in 1995 to 1,494 thousands in 2001, while the carbon dioxide constitutes 33.6% of the gaseous heat occlusion arising from agriculture. The gradually increasing temperatures leave their different impacts on agricultural production and bring about plant and livestock diseases that raise the risks in agriculture, especially since Yemeni farmers do not have the appropriate ways of protecting their crops from such changes. This also changes the climate, which, in turn, works to gradually change the characters of the climatic zones, in keeping with changes stemming from global warming and the degree of displacement to current climatic zones and also causes changes in the types of plants and the vital ecological systems. In Yemen, climatic changes can lead to the displacement of the dry tropical climate prevalent in the coasts tens of kilometers into the interior, and thus have an effect on the climatic features of the western and southern slopes, which will bring about the rainfall, and push this climate towards the arid desert climate; or the humid tropical region could extend northward, which will increase the amount of torrential rain that falls on these slopes and the other areas, and thus increase the probability of flooding towards the west, while improving the climate in the plateaus and highlands and the eastern regions, due to the increase of rainfall. Consumption of water is expected to increase, due to the increased evaporation and the increased human, plant and livestock needs for water, in view of he rising temperatures. The productivity of current agricultural crops will go down because of the rise in temperatures, besides the fact that the present irrigation systems cannot control flooding and thus the risks of land erosion by water, which Yemen faces now will increase, due to the increased sloping of the surface. 5. The Social Safety Net The social security system began to be implemented in Yemen just recently, yet, the idea of establishing a social safety net (SSN) emerged in order to reduce the deflationary and negative effects on income and employment and the standards of living, which coincided with the implementation of the EFARP and the reduction in government expenditures on programs directed towards the social protection in general, especially Government subsides for basic commodities and services (wheat, wheat flour, electricity, petroleum derivative products, transport, communications, etc.). These subsidies were replaced by a set of less costly social 46 programs, which were directly aimed towards protection of the poor groups. Accordingly, the SSN in Yemen consisted of two major components: • The first component represents programs and mechanisms that were set up as part of the requirements for the social infrastructure that aims to enhance social solidarity and to secure social equilibrium. This group includes, primarily, the civil and military service pension schemes. • The second component represents temporary programs and mechanisms that aim to confront the adverse social and economic effects on the poor and limited income groups. This group includes the funds, programs and projects, which work to provide ownership of productive assets and basic services and to create temporary job opportunities. The most significant of these programs include the Social Welfare Fund (SWF, 1996), Social Fund for Development (SFD, 1997), Public Works Project (PWP, 1998), Agricultural and Fisheries Production Promotion Fund (1993) and finally Social and Family Development Programs, Handicapped Programs and Rural Development Programs. It is worthwhile to mention that there are no clear criteria that set out the components of the SSN and the instruments for including or excluding some of the activities within the SSN. Each of the SSN units carries out its duties and seeks to achieve its objectives through any of the following orientations: • Provision of social protection to the civilian and military subscribers in the social security schemes, and their protection in their senior years, or upon illness or injury during work. • Provision of cash grants and assistance to people who are unable to earn a living. • Carrying out programs and projects that aim to give access to ownership of assets (know- how or material assets), creation of job opportunities or provision of basic social services. • Support productive activities in agriculture, fisheries and livestock grazing.

5.1. Social Security Schemes Although the social security schemes are one of the elements making up the social security system, whether in terms of risk coverage and the targeted groups, or in terms of their long duration. However, they partially differ from other elements of the SSN that are of a temporary nature, due to their independent institutional existence, with their own financial resources and their own laws and regulations. The situation and performance of the pension schemes are subject to shortfalls and inefficiencies, which were adversely reflected in the social and financial viability in both the medium and long term. A large number of the workers in the formal private sector – not to mention those in the informal sector – are not covered by the pension schemes, as the coverage rate in the private sector is only 30%. The insufficiency of the retirement pensions to maintain a standard of living that is proximate to the poverty line on one hand and the lack of coverage for unemployment or illness on the other are two aspects of basic shortfalls, which these schemes suffer from. The schemes also reflect a number of deficiencies in their financial structures due to the continuous decline in their current revenues against a continuous increase in expenditures,4 which threatens their ability to continue even in the medium term. The investment programs of the pension schemes focus on investment in treasury notes and are not directed towards real production areas, which have a positive effect on increasing economic growth and reducing poverty.

5.2. Programs Coinciding with the Economic Reform Program

5.2.1. The Social Welfare Fund (SWF) Through the provision of cash assistance to the needy – who were identified by the Law- the SWF aims to effectively contribute to reduce the burdens of poverty and lift suffering of the 4 This is despite the huge jump in revenues that resulted from the new law for social security. 47 poor, especially with the lifting of the subsidies to prevent them from feeling lost and dependent on begging or depravation. Despite the increase in the number of beneficiaries to about 450,000 families in 2000, compared to 50,000 families, at the time the SWF was set up in 1996, this number is still far from the desired coverage of all the poor, who are estimated at 835,000 households in 1999, thus the SWF covers only 54% of the needed coverage. The shortfall in the coverage reflects the various difficulties faced by the SWF and the modest level of its current institutional capacity. The SWF is also confronted by difficulties in B OX 4 . 1 3 : C ONTRIBUTION OF G RANTS TO P ROTECT applying the income criteria for determining and THE L IVELIHOOD OF THE P OOR The assessment of the contribution of the targeting the poor. This is due to the existence of a assistance of grants in protecting the large segment of the population that is close to the livelihoods of the poor could be undertaken poverty line and the difficulty of determining the by measuring the indicator for the sufficiency extent of non-sustenance below the poverty line, in of funds paid out, which shows that the addition to the dispersion of most of the poor in amount actually paid only represents 5.1% of the minimum level of the absolute poverty extremely remote areas that are difficult to reach. line, for the cases that receive YR 1,000 per The SWF also excludes broad groups of poor, month, about 6.1% for the cases receiving YR whose income is less than the minimum level of the 1,200, about 7.2%, 8.2%, 9.2% and 10.2% for poverty line, because it more than the maximum the cases receiving YR 1,400, YR 1,600, YR 1,800 and YR 2,000 respectiv ely. This level set by the Fund for eligibility of assistance, at indicator reflects the insufficiency of the YR 2,000, which is a large group of employees and assistance provided to poor families, as well people in retirement, or due to the requirement of as the wide span between these amounts and not having any other income, such as small farmers, the average household expenditures. wage earners (especially working on daily wages). The distribution of the assistance of the SWF to the governorates is not consistent with the level of poverty in each of the governorates because of the lack of adherence to the distribution criteria for poverty targeting in some of the governorates due to the influence of some of the social dignitaries or due to other considerations Field studies show problems in registration of beneficiaries that are entitled to assistance and in the mechanism for handing out the amounts set for the beneficiaries, which in many cases, are subject to deductions for intermediaries and others.

5.2.2. Basic Services, Creation of Job Opportunities and Ownership of Assets Program This inclination is basically manifested by two primary programs, which are the SFD and the PWP. Both programs provide a form of indirect support that focuses on productive employment of unemployed capacities, through the establishment of small public projects for basic physical and social infrastructure, which are labor intensive and provide pubic social services (education and health), especially in the poor urban neighborhoods and rural areas. Since both of these programs direct a significant share of their activities towards setting up and providing basic social service projects, which benefit all the population, they are not included within the support that is pointed directly to the poor, and as such, they do not form an area of targeted protection of the poor, except within the limits that are related to the basic infrastructure projects and public services that arise from them, from which the poor also benefit, or with respect to the temporary job opportunities generated by such activities that help to absorb unemployment and generate income for the unemployed in the targeted areas. The components of the SFD include supporting small productive and professional enterprises that generate job opportunities and sustainable incomes. This is the major area for direct protection aimed at the poor and unemployed. Institutional building sector of the SFD is the final item of the SFD's components, which is related indirectly to the creation of training 48 opportunities for labor to carry out the objectives and the generation of income through the establishment of NGOs and to develop the pivotal role that such NGOs currently play in the implementation of the objectives and activities undertaken by the SFD and to follow up this role in the future. It is clear that the financing appropriated for these two programs are inadequate for leaving any significant and tangible effects on the poor, whether in terms of improving the average share of the individuals of these projects, or in terms of their contribution to remedying temporary unemployment. Accordingly, both programs need additional support, which will fulfill the effective protection requirements for the livelihoods of the poor, which rests on many factors including present and future levels of poverty and unemployment and the extent of opportunities which economic growth will provide, and the capabilities available to effectively contribute to the other completed social programs, especially in the rehabilitation of targeted cases for the formation of their own autonomous sources of income. The SSN programs also proved the importance of the role that the efficiency factor plays in the mechanisms for implementation and management in enhancing effectiveness.

5.2.3. The Agricultural Production and Fisheries Promotion Fund ( APFPF) The APFPF is one of the institutions and instruments for lifting the economy and for supporting development efforts in areas of agriculture, fisheries and animal wealth. The APFPF, in general, seeks to provide support, directly or indirectly, through agricultural and fisheries cooperatives and the Agricultural Credit Bank (ACB), whether these targeted activities are owned by the poor or in which they are employed, or by the non-poor. The fisheries sector absorbed 59% of the total number of projects, which the APFPF financed during 1995-2000, and by an 18.5% share of the total costs, contrasted with 23% for the agriculture sector (both livestock rearing and crop agriculture), and 56% of total financing. Irrigation projects and water facilities took 18% of the total projects and by share of 43.7% their total financing, which shows the priority to which is accorded to this activity. The nature of this fund, in general, is directed towards supporting the productive efforts in these sectors, and accordingly, is considered an important instrument for stimulating economic activity and for raising rates of economic growth, which is considered essential for combating poverty. The dispute over the nature of the work of the APFPF and its main function will necessitate follow-up and could exclude the APFPF from the components of the SSN. Nevertheless, the APFPF does not ignore completely targeting the poor, as one of its main programs is pointed directly towards the poor by supporting domestic rearing of sheep and goats. Priority is given to the poor rural families to enable them to increase their incomes and improve their livelihoods, and accordingly contribute to the stability of the rural communities in economic and productive activity and to curtail the migration to the cities. During the period 1995-2000, the APFPF implemented around 11,863 projects at a cost of YR 11,863 million, with the number of beneficiaries reaching 6.1 millions. Around 35% of the projects were allocated to multi governorate projects. The resources were allocated to finance projects in all the governorates and the percentage of allocations was proportional to the distribution of the population accordingly. Finally, in providing its funding, the APFPF relies on providing interest free loans, in addition to providing grants, yet this approach encompasses the risks of non-repayment, which could lead to increased insistence on collaterals that enable only the rich to benefit. This will create an unfavorable climate for the farmers, fishermen and the associations of poor group. 49

5.3. Assessment of the Social Safety Net The assessment of the existing SSN rests on the extent of its ability to provide the protective social umbrella for the limited income and poor groups, on one hand and to work towards safeguarding the people in the society from the spread of poverty, which could extend to larger areas and groups over the coming period on the other, especially given the adverse effects of some of the reform policies before they realize their development results and have their positive outcomes by improving the standard of living of the poor, which may require many years to realize. Despite the importance of the direct and indirect B OX 4 . 1 4 : A SSESSMENT OF THE S ERVICES OF THE S OCIAL S AFETY N ET BY THE P OOR role of the SSN in alleviating poverty over the All of the poor that were interviewed in the areas last recent period, it encompasses only modest surveyed for the “Voice of the Poor” study affirmed capabilities for combating poverty and for that they did not hear at all about the services of the SFD or PWP, except in four areas where a few poor reaching effectively to the poor. The SSN faces men heard about the implementation of the two many difficulties, of which the most important funds for some projects and two areas in which obstacles and constraints are as follows: people did not know how to reach these funds. • Shortage of resources and the lack of an Nonetheless, most of the poor know about the SWF integrated database on poverty and the and confirmed that its assistance has reached their areas and in two areas people stressed that the properties of the poor to be able to accurately targeting of the SWF was correct in their area. In determine the deserving beneficiaries and other areas, most of the poor men and women regions, to ensure the prevention of any expressed their dissatisfaction with the activities of finagling or redundancy and duplicity, with the SWF for a number of reasons including corruption, non-coverage of real poor people and the respect to those who benefit from the SSN need of the poor to pay bribes to register their names programs. or to re -register their names in case of loss of their • Duplicity of objectives and activities, due to files “one of us sold his goats to register with the the similarity of the nature of the activities of SWF”. The majority of poor men and women also some of the programs and projects within the expressed their dissatisfaction with the criteria used for selection of b eneficiaries, and the direction of SSN, such as the PWP and the Family such assistance only to influential people and their Development Programs and the SFD in light relatives “The committee which came was in the of the lack of one institutional umbrella hands of the Sheikhs”. They suggested the under which these programs work. establishment of a committee from the areas who are knowledgeable about the conditions of all the • Poor qualifications and preparation of the people. The majority of the poor agreed that the staff of some of the units of the SSN and the suffering of women who do not have sponsors is shortage of training and rehabilitation complicated because of the lengthy procedures to programs, in addition to the shortage of the receive the assistance of the SWF and some people efficiency and performance enhancement used their ignorance to benefit from their approved benefits as most of them do not have a sponsor who programs for the projects undertaken by the can handle these procedures. relevant funds.

5.4. Contributions of the Civil Society Towards Poverty Reduction Since the early 1990s, and with the proclamation of the unified state of Yemen and the adoption of democracy as an approach for governance and political pluralism as a form of expressing opinions and to rise to authority, Yemen witnessed a large growth in the emergence and development of a modern civil society. The number of civil society organizations has risen from 270 in 1990 to 2,786 organizations in 2000. Community organizations and institutions also became numerous and diversified and their economic and social activities increased, in addition to the increase of the number of beneficiaries targeted by them. As a reflection of the conditions and situations, most of these organizations and foundations operate in traditional areas, such as local community development (1,242 associations), elimination of illiteracy, maternal and infant care (96 associations), and cooperatives (661 associations). Most of these organizations carry out their activities within a limited 50 geographical expanse such as the local community, with a weak presence and dissemination of their services in the rural areas, where most of the population and the poor are dwelling. Many of the activities undertaken by these organizations repeat each other and sometimes target the very same beneficiaries. The associations engaged in local development are found throughout all the governorates, while the organizations that carry out certain functions, such as advocating for human rights or cultural enhancement are confined to certain governorates only. The Capital City of Sana'a takes in the lion's share of these organizations, in view of the density of the population there and the political position, the economic and commercial activities of the city, and the cultural and scholarly role of the city. The rest of the organizations are centered in the Governorate Capitals or in the next largest cities, and they are found less in the secondary towns and are scarcely found in the rural areas, although some of their activities are directed towards serving the population of the rural areas. The areas, in which civil society organizations engage, have over the past few years evolved to focus on alleviating poverty, combating unemployment and providing job opportunities, besides providing educational and health services and working in environmental protection. Nevertheless, the impact of their activities on reducing poverty is still limited and of weak impact, as a result of the traditional methods followed by these organizations in carrying out their functions and their inability to innovate mechanisms and programs to enhance the voluntary spirit within the wealthy groups to increase the financing sources. However, the advantages of their roles is attributed to their services being directed towards the most poor groups, aside from their interventions being characterized as quick and based on participation and seeking to empower and provide options and alternatives. In the areas of poverty reduction, the activities of such organizations are as follows: • Facilitation of access of the poor individuals and households to small loans from banks and from quasi-governmental organizations such as the SFD, with the NGOs acting as intermediary and guarantor. • Provision of monthly cash grants to some of the poor households and financial assistance on religious occasions, which is one of the activities undertaken by most of the social charity organizations representing 46% of the total organizations that make up civil society. • Provision of in-kind assistance to poor individuals and households on some occasions, such as school uniforms and school bags at the start of each school year, clothing on holidays and food commodities on some occasions and distribution of meat of sacrificed livestock during the Eid Al-Adha (Feast of Sacrifice). • Provision of clothing and refuge for poor families that are confronted with difficult circumstances such as natural calamities. The percentage of beneficiaries of charitable assistance and welfare care provided by the civil society organizations could reach more than 90% of the beneficiaries in Yemen. The high percentage is justified by the economic difficulties, which are faced by the Yemeni people, the deeply rooted religious values and relationships of social solidarity, and the recent creation and experience of the civil society organizations which resort to traditional solutions for confronting poverty, besides these organizations meeting the wishes of the wealthy and well-off in directing their donations towards particular areas. A study showed that the contributions of charitable associations and foundations constitute 17.4% of the income of poor families. Despite the increasing growth of the organizations of civil society in Yemen, only 30% of them operate throughout the year, whereas some others are confined to seasonal operations, as on occasions or during religious holidays or within a very tight framework. There are also 20% of such organizations that lack any semblance of institutional structuring, whereby they are considered as frozen or suspended organizations, or they have yet to engage in any activity whatsoever, ever since they were set up. Similarly, the inadequate cooperation 51 amongst these organizations causes duplicity and typic ally patterned interventions. For example, most of the organizations that are active in the development of women carry out training in sewing, embroidery and needlework, although such programs have for a long time proven not to significantly improve the conditions of poor women. Similarly, all organizations that work to encourage enrollment in schools amongst the poor families confine their activities to distributing school bags, although studies have shown the low enrollment rates of children in education goes back to more important reasons than not having school bags. Yemeni women have a growing presence in the organizations of civil society due to political and economic and social developments, which paved the way for women to have access to increasing chances in participating in public life. Women are mostly found in associations and organizations as active members, despite the continuing low participation as members of Boards of Directors of such organizations. A number of active organizations in enhancing the role of women also appeared with all their management and employees consisting of women only (closed organizations). The number of such organizations has risen to 52 associations by 2000. Although their number is low, compared to the overall size of the population of women in the society, this situation still has its implications in a conservative society that maintains a strict division of roles between men and women in public life. Most women organizations engage in traditional activities that revolve around maternal and infant care, social care and education and training of women on sewing and embroidery, with a limited number engaged in cultural enhancement areas. All women's organizations are concentrated in the cities, especially in the Capital City of Sana'a, which implies their absence from the rural areas entirely, where the lives of women require many services for social care and development. Their poor institutional build up and the lack of coordination amongst them, except for some seasonal or limited bilateral cooperation or collaboration amongst such organizations characterize women's organizations even more. 52 CHAPTER 5: THE POVERTY REDUCTION STRATEGY 1. Introduction There is now, more than any other time, national consensus in Yemen on the need to address the problem of poverty and the imbalance between the demographic trends, the natural resource base and the economic structure, which created a process that generates poverty and deprivation, instead of providing job opportunities and means of livelihood. The modest achievements in growth over the past years have raised many questions on the implementation of the EFARP; whether the set of policies that were adopted were appropriate, or do they need to be reconsidered? What additional policies and/or institutional reforms need to be implemented in order to achieve the required growth? Based on the causes and the factors that determine B OX 5 . 1 : T HE S YNERGY OF THE F ACTORS L EADING TO P OVERTY the probability of falling into poverty that were The three sets of factors that lead to poverty cited in the previous chapter, given the fact that it is and the causes behind them combine together often difficult to differentiate between the causal and intertwine to reproduce, and form a strong links among these factors and the causes of poverty trap for poverty, which works to engulf more and based on the results of the different surveys and people into its grip. Therefore it is impossible to segregate these causes from each other, and studies undertaken in this respect over the past ignore their causal positive and adverse effects. years, three major sets of factors lead to poverty in The best example to prove this is population Yemen, which are as follows: growth and education, with their effects and • Decline in income and its association with the interaction extending into most, if not all, the nature and extent of economic growth. other major and secondary causes and factors. The important causal relationships among these • High population growth and the poor causes and factors and economic social and development of human resources and political decisio ns should, thus, be recognized. infrastructure. • Weak levels of social protection. To address the above-cited factors and to remedy the causes and factors that stand behind them requires the preparation of comprehensive framework (strategy) and the adoption of mechanisms and means (policies and measures) that achieve economic growth and increase job opportunities and also provide better basic services and secure an effective social safety net for the poor, under a responsible management characterized by efficiency and honesty and a mechanism that encourages participation and collaboration. The PRSP represents that framework and includes in a clear manner a set of policies, measures and interconnected activities designed to provide an environment that makes the reduction of poverty and the achievement of specific time bound objectives possible. In this strategy, the private sector is essentially charged with the task of achieving economic growth, with the government providing the physical and institutional structure, besides its continuous expansion, and improvement, of social services. Furthermore, the policies and measures to reduce poverty, which will be pursued, should take into consideration the need to have the implementation of EFARP coincide with the necessary social reforms, such as the form of social development and the initiatives for poverty reduction that require a longer period in order to ensure the sustainability of the results that were achieved in the previous period. Therefore, the PRSP sets out the objectives and measures for intervention and the action plans that are based on three overall basic goals: (i) Achievement of economic growth, creation of job opportunities and expansion of the economic opportunities for the poor by remedying the structural causes of poverty, focusing on the prevention of poverty and providing sustainable means of livelihood. (ii) Enhancement of the capacities of the poor, increasing their assets and the returns derived from such assets, towards more equity by improving the social, productive and economic conditions of the poor and those who are close to the poverty line. (iii) Reduction of the suffering and vulnerability of the poor by supporting the SSN. 53 B OX 5 . 2 : S OLUTIONS TO THE P OVERTY PROBLEM AS S EEN BY THE P OOR Some of the studies diagnosing poverty ignore searching for solutions for the problems of the poor as seen by the poor themselves, who suffer from poverty in d ifferent ways and levels. In a study entitled the "Voice of the Poor", the poor set out various solutions which they believe will help them come out from the poverty quandary, with the consensus of all the male and female groups that were interviewed, that the provision of job opportunities, capital and soft loans for investment in small enterprises – with respect to both the rural and urban communities – is the way that will enable them to achieve a source for a dignified livelihood. The poor direct all the responsibility on the Government to provide job opportunities, and men also gave more specific solutions like helping them to reclaim land, build dams, water harvesting projects, to enable investment in agricultural land, especially since they see the drought as being one of the most important causes of poverty: "Where there are dams there is work". Most women pointed out that it is necessary to have water projects, schools, health services, laying roads and the social security payments, which could lift their communities and families out of poverty: "Sister, if there are schools for our kids, doctors and teachers and the Government gives us grants; if the Government doesn't help us, then we will just die”; “ We want an easy way out, if you have someone, who is ill, you cannot rescue him unless you pay YR 500!". Although a few men indicated the importance of the provision of basic services, this however was not given the same level of priority amongst women, due to the fact that they are the ones who suffer from the weakness/absence of these services, especially since women need health care services more often than men, due to reproduction, as well as their infants, besides women being the ones to have to fetch water etc. Differences also included, women indicating a need for eliminating illiteracy and adult education, whereas men did not mention this, which could explain the widespread illiteracy amongst women more than the men who normally rely on their bodily strength to obtain a source for their livelihoods. 2. The Goals of the Poverty Reduction Strategy (PRSP) The PRSP includes the development of specific goals that can be monitored and followed-up, as well as general policies and programs to achieve growth and provide services for the reduction of poverty. The GoY has set for itself, as part of its commitments with the international community and partners in development, a number of goals as reflected in the SFYP and the Strategic Vision 2025. Therefore, it is imperative that the general goals of the PRSP in Yemen are consistent with these general objectives, which reflect a position between reality and ambition.

2.1. The General Goals • Reduction of poverty by about 13.1% during the period B OX 5 . 3 : P OVERTY R EDUCTION AND P OPULATION G R O W T H 2003-2005, to decline to 35.9% in 2005. This may be The different scenarios for growth and achievable through appropriate economic growth that poverty reduction show the role of a will lead to increasing real GDP by about 4.7%, high population growth rate in depending on the growth of the non-oil sectors by an weakening the effects of economic annual average rate of 6.3% to ensure increases in GDP growth on poverty reduction efforts, whereby this growth alone is unable to per capita and improvement in the living standards. achieve the economic and social goals. This growth is expected to keep pace with effects of the This outcome shows the importance population policies that seek to reduce the annual that must be given to population population growth rate to 3% by 2005. This growth policies and programs that aim to have also seeks to create job opportunities to reduce the an impact on fertility and to control current unemployment and underemployment rates. population growth.

2.2. Sectoral Goals

2.2.1. Coverage of Social Services • Raising the rate of health care coverage to about 65% of the population by 2005 and provision of good health servic es colder to the people by provision of basic health services in the Government health facilities, especially in the rural areas, whereby 80- 90% of the needs for health care in these areas will be provided through the application of the Regional Health System. 54 • Raising the enrollment rate in basic education to 69.3% by 2005, along with the reduction of the gender and regional gaps and disparities. In vocational training and technical education, the PRSP aims to raise the rate of those enrolled in the vocational training programs and the technical education colleges and institutes. In higher education, the goal is to develop and modernize university education to keep pace with the scientific and academic developments and to be able to absorb 282,000 students in public universities, and increase the percentage of female students up to 27% of the total, and the graduates of the scientific and practical specializations up to 16%.

2.2.2. Improvement of Infrastructure • Increase production of water for domestic use, and increase the coverage rate of the public water networks to 69% in urban areas and to 65% of the rural population; expand the scope of sanitation drainage services, in addition to construction of sewerage treatment plants, whereby the number of benefic iaries in urban areas will reach about 1.7 million people representing a 44% coverage rate. • Raising electricity coverage from the national grid to 40.3% of total population by 2005, in addition to reduction of electricity losses to 25%. The rural electrification goals are exemplified by increasing the coverage to 22.2% of all rural population by expanding electricity supply and selecting the most suitable alternative power sources including new and renewable energy, such as solar and wind energy. • Adding 3,300 km of asphalt roads and 2,950 km of gravel roads, besides the reinforcement and maintenance of about 3,194 km of asphalt roads, so as to achieve interconnection and to reinforce the transport traffic and facilitate the flow of commodities and services and movement of people, aside from maintaining the existing roads to ensure the safety of their use and their sustainability.

2.2.3. Ensuring Social Protection • Enhancing social welfare and increasing the number of beneficiaries from the SWF to about 600,000 by 2005, in addition to expanding the umbrella of the social pension schemes to cover 529,000 workers, of which 70,000 workers are from the private sector. • Training of 5,430 handicapped persons in the vocational training centers for the handicapped, and absorption of 5,430 handicapped persons in the formal educational system, in addition to provision of 4,190 job opportunities for the handicapped. • Absorption of 6,750 orphans in the orphanage homes, and accommodating about 2,500 of the displaced street children and beggars. 3. Relationship Between National and Millennium Development Goals (MDGs) The above general objectives were set also by referring to the MDGs, which were adopted by the United Nations and other international organizations, which aim at reducing poverty and its different symptoms by 2015, and for the international community to strive, side by side, with national governments to achieve these goals within a partnership and cooperation framework. Yemen has adopted, in principle, as is the case with most of the developing countries, these goals and has expresses its commitment in the numerous summits, which it attended to pursue diligently the achievement of these goals, given the availability of domestic financial resource and the amount of assistance provided by donor organizations and states. 55 COMPARISON OF THE RSP G OALS WITH THE MDG Developing Countries Yemen 2015 2000 2005 Reduce percentage of population 41.6 * 35.9* suffering from food poverty by half. Reduce percentage of starving people to - - half Stop and start to change the trend of the - - spread of AIDS Reduce Infant Mortality by two thirds 94.1 81.6 Reduce maternal mortality by ¾ 351 305 Provision of safe methods to give - - protection to all cumulative) Provision of the chance for all the enroll 62.0 69.3 in basic education Empower women and remove the social 43.9 55.0 gender gaps in basic education by 2005 Enable women and remove the social 41.0 52.0 gender gap in secondary education by 2005 Reduce the percentage of the population 60.0 35.0 that is not getting safe water by half. Apply national strategies for sustainable - - development by 2005, and reverse the trend of the deterioration of the environment by 2015 * Refer to lower poverty line and not food poverty. The PRSP goals shall be achieved only if all the different efforts and interventions were able to arrive to the establishment of prudent management and governance, effective local authorities, equitable and appropriate economic growth, creation of economic growth poles, improving social indicators, developing mechanisms for targeting the poor through reforming and upgrading the SSN, education and spreading awareness among the people on the preservation of the environment and involving the poor and women and empowering them economically, socially and culturally. The achievement of those general goals also rests on the extent of success in attaining the targeted indicators in all the social and economic sectors which are shown Table 5.1 as well as in Annex 1, which sets out priority actions and the performance indicators for all areas of activities targeted for each year of the RSPP up to 2005 the last year of the PRSP program. 56 TABLE 5.1: GOALS AND INDICATORS OF THE PRSP Goal Indicator Base 2001 2002 2003 2004 2005 Year 2000 Increase Real GDP Real GDP Growth Rate 5.1 3.3 4.1 3.7 5.3 5.4 Increase Non-Oil GDP Non-Oil GDP Growth Rate 4.7 4.0 5.0 5.7 6..5 7.0 Increase GDP per Capita Growth Rate of GDP Per 1.6 -0.1 0.8 0.5 2.2 2.5 Capita Total Population (millions) 18.3 18.9 19.5 20.1 20.8 21.4 Fertility 5.9 5.7 5.6 5.5 5.3 5.2 Maternal Morality (for 351 342 333 323 314 305 every 100,000 births) Infant Morality (for every 67.8 66.2 64.6 63.1 61.6 59.9 1,000) Child Morality (for every 94.1 91.6 89.1 86.6 84.1 81.6 1,000) Control of Population Population Growth Rate 3.5 3.4 3.3 3.2 3.1 3.0 Growth Poverty Reduction Poverty Incidence (1998) 41.6 41.5 40.6 39.7 38.0 35.9 Total (%) Urban (%) 29.9 29.6 28.6 27.7 26.1 24.4 Rural (%) 45.1 45.0 44.2 43.3 41.6 39.3 Raising Coverage of Coverage rate – Total (%) 50% 52.8 56.0 58.3 63.8 65.0 Health Services Urban (%) 80% 80.0 80.0 80.0 80.0 80.0 Rural (%) 25% 29.5 32.9 34.8 39.6 42.0 Raising Education Basic Ed ucation Enrolment 62% 62.9 64.5 66.0 67.6 69.3 Enrolment Rates Rate, Total (%) Males (%) 77.2% 78.4 79.4 80.3 81.2 82.4 Females (%) 43.9% 45.9 48.1 50.4 52.7 55.0 Graduates of Technical 12.2% .. .. .. .. 16.0 Faculties (%) Raising Coverage of % of population with access to 45 .. .. .. .. - Water and Sanitation the public water network, total Services Urban (%) 64 64 65.5 66 68 69 Rural (%) 55 .. .. .. .. 65 % of Population with access to 6.2 .. .. .. .. 8 Drainage services, total Urban (%) 33 33 34 36 40 44 Raising Electricity % of population with access to 30.0 32.0 34.7 37.0 38.5 40.3 Coverage Electricity Network, Total Urban (%) 65.7 85.2 81.3 90.2 96.9 98.2 Rural (%) 17.0 19.0 20.0 21.0 22.0 22.2 Electricity Losses (%) 38.0 .. .. .. .. 33.0 Connecting Rural Areas Asphalt roads (km) 5,955 890 1,200 950 1,100 1,250 to Markets, easing Access Rock Roads (Km) 4,009 700 650 800 950 1,200 to Services through the Rehabilitated Asphalt .. 258 229 112 121 101 Expansion of the Roads Roads (Km) Network Enforcements of Roads .. 50 80 110 210 127 (Km) Road Maintenance (Km) .. 794 794 1,032 1,111 1,270 Enhancing the Role of Number of beneficiaries 450160 476899 510160 540160 570160 600610 Social Welfare & Assistance Increasing the Coverage Number of beneficiaries, 415000 425727 433257 442605 450949 459635 of the Pension System public sector Private Sector 45000 50000 57000 62000 66000 70000 Coverage of pensions, public 40473 43913 47645 51695 56089 60857 Sector (beneficiaries) Private Sector 1,120 2,125 3,282 4,455 5,728 7,199 Reducing the Gender Gap GDI (HDR 2000/2001) 0.428 .. 57 F IGURE 5.1: YEMEN ’S PRSP P OVERTY R EDUCTION S TRATEGY (PRSP) AXIS OF THE S TRATEGY Social Protection Improving Human Resources Economic Growth Infrastructure Development Social Safety Net Water and Drainage Population Growth Economic Stability Social Security Electricity Heath Conditions System Education and Training External Monetary Roads Fiscal Sector Policy Policy Vocation Training Higher Education Basic Education Economic Restructuring and Technical Education Privatization Public Spending Sources of Growth and Promising Sectors Fisheries Agriculture Services and Industry Tourism Environment & management of natural resources G OOD G OVERNANCE AND M ANAGEMENT , P ARTICIPATION AND C OLLABORATION Good Governance Participation and Collaboration Civil Service Reforms The Government Promotion of Democracy Civil Society Enforcement of Laws and Private Sector Regulations Decentralization Donors Institutions Supporting The Poor the Poor 58 4. The Axes (Pillars) of the PRSP The GoY and its partners in development recognize that poverty reflects more than just the insufficiency of income or of provision of the basic needs of the population. Rather it also shows suffering and lack of capacity to express opinions as well as lack of representation, capacity build-up and empowerment. Everyone also recognizes the need for cooperation and partnership between the Government, the private sector, civil society and the international community in order to achieve the general goals of the PRSP without competition and racing. In this context, and based on the causes and determinants of poverty in Yemen which were dealt with previously in Chapter IV, the PRSP sets out four main axes for intervention, with a view towards allevia ting poverty and achieving the specified goals. These axes are as follows: Achieving Economic Growth Human Resources Development Improving Infrastructure Granting Social Protection To ensure achieving the objectives through the policies, measures, and actions plans, the proper execution, supervision and monitoring require an approach that supports the four axes, which is a precondition and a proper environment for achieving the success desired and to sustain its results. This approach is reinforcement of governance and prudent management, in addition to broadening the scope of participation and collaboration. The policies followed for the reduction of poverty are distinguished by the fact that they proceed coincidentally within a broad consistent and harmonious front and takes in the order of priorities for intervention and the urgent measures in the middle period (2003-2005) and also takes into consideration the long term period of the Strategic Vision 2025.

4.1. Achieving Economic Growth

4.1.1. Macro- and Microeconomic Policies Suitable for the Reduction of Poverty The stability of the overall economic B OX 5 . 4 : S TABILIZATION AND E CONOMIC R EFORMS P OLICIES balances is considered a necessary The framework for overall policies, shown in the annexes, is requirement for achieving sustainable derived from the general orientation of the economic policies economic growth, without which of the GoY, highlights the aim of stimulating growth by quickly implementing the restructuring policies, while eliminating poverty, or even reducing it preserving the gains achieved in the Stabilization Program, is impossible. To ensure the which calls for continuing the implementation of the fiscal, sustainability of growth, the structural monetary and commercial policies that succeeded in reducing adjustment measures must continue, the public budget deficit and control the level of inflation. The considering that this is also a required fruits of the favorable results of the policies of both, the Stabilization and Restructuring programs, are expected to be condition accordingly, as economic forthcoming in the near future, due to the long delays that policies will shoulder the responsibility usually accompany such policies. Therefore, the modest of achieving growth and development improvement of some of the indicators, or even their within the structural adjustment in both retraction, should not lead to interruption or suspension of the program, but rather it should be viewed as a first phase of the the long and medium terms, its continuing reforms, which should be of a wider dimension and significance as such being the same as depth, once the initial reforms are completed, with the during the economic stabilization adoption of new policies for the reduction of poverty. period. However the reduction of poverty cannot be undertaken by merely achieving economic growth alone. Rather, the pursuit for economic growth should take into consideration equitable criteria for distribution, with a view towards decreasing the variances in income and the distribution of resources. This path requires a number of overall policies and measures to be taken which will ensure this accordingly in the areas of taxes, wages and the priorities of public expenditures. Therefore, the PRSP works along two parallel paths, which are increasing economic growth and ensuring the equitable distribution of its fruit. 59 The GoY works towards continuing the implementation of the remaining policies for reform, which is found in the Matrix of Structural Policies and in a consistent way (Appendix), until the Yemeni economy is able to achieve favorable results in the near future. The national economy is expected to grow during the period from 2003-2005 by an annual projected average growth rate of about 4.7% compared to 6.3% for the non-oil GDP, which is close to the same growth rates achieved over the past years. This growth maintains a margin that is above the population growth rate by about 1.2-1.7% until it is able to create job opportunities and improve living standards, especially for the poor. Although this rate declined in some years, this should not however affect the pursuit of increased growth above the projected rates, especially when the opportunity avails itself. Similarly, and due to the need for achieving higher rates of growth, this may be achieved only after the removal of constraints which confront economic growth by carrying on with the reforms and providing the suitable environment for the private sector to take charge of leading economic activity. Attention is also focused on remedying the frailty of the economy vis-à-vis the fluctuations in world oil prices by diversifying the base of the economy and its revenue sources, with emphasis on growth in the promising sectors and those associated with the livelihood and activities of the poor. This requires the maintenance of a low inflation rate and the stability of the exchange rate of the national currency, in addition to the creation of a suitable environment for encouraging investment, especially so because investment is the driving force for economic growth, accelerated human resources development, and improved efficiency of the economy. Therefore, the GoY will continue implementation of the EFARP policies and the adoption of the required policies for launching economic growth and reducing poverty (refer to the policy measures matrix in Annex 1) to achieve the following: Main Goal: Raising rates of economic growth and consequently real GDP per capita from YR 51,558 in 2002 to YR 53,973 by 2005. The attainment of an average 6.3% non- oil GDP growth rate would lead to reduction of poverty to 35.9% in 2005.

4.1.2. Maintenance of Economic Stability Specific Goal: The GoY seeks to achieve economic stability and to control inflation rate at below 10%. Control over inflation will provide the suitable environment for increasing domestic investments and attracting foreign investments, in addition to preserving the level of real income of individuals, especially those who are of limited income (public sector) and the poorest groups (in the agricultural sector). Economic stability will be sustained by pursing a set of policies, which are as follows: A. Fiscal Policy: • Continue the implementation of the current fiscal disciplinary policy, which implies not allowing the budget deficit to exceed 4% of GDP, especially in light of the projected fall of oil proceeds (resulting from the decline in world oil prices or in the event of reduced oil production) • Review and revision of the expenditures structure, and work towards increasing the share of allocations to social services, in particular for education and health, in addition to increasing public investments in infrastructure, such as roads, electricity, water and sanitary drainage for the rural areas, where the majority of the poor are found. • Curtail current expenditures, especially the allocations for salaries and wages, by the implementation of the civil service reform program, to reduce the growth of the numbers of employees and deletion of the double dippers and ghost workers from the service to enable increases in the real wages of the civil service employees. • Improve expenditure efficiency by simplifying procedures and reinforcement of controls, which work to rationalize spending and improve public services. 60 • Continue the reforms for the tax and customs systems and their administration, with a view towards improving revenue collection, suspension of exemptions outside the Investment Law, application of the GST from the last quarter of 2002. • Improve and enhance of the performance of Box 5.5: The Impact of Improving Revenue the revenue authorities to ensure securing the Collection on the Poor collection of all due revenue entitlements, Improving collection and curtailing tax evasion subject to the need to consider the limited is considered an important method for ensuring income and poor groups, whether in terms of equity, in all its different criteria. In addition to increasing government revenues, this provides the taxes imposed on them or upon collection. additional resources that can be directed to social • Maintain the differentiated tariffs for the priorities, led by poverty reduction. This will public service of electricity, water and also ensure the application of fair standards on all the people, fight corruption, which prevents sanitation drainage to the limited income and influential power brokers from being subject to poor groups, in addition to considering raising the force of law and regulations, while leaving the deductions for amounts that are expended the poor and helpless alone subject to in areas of poverty reduction, which will enforcement and punishment accordingly. reinforce the role of the NGOs in this respect and promote community participation in combating poverty. • Review the laws that regulate the levying and collection of taxes, and consider the progressive tax system to reduce the tax burden on the limited income and poor groups, while increasing the minimum amount of taxable income, in keeping with the goal of poverty reduction. • Grant additional benefits, and remove relevant constraints, to promote investment in some of the sectors, especially those that are directed towards the areas and activities that help to create broad opportunities and/or which employ the poor. B. Monetary Policy • Continue with the policy of a floating exchange rate, which will ensure a real competitive exchange rate to promote exports. • Take measures towards complete liberalization of interest rates to encourage local savings and increase foreign capital inflows. • Control the growth in monetary supply, prevent deficit financing, and use treasury bills only when necessary to finance the budget, while being careful not to have them compete with financing of private sector investments. • Accelerate the reform of the banking system to improve financial intermediation and, subsequently, raising savings and investments and reduce risks that face savers and investors. Mobilization of savings and investments will directly contribute to improving the conditions of the limited income and some of the poor groups by encouraging them to save and thus to participate in investment. • Create a capital market to contribute to the mobilization of domestic and foreign savings and to encourage investment, especially the establishment of joint venture companies that will help in narrowing disparities in income and wealth distribution. • Redefine the role of the specialized banks, such as the ACB and the Housing Credit Bank (HCB) and their restructuring to focus on investment portfolios that are directed towards small and micro enterprises and to serve the limited income and poor groups. • Set up "Hope Bank", for granting loans to the poor, which will work towards providing financing for small and micro enterprises for the poor. C. External Sector Policies • Continue with trade liberalization policies and floating of the exchange rate to support economic stabilization, to encourage exports and to increase foreign investments so as to help in increasing job opportunities, in general, and for the poor in particular, considering that the growth of exports, initially rests on commodities that are labor intensive and 61 require minor skills, which can be found with the poor. The foreign investment inflow also helps to set up projects, create job opportunities and lead to technology transfer, absorption of skills and improvement of real wages. • Seek to set up the Greater Arab Free Trade Area and economic integration with the Arab Gulf Cooperation Council (GCC) and complete the procedures for joining the World Trade Organization (WTO). • Improve debt and reserve management and continue with rescheduling of foreign debts and undertake bilateral negotiations with other lenders, to arrive to similar arrangements reached with the Paris Club. Priority Programs and Projects - Financial System Reform: Modernization of the financial system and public accounting systems; increasing transparency in government procedures, improving and upgrading financial management and budgeting, setting information databases and network for the public administration and rehabilitation and training of government employees in all the government agencies and affiliated organs by preparation of an accurate financial and accounting system and a modern information system and by enabling government employees to undertake their duties in the best manner. - Supporting Yemen’s Accession to the WTO: The project intends to help Yemen in accession to the WTO by providing technical and institutional support to the Government and the rele vant authorities to prepare for the negotiations for membership, especially the Contact and Coordination Unit, as well as preparation of the Foreign Trade Memorandum, preparation of a medium-term strategy on the trade policy for Yemen, preparation of a study on the basis and analytical criteria for the bilateral negotiations for the agriculture agreement and the assessment of the customs procedures and reforms, support institutional capacity of the General Authority for Standards and Measures (GASM), creation of a follow-up unit on commercial technical barriers and a follow-up unit for the implementation of the of the commitments related to health and botanical health, within the framework of the Agriculture Agreement, reinforcing the institutional capacitie s of the authorities and institutions concerned with copyright and patent rights and support the legislative reform programs to make them consistent with the requirements of the WTO. - Establishing a Capital Market: This project aims to set up a capital (stock) market, within the orientations that accord the private sector an increasing role in economic and social development and in order for the market to undertake a dynamic role in mobilizing resources and savings, including from small savers; attract foreign capital and the surpluses of the Yemeni expatriates overseas; and stimulate investments in the different economic sectors. The project focuses on the completion of the legal and legislative requirements and the needed institutional frameworks for setting up the market and provision of the appropriate environment, in addition to adjustment of the conditions of the private sector firms and the adoption of transparency in their operations.

4.1.2. Restructuring the Economy The GoY is continuing with the restructuring of the national economy through removal of all the constraints that curtail the freedom of markets and the participation of the private sector in investment and output generation. The laws and procedures regulating economic activity are being subjected to a comprehensive review to ensure their consistency with the orientation towards giving the private sector the leading role in economic activity. The GoY will continue the implementation of the Privatization Program by focusing more on the productive sectors that are expected to provide new job opportunities. The privatization program will provide financial revenues to the State Treasury on one hand, and will reduce the burden of the transfers and expenditures that the Government shoulders on behalf of the public and mixed sector enterprises on the other, which would then be used to help in financing the development programs in the governorates and the poverty reduction programs. 62 The development plans are B OX 5 . 6 : T HE R OLE OF THE G O Y A N D T HE P RIVATE S ECTOR IN A CHIEVEMENT OF turning towards undertaking E CONOMIC G R O W T H a change in the structure of The problem of economic growth in Yemen is found in the achievement the national economy by of sustainable economic growth, given the poor capacities of both the carrying out the appropriate State and the private sector, and therefore the essence of the problem is not so much, who should lead the growth, but rather how to enhance the adjustments in the GDP in poor capacities of the State and the Private sector to achieve sustainable favor of Total Fixed Capital growth? The appropriate option for the Yemeni economy is to strengthen Formation (Investment). The the role of the State and the private sector on the basis of a competent table below shows the partnership. Thus, it cannot be said that, now, the time has come for the reduction of the role of the State, because its role in economic activity has overall economic become excessive, while it also cannot be considered that the Yemeni framework, which shows the private sector is able to take on the responsibility of achieving economic course of the GDP and the growth. components of revenues and The Yemeni Constitution has decisively ruled on the issue of the uses, in terms of their size, liberalized orientation of the Yemeni economy, whereby it emphasized in structural arrangement and Article (8) that a competent partnership between the publicly owned, privately owned, mixed and cooperative sectors. It is a partnership that is projected growth rates based on equal opportunities and competition and considerations of during the period from 2002- economic and social efficiency in achieving economic development. 2005. TABLE 5.2: THE OVERALL MACROECONOMIC FRAMEWORK Estimate Projections 2001 2002 2003 2004 2005 Growth Rates (%) GDP (Market Prices) 3.3 4.1 3.7 5.3 5.5 Real Non-oil GDP 4.0 5.0 5.7 6.5 7.0 Inflation (Consumer Price Index) 11.9 15.8 9.0 5.0 5.0 Real Per Capita GDP -0.1 0.7 0.5 2.1 2.5 Crude Oil Production (000 Barrels/Day) 434 433 401 390 370 Price of Yemeni Oil (US$ Per Barrel) 23.0 21.8 20.9 19.9 19.9 Percentage of GDP National Consumption 78.8 81.4 84.9 86.3 86.9 Government Consumption 17.1 17.2 17.7 17.7 17.9 Non-govt. consumption including PEs 61.7 64.3 67.2 68.6 68.9 Total Investment 22.7 23.6 24.6 25.8 26.0 Change in Stock 0.0 0.0 0.0 0.0 0.0 Fixed Capital Formation 22.7 23.6 24.6 25.8 26.0 Government 8.2 8.3 8.3 8.6 8.0 Non-Govt. including PEs 14.5 15.3 16.3 17.2 18.0 Domestic Absorption 101.5 105.0 109.5 112.1 112.9 Net Exports of Goods and NF services -1.5 -5.0 -9.5 -12.1 -12.9 Exports of Goods and NF Services 39.9 36.9 32.1 28.6 25.5 Imports of Goods and NF Services -41.5 -41.9 -41.6 -40.6 -38.4 GDP 100.0 100.0 100.0 100.0 100.0 Net Factor Income -6.3 -6.7 -5.4 -3.8 -3.4 Net Current Transfers 14.6 14.5 14.6 14.2 13.6 Total National Savings 29.5 26.4 24.3 24.0 23.3 Government 11.0 7.8 5.3 4.6 4.3 Government, exc. Oil -16.5 -16.3 -15.0 -13.4 -11.9 Non-GoY, inc. public corporations 18.5 18.6 19.1 19.5 19.0 Trade Balance 5.9 1.5 -3.6 -6.7 -8.1 Exports (FOB) 37.6 34.5 29.6 26.0 22.9 Oil and Gas 35.7 32.6 27.5 23.9 20.7 Non-oil Exports 1.9 2.0 2.0 2.1 2.1 Imports -31.7 -33.0 -33.1 -32.7 -31.0 Balance of Current Account (Including grants) 6.8 2.7 -0.3 -1.7 -2.7 63 Continuing with the movement and trend of the national economy over the past years, overall final consumption expenditures are expected to continue increasing until their share reaches 81.4% of GDP in 2002, and 86.9% in 2005, which will essentially depend on the growth of non-government consumption, at current prices by 4.6 percentage points, over the same period, based on expected increase in available resources to both domestic and foreign investment, besides reflecting government policies for meeting the immediate consumption needs of the people to improve their standard of living and to reduce poverty. Government consumption is also due to increase slightly until it reaches 17.9% of GDP to meet the requirements of implementing local authority system and to improve the performance of the civil services and its employees. In contrast, the total national savings are expected to retract sharply, especially in 2005, which is attributed to the reduction of both its government and non-government components. The PRSP seeks to also achieve gradual increase in total investments from 23.6% of GDP in 2002 to 26% in the last year of the PRSP. This increase depends on the rise in non- government investments to 18% of GDP in 2005, with smaller rates of growth for government investments, with its share maintained between 8% and 8.61% of GDP during the same period. These rates will ensure the stability of present individual incomes and their future increase by increasing real GDP per capita by an annual average of 1.5% during 2003-2005. As for exports, the projections indicate a decline in international oil prices, which will reduce oil revenues by an annual average of 3.2%. In contrast, the PRSP expects that the non-oil exports and exports of services will rise to achieve annual average growth rates of 17.1% and 10% respectively over the period by rejuvenating tourism and activating the Free Zone in Aden, and this will lead to a decline in exports of goods and services from 34.5% of GDP in 2003 to 22.9% in 2005. Nevertheless, the imports will continue to rise by lower rates not exceeding 1.5% per annum, which will turn surplus in the Trade Balance projected for 2002 to a growing deficit, reaching a maximum of 8.1% of GDP in 2005. The position of the trade balance over the same period will lead to an increase in the deficit of the Current Account until it amounts to 2.7% of GDP by 2005.

4.1.3. The Sources of Growth and the Promising Sectors Yemen possesses resources that give hope and lend B OX 5 . 7 : R AISING P RODUCTIVITY A S A S O U R C E OF A CHIEVING G R O W T H support to the development process in the country. The A primary source of growth is increasing geographical position of Yemen –being on the major productivity, which declined in all the navigational route between Asia and Europe – can once sectors over most of the 1990s, except for again – and by use of the appropriate policies make a modest improvement in some of the Aden one of the busiest ports, in addition to attracting sectors after the implementation of the EFARP. This situation reflects the foreign investments to Yemen. Similarly, oil revenues, importance of raising productivity, which, despite the limited proven reserves, can also help to in many cases saves on the amount of support the build-up of a good health and educational investments needed for projects and system, a modern infrastructure that is capable of setting activities, and even reduces the up a diversified economy, aside from the good growth capital/output ratio for the achievement of higher growth rates. Thus, the orientation potentials that natural gas provides, including the use of of the PRSP is directed towards the gas domestically. Furthermore, and due to the development of human resources, the preoccupation of the Yemeni people over the ages with restructuring of the economy, improving trade, this has acquired for them a commercial culture, the management and role of public which has enabled them to establish trade and administration are considered essential and complementary means for raising investment contacts, especially with Yemeni emigrants productivity and accelerating growth. throughout the world. Yemen also presents distinctive and ancient architectural styles, fascinating mountains, antiquities of ancient kingdoms, such as Saba (Sheba), in addition to other attractive elements, which could generate significant tourism activities and proceeds. 64 Therefore, when inquiring about the sectors that could achieve the targeted growth, the agriculture and fisheries sectors and manufacturing, including the small manufacturing operations, besides tourism, construction, trade and re-export, are among the most important promising sectors in the Yemeni economy, the focus on which is expected to lead to achieving the desired economic development. These sectors currently employ the highest percentage share of the work force, and potentially can employ more in the event that they are developed. The GoY shall work towards developing these sectors through systematic interventions to remove constraints and in a manner that will not conflict with the basic orientation of the national economy towards adoption of market mechanisms and the leadership of the private sector. Main Goal: Achievement of sustainable economic growth and diversification of the national economy. Policies: • Creation of a conducive environment for private sector investment, correction of the distorted markets and taking advantage of the savings in these sectors. • Allocation of investments in infrastructure to improve the services provided to the population, and in a manner that serves the development of these sectors, especially improvement of the roads, electricity, water supply and sanitation, communications, etc. • Preparation and adoption of sectoral policies to bring about positive changes in the promising sectors, while preparing credit policies to ensure the required investments in these sector in addition to attracting the private sector to set up industrial zones. • Review all the different laws and procedures related to sectoral activities and removal of any constraints. • Support scientific research, research and development (R&D) and services. Priority Programs and Projects - The Privatization Program: Ascertain the role of the GoY in the management of the market-based economy; reduction of government expenditures on the public economic enterprises and enhancement of their efficiency on a competitive basis, in addition to encouraging private sector investment and the realization of broader participation in ownership through public subscriptions. The program seeks to accele rate privatization, starting with the preparation of a 61 economic units specified in the SFYP after their evaluation and assessment by specialized and neutral offices. The program includes units from the various economic sectors, which include a number of large units, which is expected to be an important step for vitalizing the private sector. - The Free Zone: Support the role of the Free Zone in Aden and improvement of the competitive capacity of the Zone regionally and internationally by developing its management and rehabilitating employees that are able to deal with the conditions and properties of the zone, in addition to completion of the infrastructure projects and the utility services for the Zone. - Port Cities Development: Enhancing the competitive edge of port cities, starting with Aden, Hodeidah and Al-Mukalla by rehabilitating and improving their basic services, supporting the administrative and technical capabilities of the local authorities, to keep them at least in parallel with the systems that are found in the ports of neighboring states, besides supporting partnership between the local authority and the private sector and facilitating the procedures and processing. - Improving the Investment Climate: Undertaking regulatory and institutional reforms for investment and promotion of exports by improving the performance of the General Investment Authority (GIA), the Higher Council for Exports and its technical organs, in addition to the stimulation of the extractive industry and encouraging the private sector to set up industrial zones. 65 - Gas Pipelines and Power Generation: Constructing pipelines to transport gas extracted from the Marib-Shabwah fields to local use in the regions of Aden, Al-Hodeidah and Hadramout to be inductive to build gas-powered stations and to link to the establishment of industrial estates in those three regions.

4.1.4. Agriculture The agricultural sector seeks to achieve an average annual growth rate of 5.4% during the PRSP period by achieving integration between the components of the agriculture sector and between agriculture and industry. Despite the difficulties that confront the sector, such as scarcity of water resources, dependence of a large segment of agriculture on rainfed irrigation that is subject to fluctuations from one year to another, drought and flood periods and the expansion of erosion and desertification, spread of Qat cultivation and the consequences that arise from it, low crop productivity, and post-harvest losses, there are however significant potentials for increasing productivity, expansion of crop cultivated land area, improvement of irrigation methods and techniques and agriculture extension, in addition to curtailment of Qat cultivation. Agriculture represents the major activity of the rural areas of Yemen and absorbs the majority of the population and more than half of the labor force in the national economy. The economic activity of the rural areas is linked to the informal sector, with most of its workers being poor. The GoY seeks to expand the exchange process between the different economic activities in the sector and to integrate them with the formal economic sector through numerous rural development projects. Specific Goal: Contribute to increasing economic growth; diversification of the base of the economy; and the provision of basic services in order to reduce poverty, which is more widespread in the rural areas, as well as improving efficiency within the sector. Policies B OX 5 . 8 : T HE Q AT P R O B L E M • Raising irrigation efficiency and During the last few decades, the cultivation of Qat introduction of modern irrigation methods expanded considerably. This expansion continues and systems to improve the efficiency of through the spread of Qat farms to new areas and using one water unit and making use of additional land, some of which was not fit for farming to start with, whereby the farmers reclaim wastewater. areas of such land by expending large sums of • Improving the efficiency of rainwater money. The expansion in the cultivation of Qat harvesting by expanding the construction of remains tied to the size of the increase in demand for the crop and the income of Qat consumers. small and diversionary dams, water dikes Similarly, since Qat leads to the conservation of soil and distribution canals, in addition to and the protection of the terraces from erosion and maintenance and rehabilitation of mountain despoliation, Qat may be viewed as the only crop farm terraces. that encourages farmers to make such an investment. Qat enjoys an ability to absorb labor in • Supporting less water-intensive crops and the rural areas and to create lucrative job improving rainfed sustainable crops, such opportunities, thus helping to reduce the migration as date palms, cotton and cereals, given the to the urban areas and reduce the strain on the cities. depletion of the strategic reserves of Despite the above, since the spread and the expansion of Qat cultivation emanated from the underground water. increase of the number of people using it and • Promoting bio-protection and resistance to dealing with it, including farmers, traders, salesmen plant diseases and aphids and supporting and laborer, besides Qat becoming a social phenomenon that is characterized by the complexity agriculture research and have them linked of some of the crop's aspects and affects, it is with extension programs that are inevitable then that any interventions or remedies practicable to the farmers. will have to touch upon all the various angles of the • Improving livestock grazing to meet the problems, while making use of the positive advantages and remedying the negative aspects of needs of domestic consumption and direct such a phenomenon, which include the expanding attention to higher milk yield and faster the base of its users to include, increasingly, young growing livestock to increase subsidiary people and women, and the expansion of its cultivation, thus swallowing up more farming areas products, such as wool and dairy products. at the expense of other crops. 66 • Improving the capacities for honey production, considering that it enjoys high domestic and external demand by encouraging the breeding of honeybees and eliminating the diseases that afflict them, while also giving special importance to the Nabk (Christ's- Thorn) tree. • Giving incentives to the private sector to investing in agriculture production and marketing and to adopt projects outside the densely populated areas, with a view towards creating extensive and diversified job opportunities, in addition to those projects that promote integration between agriculture and industry. Priority Programs and Projects: - Rural Development: Raising the capacities of the rural areas and generally improving the living conditions of the people; providing agricultural services; supporting agriculture, veterinarian and fisheries extension; develop irrigation methods to increase agricultural production and supporting the institutional build-up to improve the efficiency of the existing institutions while directing attention to the development of the capacities of rural women. - Irrigation Improvement Project (Phase I): improvement and rehabilitation of the Major Spate Irrigation System Projects; participation of beneficiaries in the maintenance and operation of irrigation facilities and irrigation management; and increase of agricultural productivity by an intensive extension program, in addition to supporting and strengthening institutional build-up. - Surface Water Irrigation Improvement: Achieving the optimal exploitation of irrigating water and raising the efficiency of use of surface water irrigation at the farm level by introducing leveling techniques for land irrigated by surface water and using of survey instruments and laser leveling devices, with the participation of the farmers in operation and maintenance. - Water Harvesting Improvement: Optimal use of harvested water and the development of water harvesting projects such as water dams and dikes as nuclei for a national water harvesting program, while ensuring involvement of the farmers and their sharing of the costs of operation and maintenance. - Improvement of Irrigation from Dammed and Diked Waters: Raising the efficiency of using irrigating water at the farm level by setting up pilot farms, training technicians and extension guides on the modern irrigation methods and arrangement of extension workshops and awareness workshops through the public information media. - Monitoring and Assessment of the Water Saved by the Different Irrigation Systems: Measurement of the quantities of water, which is used by the agricultural sector and the amounts of water saved as a result of the use of modern irrigation systems. - Agricultural Research: Improvement of rainfed agriculture and better management of irrigated agriculture, which includes management of natural resources, improved breeds of basic crops; and crop, livestock, feed, grazing land and post harvest processing management. - Agricultural and Fisheries Production Promotion Fund: Reducing burdens arising from higher prices on agricultural and livestock production inputs and requirements, so as to enable the beneficiaries to continue in their activities, improve efficiency and conserve agricultural land by financing a number of projects and activities related to irrigation and water structures and in the areas of agricultural productivity and marketing, with community participation.

4.1.5. Fisheries Fisheries production may be expanded to achieve an annual average growth rate of 7.8% over the PRSP period, especially as the sector was able to achieve an average growth of 12.3% over the years of the FFYP, while emphasizing that the exploitation of fish wealth should not jeopardize the fish stock reserves. The GoY will exploit the fish resources by every means 67 possible to increase output, provide food and export the surplus, especially as the majority of the laborers in the sector are poor. Specific Goal: Optimal exploitation of the fish wealth, so as to help raise output without affecting the fish stock reserves. Policies • Review and revise laws and regulations governing fish catch to encourage traditional fishing and to regulate and control commercial fishing and increasing the value added while preserving the fisheries wealth. • Set up cooperative fisheries projects to provide financing to poor fishermen and to market their produce. • Increase incentives for attracting local and foreign investments in this sector, especially with respect to setting up fish and marine life farms, for which there are 120 natural sites along the length of the Yemeni coastline. • Regulate the marketing and exports to foreign markets in accordance with the approved specifications. Priority Programs and Projects: - Support to Research Activities: This project consists of a research vessel fully equipped with measurement instruments, sample collection and analysis systems, water salinity and temperature measurement instruments; nets for plankton, with a view towards providing research data and studying environmental factors and changes that are related to the reproduction of fish and marine life in the territorial waters of RoY. - Assessment of Fish Stock Reserves: To achieve optimal exploitation of the fish wealth and to conserve the marine environment by carrying out a biological study of fish and marine life, for the purpose of regulating the fishing areas and setting the appropriate fishing times and the allowable quantities and the appropriate fishing methods. - Creation of an Integrated Marine Control and Inspection System: Set up an integrated marine and inspection system, enhance the capacity of the General Directorate for Control and Inspection of the Ministry of Fish Wealth to enable to perform its duties, to prevent the violations of the territorial waters of the RoY, to conserve the mineral environment and to ensure the optimal exploitation of the fisheries resources. - Creation of Quality Control Laboratories: Set up quality control laboratories, determine the basis for a monitoring system and with specifications that conform to international standards, so as to help improve fisheries products and promote exports. - Improvement of Traditional Fishing in the Red Sea: Improvement of the quality of the fish; reduction of losses before and after landing and during distribution; and providing the different services for fishermen to enter new markets. - Fish Mari-culture Project: Reduce the pressure on the fish and mineral life stock reserves by mari-culture (artificial incubation) of fish, especially shrimp and protect the natural fish stock reserves from over fishing and pollution. - Agricultural and Fisheries Production Promotion Fund: Reduce burdens arising from higher prices on fish production inputs and requirements to enable the beneficiaries to continue their activities and improve efficiency by financing a number of projects and activities related to fish production and marketing with community efforts.

4.1.6. Industry The industrial sector is a major source of economic growth over the forthcoming years, whereby it is expected that manufacturing will grow by an annual average of 6.2% over the period 2003-2005 and the construction and building industry will grow by an annual average of about 5.7%. Overall, manufacturing, including oil refining, which is the major part of the industry, is characterized by the industrial and geographical concentration and low value 68 added. Although the industrial sector seeks to occupy a suitable place among the different economic sectors, its contribution will only increase to only 10.3% of GDP in 2005. The Yemeni economy could benefit from the excess labor in many manufacturing activities such as textiles, clothing, handicrafts and other medium and small industries. The sector is also considered a source and vehicle for increasing non-oil exports. Extractive activities are expected to see a retraction in oil production at a rate of 5.3%, and similarly for the price of oil, which will decline form US$ 21.8 to US$ 19.9 per barrel in 2005, unless explorations yield the discovery of commercial reserves that will increase the present proven reserves and increase the production levels in the final years of the PRSP period. Yemen also enjoys a huge reserves of natural gas, which is estimated to amount to 12- 15 trillion cubic feet, with liquefied gas is now being exploited primarily for local use, with limited amounts exported overseas. With the increase of the gas output for the new electric power stations, the potential for large-scale exports of gas to overseas markets in the forthcoming few years is considered weak, due to the saturation of such markets. Similarly, the mining sector abounds in ample resources and means, in terms of different types of minerals and rocks, such as gold, platinum, titanium, gypsum, marble, granite, etc., which can be exploited, especially due to the connection that some of these have with the construction and building industry. Specific Goal: Give incentives to the private sector for investing in industrial activities to enable it to raise its contribution to GDP and to lead the economy towards achieving appropriate growth rates by exploiting its links with other sectors. Policies: • Expansion of training and provision of incentives for the development of the industrial sector, such as the reduction of customs for investment commodities and raw materials. • Removal of the remaining regulatory constraints; continuation of trade liberalization; completion of the infrastructure; establishment of the industrial zones and completion of the reforms in the banking and judicial systems. • Support the expansion of food manufacturing, textiles, and clothing, so as to enable them to enter foreign markets. • Attention to specifications and quality and also to marketing issues. • Provision of the suitable infrastructure to the extractive industries and provision of protection and security for their projects, which could contribute substantially to increasing economic growth and the foreign currency revenues and to creation of job opportunities in the areas where the mineral ores are found. Priority Programs and Projects - Development and Promotion of Small Enterprises: Improve the economic capacity of small enterprises and handicrafts; enhance the efficiency and technical support to small industries and handicrafts and increase their contribution in rural development. The project also includes setting up a consultancy services center and small industrial zones for small industries and handicraft trades. - Improvement of the General Authority for Specifications, Standards and Quality Control: Raise the efficiency of the authority in monitoring quality in industrial, economic and commercial activities by erecting the buildings and equipping the Authority with the laboratory equipment and instruments. - Support to the Establishment of Industrial Zones: Study and promotion of the establishment of industrial zones by the private sector in a number of governorates, so as to contribute to the reduction of production costs for industrial investors by taking advantage of the economies of scale and by the creation of linkage and integration between the large, medium and small industrial operations, and also between industry and the rest of the economic activities, especially agriculture. 69 - Study of Industrial and Construction Materials Project: study and assess the industrial ores and construction rocks and determine their suitability for promotion of investment in their production and exportation. - The Geological Survey Project: Collection and preparation of the different kinds of geological and technical data derived from field work, and also all the different associated studies, and to have them presented in scientific and technical reports that document the geological situation in Yemen.

4.1.7. Services and Tourism The services sector dominates total GDP, with a share that is estimated at 47.3% in 2000. Government services dominate the sector by a 13% share of the overall sector, followed by transport and communications, wholesale and retail trade, and real estate respectively. The sector is expected to achieve growth that varies from sub-sector to sub-sector with its overall share coming to 49.8% of GDP. Tourism is one of the potential resources for the Yemen economy, based on the natural components, topographical and climatic diversity and cultural and historical heritage. Despite this, however, tourism and the associated activities were only able to contribute about 2% of GDP, which reflects the potential untapped capacity of the sector. However, and despite the recent events and the ensuing weakening of tourism in the area as a whole, the sector is projected to grow over the next three years, and the number of tourists will grow due to increased visits by businessmen in response to an improvement in economic conditions and the development of the Free Zone and the attraction of foreign investments besides the growth of internal tourism and an increase of its share in GDP. The transport and communications sector possesses broad capacities for growth, with its improvement considered an essential requirement for overcoming a major part of the constraints facing the national economy, in order to support the growth of the different economic sectors, due to its relations and strong ties with these sectors. As a result of the partial liberalization of some of the activities of the sector, it is expected to grow by an annual average of 9.9% during 2002-2005, taking advantage of the expansion projects in major roads, ports and communications services, which have now been completed or are under implementation. Fixed telephone lines are expected to increase from 460,000 lines in 2000, to one million lines in 2005, in addition to 400,000 mobile phone lines. Finally, the strategic geographical location of Yemen and the development of the Free Zone, to increase trade, especially re-exports, reflects an important source of growth and for providing an environment conducive to attracting investments. Specific Goal: Development of the coastal regions and increase the efficiency of services and infrastructure. Policies • Develop tourism-related infrastructure and encourage setting up tourism projects. • Broaden education and specialized training to cover tourism and hotel accommodations. • Reinforce security, which is considered a major requirement in this respect. • Enhance tourism culture among the population through use of the public media channels and school curricula. • Development ports and complete the Free Zone in Aden and study the establishment of other duty free zones. Priority Programs and Projects - Promotion of Tourism: Upgrade and raise the efficiency of workers in the tourism sector through high level training and rehabilitation; promote tourism to Yemen overseas and for internal tourism; involve local communities in taking advantage of tourism activities and set up the regulatory frameworks for tourism in the coasts and islands of Yemen. 70 - Preservation of Historical Cities: Renovate the historical homes, caravansaries, public drinking fountains, mosques and all the other important historical buildings and landmarks; complete the infrastructure for the historical cities; establish museums, research and technical centers and improve handicraft trades and traditional industries. - Telephone Network: Expand existing telephone exchanges, set up new ones and modernize the network by replacing the old main telephone exchanges, complete interconnections among governorates by fiber optic cables, and introduce wireless telecommunication systems and comprehensive mobile systems to provide remote population centers with access to telephone services.

4.1.8. The Environment and Natural Resources The noticeable deterioration of the B OX 5 . 9 : C OMMON A SPECTS OF C ONSERVATION OF THE E NVIRONMENT AND P OVERTY R EDUCTION various aspects of the environment Both environmental conservation and poverty reduction require requires attention to rehabilitate, equal distribution of development and sustainable livelihoods in all maintain and preserve the regions of Yemen through a set of institutional, legislative and environment. There should be focus economic measures, mechanisms and instruments, financial on the ways in which the PRSP can investments and collection and updating data, and also through enhancing community participation. At present there are also help in addressing major numerous fields and common activities between the two environmental issues and the orientations, which compliment each other, including: improvement of natural resource • Existing poverty reduction programs and projects through management, particularly water provision of essential services to the deprived regions (health, education and road projects), improvement of the environmental resources, as the PRSP seeks to situation (water harvesting projects, construction and repair of enhance sustainability of natural irrigation canals, construction and improvement of water supply resources and the reduction of the and sanitary drainage in rural areas and cities), creation of job adverse effects on the environment, opportunities for the poor (finance fishing, date palm cultivation, in addition to making the poor domestic breeding of cattle and sheep), improvement of the local communities through the institutional, technical and economic conserve their environment and empowerment, which is presently being implemented by the make the environment serve their Local Community Development Program, IDAS program, etc. livelihoods. This requires • Small pilot projects identified by the National Environmental orientations to improve the Action Plan (NEAP) to address the environmental problems and management of natural resources increase economic productivity at the local level with community participation. The Ministry of Agriculture and Irrigation presently and to integrate the aims of is implementing one of the projects in the management of land economic growth, poverty reduction resources by improving grazing and traditional grazing and the and protection and reinforcement of use of modern methods. the environment. General Goal: Reinforce environmental management of natural resources; enable and involve beneficiaries and support the role of women and youth in environmental conservation. Policies (i) Environmental Policies: • Enhance technical capacities of the institutions concerned with the environment and combating poverty and build up their technical capacities and capabilities in undertaking studies and setting forth the remedies that lead to finding comprehensive environmental and development projects and programs that rely on community participation. • Develop legal and procedural frameworks that regulate the processes for ownership of, and access to, natural resources, their proper use, maintenance and environmental conservation. • Institutional empowerment of local community organizations that are engaged in environmental conservation and assisting them in preparing their procedures and in registering them. 71 • Carry out field studies to assess the environmental conditions and natural resources of Yemen at the local administrative units and at the overall national environmental system to undertaking the necessary measures for protecting the environment from pollution. • Enable the local poor and limited income groups to participate in the design, implementation, assessment of all the efforts to conserve the environment and the management of resources. • Improve economic and social conditions of women through a set of initiatives including better access to land, credit and social services like health and education, food and water. • Find the appropriate incentives, accompanying awareness programs that convince individuals to use commonly-owned natural resources properly such as soil, water and to safeguard the general environment from pollution and deterioration. • Provide job opportunities by development and environmental projects and programs such as water harvesting, construction and improvement of irrigation canals, conservation of soil and maintenance of mountain B OX 5 . 1 0 : S PREADING THE S USTAINABLE U SE OF R ESOURCE AND agricultural terraces, recycling THE R ECOVERY OF D EGRADED A REAS wastes and their use as inputs for The cases in which the poor themselves were able to develop and maintain natural resources by depending on production and other agricultural and self-help and the available public resources are considered industrial projects, which consider successful examples, which should be disseminated on a sustainable environmental wide scale. The Agricultural and Fisheries Production conservation, as well as encouraging Promotion Fund, the Social Fund for Development, the small enterprises and personal Community Involvement in the Management of Land Resources Project and the Local Community Development initiatives. Program adopt such policies. These programs support • Undertake environmental and sustainable development by financing projects that concern economic assessments of the the deprived groups and focus their activities on the development projects and set up provision of health and education services, water, irrigation and sanitary drainage, expansion of agriculture local and national databases related and fisheries production, livestock, and other activities that to poverty and the environment. generate temporary and permanent job opportunities on • Finance projects that provide soft one hand and maintain natural resources and protect the loans for the poor, with high priority environment on the other. The local communities are to low cost effective projects that organized to develop their basic structures and to increase the income of their constituents while providing them with meet their needs while depending on technical expertise and requiring their contribution in these their own capabilities and local projects. resources. (ii) Water Resource Policies: • Reinforce institutions in the water resource sector and clarify their responsibilities in both rural and urban areas while expanding decentralization and community participation. • Enactment of laws and regulations related to water rights; regulate the exploitation of the water resources; especially underground water; and development of water resources and protecting them from pollution. • Support projects that seek to raise the efficiency of water resource uses in both agriculture and domestic use and in both the rural and urban areas. • Protect water resources from qualitative deterioration and pollution by expanding sanitation drainage and the treatment of waste from industrial and health facilities. • Use of treated wastewater in suitable activities to reduce pressure on underground water. Priority Programs and Projects (i) Environmental: - Sustainable Environmental Management: Coordinate support to environmental management and community participation in the management and planning of land resources and in the implementation of the National Plan for Environmental Protection, the Plan for Combating Desertification and the creation of the Land Resource Research and Extension Center. 72 - Activation of the Environmental Protection Law: Activate the Environmental Protection Law; review the executive procedures for the Law; adopt suitable mechanisms for the implementation of the Law; and prepare plans according to such mechanisms. - Monitoring the Environmental Impact on the Agricultural: Introduce the concept of environmental impact into agricultural projects, by means of measuring and monitoring such impacts accordingly. - Comprehensive Plan for the Development of the Socotra Archipelago: Prepare a plan for the use of land for the achievement of economic, social and environmental development of the islands and ensure that the development activities are keeping with the policies on the conservation of bio-diversity of the islands. (ii) Water Resources - Development of Water and Agriculture Surveillance Network: Development of surveillance stations to provide a climatic and water information database, to help in the proper planning and implementation of water, irrigation, dam and dike construction projects, with a view towards achieving sustainable development of water resources. - Integrated Water Management of Water and Underground Basins: The optimal use of water and curtailment of underground water depletion, by means of setting up and developing projects for integrated management of underground water, with a view towards maintaining the rural economy and ensuring adequate water supply, which would include studying, assessing and monitoring the conditions of the basins and the watersheds; support suitable traditional systems and customs for the protection of water basins and water sheds; involvement of the farmers and users in the integrated management; and formation of Water Users Groups. - Improvement of the Use of Wastewater in Agriculture: Improvement of the use of treated wastewater to reduce the strain on pumped underground water and to curtail from the random depletion of such water; conservation of the environment, as well as in order to expand irrigated agriculture.

4.2. Development of Human Resources The investment in human capital, especially for the poor, the basic fulcrum, by which it is possible to reduce the suffering from poverty and to achieve the highest returns on investment in people. This can only come by development of knowledge and skills, improvement of health services and creation of job opportunities, in addition to the adoption of favorable social orientations. The impact generated by investment in human resources is not just limited to generating higher incomes for families through work and the establishment of projects but also, first and foremost, it does generate a successive transmission to the members of these families in the form of better education and health. General Goal: Development of human capacities, considering that human beings are the object and means of development, and creation of a right environment for human beings to produce and participate towards the realization of the aims and objectives of the whole population and the local communities.

4.2.1. Population Four considerations are apparent within the population problems that have strategic implications on population, production and development, which are: (i) an imbalance between the geographical distribution of the population with the map of the natural and economic resources; (ii) high rate of population growth and the growth in the labor force at even higher rates, both of which lead to difficulty in providing enough job opportunities, in addition to increasing the pressures on, and the demand for, basic services and the growth of the food gap; (iii) while most of the population lives in the rural areas, where most of, and the most important, economic resources are found, rapid urbanization, especially in the major cities, 73 due to the migration from rural to urban areas exceeds their absorption capacities; and (iv) emphasis on the interlinakges among population issues and poverty, the environment, education and health, and accordingly it becomes impossible to solve their problems without dealing continuously and intensively with all these dimensions. Similarly, the control over population properties, in terms of structure and distribution, or the achievement of noticeable progress in the demographic properties, in terms of the number of births, mortality and total fertility, etc, require a long time, and large efforts to change their environmental, cultural, health, educational and behavioral determinants. Specific Goal: Control population growth in keeping with the available resources and with the needs of development, and thus reduce the population growth rate to 3% by 2005 and the curtailment of internal migration to the cities. Policies: • Raise awareness on the different population issues amongst the different population groups and come up with consensus on a positive position vis-à-vis these issues. • Promote the effective participation of the people in population activities, especially through the voluntary, NGOs, professional associations, religious leaders and sermonizer at all the popular levels. • Intensify population programs in all the various media channels, on the importance of reducing the high rate of population growth. • Expand reproductive health and family planning services in rural areas; educate men on the methods of family planning and develop their practice of such methods; support the voluntary efforts in providing family planning services. • Transition to local authority and the application of decentralization in the preparation and implementation of economic, social and service projects at the level of each governorate and district, in order to reduce internal migration. • Promote the investment in both crop and livestock agriculture and in fisheries; support local industry, especially light industry which is linked to agriculture and the regulation of the agriculture market, so as to insure the provision of job opportunities for people in their regions and the reduction of their migration to the major cities and secondary towns. Priority Programs and Projects - Public Media Population Awareness: Enhance the role of the information media and development of programs and efforts to disseminate population awareness on family planning and encourage addressing all the population issues through the media channels. - Religious Awareness: Spread awareness among religious scholars, sermonizers, and guides on population issues; create positive awareness among them on such issues and prepare guidelines for sermonizers and guides. - Population Awareness Among Youth, Boy and Girl Scouts: Development of awareness among young people; enhance the role of boy and girl scouts in spreading awareness on family planning, by including population issues within the activities of boy and girl scouts. - Population Awareness Among Armed Forces and Security Personnel: Include population issues in the awareness plans for the armed forces and in training of the morale guidance personnel to undertake spreading population awareness among the armed forces personnel.

4.2.2 Health The GoY realized the need to reorganize the health sector to improve its ability in identifying priorities and meeting the needs of the people. In order for the health sector to fulfill the needs of the people –especially the poor– it will have to adopt lower cost and most effective methods for providing services at affordable costs, while at the same time its need for increased resources requires that the public contribute to a share in the cost of these services. Therefore, and despite the continuation of the provision of basic health services by the public health system, the strategy of the health sector, however, aims to direct the resources of the 74 private sector and the NGOs towards these services, and to gradually turn the public health sector away from direct service provision in hospitals and to focus its role in the following directions: Providing limited basic health B OX 5 . 1 1 : P ROBLEMS F ACING THE H EALTH S E C T O R The health situation and its developments over the past decade services, especially to the poor, on led to two problems: The first one lies in the fact that, with the cost-sharing basis. expansion of the government health system, the facilities thereof Providing basic preventive health and the increase in its staff, the public expenditures for the sector service such as the Expanded not adequate anymore neither to operate the infrastructure of the Immunization Program, Food system, nor for the employees, especially with the conditions of the health facilities, which have become badly in need for repairs and Health Education for all the and maintenance, in addition to the updating of equipment and population. machinery, not to mention the severe shortages in medicinal Enhancing the Programs for supply. The second problem is evident by the competition posed Combating Endemic Diseases, by the private sector, which is also intertwined with the such as diarrhea, Malaria, government health sector, but not supplementary to it in terms of achieving the policies of the health sector, besides the duplicity of Schistosomiasis, Tuberculosis, the employment of the doctors, nurses and technicians between Hepatitis, AIDS and Venereal the two sectors and in a manner that will adversely affect the Diseases. performance of both the government and private health services. Specific Goals: Raise the coverage rate to about 65% of the population by 2005, so as to improve the health indicators by providing basic health services in the government health facilities, especially in rural areas, which should be proximate to the people, through the Health Region System, while also providing essential medicines at reasonable prices. Policies • Upgrade the efficie ncy of using the government resources by advanced administrative and financial systems and the adoption of cost sharing, in order to save additional financial resources for maintenance of the facilities, provide medicines and give incentives to the staff to improve their performance. • Regulate and supervise health services provided by the private sector, to ensure safe and responsible service provision, which is supplementary to the health care provided by the public health sector. • Transfer of administrative authorities to the regions and strengthen the participation of the population in the management of the health regions, in view of its importance in the reform of the health system. • Adopt a prudent approach to select the midwives and female health workers, who are providing primary health care on a geographical basis and the nomination of each region of its respective candidates. • Redistribute staff from the overstaffed hospitals and health centers in the cities to the health facilities in the rural areas, which have shortages of doctors and health workers, while providing a lucrative incentive system to motivate them to serve in remote areas. • Increase resources of the health care from the government budget and participation of the public in financing the expansion of the scope of health services and coverage of the rest of the rural population, which has yet to be covered by health services. • Import low cost good quality (generic) medicines with non-registered ownership, on the basis of fully recovering their costs by way of patient payments to the revolving medicine fund, while ensuring free medicines to the poor families within the area in which the relevant health facility operates. • Encourage NGOs to provide health services to the population, especially to the poor, and especially as the number of such NGOs is still almost negligible. Priority Programs and Projects - Health Programs: Includes 31 programs that aim to combat the spread of endemic diseases; improve nutrition; reduce risks, which threaten maternal and infant health; upgrade the quality of health services; implant the principle of participation in the 75 management, planning, financing, supervision and assessment, aside form development of human resources and making the medicinal policy effective. - Constructing and Equipping Facilities for the Health Sector: Upgrade and improve the health services by equipping and rehabilitation of health institutions with modern health equipment; reinforce support services; and support community participation in the management and monitoring of the performance of health institutions. - Improvement of Basic Health Services and Family Health: Improve maternal and infant services by rehabilitation of some of the health centers. - The Improvement of Health Services in Marib Governorate: Raise the coverage of health services in the governorate, considering that it is a remote and less fortunate governorate, and improve these services, so as to reduce the afflictions of diseases and curtail endemic diseases. - SFD Projects and the Project of the PWP: Develop the population by improvement of health services and contributing to the creation of permanent job opportunities, and vitalize community involvement in the preparation and implementation of public works projects, while focusing on support to institutional building of community organizations and NGOs in this respect.

4.2.3. Education and Training The progress of the country and the realization of economic and social development depend on increasing production and productivity, proper exploitation of resources, facing the challenges of globalization and competition and keeping pace with the developments and qualitative transformations in science, research and technology. Education and training is linked to all national economic sectors and the conditions of the population. Therefore, it is the key and driver for economic development and social progress, besides representing the sinew of sustainable human development. Basic education is considered essential for rural development and for the enhancement of the agricultural sector, in addition to being one of the fundamental inputs for increasing industrial productivity. The teaching of girls is an important factor in the improvement of the maternal and infant health and nutritional conditions and in the reduction of the rate of fertility, aside from its role in bringing about social change in the position of women in the society. Thus, the educational strategy in Yemen focuses on the priority of four basic approaches, which are as follows: (i) improvement of the educational environment; (ii) improvement of the management of the sector and the orientation towards decentralization; (iii) priority to basic education; and (iv) focus on the education of girls, which in turn will raise the overall enrollment rate. Specific Goal: Raise the enrollment rate in basic education to 69.3% in 2005, while reducing the gaps between girls and boys in the regions; also, raise the percentage of those enrolled in vocational training and technical education. For higher education, the orientation of the GoY is to focus on restructuring higher education to develop university education to keep pace with the advances in science and technology, with the increase of the percentage of female students to about 27% of the total enrollment and to increase the specialized science and practical field graduates to 16%. Policies (i) Basic Education • Pave the way for all to enroll in schools to improve human resources and performance efficiency. • Promote the enrollment of girls in education, especially in rural areas, to reduce the gender gap between males and females. 76 • Select the locations of schools according to the schooling map and with the participation of the local community, fencing the school buildings and provision of water closets, especially in girls' schools. • Expand basic coeducational schools for the early grades and establishment of separate classrooms for girls in the later grades in basic education. • Provide competent female teachers for the later years of basic education. • Waive schooling fees for girls and provide them with financial or in-kind assistance in some of the areas, in order to; lessen the costs of education on their families. • Distribute education allocations among the governorates and between the sub-sectors in favor of basic education, while working to upgrade efficiency of public expenditures. (ii) Vocational Training and Technical Education • Expand the number of vocational and technical institutes and centers, and set up the major institutes and centers proximate to the industrial areas, whereby they should include centers for serving and meeting the needs of the nearby areas. • Develop and modernize the existing institutes and centers and increase their absorption capacities to meet the current and future needs of the labor market quantitatively and qualitatively. • Set up incentives to motivate male and female students to enroll in vocational and technical fields, especially the children of poor families, from the poverty pockets and the remote governorates; and to address some of the social causes, which hinder the enthusiasm for vocational training and technical education, and for dropouts from them. • Prepare flexible financial regulations to enable the vocational and technical training institutes and centers to take advantage of any income they can generate towards self- advancement. (iii) Higher Education • Activate the role of the Higher University Council in controlling, supervising, monitoring, and guiding the different aspects of public and private education, in accordance with the criteria for performance evaluation. Similarly, prepare admissions policies in accordance with the needs of development and the labor market and absorb capacities of every university and college/faculty. • Achieve balance between the different specialized fields and expand the absorption capacities of the specialized fields, for which there is a high demand for its graduates, which are associated with the natural environments and which meet the needs of development and the la bor market, while securing their requirements of faculty, laboratories, workshops and teaching aids, etc. • Review and improvement of educational programs and curricula in higher education, so as to keep pace with accelerating developments and to prepare graduates that are able to join the labor force. • Impose tuitions that allow for freeing more resources for basic education and creating incentives for students to choose the specialized fields that are required by the labor market and which work towards the improvement of the quality of education, while accompanying this with a program for scholarship grants. • Fix the number of scholarship grants for overseas studies and limit them to specialized rare scientific and technical fields and set a specific percentage for excellent and outstanding students, who hail from limited income and poor families. Priority Programs and Projects (i) Basic Education - Expansion of Basic Education: Construction of new schools; expansion, rehabilitation and maintenance of existing schools, while providing furniture for and equipping schools; also work towards reform of the basic educational sector and improvement of the quality of education. 77 - Investment in the Education Sector: Reform of the educational sector and improvement of its output; improve the curricula and teaching techniques and train teachers; and work towards reducing the crowded classrooms and encouragement of female enrollment by completing the construction of 750 classrooms. - Construction of Additional Classrooms for Basic and Secondary Education: confront the expansion of basic and secondary education and reduce overcrowded classrooms and improve the quality of education. - Building Schools: Increase the rate of enrollment of girls in basic education, especially in the rural areas, by building, furnishing, equipping and renovating 732 classrooms, in addition to improving the quality of education. - Constructing 200 Girls' Schools: Promote the enrollment of girls in education to reduce the gender gaps and improvement of their living conditions. - Project for the Completion of constructing and Equipping 3,500 Classrooms: Confront the increased enthusiasm for education and reduce the crowded classrooms and rehabilitation of some of the educational facilities. - School Mapping and Support to Planning and Statistics: complete the preparation of the Schooling Maps for the eight governorates; reorganize and redistribute services; set up the statistical system and update the database of the sector and regularly collect information and data on education. - SFD Projects and the Project of the PWP: develop population by improvement of educational services and contributing to the creation of permanent job opportunities, and vitalize community involvement in the preparation and implementation of civil works projects, while focusing on support to institutional building of community organizations and NGOs in this respect. (ii) Vocational Training and Technical Education: - Completion of the Vocational Training Project: rehabilitate 15 centers with the required equipment and improve 60 sections in different centers of the country; set up new specialized fields, with special consideration for specializations that are appropriate for women; improve curricula and upgrade quality of staff, with a view towards providing the qualified technical staff to meet the needs of the labor market and the requirements of development and for the replacement of expatriates by Yemeni employees. - Setting up Vocational and Technical Training Center and Institutes: Construct and equip 35 centers and institutes for vocational training in a number of governorates, in order to meet the needs of the market for qualified technical staff. - Constructing a Higher Polytechnic Institute: Construct and equip the institute; prepare its curricula and train its staff , with a view towards providing qualify personnel to meet the needs of the labor market and the requirements for development and to "Yemenize" the technical positions. - Improvement of Vocational and Technical Training Institutes and Centers: The rehabilitation of a number of old institutes and centers and replacement of their machinery and equipment to keep pace with needs of the new training programs; set up new sections; and the development of curricula and rehabilitation of staff. - Establishment of Handicraft Institutes and Centers: establish five institutes and centers for the traditional handicraft trades in the Capital Secretariat, Hodeidah, Taiz and Sa'ada, with a view towards preserving the traditional skills and contribute to the development of some of the productive and service sectors. - Training Institutes and Centers for Girls: Set up four institutes and centers for training of girls in the areas of specialization that are more suitable for their work and to meet the needs of the labor markets, with a view towards enhancing the contribution of women in development 78 (iii) Higher Education - Higher Education Project: prepare and implement a national strategy for the reform of higher education and the improvement of the institutional of the Ministry of Higher Education and scientific research in reinforcing higher education, by means of improving the management of, and providing the essential funding for higher education, while focusing on improvement of its quality. - Link Government Universities With the Information Networks: Provide government universities with the essential equipment, interconnected networks; rehabilitate the staff in computers and information and facilitate access to research centers though the Network. - Constructing University Colleges/Faculties: Set up the Faculty of Engineering and Technology in Hadhramout University and the Faculty of Water Structures in Dhamar University, in order to prepare and rehabilitate staff in the engineering and technological fields to meet the needs of the labor markets and the requirements of development. - Constructing the Community College Buildings: Constructing the buildings and equipment required for operating the Community Colleges in Sana'a, in the required form, with a view towards preparing the intermediary personnel that meet the requirements for development for human resources in the fields of engineering, technology, business management and in the different production and service fields, in addition to the arrangement of the job rehabilitation and training for the government and private institutions. - ICT for Human Development Purposes: Enhancing the use of Information and communication technology through adopting policies to encourage ICT and support its uses in the areas of the PRS including health and education, to serve the public in general and the poor in particular. Such innovation schemes should also be result-oriented. 4.3.Improving Infrastructure Despite improvements realized B OX 5 . 1 2 : D EVELOPMENT OF THE R URAL E CONOMY The establishment of infrastructure and provision of institutional over the past years in infrastructure, and financial structure for the informal sector represents the best however, it is still below the method for integrating and improving the informal sector to desired standard and is enable it to upgrade its efficiency, to generate new and productive characterized by the geographical job opportunities and to contribute to the realization of economic variances and bias towards the growth and improvement of the standard of living of the people that operate in the sector and, thus, to curtail migration to the urban areas and the more fortunate cities. The importance of the rural areas is evident in linking the groups. The infrastructure services centers for agricultural and fisheries production with the internal also suffer from numerous markets and the export outlets, so as to work towards reducing difficulties, due to the population the cost of transporting the commodities and individuals, stimulating the transportation and transfer movements and the growth and the high migration rate creation of a market, which justifies the establishment of large to the urban areas, which lead to projects, in addition to facilitating access to basic social services. increased pressures on the infrastructure, and to random expansion and the dispersion of the efforts of projects, in view of the huge needs that arise thereof, besides the fact that these pressures are beyond the capacities of the relevant concerned organs, and even proceed without a long term strategy and plans and the shortfall in the legislation that regulate the activities of the sector. The completion of infrastructure services requires many projects and large financing, especially in the rural areas, where services only provide coverage to limited areas. The improvement of the infrastructure represents a method for the realization of rural development and to reduce the typical migration to the cities. At the same time, the limited natural resources, topped off by the narrow area of cultivable land and the scarce water resources in the areas of agglomeration of people, with the continuation growth in population –especially in the central highlands– represents one of the fundamental limitations on economic and social development. the cities and areas extending along the Yemeni coastline, a strategic component and a basic vehicle for coming out of this problem and for the 79 achievement of Yemen's economic and social goals. To achieve this requires the development of the coastal areas, by first providing the infrastructure and promoting the establishment of economic activities in these areas. The establishment of the required infrastructure in these areas is deemed to be less costly, if we take into consideration the extent of water problems in the highlands compared to the potentials for desalination of seawater. Specific Goal: Contribution to the achievement of economic growth and diversification of the economic base and provision of basic services to reduce poverty, which is more widespread in rural areas while giving priority to the less fortunate groups, such as women, children and the population of remote areas. Priority Programs and Projects - Conflict Prevention: Intensify development projects and services in remote regions most vulnerable to conflict and unrest, in particular Marib, Shabwah, Aljouf, Amran, Aldhalei and east of Sana’a Governorate. This would ensure social stability in those regions and reduce the possibility of potential violence and extremism.

4.3.1. Water and Wastewater Sanitation Wastewater Sanitation acquires significant importance, due to the health risks, which it can cause and the pollution that result from it to scarce resources. The data shows the low standard of the wastewater sanitation services and their concentration in the major cities, despite the efforts, which were exerted over the past period. The Water and Wastewater Sanitation sector is witnessing a pilot experiment in the establishment of local corporations for production and distribution of water as one of the mechanisms for the reform and restructuring of the sector, presently being undertaken. Specific Goal: Increase water production for domestic uses to 162.5 million m³ by 2005, and thus raise coverage of the public networks to 69% in the urban areas; expand scope of wastewater sanitation services to raise coverage to about 44%. In the rural areas, the aim is to increase consumption to 423 million m3 and increase coverage to about 65% of the rural population. Policies • Set up and operate quality control and standard systems and the required scientific laboratories. • Promote and regulate the participation of the private sector in operation and management of water supply systems, and in protecting them from waste or pollution, in collaboration and coordination with the National Water and Sanitation Authority (NWASA), cooperative associations and local councils; expand the application of decentralization and set up financially and administratively autonomous branches responsible for production and distribution, in the same manner as was accomplished in the Capital Secretariat and some of the governorates. • Provision of service on cost recovery basis, subject to the criteria of social equity. • Completion of the program for restructuring the water sector and increasing the efficiency of its management, the elimination of institutional conflict and interventions, with a view towards rationalizing the use of water resources and set up an entity to provide wastewater sanitation in the rural areas. • Implementation of a comprehensive modernization and maintenance program for the public water supply network, with a view towards reducing losses. • Enhance the skills and expertise of the employees of the facilities and utilities of the water supply and wastewater sanitation sector and upgrade their planning, technical and administrative capacities to help improve the performance and services of the sector. 80 Priority Programs and Projects - Capital Secretariat Water Supply and Wastewater Sanitation: Provision of water supply service to the City of Sana'a and expand the wastewater sanitation in order to preserve the environment. - Water and Sewerage Services for a Number of Cities in Some of the Governorates: Provision of water supply and wastewater services, to improve services, infrastructure and health conditions, reduce the pollution of the environment and internal migration by drilling and equipping wells; set up water supply and wastewater sanitation networks and treatment plants. - Renewed Program for Wastewater Sanitation in the Major Cities: Provision of water supply and wastewater sanitation to improve services for the secondary towns and reduction of environmental pollution. - Water and Sanitation in Secondary Cities: Provide water and sanitation to improve services and infrastructure and to reduce pollution in the cities of Bajel, Zabbed, Beit ElFaqeeh, Al-luheiah, Alshehr, Jiblah, Zinjibar and Jaar. - Yarim, 'Amran, and Sa'ada Water and Sewerage Services: Improvement of water supply and wastewater sanitation in these cities and reduction of environmental pollution. - Water Supply and Wastewater Sanitation in Rural Areas: Supply rural areas with potable water and set up suitable wastewater sanitation systems to preserve the environment. - SFD Projects and PWP Project: Community development through improvement of water supply and wastewater sanitation services and contribution to the generation of job opportunities and upgrading community participation in the preparation and implementation of civil works, while focusing on the institutional build-up of community associations and NGOs.

4.3.2. Electricity Sector Indicators show the failure of electric power in Yemen in keeping pace with demand due to the aging of the power stations and the distribution networks, which is reflected in the high losses that are currently estimated at about 38%, well above the internationally prevailing levels. This situation prevents the full utilization of machinery and equipment in the different productive and service units, or burdens the private sector facilities with the cost of setting up their own generating plants, not to mention the inability to systematically fulfill domestic lighting requirements. This situation is expected to continue over the medium term due to the increase of demand at high rates, and thus increases the adverse aspects on investment opportunities and the growth of output, income and employment, clearly showing the importance of strategic investment by the private sector in this field. Specific Goal: Increase the installed capacity to 1,266 MW, increase the coverage rate of electricity supply to 40.3 % of total population by 2005, and reduce electricity losses to 25%. The objectives for rural electrification are exemplified by increasing coverage rate to 22.2 % of the total rural population by expanding supply and choosing the most suitable energy sources alternatives including new and renewable energy sources such as solar and wind energy Policies • Rehabilitation of existing power stations, and attention to upgrading the maintenance level and the efficiency of operations. • Attract private sector capital to invest in generation, transmission and distribution of electricity and transfer responsibility for operations and maintenance of some power stations, transmission grid and distribution networks to the private sector, in preparation for making the experiment universal. 81 • Support the orientation towards financial and administrative decentralization to improve operations efficiency in the branches and improve the quality of service to the consumers. • Expand on the concept of local participation in the execution and management of electricity generation projects; and secure operations and maintenance of these projects, so as to guarantee that they are well utilized and developed. • Set the tariff structures on commercial basis, while keeping to the minimal limits of social justice; and improve the level of collections of due payments. • Prepare and execute intensified programs to build personal capacities and upgrade the skills and efficiency of staff; give special care to operations and maintenance programs in the power generating stations, substations and the transmission and distribution networks. • Concentrate on the projects for densely populated areas. Give priority to undertaking electrification projects in deprived areas. • Develop and advance the sources of new and renewable energy and prepare programs for the to gain the maximum benefit from such energy, especially in rural and remote areas and in the Yemeni islands. Priority Programs and Projects - Power Generating Station by Gas Project: Construct a 300 MW gas power station in Marib Governorate, with high voltage transmission line, major substations to Sana'a, for the purpose of addressing the existing shortage. - Renewable Sources Power Generating Station Project: The use of renewable sources of energy that conserves the environment and contributes to the provision of electric power, especially in the areas where the required sources are available. - Modernization of the Transmission Line Project in the Coastal Areas: Secure transmission of power from power stations and reduce interrupted supply due to humidity and climatic conditions in the coastal areas. - Reinforcement of Some of the Power Generating Plants: Reinforce generation in Al-Hali Power Station (Hodeidah), Khourmaksar Power Station (Aden), 'Usaifarah Power Station (Taiz) and South Sana'a Power Station to meet the increasing demand in these cities. - Enhancing Power Generation in Some Districts: Enhance the existing power generation capacities and completion of linking the electricity grid and distribution in some districts. - Electrification of al-Qafr, Al-Saddah and Al-Nadirah Project: Provision of electricity from the national grid to secondary towns and reinforcement of infrastructure in the project area to create economic and social activity that contributes to overall rural development. - Al-Habilayn-Dhamar Transmission Line Project: Construction of a 132 kV line from Al- Habilayn to Dhamar across the Governorates of Al-Dhali'a, Ibb and Dhamar, for the purpose of reinforcing the national grid and reducing losses and provide service to new areas to improve the elements of the infrastructure and rural development in these areas. - Project for the Construction of Two New Power Stations in Both Sana'a and Aden: Undertake the studies, prepare designs and tender documents and construct a 120 MW power station in Sana'a and an 80 MW power station in Aden, to support generation in the Capital Secretariat and the City of Aden to face the existing shortage and to absorb the disconnected industrial loads. - Fourth Power Project: Connection of secondary towns with the national electricity grid and feed several villages and to do away with the costly isolated diesel plants.

4.3.3. Roads Passenger movement and merchandise transport in Yemen relies primarily on overland transport. Despite its improvement, the availability of a modern road network to link most parts of the country is, nevertheless, still inadequate to meet current and future development needs since the paved roads do not exceed 9 % of the total roads and their proportion to land area does not exceed 11 km for every 1,000 square km, which is a very low rate when 82 compared with the regional and international ratios. The roads sector also needs support and institutional, organizational and technical strengthening to change efficiency of performance and soundness and adequacy of the services of the sector, which suffers from obstacles that may be highlighted as follows: (i) institutional and regulatory weakness of the sector; (ii) differences in the technical and engineering specifications of the road network, which impede and increase the cost of maintenance; (iii) non-compliance with the load limits, which the roads were designed for, which subjects the roads to rapid deterioration; and, (iv) deterioration of large sections of the paved and dirt roads due to the absence of regular maintenance work. Specific Goal: Completion and modernization of the domestic and international road network to link all the Yemeni regions with each other, including the secondary towns and the rural areas on one hand, and Yemen with its regional and international surroundings on the other, so as to achieve greater interrelations, strengthen transport traffic and ease the flow of goods and services and transportation of individuals, in addition to maintenance of the existing road network to ensure the safety of their use and their sustainability. Policies • Completion of overland connection of the coastal strip, given its increasing importance in light of growing domestic economic and social activity and the orientation of the Government towards regional economic integration and global economic cohesion. • Construction of a road network to link industrial and agricultural production centers, fishing, and mining areas with the domestic markets and the export outlets. • Complete the uncompleted sections of the domestic and international road networks; organize road construction, whereby to first complete the projects currently under implementation and within their financial allocations and to only start any project, if adequate allocations are appropriated for them. • Give priority to the roads that link population agglomerations with the road network and rationalize the rural road development program, by means of preparing program for arranging the priorities of the rural roads. • Support and involve the local communities and individual contributions in the construction and maintenance of feeder and dirt roads and activate the role of the organs of the local authorities in laying, maintaining and sustaining rural roads and reinforce the role of the development and social funds in this area.. • Set forth the technical and engineering specifications and standards for the road network in accordance with requirements, and to work towards making them compatible with the technical specifications set forth in the international road agreements in the Arab Orient; comply with the Laws of Vehicle Axial Weight Load and Dimensions and operate the existing Axial Weight Load Stations; and set up new stations as needed, in addition to placing traffic and alert signs. Priority Programs Projects - Rural Roads: Facilitate the connection and movement from centers of the Governorate to the districts; serve the largest scope of rural population agglomerations; improve access to basic social services and facilitate access to production inputs and consumer commodities and promoting economic growth by encouraging agricultural production and activities associated with it and the creation of job opportunities. The program seeks to set up a mechanism for planning and determining priorities, while involving local communities and individual contributions in the construction and maintenance of feeder and dirt roads and activate the role of the organs of the local authorities in laying, maintaining and sustaining rural roads and reinforce the role of the development and social funds in this area. 83 - Seyhout-Nashtoun Road (172 km) and Tarim–Thamoud-Al-Shahn Road (400 km): achieve the linkage with the Arab Road Network, facilitate interconnection between the regions benefiting from the project and the rest of the areas of Yemen and with the Sultanate of Oman, so as to encourage agricultural and livestock production, marketing of products and stimulating internal and external tourism. - Aden–Bab Al-Mandab–Al-Mocha Road (255 km): Realize the linkage of the main road network and the coastal road, so as to help stimulate domestic and foreign economic and commercial activities. - Ahwar–Ruthoum–Al-Nusheimah Road (150 km): Completion of linking the coastal roads between Aden and Al-Mukalla and lining the area with the oil port and protect the oil pipeline and connecting the fishing communities in the area to encourage fisheries production and marketing. - Harrah–Sa'ada Road (205 km): Interconnect the northwestern regions along the border with each other and with the internal regions to facilitate the intercommunication of the people of the area, increase agricultural production and encourage commercial trade. - Arhab–Al-Hazm (Al-Jouf) – Al-Boq'a (283 km): Achieve linkage with Saudi Arabia; secure transport traffic in accordance with the needs of the economic activity; stimulate production and marketing of agricultural and livestock products and commodity trade. - Thamoud–Jabal Safouh–Jabal Saghir–Al-Yutmah–Al-Boq'a (720 km) Road: Achieve linkage between Sa'ada and Al-Jouf Governorates reaching up to the border with Saudi Arabia and secure transport traffic in accordance with the needs of the economic activity; stimulate production and marketing of agricultural and livestock products and commodity trade. - Reinforcement of Parts of Aden – Al-Mukalla Road: Construct Asphalt roads and widen the present network to cut travel time of trip, reduce the cost of operating vehicles and reduce accidents. - Amran–Sana'a–Dhamar–Ibb–Taiz –Lahj–Aden (459 km twin directional) Road: Reduce the pressure on the present road extending from 'Amran to Aden, reduce accidents, shorten the time span of trip, facilitate the movement of merchandise and the agricultural products between the areas of production and marketing that the road passes through, besides reinforcing the link between Sana'a, the Capital City and a number of governorates which the road crosses reaching to Aden Governorate. - SFD Projects and PWP Project: Community development, by means of construction and improvement of roads and contributing to the generation of permanent job opportunities and to upgrade the level of community participation in the preparation and implementation of civil works. - Program of the Major roads that link governorates or within a governorate: (for details refer to annex 3).

4.4. Ensuring Social Protection The change of poverty in Yemen from a mere accidental to a more structural case has increased the difficulties facing the social safety net and reduced its effectiveness and efficiency under its present condition and resources. The long-term success of the package of polices under the reform program depends on the state’s ability to protect the socio-economic conditions of the most vulnerable and fragile segments of society. This requires the formulation of a new concept addressing the role and infrastructure of the Social Safety Net (SSN) and the transformation of its tools from interim and compensatory mechanisms to more permanent mechanisms for sustainable social development. Social insurance programs occupy an important place in the concept of social protection. This compulsory system of insurance works on spreading the umbrella of insurance protection against risks like aging, disability and death in the broad sectors representing most segments of limited income. Strengthening the role of the social safety net and its programs depends on the adoption of a set of advanced and flexible policies and measures, which address the existing shortcomings. 84 General Goal: the development and support of the social safety net through the increase in funding for the different program along with the necessity to strengthen the linkages among the different components of the net and commitment of poverty indicators as criteria for distribution. Special attention is to be given to reforming retirement funds with the aim of first saving appropriate and long- lasting retirement income and secondly enhancing national saving and investment. Policies (i) Social Safety Net (SSN): • The expansion of protection objectives to exceed protection boundaries covering the poorest and most exposed segments to the negative impact of the reforms to include the most vulnerable segments from sliding below the poverty line. This would demand an increase in the funds of the Social Welfare Fund; • The direction of projects and services towards the poorest regions taking into the poverty criteria as the primary means of targeting and distribution of resources and the allotment of specific percentages for some regions on the basis of local and geographic considerations and circumstance; • Resource distribution for activities which support job creation and income generation fields; • The revision of the role of endowment and alms in poverty reduction and the direction of their resources towards the poor; • The expansion of the SSN programs so as to present more of a diverse network of general services and projects in financial and social infrastructure; • The development of financial resources for these programs through alms and taxation on Qat and from foreign assistance and giving some of the activities to local authorities so as to strengthen their role in the protection of the poor and the realization of their expanded and diverse objectives; • The expansion of the role of NGOs through training, funding and institutional support so as to enable NGOs to contribute in the making services, activities and assistance for the poor and their regions accessible, keeping in mind the necessity for supervision; • The revision and evaluation of the role of the different programs within the SSN so as to avert any duplication or overlapping through the merger of some of the programs and or support for integration and coordination by activating the role of the National Committee for the SSN and by conducting regular assessment of targeting and outreach to the poor regions under all programs. (ii) Social Security: • Reforming the security coverage from the styles of defining subscriptions its base, collection, retirement pension sum and grounds for its calculation in a way that ensures that retirement pensions correlate with living expenses; • Vertical expansion in the security system to include health insurance and horizontal to cover a larger percentage of employees in private enterprises and self employed staff and the establishment of optional funds complementing the improvement of privileges for the retired; • The establishment of an integrated data base and the introduction of computers to ensure the registration of the job, financial and social data for subscribers and the retired in a way that helps making an inventory and follow-up of the collection of due legal installments; • The implementation of a new strategy on the investment of social insurance funds based on the diversification of the investment portfolio while ensuring higher efficiency of investment portfolio management and continuous performance evaluation; 85 Priority Programs and Projects - Social Welfare Fund (SWF): The provision of cash assistance to the poorest in society, the elderly, orphans and women with no caretaker in addition to segments unable to work and make money within the bounds of the Social Welfare Law; - Social Fund for Development (SFD): The development of society through the improvement of education, health services, water supply and sanitation and the contribution to the creation of permanent job opportunities with focus on the development of small and micro enterprises, institutional support for national associations and NGOs; - Public Works Project (PWP): The improvement and provision of social services, environmental situation, the basic infrastructure for alleviating the adverse effects of the reform program through job creation, raising the level of community participation in the preparation and implementation of civil works projects; - The Agriculture Production and Fisheries Promotion Fund: (APFPF): The alleviation of burdens resulting from the rise in the prices of accessories and inputs for agriculture production, livestock and fisheries to enable beneficiaries to maintain their activities, raise efficiency and agriculture land conservation through financing a number of projects and activities related to irrigation, water installations and productive and marketable agricultural fields in participation with popular efforts; - The National Program for the Development of Productive Families: The establishment of centers for productive families in the governorates, the operation of existing ones and the establishment and equipping productive units in addition to the creation of mobile units to cover rural areas. Training is linked with production through the creation of 14 training course on income generation with focus on the qualification of poor families, which receive social welfare cash subsistence. - Rehabilitation of the Disabled: The establishment of training centers for the disabled, young and old and making available the necessary equipment to enable them to integrate in society and economic activity. - The Program on Combating Poverty and Job Creation: The implementation of the national poverty survey and labor market survey and the implementation of the local community development program in some of the poorest regions through the contribution in the establishment of local communities and financing income generation projects in addition to support for the National Program for the Development of Productive Families and operation of a micro lending program. - Poverty Information System and Monitoring: The establishment of a comprehensive data base on poverty indicators and poverty monitoring through surveys and in a way that helps in the preparation of poverty profiles of certain target groups and regions nationwide and making available sufficient data for the preparation of policies and facilitating the evaluation of the impact of policies and effectiveness of programs. - Civil Service Fund: Addressing inflation in the civil service through the identifications of needs of administrative units of staff in line with organizational and employees structures, the referral of excess labor force to the fund so as to re-arrange either re-training and distribution according to market need or the procurement of outstanding service before referral for retirement or paying compensation for those wishing to leave public office.

4.5. Administration, Good Governance, Participation and Cooperation Administration, good governance and participation gain their significance for being interconnected with the four pillars of the strategy and for their impact on achieving the main and secondary objectives in addition to being a basic perquisite for realizing sustainable development and poverty reduction.

4.4.1. Administration and Good Governance Administration and good governance posses means of impact on directing economic resources and growth through the public budget and investment program, etc., in a way that 86 ensures poverty reduction. Good governance and administration and their institutions play a primary role in giving priority to human resources development, the expansion of the social protection umbrella leaving behind a positive return in favor of the poor and low income and reflect a conducive climate for the needs of the poor. Accountability primarily takes a form that is political in nature, cooperation between the poor BOX 5.13: T HE RELATIONSHIP BETWEEN ADMINISTRATION , GOVERNANCE AND POVERTY and the middle class and other segments in society. This would require making government Bad administration and governance form a suitable environment for the outbreak and spread of administration and legal institutions and service poverty. Poverty is not linked only with potential provision more efficient and accountable. The and resources of individuals but also with poor segments in society are the weakest and surrounding conditions topped with regime and most vulnerable to state decisions and directions government administration. Good governance helps the poor, assists in alleviating and getting due to their inability to make their voice on their them out of their burden. Weak administration hardship heard. These segments therefore fail in meanwhile fails to identify their priorities topped most cases to obtain their rights, to lift their with poverty reduction. suffering and sometimes to merely such rights before corrupt administrations. The prevalence of good governance, efficient administration and responsive institutions is a basis and a prerequisite for the success of poverty reduction efforts and joint cooperation aimed at realizing growth in general. The ongoing institutional reforms in Yemen are addressing fields that are considered critical in furthering the investment environment especially in the modernization of the civil service, reforming the judiciary and strengthening local authority. General Goal: Making available good governance and administration enabling the optimization of the country’s resources, realization of the objectives of society and allowing for the participation of all segments in society including the poor in the decision making process.

4.4.2. Civil Service Modernization Civil service modernization, which is an integral part of the reform program, occupies top priority due to the fact that no economic development can be achieved with a modern government administration. In 1998, the Civil Service Modernization Strategy had been put for debate and had been later on developed in a national conference. The Strategy aspires to develop a modern administration apparatus complementing economic reforms and assisting in accelerating growth and economic development in addition to the promotion and support for the private sector and civil society organizations. Specific Goal: The provision of efficient, effective and transparent government services under which performance and incentive are criteria that are applied in actual practice. Policies • The completion of the process of job description in the civil service and getting rid of imaginary and excess labor force as soon as possible; • The restructuring of government agencies starting with the main selected agencies; • Focus on measures that enhance the efficiency of government agencies and the improvement of procedures for control and transparency; • Preparation of a general policy on wages to ensure satisfactory levels of living, ensure incremental increase in wages according to mechanisms that correlate with the movement of the national economy and world economic changes and taking into consideration the outcome and its impact on economic stability and the civil service system. Priority Programs and Projects - Civil Service Modernization: the provision of high quality and cost effective government services through the restructuring of government agencies, termination of duplication, 87 enhancement of transparent procedures, fixture of implementation, improvement in budget preparation and financial administration systems, the establishment of effective control on hiring and redistribution, the termination of the services of the excess labor force fairly and the improvement of the wages system.

4.4.3. Enhancing and Strengthening of Democracy Democracy is considered the guarantee that would make the poor and rich and the governor and the governed alike a voice that is heard in all issues and conditions including those of the poor themselves. The poor like any other segment of society are partners in decision-making. This would require the support for and strengthening democracy in Yemen and the continuation of democratic policies that have become an integral part of the life of society. Specific Goal: Maintaining democratic practices until they become daily in society. Policies: • Work and commitment to transparency in all affairs of governance and administration which would keep society away from ill use and personal interest and would also make work free from oppression, deprivation and the control of the powerful; • The promotion of participation away from turbulence, turmoil and hesitancy which in most cases mix up with and hamper participation; • Public education and awareness on the individual rights and duties so as to ensure public response out of knowledge to promote and allow political parties and civil society organizations to carry out their role in society; • Safeguarding the freedom of the press and freedom of expression and making the clear distinction among the three authorities; • Conducting regular general elections. Priority Programs and Projects: - Supporting Elections: The provision of expertise and technical support for the Supreme Electoral Commission especially in areas like voter registration, professional development and decentralization within the Commission, the expansion of the democratic participation by less fortunate segments including women, raising public awareness on the importance of elections and participation.

4.4.4. Implementation and Enforcement of Laws and Regulations The precise and accurate application of the law away from favoritism serves all citizens topped by the poor who would be able to obtain their rights and safeguard their dignity. It would also ensure the fight against corruption and further strengthen the solidarity and unity in society. Specific Goal: The creation of a state of law and order in which everybody is equal before the law and bears his or her responsibility and obtains his or her rights. Policies: • Consolidate the respect of law, commitment to observing it fully and resemblance of role models by state leaders; • Identification of fields and sectors that face legislative weakness or deficiency, addressing these flaws, the removal of contradiction in legislation and laws especially those related to the poor and poverty reduction programs; • Improve performance of the judiciary system, general prosecutors and courts and enhancement of the role of inspection and financial control units in government agencies; • Swift implementation of court rulings. 88 Priority Programs and Projects: - Basic Infrastructure for the Judiciary: the creation of suitable working conditions for the organs of the judicial authority mainly by construction and equipping of courts; - Training for Members of the Judicial Authority: the enhancement of capacity of performance for members of the judicial authority through regular training programs and workshops so as to assist in speedy actions and rulings on matters of conflict.

4.4.5. Strengthening Local Authority and Decentralization The local authority contributes better and more precisely than the central government in the identification of needs of local communities. It also works in addressing and answering to such needs swifter. The local authorities in many countries have proved their effectiveness due to closeness to the people especially the poor. Therefore, the state will work on maintaining support for local councils as the main local vehicle for democracy, which play a substantial role in feeling the needs of the poor and support for poverty reduction programs at the local level. Specific Goal: The authorities mandate administrative units to take charge of tasks that enable them to improve the livelihood of the people in their local communities and addressing their problems and participation in accountability and decision- making. Policies: • Strengthening the capacities of local authorities and their role in decision-making especially in issues related to the basic needs of local communities; • Spreading awareness among the public and conducting general referendums on all important issues; • Improving monitoring and follow-up to ensure a local authority that is pro-poor. Priority Programs and Projects: - Basic Infrastructure and Human Capacity for Local Authorities: Strengthening the role of local authorities, making available the necessary financial and human requirements in line with the Local Authority Law most importantly the construction and equipping of headquarters for local councils and training for the local authority cadre.

4.4.6. Support for Pro-Poor Government and National Institutions The poor cannot in most cases or even the institutions they establish defend their causes and obtain sufficient protection. Therefore, the presence of pro-poor government and national institutions is a step in the right direction to sustain demand and impact on other partners to pay attention to the poor and aid the poor to alleviate their poverty. Specific Goals : Giving priority to the poor in development and in poverty alleviation. These cannot be secured except through making government institutions closer to the issues and problems of the poor in addition to the expansion of the role of national organizations (NGOs) as government partners in development. Such organizations are closer to the poor and their communities. Policies • Support for local community institutions and NGOs that support the poor; • The promotion of the involvement of the poor and their organizations in community affairs through different mechanisms and activities; • The promotion of the establishment of these institutions as a supporting factor for granting top priority to the needs of the poor. 89 Priority Programs and Projects - Local Communities Development Program: institutional capacity building for local communities through a partnership work program and the embodiment of bottom to top development approach, participation in planning, implementation, follow-up and evaluation in addition to the support of members of local communities in rural areas especially women to realize sustainable development. The program also adopts the idea of establishing revolving funds for these communities to finance local development activities; - Self Help Development in Rural Areas Project: capacity building for self help for rural communities to improve their living standard through the implementation of sustainable development activities, the establishment of small projects like water storage and water supply ponds, land conservation, bee keeping and livestock farms, etc. Available public services through training and information should be used; - Social Fund for Development: community development through institutional support for national associations and NGOs; - Disaster Mitigation Project: being ready to withstand disasters and disaster management, risk assessment and post disaster evaluation, planning and implementation of measures to mitigate and remedy disasters.

4.6. Participation and Cooperation BOX 5.14: PARTICIPATION OF THE POOR T HROUGH LISTENING TO THEIR VOICE The pro poor development process lies in The understanding of poverty and its causes remains the adoption of a participatory approach insufficient unless it includes analysis of poor visions. including the participation of the poor Therefore, social approximation and participatory research themselves in the identification of have approached analysis to understand poverty, its causes development prospects and bringing about and remedies from the perspective of the poor themselves. sustainable development. Participation With this methodology in mind, a study on the voices of the poor was conducted and core group discussions were used as starts in the early stages of preparation a main tool to generate and brainstorm ideas on programs through the last stages related to and strategies. Field visits were made to 21 districts spread implementation, follow-up and evaluation. in nine governorates where severe poverty exceeds 50%. This approach would lead to the expansion Identification of core discussion groups was left to the local communities themselves and the poor themselves defining of the participation of the poor and raising who is poor. their stake in development. Actual implementation of the principle of partnership among the state, civil society organizations, private sector and donors in addition to the poor themselves demands serious and responsible cooperation. The state takes up the bulk of this responsibility within society as a whole with the aim of making an impact on the social benefits in favor of the poor. The state must also lay down the legal and political frame that regulates these relationships making state institutions more open and responsible before all. This would entail the necessity of having institutions that are democratic, transparent and participatory in decision making and monitoring of implementation. Decentralization must be linked to effective mechanisms for popular participation and public practice in monitoring government agencies. This can be done through the involvement of local communities, local families and the poor in the different activities like the involvement of parents in education affairs, the involvement of all beneficiaries in water supply, irrigation and healthcare activities, etc. Giving bigger room for civil society organization is crucial to the creation of a proper environment for more active partnership. Civil society organizations should also have the opportunity to communicate with the state and have access to various resources to enable these organizations to contribute to poverty alleviation. These organizations are also considered tools for mobilization and pr ovision of social services 90 especially that these organization are more efficient and responsive to the needs of the poor and less costly than governments. 5 The role of the private sector is primarily BOX 5.15: RESULTS OF A S TUDY ON COMMUNITY limited to providing financial support for PARTICIPATION civil society organizations. Such Yemenis had long worked until the near future collectively cooperation could be enhanced through on developing their communities. Thus, community the creation of fields of interventions participation is not considered new to Yemen. It has reflected over the years the increasing attention to where there more than one objective to community participation by State organs, NGOs and donors achieve like poverty reduction, curbing and their wish to in building up on local traditions and unemployment, expansion of the private available potential in addition to making use of the sector activity and the increase in sources increasing awareness that top to bottom approaches lack for national associations. sustainability and ownership. They also exclude women and the poor from development. A study entitled “Community Participation Projects: Do They Reach the Poor?” which General Goal: Enhancing cooperation in was commissioned by the Ministry of Public Health and planning, financing, Population, OXFAM and UNDP covering 49 relevant implementation and follow-up projects has concluded the following: (i) there is increasing to make partnership a success trend by the government, international financing institutions and partly local NGOs to adopt as an approach community and to ensure the participation which is scattered in most regions of the sustainability of the country covering mostly services; (ii) the majority of these development process and projects in their assessment of the experience has described combating poverty. it as a success and that activities that are carried out through participation are of more efficient and of more quality and Policies sustainability and with less complications and disputes; (iii) despite that most projects sought to assist the less fortunate • identification of basic needs through in society like women, the poor and marginalized, there are participation and exchange of no sufficient mechanisms ensuring the participation of these information, assessment of groups during the different project cycle neither as conditions and listening to the voices participants nor as beneficiaries; and (iv) cost sharing constitutes an important matter in all community of the poor and the population of participation projects which either encourage or discourage local communities; ownership and participation based on the implementation • involvement of all those of relevance method. The study has focused on a number of and interest in the identification of recommendations most importantly making use of the best policies, programs and projects on present practices especially in view of the accumulated experience of what is or what is not appropriate to be done poverty reduction especially, civil and also the need for inter-coordination among the different society organizations and the poor projects either through linkages or through the establishment themselves being the target. This of a community participation unit. could be done through regular meetings and exchange of information at the local community levels; • activation of the role of pro-poor civil society organizations especially those that are present among the poor and already have the capacity to identify needs more precisely well through empowerment of the poor to achieve their objectives and fulfill their desires; • creation of awareness among the poor and the promotion of the establishment of organizations for the poor to assist them in proving their present and encourage them to work and participate with the local authority; • the promotion of the establishment of unions for civil society organizations at the regional level and a general union for the country as a whole; • ensure coordination between the state, donor organizations and projects that are implemented in Yemen and the involvement of donor in policy design, priority identification, proper implementation, follow-up and evaluation, the creation of mutual trust among all parties and the creation of a favorable and encouraging environment for further support and empowerment; 5 The existing problem is represented in the effects and conditions that followed the events of September 11th which will a substantial impact and constraint on the financial resources and assistance provided by civil society organizations. Accordingly, these organizations will increasingly have to depend on their own resources to finance different activities and programs 91 • The coordination, activation and direction of poverty reduction programs through the National Committee for the Social Safety Net, identification of work priorities and regions in consultation and agreement with donor countries and agencies; • The enhancement of the role of the private sector and businessmen in support charity organizations and social activities. Priority Programs and Projects: - United Nations Development Assistance Framework (UNDAF): focusing on the fields that have been selected related to gender issues with special emphasis on rural regions, local rule, capacity building in policy analysis and preparation of human development programs. These areas represent basic and priority challenges for Yemen. This would require the attraction of other donor partners, civil society organizations and private sector to cooperate and coordinate and to build up on the existing momentum so as to further the capacity and integration of these interventions and come up with new and innovative ways for the efficient utilization of resources; - The Social Safety Net Project: the activation of the role of the National Committee for the Social Safety Net enabling it to take charge of supervision of all net programs and projects that have been identified according to specific criteria in addition to enhancing its role in the identification of objectives, policy design, inter-coordination within the net to avert any duplication or overlapping and ensure integration and cooperation with national organizations and donor countries and agencies. 92 CHAPTER 6: IMPLEMENTATION OF THE PRSP 1. Introduction Implementation of the PRSP will start in 2003 and last for three years, which means an overlap with the last three years of the SFYP (2001-2005). The PRSP was based on the directions of the SFYP with regard to the priorities with a special focus on poverty reduction efforts. Yemen, as well as other developing countries, seeks the assistance of the international community to fill the gap between national savings and the necessary investments for the realization of the economic growth targets. The needs for external sources increase or decrease according to the sufficiency of domestic resources particularly in the light of the volatile oil prices, which greatly affect the main source of government revenues in Yemen. 2. Costs and Financing

2.1. Public Finances Public expenditures during the three years of the PRSP were prepared under the macroeconomic framework of the strategy that strives to achieve high and increasing economic growth rates within a sustainable fiscal policy in the medium and long-terms. Furthermore, increasing fiscal allocations to social sectors and infrastructure was taken into consideration to ensure the contribution of this spending to poverty reduction while giving special attention to the general trend in the increased allocations to these sector in the last years of the strategy. The forecasts of the PRPS are built on expected decline in oil revenues, increased non-oil revenues and rationalization of public expenditures to minimum growth levels to ensure containment of the fiscal deficit. Total current government revenues (including grants) are expected to decline in the coming three years to reach 29.5% of GDP by the end of the PRSP period as a result of expected decline in oil and gas revenues from 20.3% of GDP in 2003 to 16.2% by 2005. The projected shortfall in oil and gas proceeds is expected to be partially offset by the growth in non-oil revenues such as direct and indirect taxes which are projected to reach 12.5% of GDP in 2005. GoY’s policy for revenue mobilization and development, particularly for non-oil revenues, is based on the most efficient utilization of available economic resources and adjustment of the tariffs for public services on economic basis by taking into consideration cost of production and maintenance and cost recovery. The government is currently working on the development of the tax system through the application of the Generalized Sales Tax (GST), amendment of the income tax, raising the efficiency of tax administration and collection. GoY also plans to expand the role, and participation, of the private sector in the existing, new, and the to-be privatized development projects, which will all lead to increase in public revenues in the medium and long-terms. In the public expenditure side, the medium-term expenditure framework reflects the adoption of the policy of expenditure restraints in the light of expected decline in government revenues. In particular, current expenditures are projected to decline from 28.2% of GDP in 2003 to 25.4% in 2005 despite the expected increases in wages and salaries, goods and services, maintenance and operations and debt services while transfers and subsidy allocations are expected to decline sharply. These indicators reflect government’s effort to raise the efficiency of the civil service, retrenchment of excess public sector employees, reducing disguised unemployment while raising salaries and wages for employees in the administrative apparatus of the State in addition to rationalization of spending on non-developmental activities and taking urgent and effective measures to enable the private sector to contribute 93 effectively in production and investment in development projects and the provision of services. TABLE 6.1: MEDIUM EXPENDITURE FRAMEWORK, 2003-2005 (As percentage of GDP) Projected 2003 2004 2005 Total current revenues and grants 32.2 30.5 29.5 Total Revenues 31.4 29.7 28.7 Oil and Gas 20.3 17.9 16.2 Oil Exports 11.3 9.2 7.3 Domestic Oil and Gas 9.0 8.8 8.9 Non-Oil Revenues 11.1 11.8 12.5 Taxes 8.8 9.5 10.3 Direct Taxes 3.6 3.8 3.9 Indirect Taxes 5.2 5.8 6.4 O/w Customs 2.5 2.8 3.1 Non-tax Revenues 2.3 2.3 2.3 Grants (cash) 0.8 0.8 0.8 Total Expenditure 35.2 34.5 33.2 Current Expenditure 28.2 27.1 25.4 Civilian Salaries and Wages 9.0 9.2 9.3 Goods and Services 2.8 2.9 2.9 Maintenance and Operations 0.4 0.4 0.4 Debt Service 2.2 2.4 2.6 Transfers and Subsidies 6.0 4.9 3.6 Current Transfers 3.9 3.8 3.5 Subsidies 2.2 1.2 0.1 Other Current Spending * 8.0 7.6 6.2 Development Expenditures 7.0 7.4 7.8 Fiscal Balance (including grants) -3.0 -4.0 -3.7 Net Domestic Financing 1.7 2.7 2.6 Net External Financing 1.3 1.3 1.1 *: Include Civil Service, Roads, Defense, Agriculture and Fisheries Funds and other current expenditures. The above-projected expenditures and revenues imply realization of a fiscal deficit throughout the three years of the PRSP with the intention of not allowing the deficit to reach unsafe limits, at most 4% of GDP in 2004. The budget was also based on the fact the deficit will be financed from real sources to avoid any inflationary pressures caused by deficit financing, with the resort to external borrowing on concessionary terms to meet the needs of the budget as well as the balance of payments.

2.2. Development Requirements and Priorities of the PRSP The fiscal framework, despite revenue constraints, includes a continuous increase in development expenditure reaching 7.8% of GDP in 2005, with an average annual growth of 13.3% during the span of the strategy. This would lead to an increase in the share of development expenditure from the budget to total expenditures from around 18.8% in 2002 to around 23.5% in 2005. Development expenditure targets sectors relevant to poverty reduction and improving the livelihood of the population especially in the rural areas and providing them with the basic social services. Table 6.2, on priority budget spending, shows an increase in social spending which includes education, health and social welfare to around 13.2% of GDP in 2005. The PRSP seeks to develop human resources as an important pillar of development and combating poverty through increasing spending on education at an annual average of 12.9% reaching YR 193.6 billion in the last year of the strategy at 9.6% of GDP, 28.9% and 72.7% of total expenditure and social expenditure respectively. Basic education takes up the bulk of spending on education, which is shown in its share in investment expenditure on the sector at a percentage starting with around 64% in 2003 to reach more than 70% in 2005. 6 6 There is no detailed breakdown of total allocations for education by basic, secondary, technical and high education separately. The same case is with allocations for health by primary healthcare, etc. Investment 94 Requirements for improving health services are estimated at allocation of 2.2% of GDP and 6.6% of total expenditure in 2005 as opposed to 1.7% and 4.7% respectively in 2002. The increase shows an improvement in government health services and due to its impact on the quality of life and poverty reduction. The growth in investment expenditure in health in the per capita primary healthcare, even though humble, reflects its priority and coincides with an increase in spending on the government health sector and an expanded private sector role in providing curative health services. The financial requirements for the social safety, which includes the SWF, have increased to 1.4% of GDP and 4.2% of total expenditure in 2005 to cover a larger percentage of the poor who are incapable of productivity and entry into the labor market. The share of defense in public spending is expected to decrease to 6% of GDP in 2005. This reflects the direction towards re-allocation of resources to social sectors and infrastructure services. TABLE 6.2: PRIORITY S PENDING IN THE GENERAL BUDGET Item 2003 2003 2005 Total Public Expenditures (YR million) 600,160 637,215 669,644 Defense (% of GDP) 6.5 6.3 6.0 Social Expenditures * (% of GDP) 12.1 12.8 13.2 Social Expenditures (YR million) 206,305 236,416 266,244 Health (% of GDP) 1.9 2.1 2.2 Investment Expenditure in Health (YR million) 9,561 8,255 12,847 Primary Healthcare (YR million) 5,207 5,580 6,987 Education (% of GDP) 9.1 9.4 9.6 Investment Expenditure in education (million YR) 25,214 27,182 30,759 Basic education (YR million) 16,110 17,644 21,325 Social Welfare Fund (% of GDP) 1.1 1.3 1.4 Social Welfare Fund (YR billion) 18.8 24.0 28.2 Civil Service Fund (YR billion) 3.5 3.5 3.5 Agriculture and Fisheries Promotion Fund and Road 4.5 4.8 5.1 Maintenance Fund (YR billion) Others (% of GDP) 16.5 15.2 14.6 In millions of YR 281,455 282,399 293,900 * This includes wages, commodities, services and investment expenditure on education, health and primary healthcare including projects of the SFD and the PWP. NOTE: spending on education and health includes projects of the SFD and the PWP. The government, while staying away from activities that could be undertaken by the private sector, works on providing socio-economic services through direct and non-direct activities given the present conditions. It is expected that the total share of the Agriculture and Fisheries Promotion Fund and Road Maintenance Fund would increase to 0.3% of GDP in the three- year span of the strategy. Funds for the Civil Service Fund would increase to 0.2% of GDP.

2.2.1. Total Investment and its Sources of Finance The PRSP expects that total investment would substantially increase in current prices at an average of around 11.5%, which in turn increases its percentage to GDP from 23.6% in 2002 to 26% in 2005 in a bid to realize the objectives of increasing and improving the infrastructure of the economy, basic services for society and create an increase in the productive capacities for new job opportunities. The expected growth in non-government investment (including public enterprises) reflects the role of the private sector in taking the lead in investment. It is expected that private sector investment would reach 68-69% of the total investment and 15.3% and 18% of GDP during 2002-2005. expenditure has rather sector breakdown. The Ministry of Finance in collaboration with line ministries will work on providing detailed breakdown starting with 2003 Budget. 95 TABLE 6.3: TOTAL INVESTMENT AND ITS SOURCES OF FINANCE Item 2002 2003 2004 2005 % of GDP Formation of fixed capital 23.6 24.6 25.8 26.0 Change in Stock 0.0 0.0 0.0 0.0 Total Investment 23.6 24.6 25.8 26.0 Government Investment 8.3 8.3 8.6 8.0 Non-government Investment * 15.3 16.3 17.2 18.0 Sources of Finance for Total Investment National Saving 26.4 24.3 24.0 23.3 Government Sector 7.8 5.3 4.6 4.3 Non-government Sector * 18.6 19.1 19.5 19.0 * Inclusive of public enterprises. NOTE: Decimal points might not coincide with rounding up figures . The contribution of government resources in financing investment is expected to decline from 7.8% in 2002 to 4.3% in 2005 compared to a slight and fluctuating increase in financing the non-government sector including public enterprises from 18.6% to 19.0% during the same period. These indicators reflect primarily the public expenditure registry due to a retreat in oil revenues.

2.2.2. Priority Programs and Projects The PRSP includes the preparation of lists of investment programs and projects that are necessary to realize the objectives outlined in the strategy. These programs and projects have been identified at the sectoral level as either ongoing or new projects with investment costs taking into consideration the impact of these programs and projects on job creation, the increase in the number of beneficiaries and relevant measurement as percentage of the basic objective. Implementation duration for each project or program and the breakdown of the expected investment for the period has been estimated during the period before the implementation of the strategy (pre-2003) and broken down by the three years of the implementation of the strategy i.e., 2003, 2004, 2005 consecutively. In case project implementation exceeds the period of the strategy implementation, the remaining total sum is also calculated. Such estimations have led to some technical problems related to the criteria on cost estimation and impact assessment especially in the sectors whose qualitative objectives are represented in non-measurable quantities. These include some social services like culture. Despite this, quantitative indicators have estimated to complete the overall costing exercise. Table 6.4 presents the total number of projects and programs, which are necessary for the realization of the objectives of the PRSP and the cost of their implementation. 7 TABLE 6.4: PRSP PROGRAMS & PROJECTS (YR millions) Total Pre Cost by year Strategy Post 2005 Cost Aggregate Grand total Economic growth Human Resources Infrastructure Social Protection* Governance, Participation & cooperation Others - - - *Allocations from the SFD & PWP have been distributed according to their respective sector. These projects and programs overall represent ongoing activities that will go on during some years of the implementation of the PRSP. Some of these projects and program might even go 7 An Annex contains a detailed list of all programs and projects and their cost on annual basis. 96 on beyond the span of the strategy. Therefore, estimates have not only been reflected with the purpose of identifying their cost estimates for their own sake and for the sake of enabling the identification of the specific total cost for the PRSP but also with the aim of clarifying priorities and preliminary costs, and then undertaking regular revision of such estimations in light of any changes or requirements. The Ministry of Planning and Development (MoPD) will prepare detailed profiles of each program and or project to facilitate effective implementation follow-up. The total cost of projects under the PRSP amount to YR 413.4 billion during the next three years of which YR 18,891 million will cover the cost of new projects representing 4.6% compared to YR 394.7 billion for ongoing programs and projects. Local financing is estimated at 73% of the total. The remaining cost will be covered from foreign financing sources, of which most has been secured. In case, financial resources provided by the state retreat sharply for reasons related to expected economic growth or absence of external financing for some projects under fund mobilization, some objectives of the strategy would have to revised according to such restrictions. Furthermore, since the GoY is seeking to realize the MDGs without which Yemen would lag behind in development, it is necessary to secure financing from donors for new projects that still lack funding in addition to the assistance in additional programs and projects that would help reduce the gap between the current situation and the MDGs. 3. International Cooperation The GoY has long expressed its desire to strengthen international cooperation with the aim of realizing the ambitions of the Yemeni people for sustainable development that match the international objectives of development and the MDGs in which donor countries and organizations committed themselves to work with countries of the developing world on answering to their development needs. The GoY has taken several measures to strengthen its democratization process and improve its relations with other countries and with regional and international organizations. Yemen has also been able to resolve its border disputes and signed border treaties with its neighbors on the principle of mutual interest and non-harm with the aim of ensuring good and stable relationships with these countries. These treaties have opened the way for a better environment for comprehensive development and international cooperation and the re-direction of government resources dedicated to defense to investments serving human development in the country. Yemen’s commitment to human rights has encouraged efforts by donor agencies to assist in the stabilization and modernization of the Yemeni economy and proper investment of resources in planning development. Yemen has focused in its policy with bilateral donor countries and regional and international multilateral donor agencies on the basic human services that have direct impact on the daily life and activity of the people. Such priorities match up to a large extent with those of the donor countries and financing institutions, which target the contribution in the improvement of the livelihood and strengthening the capacities of individuals in all fields especially those that are basic to poverty reduction. The main component of loans provided to Yemen during 1999-2001, which is mainly represented by IDA (52% of the total loans), is directed to support the reform program in addition to financing social development projects, infrastructure and economic sectors especially agriculture. The other funds, which include IFAD, OPEC, Arab Fund and Saudi Fund, have contributed around 39% of the loans (around US$ 353.7 million) compared to 11% provided by the Islamic Bank for Development. Development assistance (grants) which reached around 0.9% of GDP in 1999 and 0.3% in 2001, comes mainly from bilateral donors (43% of total grants) topped by the Netherlands, Germany, Japan and the United States of America and the European Union through the Food Aid, while the United Nations organizations contributed around 10% of total grants. 97 Financing has been mainly directed to social sectors, i.e., education, training, water and sanitation and primary healthcare including immunization campaigns, reproductive health, family planning, nutrition, poverty reduction projects and environmental protection. Donor countries regard these sectors and fields of intervention as priorities outlined in the MDGs for developing countries including Yemen. Therefore, the GoY Yemen anticipates a continuation of focus of development assistance on these sectors in view of what socio-economic indicators show the need to maintain development in the following: • Education, especially basic education and vocational and technical education; • Public health and more specifically primary healthcare; • Water supply and sanitation; • Improvement in agricultural capacities, irrigation schemes and the realization of food security. The directions of international and regional financing institutions match those of the state policy towards the creation of an infrastructure capable of contributing to the improvement of the livelihood of the people especially in rural areas and in addressing investment requirements and promotion of economic activity so as to reduce unemployment and increase per capita income. Accordingly, international financial institutions work on supporting investment in electricity, transport, roads and water installations. The GoY due to insufficient domestic resources will remain incapable of financing of strategic projects related to basic infrastructure and social services let alone the implementation of poverty reduction programs, which should eventually realize the objectives for prospective human development. Dependency on grants and loans in addition to technical assistance will largely remain. According to the 2000 Human Development Report, official development assistance (ODA) for Yemen was put at US$ 18 per capita, which is considered one of the lowest ODA among LDCs. Only six countries ranked below Yemen, four of them just came out of wars. Yemen continues to seek a common understanding with its development partners on the development needs, inputs and programs in the country. The aim is to raise the level of development assistance among the present donor partners and to attract new donors into supporting Yemen. In addition, the GoY in collaboration with the donor community seeks to optimize the financial resources effectively and its distribution to ensure maximum benefits for human development programs and poverty reduction. The government is currently assessing the creation of “A Financing Fund for the PRSP” that would include a clear and transparent mechanism for the utilization of resources. 4. Risk Factors The set of economic, financial and administrative reform measures adopted by Yemen since 1995 has led to positive results. These were clearly reflected in the improvement in macro- economic indicators and the stabilization of the national economy making it more open to the world economy. The economic base remains weak though and prone to risk. Therefore, it becomes rather difficult to control all circumstance and factors that could accompany the implementation of the PRSP especially that Yemen is prone to internal shocks more specifically drought and flooding in addition to external factors especially fluctuation of oil prices and holdup of foreign assistance.

4.1. Drought and Flooding Yemen’s geographic location in semi-arid region dictates the prevailing climate. Rainfall is between 50 mms along the coastline, between 400-1200 mms in the western highlands declining to around 50 mms in the desert lowlands. There are no rivers or lakes in Yemen. There are flood passageways and some springs in addition to limited mostly non-renewable underground water. 98 There are two rainfall seasons, March-May and July-September, with significant irregularity in addition to successive periods of severe drought and destructive flooding. Agriculture is the most prone to poverty, being one of the main economic sectors contributing 15.3% to GDP in 2000; agriculture remains the main employer of the labor force reaching 53% in addition to providing for the livelihood of two thirds of the population of whom the majority are poor. The occurrence of drought or flooding undoubtedly leads to a reduction in agriculture production and hinders poverty reduction efforts, as was the case in 1996 and 1999 during which rain dependent cereal production retreated by around 20% and 17% respectively.

4.2. Fluctuation of Oil Prices The performance of the national economy during 1995-2000 reflects to a large extent its dependency on external factors especially the fluctuations in the prices of crude oil in the world markets. Oil contributes about 36% to GDP and is an important source of foreign exchange and fiscal revenues. Oil revenues account for around 60-70% of public revenues. Economic growth slowed down during some years in the last decade due to declines in oil revenues, which were affected by the decline in the price of crude oil. While oil production increased slightly in 1994 to 300,000 bpd from an earlier production of 200,000 bpd during 1992-1994, the decline in the price of a barrel of oil to US$ 15.8 during that year negatively affected economic growth. Negative growth was registered at 2.4% of non-oil GDP. This led to further structural imbalances in the form of a rise in the gap of macro demand to reach 19.3% of GDP. Inflation rose to around 50% affected by the growth in money supply of 31.6% and a huge public budget deficit of about 14.9% of GDP. Such imbalances reflected the extent of dependency of the national economy on the outside world on hand and the vulnerability of the economy to external factors on the other. The FFYP Plan had expected an economic growth of 5.6% in 1998. Actual GDP growth did not exceed 4.5% because of the sharp decline in oil prices to below US$ 10 bpd during the year. The price of oil was anticipated to remain at 418 a barrel during that year. This led to an increase in the budget deficit to 9.3% of GDP after it declined to around 2.3% in 1997. Public revenues had also decreased to 28.8% of GDP compared to 33.7% in 1997. Public expenditure increased to 35.5% of GDP compared to 33.4% in 1997 despite the government’s move to reduce current expenditures once and development expenditures twice in 1998. The increase in the budget deficit triggered the government to seek loans from the banking sector after it had financed its deficit from non-inflationary sources. Money supply grew by 11.7% and the purchasing power of the Rial weakened by around 17.8% due to inflation and retreat in the Rial’s exchange price with other foreign currencies. Under the 2002 budget, the first scenario for oil revenues was based on US$ 18 a barrel which would lead to revenues totaling YR 480 billion compared to YR 583 billion for expenditures. Due to projection that oil prices may decline, the budget put the price of a barrel at US$ 17. This has led to the reduction of total expenditure in the budget by around 11% and investment expenditure by around 31%. The budget scenario shows the substantial impact of a slight change in the prices of oil on government spending including allocations for poverty reduction, which would in turn be most prone to reduction. On the other hand, the drop in oil prices leads to a retreat in foreign currency reserves and the exchange rate of the local currency and thus trigger an increase in the prices of local and imported commodities and service leading to more severe and expanded circle of poverty.

4.3. Foreign Assistance Holdup Yemen has substantially depended on the assistance of donor countries and agencies in supporting its development efforts during the last decades. Development has in general been affected and to a large extent by the total cutoff of development assistance in the wake of the Second Gulf War. This disrupted development programs, projects were delayed and assets 99 and installations were devalued. After the gradual resumption of foreign assistance in the wake of Yemen’s adoption of economic reforms, Yemen has been facing two problems: The first had to do with the insufficiency of foreign assistance to meet development needs. The second relates to with the delay in financing for reasons born sometimes by the government and by donors themselves. This has led to slow project and program implementation, price increases and confidence shaking over development efforts. The investment appropriations in the public budget and foreign sources earmarked during the FFYP amounted to 75.6% of planned figures. Actual implementation reached 81% out of those funds and 60.5% of the planned allocations. The differences are attributed to low implementation of projects financed from foreign sources under the plan. Implementation declined to 41.2% of what was planned as opposed to 91% from government sources and 74% from self-financing sources. The government is working within the framework of the PRSP on the enhancement of absorption effectiveness and project implementation of programs and projects according to clear and specific criteria and on more effective and flexible joint cooperation mechanisms. 5. Monitoring and Follow-up The program for the preparation of the PRSP included a review and an evaluation of the Poverty Information and Monitoring System (PIMS) established in 1998 in collaboration with UNDP aiming at strengthening the poverty information infrastructure, provision of a comprehensive, precise and modern information system on poverty through data collection and analysis to help in placing policies and remedies. The PIMS unit has tasks outlined in the project document as follows: q The establishment of a comprehensive data base including poverty indicators; q Monitoring poverty status in Yemen through conducting surveys which help profile target groups and regions and also poverty at large nationwide; q Provision of sufficient data for the preparation of necessary policies and facilitating the evaluation of the impact of polices and effectiveness of programs. The project document has also outlined the following phases: q Phase I covering the first year of the project. This phase is an exploratory period for the preparation of a national poverty map through the use of approximated indicators on poverty based on available data; q Phase II cover the second and third year of the project which include the compilation and analysis of data nationwide; q Phase III covers the fourth and fifth years of the project during which attention will shift towards monitoring poverty and evaluation of the impact of poverty reduction policies. This phase will also cover the innovation of methodologies and ways to measure and predict poverty. The project has completed phase I and phase II in addition to the completion of the 1999 Poverty Survey, building up sufficient capacities on the design of forms and systems and data collection and remedies. The following problems had surfaced: q Lack and contradictory information, indicators and survey results; q The absence of the application of information to the needs of users especially the necessary information for the SFYP and the National Human Development Report; q A weak mechanism and monitoring system, delay of correction of contradictory information and failing to observe the best possible technical measures; q Delay in the implementation of the project work plan including the implementation of phase III on poverty monitoring. This proposal seeks to identify the tasks of the different agencies within comprehensive information and monitoring system and utilize potential support and assistance that could be provided by donors. It would also remedy the existing weak coordination among the sectors 100 in the MoPD on one hand and that that exists between the Ministry and its branch regional offices. It would also link several activities with the PRSP as the need arises. The proposal centers on the following four elements: 1. The formation of a steering committee for the PIMS with the MOPD as the supervising agency with the membership of the PRSP committee, CSO and UNDP. This body will identify and endorse the necessary activities and studies as well as contract CSO to conduct poverty surveys and updating of data according to a specific work plan; 2. The PIMS unit will de divided into two components: (i) Poverty Information to be handled by the CSO, which will collect data from different sources including surveys, data outputs and establishment and updating of comprehensive poverty database on the level of governorate. CSO undertaking of such tasks will enhance its capacity and commitment to include poverty statistics in the Statistics Annual Book. Practical and swift steps are required to establish a department for poverty information with the CSO structure and to putting place a work plan for such department for consideration by the project steering committee for financing; and (ii) Analysis and Design of Poverty Reduction Policies and carrying out coordinated monitoring by the steering committee and the sector form Macroeconomic Planning in MoPD. This undertaking requires the availability of data to MoPD for policy design, monitoring, analysis and studies. 3. In order to address the coordination problems within the sectors of MoPD and that between MoPD with its branch regional offices the following will be undertaken: (i) an information and monitoring committee is to be formed chaired by the Vice-Minister for Planning and Development and comprises as members the deputy ministers of MoPD, the PRSP preparation committee, the Technical Office in MoPD and others. This body will work on the completion of an information system in the Ministry, which will also absorb the poverty information and monitoring system. It will also strengthen the linkages of the different tasks and activities of the Ministry through better coordination among the different sectors and branch regional offices. The tasks will be divided among the sectors as follows: (a) Macro planning and Studies Sector will undertake the identification of objectives, policy design and evaluation and monitoring; (b) International Cooperation Sector will undertake the mobilization of foreign financing and follow-up; (c) Projects Planning and Programming Sector will undertake the preparation of programs, projects and follow-up; and (ii) Strengthening the role of the MoPD regional offices enabling them to identify objectives, policies and projects at the level of governorates along the lines of objectives and policies at the central level and in accordance with regional needs and circumstances and in close coordination with headquarters and other branch regional offices. The programs and projects after they are studied are referred to the Ministry for consideration within lists of programs and projects and for evaluation of their contribution to the implementation of objectives and synergy with specific policies. Therefore, this reflects the importance of linking up governorates with the information system at headquarters in addition to the identification of systems and criteria for the selection of projects and their feasibility, etc. 4. Strengthening the role of the PRSP committee and the re-identification of its tasks to accommodate the requirements for the implementation of the PRSP, monitoring, follow- up and evaluation. In addition, director generals of planning in the different ministries and government agencies will be assigned as liaisons for the strategy committee. Direct working mechanisms will be created with the planning and investment committees at the level of governorate/district being involved in the implementation of the strategy and monitoring, follow-up and evaluation at the local level. The strategy committee will prepare the an action plan for the next three years which will include the set of activities the have to undertaken, and the conducting of an annual evaluation of the strategy and contracting the CSO to conduct the 2003 household survey at the level of all governorates. The survey would provide an analysis of the evolution of poverty based on a coordinated database for the period 1998-2003. A quick annual survey will later on be conducted on the important indicators of poverty based on a sample and the data 101 available from the household survey. This would enable a consistent follow-up of the evolution of the poverty phenomenon. 6. A Mechanism for the PRSP Committee and Social Safety Net (SSN) The programs and funds that are established to reduce the negative effects of the EFARP maintain financial and administrative autonomy and are run by different agencies, boards of directors and steering committees which allows these funds and programs to be dynamic and flexible. This has triggered the placement of these funds and programs under one umbrella to ensure coordination and integration among the different activities which all have the primary objective of reducing poverty. The government has issued decree No. 15 for 1998 stipulating the establishment of the National Committee for the Social Safety Net (SSN) chaired by the Prime Minister and membership of 13 cabinet ministers and representatives from civil society and the private sector. The decree spelled out the mandate of this committee, which is primarily in charge of coordination and ensuring the integration of all net components. The Secretariat at the Prime Minister’s Office, which was temporarily the interim secretariat for the National Committee, has not been able to ensure coordination of the different components within the social safety net despite the fact that some components has been able to create bilateral coordination mechanisms. One main part of the preparation and implementation of the PRSP requires the coordination of strategy policies, objectives, programs and projects related to the strategy through an appropriate and effective mechanism. While the National Committee for the SSN represents a high coordination body with a permanent secretariat at the Prime Minister’s Office or Ministry of Social Affairs and Labor, there remains a pressing need for technical coordination for the Net in order to realize its objectives and ensure its effectiveness. This requires coordination, follow-up, supervision and evaluation, which are taken up by the PRSP committee. The committee drafts reports and comments and forward them through the Minister of Planning and Development to the National Committee for the SSN in addition to the preparation of bi-annual progress reports. This will ensure proper liaison between the strategy committee with different mechanisms and the SSN within the framework of the preparation, implementation and supervision of the PRSP. Despite the CSO making positive steps in conducting three main surveys during the last few years with the help of several donors, its capacity to maintain data collection and analysis remains insufficient thus making planning, follow-up monitoring and evaluation and ability to identify future direction and comparative analysis rather difficult. Therefore, administrative capacity building has to be enhanced in order to optimize the limited economic resources in addition to enhancing investment in the information infrastructure needed to bring about change in macro development and realize the objectives of the PRSP in Yemen. The Ministry of Planning and Development has begun during the second quarter of 2002 the recruitment of new more qualified staff that will be trained and empowered with skills to assist in the implementation of the above information system and the activities related to the monitoring and follow-up required as part of the activities of the PRSP. 102 STRUCTURE OF THE PRSP MECHANISM Cabinet NCSSN Local Councils DONORS PRSP MoPD Ministerial PIMS Committee MoPD Branches Technical Team MoF Civil Society LM LM LM LM LM LM LM LM LM LM: Line Ministry NCSSN: National Committee for the Social Safety Net. 103 A N N E X 1 : PO L I C Y M E A S U R E S M A T R I X Objectives Policy Measures Indicators Concerned Institutions Date 1. General Objectives Reducing poverty through adequate - Improve the business environment for private Reducing poverty incidence by almost GIA, MoPD, others. 2005 economic growth that increases real sector participation. 13.1%. GDP based on non-oil sectors, - Allocate infrastructure investments towards accompanied by population policies activating growth and improving services. Increasing per capita GDP at an annual 2003-2005 targeting reducing population growth - Adopting appropriate policies for the average of between 1.2-1.7%. and thus leading to increasing per capita promising sectors. GDP and improving living conditions. - Adopt a credit policy to provide the necessary Lowering unemployment rate. MoPHP, NPC, MoI. 2003-2005 financial resources. - Implement media awareness programs on population issues. 2. Pillars of the PRSP 2-1 Economic Growth Improving non-oil sectors growth, - Adopt policies leading to favorable changes Achieve a 4.7% average growth of GDP, Various government agencies. 2003-2005 diversity sources of income, and in t he promising sectors. a 6.3% for non-oil GDP. increase per capita GDP. - Adopt credit policies to provide necessary MoF, CBY 2004 credit to those sectors. - Program to encourage private sector to invest in industrial estates & extraction. MoIT, MoPD, GIA 2003 Fiscal Policy - Revise expenditure structure to increase the Increase share of social expenditure to MoF and all related ministries. 2005 Achieving economic stability, share of basic social services. 13.2% of GDP. controlling inflation, mobilizing local - Apply a transitional system to plan and direct Increase external resources by 5%. MoPD, MoF. 2003 and foreign investments as a poverty related spending, and explore continuation of the reform program. possibility of creating a PR Fund. - Link databases of MoF & MoCSS. Issue a civil service payroll. MoCSS, MoF. 2003 - Set out a clear wage policy and increase real MoCSS, MoF. 2003 wages of civil servants. - Gradual lifting of subsidy for petroleum Reduce the share of subsidy in public MoF. 2003-2005 products. expenditure. - Continue Implementation of GST. Continue implementation of GST and its MoF, TA. 2003-2005 - Undertake an assessment study on the development as a continuous process. TA, CA. 2003 efficiency of the tax and customs system. - Evaluate the impact of taxes on the poor while MoF, TA. 2003 considering ability of low income and the poor when imposing and collecting taxes. - Implement tax and customs reforms including TA, CA. 2003-2004 the ASYCUDA system in all outlets, and upgrade performance of revenue institutions. 104 Objectives Policy Measures Indicators Concerned Institutions Date Monetary Policy - Issue a regulatory law for the Banking system. CBY 2003 Adoption of a monetary policy that - Establish a financial market. copes with the market economy based - Complete restructuring of specialized banks. MoF, CBY. 2003 on rational decision. - Establish Al-Amal Bank for the poor. MoF, CBY. 2003 - Liberalize interest rates. MoSAL, CBY. 2003 - Control money supply & stop deficit Cancel minimum and maximum ceilings. CBY. 2003-2005 financing. An inflation rate not exceeding 10%. MoF, CBY. 2003-2005 Foreign Sector - Remove remaining trade barriers. - MoIT, MoF, CA. 2005 Enhancing trade liberalization policy - Encourage labor-intensive export activities. - EC, MoF, MoIT. Continuous and promoting exports, particularly - Continue integration with GCC countries - M0IT. Continuous those that help job creation and the and accession to WTO. adoption of technology, and completion - Simplify the duty drawback system. - CA. 2003 of accession to WTO. - Support the private sector to establish an - EC, CBY. 2004 EXM bank. Restructuring the Economy - Implementation of the privatization - Complete the privatizing of 61 PEs - PC with other government 2005 Removal of all obstacles facing the free program. stated in the SFYP. agencies. market and private sector investments - Achieving a gradual increase in investment. - Increase investments to 26% of GDP. - MoF, Private sector. 2005 through focus on productive sectors which are expected to create jobs. Sources of Growth and - Amend the investment law. - Issuing the amended investment law. - GIA 2003 Promising Sectors - Allocate infrastructure investments to - MoF, MoPD and others. continuons Realizing economic growth, enhance prospects of the promising sectors. diversifying the economy and reducing - Set out credit policies to ensure provision of - CBY. continuous poverty. necessary financing. - Revise laws and regulations relating to the - Various agencies. continuous promising sectors. - Complete the 2 nd phase of Aden free zone. - FZA. 2003-2005 - Implement Port Cities project to raise compe- - MoPD and others. 2003-2005 titiveness of Aden, Mukalla & Hodeidah. Agriculture - Introduce modernized irrigation schemes. - Achieving an average growth of - MoAI and its various authorities. 2003-2005 Increase productivity, achieve economic - Construct small dams and distribution canals. 5.4% in the sector. - MoAI and its various authorities. 2003-2005 growth, diversity the economy and - Support agriculture research and link with - MoAI and its various authorities. 2003-2005 create job opportunities to reduce extension services. - poverty . - Establish pilot and model farms. - MoAI and its various authorities. 2003-2005 - Organize Guidance and awareness programs - MoAI, MoInfo. 2003-2005 via the media. Fisheries - Review laws and regulations regulating fishing. - Achieve an average growth of 7.8% MoFW. 2003 Optimal utilization of fish wealth to - Establish a Union for fish cooperatives. in the sector. Fish cooperatives. 2003 increase production without affecting - Establish quality control labs. MoFW. 2003-2005 the stock. - Carry out a stock assessment study. MoFW. 2003-2004 - An integrated monitoring and inspection system MoFW, MoI. 2003-2004 105 Objectives Policy Measures Indicators Concerned Institutions Date Industry - Assess exempting industrial activities from - Achieve an average growth of 6.2% in MoIT. 2003-2005 Motivating the private sector to invest in customs on imported inputs. manufacturing and 5.7% in continuous industrial activity in order to raise - Continue trade liberalization to improve construction. MoIT. sector’s contribution to GDP, and lead product quality. economic growth realizing linkages - Evaluate industrial activities in extraction and MoOM. 2003-2004 with the other sectors. undertake geological surveys. - Establish a business Advisory center. MoIT, MoPD. 2004 - Provide QCMA with necessary equipment MoF, QCMA. 2003-2005 and tools. Tourism and Services - Complete telecom links among all - Achievement of an annual growth as MoT. 2005 Develop coastal regions and improve governorates. percentage of GDP. provision of services and infrastructure. - Enhance national security in all regions. MoI and others. continuous - Enhance Training in the area of tourism. MoTE, MoVTTE 2003-2005 - Implement old cities preservation projects. MoC. 2003-2005 - Involve local communities in these activities. - Prepare legal frameworks for shore and island MoTE. 2004 tourism. Environment and Natural - Develop legal frameworks relevant to natural MoOM, MoAI. 2003-2004 Resources Management resources possession. Enhance natural resources management - Expand decentralization and independence in MoEW & water Authorities. continuous and preserve the environment through water resources management. involving beneficiaries and employing - Issue and enhance water legislation starting MoAI & water Authorities. 2003 the poor in environmental projects, and with issuing water and irrigation code. expand women and youth’s role in - Establish a water database. MoAI & water Authorities. 2003-2004 development. - Implement the comprehensive plan for MoPD & local authorities. 2003-2005 Socotra development. - Activate the environment protection law. MoTE. 2003-2005 Human Resources Development Developing human capabilities and providing a favorable environment for production, participation and enhancing the role of local communities. Population Status - Intensifying family planning programs in the - Reducing population growth to 3% MoHP, PC, MoInfo. 2005 Controlling population growth and media. per annum. limiting internal migration. - Involve communities through civil society continuous organizations and others. - Incorporate population issues in the military PC, Moral Guidance Dept., MoYS continuous moral guidance programs and in the activities of boy scouts and girls’ guides. - Draft a guide book for religious preachers that MoEG. 2003 takes into consideration population issues. 106 Objectives Policy Measures Indicators Concerned Institutions Date Health Status - Deliver basic health service based on cost - Raise coverage rate to 65% of total MoHP. 2005 Provide close and acceptable health sharing. population. services via government health - Raise health allocations particularly those - Increase share of the health sector MoF, MoPD, MoHP. 2005 facilities, particularly in rural areas, and relevant to primary health care and increase of total expenditure to 2.2% of apply the health regions system as well their efficiency. GDP. as make sure to provide basic drugs at - Re-locate health sector’s staff. MoCSS, MoHP. 2003 prices affordable to low income groups. - Organize and supervise health services provide - Issue a Private Health MoHP. 2003 by the private sector. Establishments Law. - Implement an incentives system to encourage working in remote areas. MoHP. 2003 - Import generic medicine at low prices. - Establish a mechanism to ensure free medicine - Establish a drug revolving fund. MoHP, NCSS. 2003 to poor families. Education and Training - Expand the const ruction of schools. - Raise basic education enrollment to MoE. 2005 Raise basic education enrollment while - Re-allocate public financial resources among 69.3%and to 55% for girls. MoF, MoE. 2005 reducing gender disparities and among governorates and within education favoring regions, and increase the number of basic education. - Increase basic education share of 2003-2005 those enrolled in vocational trainin g and - Rehabilitate vocational training centers and education spending by 10%. MoVTTE. technical education , and restructure build the new ones close to industrial areas. higher education to cope with the - Draft a higher education strategy. MoHESR. 2003 developments and progress in the - Adopt admission policies that cope with - Raise the share of female students in MoHESR. 2003 various fields and also to accommodate development requirement and labor market universities to 27%, and to 16% of the growing number of students with the needs. graduates from sciences and applied objective of encouraging more female - Specify a share of university scholarships to studies. MoHESR. 2003 enrollment. the exemplary and the poor. Upgrade the Infrastructure Contribute to achieving economic growth and providing basic services to alleviate poverty especially in rural areas. Water Supply and Sanitation - Expand decentralization applications and the - Increase water production to 162.5 - MoEW & its authorities. 2005 Increase water production and raise establishment of independent local branches. million cubic meters in urban areas coverage in urban and rural areas as - Provide services based on cost recovery, and to 423 million in rural areas, - MoEW & its authorities. 2003-2005 well as expand sanit ation services. taking into consideration social justice criteria. that will raise coverage from the - Organize the participation of the private sector network to 69% and 65% - MoEW & its authorities. 2003 and local communities in management, respectively, while increasing operation and maintenance. sanitation coverage to 7.4% of the - Complete the sector’s program for population. - MoEW & its authorities. 2003 restructuring. - Establish and operate quality control systems. - MoEW & its authorities. 2003-2005 Electricity Sector - Build a gas powered station of 300 MW, and - Increase installed capacity to 1,266 - MoEW, MoPD. 2005 Provide electricity to the population and enhance power generation in other plants. MW thus raising coverage to 40%, while reducing wastage to 25%. 107 Objectives Policy Measures Indicators Concerned Institutions Date to economic activities, and explore other - Develop all energy resources including while reducing wastage to 25%. - MoEW, MoPD. continuous option to generate electricity including renewable resources, particularly in rural, renewable resources. remote areas and in the islands. - Link secondary cities to the national - MoEW, MoPD. 2003-2005 electricity grid. - Rehabilitate existing power stations while - MoEW, MoPD. 2003-2005 dispensing of diesel generators.. Road Sector - Complete coastal roads and regional - Increase asphalted roads by 3,300 - MoPWUD 2005 Establish the coastal link with roads connection. Km, paved roads by 2,950 Km, and starting from the northern borders - Rationalize rural roads program through maintain 3,194 Km of asphalted - MoPWUD & its agencies, MoPD. 2003 leading to the Omani border in the east, specifying priorities. roads. connecting Yemen to the Arab road - Activate the role of local authorities to - Local Authorities. 2003-2004 network, in addition to linking construct roads and maintain them. secondary cities with each other and - Identify road specifications, technical and - MoPWUD. 2003 with rural areas in order to expand engineering standards. passengers and goods traffic. - Operate existing weight stations and enforce - MoPWUD & its agencies. continuous the relevant legislation. - Executing a periodical and emergency - MoPWUD & its agencies. 2003-2005 maintenance programs. Social Protection - Expand the social safety programs as an - Increase the number of beneficiaries - NCSSN and other ministries. 2005 Promote the social safety network integrated scheme of services and projects, in from the Social welfare Fund to enforcing linkages among its addition to increasing the allocations of its 600,600 cases. components to provide social protection various components. for the poor and the vulnerable, through - Stick to poverty indicators while allocating - Expand the umbrella of social - MoCSS. 2003 expanding coverage of the social resources to projects and programs. securities to cover 529,000 employees welfare fund and of the social securities, - Include more employees within the social of which 7,0000 from the private - MoSAL. 2003 while improving service delivery and securities schemes, and reform the pension sector. providing rehabilitation to the handicap funds to increase pensions and improve return - Train 5,430 handicaps and and street children. on investment. accommodate 4,190 in formal - Rehabilitate and integrate the handicap into education. - MoSAL. 2003 society. - Accommodate 6,750 in care centers - Vitalize the role of the NCSSN, and undertake and house 2,500 homeless children. - NCSSN. 2003-2005 periodic assessment on programs and projects performance. - Establish a comprehensive data-base and - NCSSN. 2003-2005 apply computer operations. - Review the role of Endowment and Elms - MoEG. 2003-2005 within the context of poverty reduction. - Build and organize shelters and care - MoSAL. 203-2005 residence. 108 Objectives Policy Measures Indicators Concerned Institutions Date Governance, Participation and Cooperation Achieve good governance to reach optimal resource utilization and to ensure participation of all society as well as donor support. Modernization of Civil Service. Provide government services with - Curtail personal interest and MoCSS, MoPD, PMO. 2003-2005 efficiency, and ensure fairness, - exploitation, and commit to achieve MOCSS. 2003 transparency and the application of transparency. performance criterion. - Restructure Government administrative units. - Start with the designated units. MoT & others. 2002-2010 - Accomplish job description. MoCSS & others. 2003-2005 - Move towards electronic government. MoCSS, MoF. 2003-2005 . - Identify and delete doubled dippers and activate MoCSS, MoF. 2003 the Civil Service Fund. - Concentrate on measures which ensure MoCSS. 2003 efficiency, supervision and transparency. - Apply a wage policy to ensure an acceptable MoF. 2003-2005 standard of living , and gradually increase wage while considering all changes and variables. 2003 - Prepare a biometric identification system for MoCSS. the civil service. Support and Enhance Democracy - Spread awareness relevant to citizen rights and All government units. Continuous. Adhere to democratic practice until it responsibilities. becomes part of the daily behavior of - Involve political parties and civil society Political Parties committee and others. Continuous. the Yemeni citizen. organizations to bear its responsibilities and take its role. - Ensure periodicity of elections and freedom of - Holding parliamentary elections Election committee, MoI. 2003 press. Laws and regulations - Identify shortcomings in legislation and amend MoLA, MoSAL. 2003 Exemplify the state of Law and order, to ensure consistency especially areas where and that citizens are all equals before the the poor are most effected. law in their rights and duties. - Complete constructing court buildings. MoJ. 2003-2005 - Introduce information system and database MoJ. 2003-2005 within the Judiciary. - Strengthen the role of the judicial police. MoJ, MoI. 2003-2005 Enhancing Local Authority - Construct quarters for local councils and MoLA. 2003-2005 Delegate responsibilities to local furnish them. authorities and strengthen participation - Continue delegating and transferring MoLA, MoF, Local Councils. 2003 of local communities in decision- responsibilities relating to budget making. implementation. 109 Objectives Policy Measures Indicators Concerned Institutions Date making. implementation. - Continue training local authority cadres. MoLA. 2003-2005 - Involve the society in the decision-making Local Councils. continuous process relating to their needs. - Implementing awareness programs for MoLA. 2003-2005 citizens to encourage their participation. Supporting Pro- Poor Institutions -Execute programs that would result in NCSSN. 2003-2005 Accord priority to the poor in the government institutions becoming pro- poor. context of development and expand the -Give priority to establish societal institutions role of civil society as long as it is that support the poor. MoSAL. continuous considered a partner. -Set out mechanisms that enable the participation of the poor. MoSAL. 2003 Participation and Cooperation -Activate the role of t he NCSSN. NCSSN. 2003 Enhance participation and cooperation -Set out a clear mechanism to coordinate MoPD & Donors. 2003 in planning, financing, implementation, between donor activities. and follow-up in order to ensure success -Open channels and prospects for civil society MoSAL & others. 2003-2005 of partnership and secure sustainability organizations in order to communicate with of development and alleviation of the government and to mobilize various poverty. resources. 110 Annex 2 PRIORITY PROGRAMS AND PROJECTS 111 PILLARS OF THE PRSP (Million YR) Pillars Source Pre Period Post 2005 Total 2003 2003 2004 2005 Total Achieving Economic Growth Gov. 2907 3092 3245 3460 9797 6373 19077 Ext. 10368 10870 14747 10288 35905 18470 64743 Total 27014 17774 21890 17660 57324 34852 119190 Development of Human Gov. 21891 20082 21435 27497 69014 42342 133247 Resources Ext. 14292 13665 12645 14981 41291 17891 73474 Self 26 1136 1464 1128 3728 448 4202 Total 36209 34883 35544 43606 114033 60681 210923 Improving Infrastructure Gov. 45663 22035 29256 27704 78995 100946 225604 Ext. 47028 20666 18443 14211 53320 23802 124150 Total 92691 42701 47699 41915 132315 124748 349754 Ensuring Social Protection * Gov. 3752 22978 28510 33024 84512 5350 93614 Ext. 25604 15860 16979 18138 50977 18104 94685 Total 29356 38838 45489 51162 135489 23454 188299 Good Governance, Gov. 406 988 1019 576 2583 1157 4146 Participation and Cooperation Ext. 2168 2038 1911 691 4640 3822 10630 Total 2574 3026 2930 1267 7223 4979 14776 Total Gov. 74,619 69,175 83,465 92,261 244,901 156,168 475,688 Ext. 99,460 63,099 64,725 58,309 186,133 82,089 367,682 Self 26 1,136 1,464 1,128 3,728 448 4,202 Total 187,844 137,222 153,552 155,610 446,384 248,714 882,942 Less allocation from SSN to 32099 38085 43039 113223 various pillars Other Programs & Projects 14425 21211 44755 80391 Grand Total 187844 119548 136678 157326 413552 248714 882942 • Includes current revenues of the SWF. Allocations of the SDF have been distributed in the relevant activity i.e. education, health, water & sanitation, training, institutional support, while the remaining amount has been accorded to the SSN. As for the PWP, all Funds were distributed to the activities. 112 A C H I E V I N G E C O N O M I C GR O W T H (Million YR) Pre Period Description Source Post 2005 Total 2003 2003 2004 2005 Total Gov. 147 195 194 79 468 137 752 Ext. 904 271 270 0 541 514 1,959 Maintaining Economic Stability Self 0 0 0 0 0 0 0 Total 1,051 466 464 79 1,009 514 2,574 Gov. 776 354 355 364 1,073 639 2,488 Sources of Growth and the Ext. 0 1,614 1,614 1,615 4,843 0 4,843 Promising Sectors Self 265 1,870 1,871 1,880 5,621 264 6,150 Total 2,593 1,234 1,236 1,256 3,726 1,526 7,845 Gov. 1,107 642 905 908 2,455 1,015 4,577 Ext. 6,762 2,323 2,305 2,315 6,943 2,200 15,905 Agriculture Self 0 0 0 0 0 0 0 Total 7,869 2,965 3,210 3,223 9,398 3,195 20,462 Gov. 4 9 36 26 71 0 75 Ext. 88 193 4,006 673 4,872 0 4,960 Fisheries Self 0 0 85 85 170 0 170 Total 92 202 4,127 784 5,113 0 5,205 Gov. 227 346 193 128 667 443 1,337 Ext. 267 120 22 0 142 106 515 Industry Self 0 0 0 0 0 0 0 Total 494 466 215 128 809 549 1,852 Gov. 592 1,445 1,497 1,732 4,674 3,676 8,942 Ext. 1,844 5,110 5,111 5,113 15,334 6,610 23,788 Services & Tourism Self 0 0 0 0 0 0 0 Total 14,358 11,101 11,154 11,395 33,650 19,608 67,616 Gov. 54 101 65 223 389 463 906 Environment and Natural Ext. 503 1,239 1,419 572 3,230 9,040 12,773 Resources Management Self 0 0 0 0 0 0 0 Total 557 1,340 1,484 795 3,619 9,460 13,636 Gov. 2,907 3,092 3,245 3,460 9,797 6,373 19,077 Ext. 10,368 10,870 14,747 10,288 35,905 18,470 64,743 Total Self 265 1,870 1,956 1,965 5,791 264 6,320 Total 27,014 17,774 21,890 17,660 57,324 34,852 119,190 113 Maintaining Economic Stability (Million YR) Pre Period Program / Project Description Source Post 2005 Total 2003 2003 2004 2005 total Modernize the financial and public accounting systems; increase transparency and congruity in Gov. 147 112 113 0 225 137 509 Reform of the government procedures, improve and upgrade financial management and budgeting, connect Ext. 720 114 114 0 228 330 1278 Financial System information network and rehabilitate and train government employees in all the government Total 867 226 227 0 453 467 1787 organs and facilities. Assist Yemen in accession to the WTO by providing technical and institutional support to the Gov. 0 0 0 0 0 0 0 Government and the relevant GoY authorities to prepare for the negotiations, especially the Ext. 184 157 156 0 313 184 681 Supporting Yemen's Contact and Coordination Unit, as well as preparation of the Foreign Trade Memo, the study of the Application to Join the effects and dimensions of members hip, preparation of a medium-term strategy on the trade policy of Yemen, preparation of a study on the basis and analytical criteria for the bilateral negotiations WTO for the Agriculture Agreement and the Assessment of the Customs Procedures and Reforms, Total 184 157 156 0 313 184 681 support institutional capacity of the QCMA, and support legislative reforms to make them consistent with the requirements of the WTO set up a financial market to give the private sector a growing role in economic and social Gov. 0 83 81 79 243 0 243 development and in order for the market to undertake a dynamic role in mobilizing resources and Ext. 0 0 0 0 0 0 0 savings, including from those small savers; attract foreign capital and the surpluses of the Yemeni Financial Securities Market overseas; and stimulate investments in the different economic sectors. The project focuses on the completion of the legal and legislative requirements and the institutional frameworks for setting up Total 0 83 81 79 243 0 243 the market, in addition to adjusting the conditions of private sector firms and adopting transparency in their operations Gov. 147 195 194 79 468 137 752 Total for Maintaining Economic Stability Ext. 904 271 270 0 541 514 1959 Total 1051 466 464 79 1009 514 2574 114 SOURCES OF G ROWTH AND THE PROMISING S ECTORS (Million YR) Program / Pre Period Description Source Post 2005 Total Project 2003 2003 2004 2005 total Ascertain the role of the GoY in the management of the economy based on a market economy; reduce public Gov. 0 6 6 7 19 8 27 spending on PEs and enhance their efficiency on competitive basis, in addition to encouragement of private sector Ext. 0 0 0 0 0 0 0 Privatization investment and the realization of broader participation in ownership through public offering. The program seeks to accelerate privatization, starting with the preparation of a number of economic units, by means of having them Total 0 6 6 7 19 8 27 assessed by specialized and neutral offices. Gov. 776 315 315 317 947 631 2354 Support the role of Aden Free Zone and improve its competitive capacity regionally and internationally, by means of Aden Free Ext. 0 0 0 0 0 0 0 developing its management and rehabilitating employees to deal with the conditions and aspects particular to the Zone Zone, in addition to completion of the infrastructure. Self 265 217 217 218 652 256 1173 Total 1041 532 532 535 1599 256 2896 Enhancement of the compet itive capability of the port cities, starting with Aden, Hodeidah and Al-Mukalla, by Gov. 0 0 0 0 0 0 0 Port Cities means of rehabilitating and/or improving their basic services, preparing the administrative system and support the Ext. 0 1614 1614 1615 4843 0 4843 Development administrative and technical capabilities of local authorities, to keep them at least in parallel with systems in the ports of neighboring states, besides supporting partnership between the local authority and the private sector and Total 0 1614 1614 1615 4843 0 4843 facilitating procedures and measures. Reinforceme Achieve the regulatory and institutional reforms for investment and promotion of exports, by means of focusing on Gov. 0 33 34 40 107 0 107 nt of the the improvement of the performance of the General Investment Authority, the Higher Export Council and its Ext. 0 0 0 0 0 0 0 Investment technical organ, in addition to the stimulation of the mining industry and encouraging private sector to set up industrial zones. Total 0 33 34 40 107 0 107 Climate Assessing the construction of gas pipelines to transport gas extracted from the fields in Marib & Shabwah to local use Gov. Gas Pipelines in the regions of Aden, Al-Hodeidah, Hadramout as an inductive to construct gas-powered stations and link to Ext. establishing industrial estates in those three regions. Total Gov. 776 354 355 364 1073 639 2488 Ext. 0 1614 1614 1615 4843 0 4843 TOTAL FOR T HE S OURCES OF GROWTH AND THE PROMISING S ECTORS Self 265 1870 1871 1880 5621 264 6150 Total 2593 1234 1236 1256 3726 1526 7845 115 AGRICULTURE (Million YR) Pre Period Post Program / Project Description Source Total 2003 2003 2004 2005 total 2005 Rural Development Advance the capacities of rural areas and improve the living conditions of the Gov. 269 264 261 261 786 345 1400 population generally; provide agricultural, veterinarian and fisheries extension services; Ext. 5085 1558 1049 1059 3666 1410 10161 develop irrigation methods to increase production, support the institutional build-up to improve efficiency, while directing attention to the development of the capacities of Total 5354 1822 1310 1320 4452 1755 11561 rural women. Surface Water Irrigation Optimal exploitation of water irrigation and raise efficiency of use of surface water at Gov. 31 0 13 14 27 10 68 Improvement the farm level by introducing leveling techniques and the use of survey instruments and Ext. 352 0 149 149 298 118 768 laser leveling devices. Total 383 0 162 163 325 128 836 Water Harvesting Improvement Optimal use of harvested water and the development of water harvesting projects, such Gov. 15 0 21 22 43 17 75 as water dams and dikes as nuclei for a national water harvesting program, while Ext. 463 0 196 196 392 155 1010 ensuring to involve the farmers and make them bear operation and maintenance costs. Total 478 0 217 218 435 172 1085 Improvement of Irrigation from Raise the irrigation efficiency at the farm level by setting up pilot farms , training Gov. 510 0 217 217 434 340 1284 Dammed and Diced Waters technicians and extension guides on the modern irrigation methods and arrangement of Ext. 0 0 0 0 0 0 0 extension and awareness workshops through the public information media. Total 510 0 217 217 434 340 1284 Monitoring and Assessment of Gov. 38 0 16 16 32 20 90 Measurement of the quantities of water, which is used by the agricultural sector and the Water Saved by Different Ext. 344 0 146 146 292 115 751 amounts of water saved as a result of the use of modern irrigation systems. Irrigation Systems Total 382 0 162 162 324 115 821 Agricultural Research Improvement of rainfed agriculture and better management of irrigated agriculture, Gov. 215 242 242 243 727 142 1084 which includes management of natural resources, improved breeds of basic crops; and Ext. 0 0 0 0 0 0 0 crop, livestock, feed, grazing land and post harvest processing management. Total 215 242 242 243 727 142 1084 Irrigation Improvement improve and rehabilitate Major Spate Irrigation Systems; the participation of Gov. 29 136 135 135 406 141 576 beneficiaries in the maintenance and operation of irrigation facilities; and increase of Ext. 518 635 635 635 1905 402 2825 agricultural productivity by an intensive extension program. Total 547 771 770 770 2311 543 3401 Improve provision of social services, environmental situation, basic infrastructure for Gov. 0 0 0 0 0 0 0 Public Works Project alleviating the adverse effects of the reform program through job creation, raising level Ext. 0 130 130 130 390 0 390 of community participation in the preparation and implementation of public projects. Total 0 130 130 130 390 0 390 Gov. 1107 642 905 908 2455 1015 4577 Total for Agriculture Ext. 6762 2323 2305 2315 6943 2200 15905 Total 7869 2965 3210 3223 9398 3195 20462 116 Fisheries (Million YR) Pre Period Post Program / Project Description Source Total 2003 2003 2004 2005 total 2005 This project consists of a research vessel fully equipped with measurement Gov. 0 0 0 0 0 0 0 instruments, sample collection and analysis systems, water salinity and temperature Ext. 0 0 3290 0 3290 0 3290 Support to Research measurement instruments; nets for plankton, with a view towards providing research data, and studying the environmental factors and changes that are related to the Total 0 0 3290 0 3290 0 3290 reproduction of fish and marine life in the territorial waters. Achieve optimal exploitation of the fish wealth and to conserve the marine Gov. 0 0 30 26 56 0 56 Assessment of Fish environment, by means of carrying out a biological study of fish and marine life for the Ext. 0 0 153 153 306 0 306 Stock purpose of regulating fishing areas and setting the appropriate fishing times, the Total 0 0 183 179 362 0 362 allowable quantities and the appropriate fishing methods. Set up an integrated marine and inspection system, enhance the capacity of the General Gov. 4 9 6 0 15 0 19 Creation of an Directorate for Control and Inspection in the Ministry of Fish Wealth to enable to take Ext. 88 193 129 0 322 0 410 Integrated Marine on its duties and prevent the violations to the territorial waters of RoY and to conserve Control and the mineral environment and to ensure the optimal exploitation of the fisheries Total 92 202 135 0 337 0 429 Inspection System resources. Creation of Quality Set up laboratories for quality control, determine the basis for a monitoring system and Gov. 0 0 0 0 0 0 0 Control Laboratories with specifications that conform to international standards, so as to improve product Ext. 0 0 94 94 188 0 188 Project and promote exports. Total 0 0 94 94 188 0 188 Improvement of Improvement of the quality of the fish; reduction of losses, before and after landing Gov. 0 0 0 0 0 0 0 Traditional Fishing in and during distribution; and provide the different services for fishermen to enter new Ext. 0 0 255 341 596 0 596 the Red Sea Project markets. Total 0 0 255 341 596 0 596 Reduce burdens arising from higher prices for fish production inputs and requirements, Gov. 0 0 0 0 0 0 0 Agricultural and so as to enable the beneficiaries to continue in their activities and improve efficiency, Ext. 0 0 128 128 256 0 256 Fisheries Production by means of financing a number of projects and activities related to fish production Self 0 0 85 85 170 0 170 Promotion Fund and marketing, in participation with community efforts. Total 0 0 213 213 426 0 426 Gov. 4 9 36 26 71 0 75 Ext. 88 193 4006 673 4872 0 4960 Total for Fisheries Self 0 0 85 85 170 0 170 Total 92 202 4127 784 5113 0 5205 117 Industry (Million YR) Pre Period Program / Project Description Source Post 2005 Total 2003 2003 2004 2005 total Improvement of the economic capacity of small enterprises and handicrafts; Gov. 5 6 6 0 12 6 23 The Small Enterprise enhance the efficiency and technical support to small industries and Ext. 150 21 22 0 43 67 260 handicrafts and increase their contribution in rural development. The project Development and Support also includes setting up a consultancy services center and small industrial Total 155 27 28 0 55 73 283 zones for small industries and handicraft trades. Improvement of the Gov. 46 45 45 45 135 68 249 General authority for Raise the efficiency of the authority in monitoring quality in industrial, Ext. 0 0 0 0 0 0 0 Specifications, Measures economic and commercial activities, by means of erecting the buildings and (Standards) and Quality equipping the Authority with the laboratory equipment and instruments. Total 46 45 45 45 135 68 249 Control Study and promotion of the establishment of industrial zones by the private Gov. 0 142 142 0 284 96 380 sector in a number of governorates, so as to contribute to the reduction of Ext. 0 0 0 0 0 0 0 Support to the production costs for industrial investors, by means of taking advantage of the Establishment of Industrial Zones economies of scale and by the creation of linkage and integration between the Total 0 142 142 0 284 96 380 large, medium and small industrial operations, and also between industry and the rest of the economic activities, especially agriculture. Gov. 43 40 0 83 123 47 213 Study of Industrial and study and assess the industrial ores and construction rocks and determine their Construction Materials suitability for promotion of investment in their production and exportation. Ext. 0 0 0 0 0 0 0 Total 43 40 0 83 123 47 213 Collection and preparation of the different kinds of geological and technical Gov. 133 113 0 0 113 226 472 data derived from field work, and also all the different associated studies, and Ext. 117 99 0 0 99 39 255 The Geological Survey to have them presented in scientific and technical reports that document the Total 250 212 0 0 212 39 501 geological situation in Yemen. Gov. 227 346 193 128 667 443 1337 Total for Industry Ext. 267 120 22 0 142 106 515 Total 494 466 215 128 809 549 1852 118 Services & Tourism (Million YR) Pre Period Program / Project Description Source Forward Total 2003 2003 2004 2005 total Improvement and enhancement of the efficiency of the people engaged in Gov. 36 91 128 167 386 822 1244 tourism, by means of high level training and rehabilitation; promotion of Ext. 51 0 0 0 0 0 51 Improvement of Tourism Project tourism to Yemen overseas and for internal tourism; involvement of local communities in taking advantage of tourism activities and setting up the Total 87 91 128 167 386 822 1295 regulatory frameworks for tourism in the coasts and islands of Yemen. Renovate the historical homes, caravansaries, public drinking fountains, Gov. 556 79 94 290 463 1354 2373 mosques and all the other important historical buildings and landmarks; Ext. 0 0 0 0 0 0 0 Preservation of Historical completion of the infrastructure for the historical cities; establishment of Cities Project museums, research and technical centers and improvement of handicraft Total 556 79 94 290 463 1354 2373 trades and traditional industries. Expansion of existing telephone exchanges and setting up new ones and Gov. 0 1275 1275 1275 3825 1500 5325 modernization of the network, by means of replacing the old main telephone Ext. 1793 5110 5111 5113 15334 6610 23737 The Telephone Network exchanges, completion of the main interconnecting points between the Self 11922 4546 4546 4550 13642 9322 34886 Project governorates, by fiber optic cables, introduction of wireless telecommunication systems and comprehensive mobile systems to provide Total 13715 10931 10932 10938 32801 17432 63948 remote population centers with access to telephone services. Gov. 592 1445 1497 1732 4674 3676 8942 Total of Services & Tourism Ext. 1844 5110 5111 5113 15334 6610 23788 Self 11922 4546 4546 4550 13642 9322 34886 Total 14358 11101 11154 11395 33650 19608 67616 119 Environment and Natural Resources Management (Million YR) Program / Project Description Source Pre Period Post 2005 Total 2003 2003 2004 2005 total Sustainable Environmental Coordinate support to environmental management and community Gov. 18 6 0 158 164 418 600 Management participation in the management and planning of land resources and in Ext. 169 76 0 62 138 228 535 the implementation of the NEAP, Plan for Combating Desertification Total 187 82 0 and creation of the Land Resource Research and Extension Center. 220 302 646 1135 Activate the Environmental Activate the Environmental Protection Law; review the executive Gov. 0 95 0 0 95 0 95 Protection Law procedures for the Law; and prepare plans accordingly. Ext. 0 0 0 0 0 0 0 Total 0 95 0 0 95 0 95 Monitoring the Introduce the concept of environmental impact into agricultural Gov. 6 0 2 2 4 2 12 Environmental Impact on the projects, by means of measuring and monitoring such impact. . Ext. 58 0 24 24 48 16 122 Agricultural Total 64 0 26 26 52 18 134 Comprehensive Plan for the Prepare a plan for the use of land for the achievement of economic, Gov. 0 0 0 0 0 0 0 Development of the Socotra social and environmental development of the islands and to ensure Ext. 0 906 906 0 1812 8341 10153 Archipelago that the development activities are in keeping with the policies on the Total 0 906 906 0 1812 8341 10153 conservation of bio-diversity of the islands. Development of Water and Development of surveillance stations to provide a climatic and water Gov. 0 0 32 32 64 23 87 Agriculture Surveillance information database for proper planning and implementation of Ext. 0 0 292 292 584 195 779 Network water, irrigation, dam and dike construction projects, with a view Total 0 0 324 towards achieving sustainable development of water resources. 324 648 195 843 Integrated Management of Optimal use of water and reduction of underground water depletion, Gov. 0 0 31 31 62 20 82 Underground Basins by means of setting up and developing projects for integrated Ext. 0 0 197 194 391 260 651 management of underground water, with a view towards maintaining Total 0 0 228 the rural economy and ensuring adequate water supply. . 225 453 260 713 Improvement of the Use of Improvement of the use of treated wastewater to reduce the strain on Gov. 30 0 0 0 0 0 30 Wastewater in Agriculture pumped underground water and to curtail from the random depletion Ext. 276 257 0 0 257 0 533 of such water; conservation of the environment. Total 306 257 0 0 257 0 563 TOTAL FOR ENVIRONMENT AND NATURAL RESOURCES MANAGEMENT Gov. 54 101 65 223 389 463 906 Ext. 503 1239 1419 572 3230 9040 12773 Total 557 1340 1484 795 3619 9460 13636 120 Development of Human Resources (Million YR) Pre Period Description Source Forward Total 2003 2003 2004 2005 total Gov. 0 5 6 0 11 5 16 Ext. 0 64 62 0 126 62 188 Population Self 0 39 39 0 78 39 117 Total 0 108 107 0 215 106 321 Gov. 12046 4814 3964 6241 15019 4247 31312 Ext. 6786 3650 2866 5478 11994 5899 24679 Health Self 26 1097 1425 1128 3650 409 4085 Total 18858 9561 8255 12847 30663 10555 60076 Gov. 9845 15263 17465 21256 53984 38090 101919 Education and Ext. 7506 9951 9717 9503 29171 11930 48607 Training Self Total 17351 25214 27182 30759 83155 50020 150526 Gov. 21891 20082 21435 27497 69014 42342 133247 Ext. 14292 13665 12645 14981 41291 17891 73474 Total Self 26 1136 1464 1128 3728 448 4202 Total 36209 34883 35544 43606 114033 60681 210923 121 Population (Million YR) Pre Period Program / Project Description Source Forward Total 2003 2003 2004 2005 total Enhance the role of the information media and development of Gov. 0 1 1 0 2 1 3 Public Media Ext. 0 14 13 0 27 13 40 Population Awareness programs and efforts to disseminate population awareness on the importance of family planning and encourage addressing all the Self 0 6 6 0 12 6 18 Project population issues through the media channels. Total 0 21 20 0 41 20 61 Spread awareness among religious scholars, sermonizers, and Gov. 0 2 3 0 5 2 7 Religious Awareness guides on population issues; create positive awareness among Ext. 0 21 20 0 41 20 61 Project them on such issues and prepare guidelines for sermonizers and Self 0 0 0 0 0 0 0 guides. Total 0 23 23 0 46 22 68 Development of awareness among young people; enhance the Gov. 0 0 0 0 0 0 0 Population Awareness role of boy and girl scouts in spreading awareness on family Ext. 0 13 13 0 26 13 39 Among Youth, Boy Self 0 26 26 0 52 25 77 and Girl Scouts Project planning, by including population issues within the activities of boy and girl scouts. Total 0 39 39 0 78 38 116 Include population issues in the awareness plans of the armed Gov. 0 2 2 0 4 2 6 Population Awareness Ext. 0 16 16 0 32 16 48 Among Armed Forces forces and in training and rehabilitation of the morale guidance Self 0 7 7 0 14 8 22 and Security Personnel personnel to undertake spreading population awareness among the armed forces personnel. Total 0 25 25 0 50 26 76 Gov. 0 5 6 0 11 5 16 Total of Population Ext. 0 64 62 0 126 62 188 Self 0 39 39 0 78 39 117 Total 0 108 107 0 215 106 321 122 Health (Million YR) Pre Period Program / Project Description Source Forward Total 2003 2003 2004 2005 total Includes 31 programs that aim to combat the spread of endemic diseases; Gov. 5738 2927 2160 4291 9378 3626 18742 improve nutrition; reduce risks, which threaten maternal and infant health; Ext. 5762 2939 2160 4291 9390 3641 18793 Health Programs Project upgrade the quality of health services; implant the principle of participation in Self 26 13 13 26 52 16 94 the management, planning, financing, supervision and assessment, aside form Total 11526 5879 4333 8608 18820 7283 37629 development of human resources and making the medicinal policy effective. Upgrade and improve the health services by equipping and rehabilitation of Gov. 6308 1887 1804 1950 5641 621 12570 Constructing and health institutions with modern health equipment; reinforcement of support Ext. 1024 711 706 1187 2604 2258 5886 Equipping Facilities for services; and support community participation in the management and Self 0 1084 1412 1102 3598 393 3991 the Health Sector * monitoring of the performance of health institutions. Total 7332 3682 3922 4239 11843 3272 22447 Gov. 0 0 ** Improvement of Basic Improvement of maternal and infant services, by means of rehabilitation of Ext. 0 0 Health Services and some of the health centers. Self 0 0 Family Health Project Total 0 0 0 0 0 0 0 Gov. 0 0 ** Improvement of Raise the coverage of health services in the governorate, considering that it is Ext. 0 0 Health Services in Marib a remote and less fortunate governorate, and improving these services, so as to Governorate Project reduce the afflictions of diseases and curtail endemic diseases. Self 0 0 Total 0 0 0 0 0 0 0 Gov. 12046 4814 3964 6241 15019 4247 31312 Ext. 6786 3650 2866 5478 11994 5899 24679 Total of Health Self 26 1097 1425 1128 3650 409 4085 Total 18858 9561 8255 12847 30663 10555 60076 Of which primary health care Total 0 5207 5580 6287 17074 0 17074 * Allocations of the SDF and the PWP were included within these programs and projects. ** Allocations not yet specified. 123 ED U C A T I O N A N D T R A I N I N G (Million YR) Pre Period Program / Project Description Source Post 2005 Total 2003 2003 2004 2005 total Construction of new schools; expansion, rehabilitation and maintenance of existing schools, while Gov. 105 108 129 162 399 365 869 Expansion of Basic Education providing furniture for and equipping schools; also work towards reform of the basic educational Ext. 1925 798 956 563 2317 2697 6939 Project sector . Total 2030 906 1085 725 2716 3062 7808 Reform of the educational sector and improvement of its output; improve the curricula and Gov. 151 117 0 0 117 172 440 Investment in the Education teaching techniques and train teachers; and work towards reducing the crowded classrooms and Ext. 3364 522 0 0 522 768 4654 Sector Project encouragement of female enrolment by completing the construction of 750 classrooms. Total 3515 639 0 0 639 940 5094 Construction of Additional Gov. 2100 7129 8554 10693 26376 24112 52588 Confront the expansion of basic and secondary education and reduce overcrowded classrooms and Classrooms for Basic and Ext. 0 0 0 0 0 0 0 improve the quality of education. Secondary Education Total 2100 7129 8554 10693 26376 24112 52588 Increase the rate of enrolment of girls in basic education, especially in the rural areas, by building, Gov. 0 0 0 0 0 0 0 Project for Building Schools furnishing, equipping and renovating 732 classrooms, in addition to improving the quality of Ext. 0 145 173 216 534 488 1022 education. Total 0 145 173 216 534 488 1022 Gov. 0 0 0 0 0 0 0 Project for the Construction of Promote the enrolment of girls in education to reduce the gender gaps and improvement of their 200 Girls' Schools living conditions. Ext. 0 289 347 434 1070 978 2048 Total 0 289 347 434 1070 978 2048 Project to Construct and Gov. 4800 408 0 0 408 600 5808 Confront the increased enthusiasm for education and reduce the crowded classrooms and complete and equipping 3,500 Ext. 0 0 0 0 0 0 0 rehabilitation of some of the educational facilities. Classrooms Total 4800 408 0 0 408 600 5808 The School Mapping Project complete the preparation of the Schooling Maps for the eight governorates; reorganize and Gov. 30 152 182 227 561 512 1103 and Support to Planning and redistribute services; set up the statistical system and update the sector’s database and regularly Ext. 0 0 0 0 0 0 0 Statistics collect information and data on education. Total 30 152 182 227 561 512 1103 Gov. 0 0 0 0 0 0 0 SFD Projects and Development of the population by means of improvement of educational services and contributing to the Ext. 0 3441 3632 3976 11049 0 11049 creation of permanent job opportunities, and vitalize community involvement in the preparation and Total 0 3441 3632 3976 11049 0 11049 implementation of civil works projects, while focusing on support to institutional build-up of community Gov. 0 0 0 0 0 0 0 PWP Project (Education) organizations and NGOs in this respect. Ext. 0 1735 1735 1735 5205 0 5205 Total 0 1735 1735 1735 5205 0 5205 Gov. 0 1266 1936 3319 6521 0 6521 Other Projects Ext. 0 0 0 0 0 0 0 Total 0 1266 1936 3319 6521 0 6521 Gov. 7186 9180 10801 14401 34382 25761 67329 Total of Basic Education Ext. 5289 6930 6843 6924 20697 4931 30917 Total 12475 16110 17644 21325 55079 30692 98246 Rehabilitation of 15 centers and improve 60 sections in different centers; set up new specialized Gov. 298 12 0 0 12 215 525 Completion of the Vocational fields specially for women; improve curricula and upgrade quality of staff and replacing Ext. 1544 746 0 0 746 2128 4418 Training Project expatriates by Yemeni employees. Total 1842 758 0 0 758 2343 4943 Gov. 90 946 1419 1730 4095 2426 6611 124 Pre Period Program / Project Description Source Post 2005 Total 2003 2003 2004 2005 total Gov. 90 946 1419 1730 4095 2426 6611 Set Up Vocational and Ext. 120 946 1419 1694 4059 8154 2431 6610 13221 Total 210 1892 2838 3424 4857 Technical Training Center and Institutes The Project for the Construction of a Constructing and equipping the institute; prepare its curricula and train its staff , with a view towards providing Gov. 13 14 20 0 34 38 85 qualify personnel to meet the needs of the labor market and the requirements for development and to Ext. 65 254 380 0 634 603 1302 Higher Polytechnic Institute "Yemenize" the technical positions. Total 78 268 400 0 668 641 1387 The improvement and provision of social services, environmental situation, the basic infrastructure for Gov. 0 0 0 0 0 0 0 PWP alleviating the adverse effects of the reform program through job creation, raising the level of community Ext. 0 118 118 118 354 0 354 participation in the implementation of civil works projects Total 0 118 118 118 354 0 354 Set up four institutes and centers for training of girls in the areas of specialization that are more suitable for their Gov. 0 85 128 153 366 213 579 Project for Training Institutes and work and to meet the needs of the labor markets, with a view towards enhancing the contribution of women in Ext. 0 0 0 0 0 0 0 Centers for Girls development Total 0 85 128 153 366 213 579 Establishment of five institutes and centers for the traditional handicraft trades in the Capital Gov. 0 68 102 122 292 170 462 Project for the Establishment of Secretariat, Hodeidah, Taiz and Sa'ada, with a view towards preserving the traditional skills and Ext. 0 0 0 0 0 0 0 Handicraft Institutes and Centers contribute to the development of some of the productive and service sectors. Total 0 68 102 122 292 170 462 Project for Improvement of The rehabilitation of a number of old institutes and centers and replacement of their machinery Gov. 477 227 341 409 977 886 2340 Vocational and Technical and equipment to keep pace with needs of the new training programs; set up new sections; and the Ext. 0 0 0 0 0 0 0 Training Institutes and Centers development of curricula and rehabilitation of staff. Total 477 227 341 409 977 886 2340 Gov. 878 1352 2010 2414 5776 3948 10602 Total of Vocational Training And Technical Education Ext. 1729 2064 1917 1812 5793 5162 12684 Total 2607 3416 3927 4226 11569 9110 23286 Project to Link Government Gov. 0 0 0 0 0 0 0 Provide government universities with the essential equipment, interconnected networks; rehabilitate the staff in Universities With the Information Ext. 0 99 99 99 297 145 442 computers and information and facilitate access to research centers though the Network. Networks Total 0 99 99 99 297 145 442 Set up the Faculty of Engineering and Technology in Hadhramout University and the Faculty of Water Gov. 1766 4672 4595 4382 13649 8289 23704 University Colleges/Faculties Project Structures in Dhamar University to prepare and rehabilitate staff in the engineering and technological fields to Ext. 488 858 858 668 2384 1692 4564 meet the needs of the labor markets and the requirements of development. Total 2254 5530 5453 5050 16033 9981 28268 Construct buildings and equipment required for operating the Community Colleges in Sana'a, to prepare Gov. 15 59 59 59 177 92 284 Project to Construct the Community intermediary personnel that meet the requirements for human resource development n the fields of engineering Ext. 0 0 0 0 0 0 0 College Buildings and technology, business management and in different production fields. Total 15 59 59 59 177 92 284 Enhancing the use of ICT to serve development purposes; through the adoption of policies that encourage Gov. Information & Communication innovation and support ICT in the areas of the PRSP to serve the public in general and the poor in particular Ext. Technology and to be result oriented. Total Gov. 1781 4731 4654 4441 13826 8381 23988 Ext. 488 957 957 767 2681 1837 5006 Total 2269 5688 5611 5208 16507 10218 28994 Gov. 9845 15263 17465 21256 53984 38090 101919 Ext. 7506 9951 9717 9503 29171 11930 48607 Total 17351 25214 27182 30759 83155 50020 150526 125 IMPROVING INFRASTRUCTURE (Million YR) Pre Period Post Program / Project Source Total 2003 2003 2004 2005 Total 2005 Gov. 13689 7825 8821 8647 25293 18140 57122 Water and Wastewater Ext. 30760 9903 10477 6850 27230 2050 60040 Sanitation Self 0 0 0 0 0 0 0 Total 44449 17728 19298 15497 52523 20190 117162 Gov. 7108 4639 4385 3057 12081 39295 58484 Ext. 6488 4083 1028 422 5533 6303 18324 Electricity Self 0 0 0 0 0 0 0 Total 13596 8722 5413 3479 17614 45598 76808 Gov. 24866 9571 16050 16000 41621 43511 109998 Ext. 9780 6680 6938 6939 20557 15449 45786 Roads Self 0 0 0 0 0 0 0 Total 34646 16251 22988 22939 62178 58960 155784 Gov. 45663 22035 29256 27704 78995 100946 225604 Ext. 47028 20666 18443 14211 53320 23802 124150 Total Self 0 0 0 0 0 0 0 Total 92691 42701 47699 41915 132315 124748 349754 126 WA T E R A N D WA S T E W A T E R S A N I T A T I O N (Million YR) Pre Period Program / Project Description Source Forward Total 2003 2003 2004 2005 total Capital Secretariat Gov. 2020 399 420 302 1121 0 3141 Provision of water supply service to the City of Sana'a and expand the Water Supply and r Ext. 11003 1453 1896 938 4287 0 15290 wastewater sanitation in order to preserve the environment. Sanitation Project Total 13023 1852 2316 1240 5408 0 18431 Project for Water and Provision of water supply and wastewater services, to improve Gov. 1390 458 474 373 1305 0 2695 Sewerage Services for services, infrastructure and health conditions, reduce the pollution of Ext. 8078 1877 1935 1338 5150 0 13228 f Cities in Some of the the environment and internal migration by drilling and equipping Total 9468 2335 2409 1711 6455 0 15923 Governorates wells; set up water supply and wastewater sanitation networks . Renewed Program for Provision of water supply and wastewater sanitation to improve Gov. 0 408 372 190 970 0 970 Wastewater Sanitation services for the secondary towns and reduction of environmental Ext. 0 15 0 0 15 0 15 in Major Cities pollution. Total 0 423 372 190 985 0 985 Provide water & sanitation services to improve services and Gov. 351 716 1871 2106 4693 0 5044 Water & Sanitation in infrastructure and to reduce pollution in the cities of Bajel, Zabeed, Ext. 1886 2135 2962 4252 9349 0 11235 Secondary cities Beit El-Faqeeh, Allyhyah, AlShehr, Jiblah, Zinjbar, and Jaar. Total 2237 2851 4833 6358 14042 0 16279 Yarim, 'Amran, Sa'ada Improvement of water supply and wastewater sanitation in these cities Gov. 525 82 65 30 177 612 1314 Water and Sewerage and reduction of environmental pollution. Ext. 2783 587 452 42 1081 0 3864 Services Total 3308 669 517 72 1258 612 5178 Program for Water Gov. 9403 5762 5619 5646 17027 17528 43958 Supply rural areas with potable water and set up suitable wastewater Supply and Sanitation Ext. 4208 981 274 280 1535 2050 7793 sanitation systems to preserve the environment. in Rural Areas Total 13611 6743 5893 5926 18562 19578 51751 Gov. 0 0 0 0 0 0 0 PWP Project Community development through improvement of water supply and Ext. 778 779 779 0 1558 0 2336 wastewater sanitation services and contribution to the generation of Total 778 779 779 0 1558 0 2336 job opportunities and upgrading community participation in the preparation and implementation of civil works, while focusing on the Gov. 0 0 0 0 0 0 0 SFD Projects institutional build-up of community associations and NGOs. Ext. 2024 2076 2179 0 4255 0 6279 Total 2024 2076 2179 0 4255 0 6279 Gov. 13689 7825 8821 8647 25293 18140 57122 Total of Water & Sanitation Ext. 30760 9903 10477 6850 27230 2050 60040 Total 44449 17728 19298 15497 52523 20190 117162 127 Electricity (Million YR) Pre Period Program / Project Description Source Forward Total 2003 2003 2004 2005 total Construct a 300 MW gas power station in Marib Governorate, with high voltage Gov. 379 645 806 968 2419 26296 29094 Power Generating Station by transmission line, major substations to Sana'a, for the purpose of addressing the existing Ext. 0 2580 161 0 2741 2125 4866 Gas shortage of electricity. Total 379 3225 967 968 5160 28421 33960 The use of renewable sources of energy that conserves the environment and contributes Gov. 0 0 0 0 0 0 0 Renewable Sources Power to the provision of electric power, especially in the areas where the required sources are Ext. 0 87 130 130 347 0 347 Generating Station available. Total 0 87 130 130 347 0 347 Modernization of the Gov. 60 26 34 65 125 66 251 Secure transmission of power from power stations and reduce interrupted supply due to Transmission Line Project in Ext. 600 258 45 16 319 248 1167 humidity and climatic conditions in the coastal areas. the Coastal Areas. Total 660 284 79 81 444 314 1418 Reinforce generation in Al-Hali Power Station (Hodeidah), Khourmaksar Power Gov. 113 65 113 129 307 4343 4763 Reinforcement of Some of Station (Aden), 'Usaifarah Power Station (Taiz) and South Sana'a Power Station to Ext. 0 0 0 0 0 0 0 the Power Generating Plants meet the increasing demand. Total 113 65 113 129 307 4343 4763 Gov. 5483 2237 1852 1895 5984 5930 17397 Enhancing Power generation Enhance the existing power generation capacities and completion of linking the in some districts electricity grid and distribution in some districts. Ext. 0 0 0 0 0 0 0 Total 5483 2237 1852 1895 5984 5930 17397 Provision of electricity from the national grid to secondary towns and reinforcement of Gov. 713 26 9 0 35 50 798 Electrification of al-Qafr, Al- infrastructure in the project area to create economic and social activity that contributes Ext. 1530 0 30 30 60 360 1950 Saddah and Al-Nadirah to overall rural development. Total 2243 26 39 30 95 410 2748 Construction of a 132 kV line from Al-Habilayn to Dhamar across the Governorates of Gov. 0 0 0 0 0 0 0 Al-Habilayn-Dhamar Al-Dhali'a, Ibb and Dhamar, for the purpose of reinforcing the national grid and Ext. 0 44 588 246 878 680 1558 Transmission Line reducing losses and provide service to new areas to improve the elements of the infrastructure and rural development in these areas. Total 0 44 588 246 878 680 1558 Project for the Construction Undertake the studies, prepare designs and tender documents and construct a 120 MW Gov. 341 1571 1571 0 3142 2550 6033 of Two New Power Stations power statio n in Sana'a and an 80 MW power station in Aden, to support generation in Ext. 2933 740 74 0 814 2125 5872 in Both Sana'a and Aden the Capital Secretariat and the City of Aden to face the existing shortage and to absorb the disconnected industrial loads. Total 3274 2311 1645 0 3956 4675 11905 Gov. 19 69 0 0 69 60 148 Connection of secondary towns to the national electricity grid and feed several villages Fourth Power Project Ext. 1425 374 0 0 374 765 2564 and to do away with the costly isolated diesel plants. Total 1444 443 0 0 443 825 2712 Gov. 7108 4639 4385 3057 12081 39295 58484 Total of Electricity Ext. 6488 4083 1028 422 5533 6303 18324 Total 13596 8722 5413 3479 17614 45598 76808 128 Roads (Million YR) Pre Period Program / Project Description Source Forward Total 2003 2003 2004 2005 total Facilitate the connection and movement from centers of Governorates to the districts; serve the Gov. 11963 2325 7713 7713 17751 20613 50327 largest rural population agglomerations; improve access to basic social services and facilitate Ext. 600 737 737 737 2211 2290 5101 access to production inputs and consumer commodities and encouraging agricultural production Rural Roads Program and activities and the creation of job opportunities. The program seeks to set up a mechanism for planning and determining priorities, while involving local communities in the construction and Total 12563 3062 8450 8450 19962 22903 55428 maintenance of feeder and dirt roads. Seyhout -Nashtoun Road (172 achieve the linkage with the Arab Road Network, facilitate interconnection between the regions Gov. 38 567 1658 1658 3883 1840 5761 km) and Tarim–Thamoud-Al- benefiting from the project and the rest of the areas of Yemen and with the Sultanate of Oman, so Ext. 213 1473 1473 1473 4419 2700 7332 Shahn Road (400 km) Projects as to encourage agricultural and livestock production, marketing of products and stimulating internal and external tourism. Total 251 2040 3131 3131 8302 4540 13093 Gov. 1650 409 409 409 1227 1500 4377 Aden–Bab Al-Mandab–Al- Realize the linkage of the main road network and the coastal road, so as to help stimulate Mocha Road (255 km) Project domestic and foreign economic and commercial activities. Ext. 0 0 0 0 0 0 0 Total 1650 409 409 409 1227 1500 4377 Ahwar–Ruthoum–Al- Completion of linking the coastal roads between Aden and Al-Mukalla and lining the area with Gov. 23 30 30 30 90 776 889 Nusheimah Road (150 km) the oil port and protect the oil pipeline and connecting the fishing communities in the area to Ext. 0 0 0 0 0 0 0 Project encourage fisheries production and marketing. Total 23 30 30 30 90 776 889 Interconnect the north-western regions along the border with each other and with the internal Gov. 1010 88 88 88 264 517 1791 Harrad–Sa'ada Road (205 km) regions to facilitate the intercommunication of the people of the area, increase agricultural Ext. 517 148 148 148 444 517 1478 production and encourage commercial trade. Total 1527 236 236 236 708 1034 3269 Achieve linkage with Saudi Arabia; secure transport traffic in accordance with the needs of the Gov. 75 538 538 538 1614 1275 2964 Arhab–Al-Hazm (Al-Jouf) – Al- economic activity; stimulate production and marketing of agricultural and livestock products and Ext. 150 526 525 526 1577 1275 3002 Boq'a (283 km) commodity trade. Total 225 1064 1063 1064 3191 2550 5966 Thamoud–Jabal Safouh–Jabal Achieve linkage between Sa'ada and Al-Jouf Governorates reaching up to the border with Saudi Gov. 8 8 8 8 24 20 52 Saghir–Al-Yutmah–Al-Boq'a Arabia and secure transport traffic in accordance with the needs of the economic activity; Ext. 0 0 0 0 0 0 0 (720 km) Road stimulate production and marketing of agricultural and livestock products and commodity trade. Total 8 8 8 8 24 20 52 Gov. 354 101 101 102 304 354 1012 Reinforcement of Parts of Aden Construct Asphalt roads and widen the present network to cut travel time of trip, reduce the cost – Al-Mukalla Road of operating vehicles and reduce accidents. Ext. 709 203 203 203 609 709 2027 Total 1063 304 304 305 913 1063 3039 Amran–Sana'a–Dhamar–Ibb– Reduce the pressure on the 'Amran to Aden roads, reduce accidents, shorten trip time , facilitate Gov. 0 2193 2193 2193 6579 5100 11679 Taiz –Lahj–Aden (459 km two the movement of merchandise and the agricultural products between the areas of production and Ext. 5100 1262 1262 1262 3786 5100 13986 directions) Road marketing that the road passes through, besides reinforcing the link between Sana'a, the Capital City and a number of governorates which the road crosses reachin g to Aden Governorate. Total 5100 3455 3455 3455 10365 10200 25665 SFD Projects and PWP Project Community development, by means of construction and improvement of roads and contributing to Gov. 0 0 0 0 0 0 0 the generation of permanent job opportunities and to upgrade the level of community participation Ext. 0 1384 1643 1643 4670 0 4670 in the preparation and implementation of civil works. 129 Pre Period Program / Project Description Source Forward Total 2003 2003 2004 2005 total in the preparation and implementation of civil works. Total 0 1384 1643 1643 4670 0 4670 Major roads linking Gov. 9745 5505 5505 5454 16464 16616 42825 governorates or within a Linking the various governorates or districts of the governorate with the centers Ext. 7591 3593 3852 3852 11297 7958 26846 governorate Total 17336 9098 9357 9306 27761 24574 69671 Gov. 24866 9571 16050 16000 41621 43511 109998 Total for Roads Ext. 9780 6680 6938 6939 20557 15449 45786 Total 34646 16251 22988 22939 62178 58960 155784 130 Ensuring Social Protection (Million YR) Program / Project Description Source Pre Period Forward Total 2003 2003 2004 2005 total Social Welfare Fund The provision of cash assistance for the poorest in society, the elderly, orphans and Gov. 0 18755 24011 28238 71004 0 71004 women with no caretaker in addition to segments unable to work and make money Ext. 0 0 0 0 0 0 0 within the bounds of the Social Welfare Law Total 0 18755 24011 28238 71004 0 71004 Social Fund for The development of society through the improvement of education, health services, Gov. 0 0 0 0 0 0 0 Development water supply and sanitation and the contribution to the creation of permanent job Ext. 18000 10869 12226 13502 36597 13502 68099 opportunities with focus on the development of small and micro enterprises, Total 18000 10869 12226 13502 36597 13502 68099 institutional support for national associations and NGOs Public Works Project The improvement and provision of social services, environmental situation, the basic Gov. 0 0 0 0 0 0 0 infrastructure for alleviating the adverse effects of the reform program through job Ext. 7439 4325 4325 4325 12975 4325 24739 creation, raising the level of community participation in the preparation and Total 7439 4325 4325 4325 12975 4325 24739 implementation of civil works projects The Agriculture Production The alleviation of burdens resulting from the rise in the prices of accessories and inputs Gov. 3000 3000 3000 3000 9000 3000 15000 and Fisheries Promotion for agriculture production, livestock and fisheries to enable beneficiaries from Ext. 0 0 0 0 0 0 0 Fund maintaining their activities, raising efficiency and agriculture land conservation Total 3000 3000 3000 3000 9000 3000 through financing a number of projects and activities related to irrigation, water 15000 installations and productive and marketable agricultural fields in participation.. The National Program for The establishment of centers for productive families in the governorates, the operation Gov. 178 157 220 378 755 2206 3139 the Development of of existing ones and t he establishment and equipping productive units in addition to the Ext. 69 61 24 0 85 253 407 Productive Families creation of mobile units to cover rural areas. Training is linked with production Total 247 218 244 378 840 2459 through the creation of 14 training course on income generation with focus on the 3546 qualification of poor families, which receive social welfare cash subsistence. The Project for the The establishment of training centers for the disabled, young and old and the making Gov. 574 66 79 108 253 144 971 Qualification of the Disabled available the necessary equipment to enable them to integrate in society and economic Ext. 96 5 6 0 11 24 131 activity. Total 670 71 85 108 264 168 1102 The Program on Combating The implementation of the national poverty survey and labor market survey and the Gov. 0 0 0 0 0 0 0 Poverty and Job Creation implementation of the local community development program in some of the poorest Ext. 0 254 225 138 617 0 617 regions through the contribution in the establishment of local communities and Total 0 254 225 138 617 0 financing income generation projects in addition to support for the National Program 617 for the Development of Productive Families and operation of a micro lending program. Poverty Information System The establishment of a comprehensive data base on poverty indicators and poverty Gov. 0 0 0 0 0 0 0 and Monitoring Project monitoring through surveys and in a way that helps in the preparation of poverty Ext. 0 346 173 173 692 0 692 profiles of certain target gro ups and regions nationwide and making available sufficient 131 Program / Project Description Source Pre Period Forward Total 2003 2003 2004 2005 total profiles of certain target gro ups and regions nationwide and making available sufficient Total 0 346 173 173 692 0 data for the preparation of policies and facilitating the evaluation of the impact of 692 policies and effectiveness of programs. Civil Service Fund Referral of excess labor to the fund so as to arrange either re -training and distribution Gov. 0 1000 1200 1300 3500 0 3500 according to market needs or the procurement of outstanding service before referral for Ext. 0 0 0 0 0 0 0 retirement or paying compensation for those wishing to leave public office. Total 0 1000 1200 1300 3500 0 3500 Grand total of SSN before reallocating funds to the various activities Gov. 3752 22978 28510 33024 84512 5350 93614 Ext. 25604 15860 16979 18138 50977 18104 94685 Total 29356 38838 45489 51162 135489 23454 188299 *Social Welfare Fund Gov. 0 18439 23608 27764 69811 0 69811 Ext. 0 0 0 0 0 0 0 Total 0 18439 23608 27764 69811 0 69811 *Social Development Fund Gov. 0 0 0 0 0 0 0 Ext. 0 9295 10150 10950 30395 30395 Total 0 9295 10150 10950 30395 0 30395 * Public Works Project Gov. 0 0 0 0 0 0 0 Ext. 0 4325 4325 4325 12975 0 12975 Total 0 4325 4325 4325 12975 0 12975 Total of Social Protection Gov. 3752 4539 4902 5260 14701 5350 23803 Ext. 25604 2240 2504 2863 7607 18104 51315 Total 29356 6779 7406 8123 22308 23454 75118 *Includes current revenues of the SWF. Allocations of the SDF have been distributed in the relevant activity i.e. education, health, water & sanitation, training, institutional support, while the remaining amount has been accorded to the SSN. As for the PWP, all Funds were distributed to the activities. 132 Good Governance, Participation and Cooperation (Million YR) Pre Period Program / Project Description Source Forward Total 2003 2003 2004 2005 total The provision of high quality and cost effective government services through the Gov. 159 169 169 0 338 284 781 restructuring of government agencies, termination of duplication, enhancement of Ext. 1506 986 991 0 1977 2238 5721 Civil Service Modernization transparent procedures, fixture of implementation, improvement in budget preparation and financial administration systems, the establishment of effective control on hiring Total 1665 1155 1160 0 2315 2522 6502 and redistribution, the termination of the services of the excess labor force fairly. The provision of expertise and technical support for the Supreme Electoral Gov. 0 81 99 108 288 0 288 Commission especially in areas like voter registration, professional development and Ext. 0 260 0 0 260 0 260 Election Support Program decentralization within the Commission, the expansion of the democratic participation by less fortunate segments including women, the enhancement of public awareness on Total 0 341 99 108 548 0 548 the importance of elections. Gov. 0 540 540 468 1548 575 2123 Basic Infrastructure Project the creation of suitable conditions for the work of the apparatus of the judicial of the Judiciary authority most importantly the construction and equipping of courts Ext. 376 141 141 0 282 94 752 Total 376 681 681 468 1830 669 2875 Strengthening the role of local authorities, makin g available the necessary financial Gov. 239 180 193 0 373 147 759 Basic Infrastructure and and human requirements in line with the Local Authority Law most importantly the Ext. 0 0 0 0 0 0 0 Human Capacity Project for construction and equipping of headquarters for local councils and training for the local Local Authorities authority cadre. Total 239 180 193 0 373 147 759 Institutional capacity building for local communities through a partnership work Gov. 8 18 18 0 36 151 195 program and the embodiment of bottom to top development approach, participation in Ext. 96 166 166 0 332 1484 1912 planning, implementation, follow-up and evaluation in addition to the support of Local Communities members of local communities in rural areas especially women to realize sustainable Development Program development. The program also adopts the idea of establishing revolving funds for Total 104 184 184 0 368 1635 2107 thes e communities to finance local development activities Capacity building for self help for rural communities to improve their living standard Gov. 0 0 0 0 0 0 0 Self Help Development in through the implementation of sustainable development activities, the establishment of Ext. 0 105 105 105 315 0 315 Rural Areas small projects like water storage and water supply ponds, land conservation, bee keeping and livestock farms, etc. Available public services through training and Total 0 105 105 105 315 0 315 information should be used Gov. 0 0 0 0 0 0 0 Social Fund for Community development through institutional support for national associations and Development NGOs Ext. 190 216 311 389 916 6 1112 Total 190 216 311 389 916 6 1112 133 Pre Period Program / Project Description Source Forward Total 2003 2003 2004 2005 total Being ready to withstand disasters and disaster management, risk assessment and post Gov. 0 0 0 0 0 0 0 Disaster Mitigation disaster evaluation, planning and implementation of measures to mitigate and remedy Ext. 130 163 163 456 0 456 disasters. Total 0 130 163 163 456 0 456 Focusing on the fields that have been selected related to gender issues with special Gov. 0 0 0 emphasis on rural regions, local rule, capacity building in policy analysis and Ext. 0 0 0 preparation of human development programs. These areas represent basic and priority United Nations Development challenges for Yemen. This would require the attraction of other donor partners, civil Assistance Framework society organizations and private sector to cooperate and coordinate and to build up on Total 0 0 0 0 0 0 0 the existing momentum so as to further the capacity and integration of these interventions and come up with new and innovative ways for the efficient utilization of resources. Activation of the role of the National Committee for the Social Safety Net enabling it Gov. 0 0 0 0 0 0 0 to take charge of supervision of all net programs and projects that have been identified Ext. 0 34 34 34 102 0 102 The Social Safety Net according to specific criteria in addition to enhancing its role in the identification of objectives, policy design, inter-coordination within the net to avert any duplication or Total 0 34 34 34 102 0 102 overlapping and ensure integration and cooperation with national organizations and donor countries and agencies Gov. 406 988 1019 576 2583 1157 4146 Total of Administration, Good Governance, Participation and Cooperation Ext. 2168 2038 1911 691 4640 3822 10630 Total 2574 3026 2930 1267 7223 4979 14776 134

ANNEX 3 135 TABLE 1: M AJOR ROADS LINKING GOVERNORATES OR WITHIN GOVERNORATES Name Description Amran/ Sooada / Ahnum Road Linking areas of Amran governorate Dhamar/ Thubaa / Al-Hussinia Road. Linking between Dhamar & Al-Hodeidah Governorate then with others through additional road for Maber / Bajel Finishing Mareb/ Al-Beida Road. Binding the center of the two governorate by direct road. Al-Mahweet / Al-Qanawas/ Hajjah Road Linking Al-Mahweet & Hajjah governorates' area Wasset / Markha / Al-Beida Road Linking between Shabwah & Mareb governorates Al-Mukla / Dawan Road Linking the coast & interior areas of Hadramout governorates Al-Manswria/ Juban/ Al-Jaafaria Road Linking areas of Sana'a & Al-Hodeidah Governorates Ibb / Baadan / Al-Sahr Road Linking areas of Ibb governorate Al-Askariya / Labaoos / Al-Beida Road Linking Laheg & Al-Beida governorates Al-Gydah / Tarym Road Linking Al-Mahrah & Hadramout governorates. Al-Sharq city / Al-Dalil Road Linking Dhamar & Ibb governorates Harf Sufyan / Al-Batenia / Al-Matama Road Linking Amran & Al-Jawf governorates Al-Barah / Al-Wazeia Road Linking areas of Taiz governorate to the coast Al-Mawaset / Al-Samsarah / Kadas Road Linking areas of Taiz governorate Al-Gurfa / Sah Road Linking areas of Hadramout governorate Al-Mashed / Dawan Road Linking areas of Hadramout governorate Wadi Hagar / Al-Sufal / Al-Jawal Road Linking areas of Hadramout governorate Ibb/Al-Sabrah/Qataba Road Linking Ibb and Al-Daleh governorates Al-Awdain/Al-Jarahi Road Linking Ibb & Al-Hodeidah governorates Huraib/Bayhan Road Linking Mareb & Shabwah governorates Ablah/Al-Abdyaa Road Linking areas Mareb governorate Radaa/Jubban/Damt Road Linking Al-Beida & Al-Daleh governorates Sa'adah/ Kitaf/Al-Buqaa Road Linking areas of Sa'adah governorate. Mabar/Al-Sharq City/Al-Juma'a Road Linking Dhamar & Al-Hodeidah governorates Bayhan/Nuaman Road Linking Shabwah & Al-Beida governorates Reinforcement of Parts of Aden – Al-Mukalla Road Reinforcement the road Thula/ Amran Road linking districts of Amran governorate Al-Turba / Tur Al-Baha Road Linking Taiz & Laheg governorates Al-Tufa / Awain Road Kahlan / Al-Maghraba / Al-Jumimah Road linking districts of Hajjah governorat e Khamis Bani Saad /Al-Mahweet Road linking districts of Al-Mahweet governorate Stregneth Al-Taqya / Al-Ahmer Road Reinforcement the road Reinforcement of Aden / Shaqra Road Reinforcement the road Harad / Midi Road linking districts of Hajjah governorate Al-Hutayb / Wisab Road linking districts of Shabwah governorate Ayad/ Shabwah Old/ Asaker/ Al-Aber Road linking districts of Hadramout governorate Al-Jubaa/ Al-Mahilya/ Al-Sawadya Road Linking Mareb & Al-Beida governorates Saffer/ Wadi Al-Janah / Bayhan Road linking districts of Mareb & Shabwah governorates Completion of Sarfit/ Huff Road Completion of the road Al-Aber / Al-Wadiaa Road Linking ROY & KSA 136 Name Description Abs-Aslam / Al-Mahabisha Road linking districts of Hajjah governorate Al-Zahir/ Al-Humidat / K harab-Almarashi/ Al-Anan/ Rajuza Road linking districts of Al-Jouf governorate Taiz / Muthikhira Road linking districts of Taiz governorate Majd-Qusim / Dumnat-Khader Road linking districts of Taiz governorate Al-Saaira Majbbanah Road linking districts of Taiz governorate Sharab Al-Salam Center Road linking districts of Taiz governorate Harass / Bani-Ali / Al-Ghader Road linking districts of Taiz governorate Al-Maqarima / Al-Zaazi Road linking districts of Taiz governorate Al-Sawidah / Wadi Al-Zabirah Road linking districts of Taiz governorate Al-Marabidah / Al -Ahkum Road linking districts of Taiz governorate Radaa / Al-Qarishah Road linking districts of Al-Beida governorate Al Abdullah Area Road linking districts of Al-Beida governorate Manar / A nss Road linking districts of Dhamar governorate Al-Khaab / Al -Daiysah Road linking districts of Dhamar governorate Dhifan / Kuhal Road linking districts of Amran governorate Al-Ashmur / Miswar Road linking districts of Amran governorate Al-Aood / Qataba Road linking districts of Al-Daleh governorate Al-Ribat / Amad Road linking districts of Hadramout governorate Jabbal Buraa Road linking districts of Al-Hodeidah governorate Al-Maghraba/ Sayeem – Al-Hima Al-Dhakilia Road linking districts of Sana'a g overnorate Al-Khadraa / Bani-Shadad Road linking districts of Sana'a governorate Al-Sahman / Bani-Shadad Road linking districts of Sana'a governorate Al-Sooama / Jishan Road linking districts of Abyan governorate Al-Kataa / Khamis Bani Saad Road linkin g districts of Al-Mahweet governorate Barman/ Wadi-Wasr/ Shabwah Road linking districts of Shabwah governorate Nakil Al-Ramah / Wadi-Baklan Road linking districts of Sana'a governorate Al-Sharaf/ Al-Beida Road linking districts of Al-Beida governorate Bani-Hushish Road linking districts of Sana'a governorate Radaa / Bilad Al-Jouf Road linking districts of Al-Beida governorate Radaa/ Hanka / Al-Mafraq – Al-Beida Road linking districts of Al-Beida governorate Mafraq Al-Milaaya / Al-Sharm Road linking districts of Dhamar governorate Rubayat Bani Bahr / Dhamar Road linking districts of Dhamar governorate Al-Shaqr / Al-Qafar Road linking districts of Dhamar governorate Bani Ayub Road linking districts of Dhamar governorate Qarateel / Hamdan Road linking districts of Sana'a governorate Bayhan / Kara'a/ Al-Harajah Road linking districts of Shabwah governorate Yahar / Shab Bani Saad Road linking districts of Laheg governorate Khalan / Bit Al-Muhya'a Road linking districts of Al-Daleh governorate Miswarah/ Al-Shat/ Bayhan linking districts of Al-Beida governorate Manakha/ Al-Hijjrah Road linking districts of Sana'a governorate Al-Tawillah / Laaha/ Miswar Bani Al-Awam linking districts of Hajjah governorate 137 TABLE 2: CONSULTATION WORKSHOPS DURING PHASE ONE OF THE PRSP PROCESS Participants Date Venue Sunday Ministry of Social Affairs & Labor Ministry of Social Affairs & Labor 30/12/2001 Sunday Women's National Committee Women's National Committee 06/01/2002 Ministry of Planning & Development, Tuesday Ministry of Finance, Central Statistic Ministry of Planning & Development 08/01/2002 Organization Wednesday Ministry of Health & Population Ministry of Health & Population 09/01/2002 Saturday Ministry of Education Ministry of Education 12/01/2002 Sunday Civil Society Ministry of Planning & Development 13/01/2002 Wednesday Ministry of Agriculture & Irrigation Dept. of Irrigation 16/01/2002 Sunday National Committee for Human National Committee for Human Rights 20/01/2002 Rights Monday Faculty of Commerce & Economics - Universities 21/01/2002 Sana'a University 138 TABLE 3: CONFERENCES & WORKSHOPS HELD IN PHASE 2 OF THE PRSP PROCESS Venue Participants Date Working Groups Organizer Aden Abyan and Laheg Saturday *Determinates of Poverty Aden University 09/03/2002 *Private Sector Planning Office -Aden * Human Rights Taiz Al-Dhalei Sunday *Private Sector Taiz University 10/03/2002 * Civil Society Planning Office - Taiz * Human Rights Al-Hodeidah Al-Mahweet, Hajjah Wednesday * Poverty disparities Al-Hodeidah University 13/03/2002 * Civil Society Planning Office - Al- * Agriculture Development Hodeidah Seyoun Hadramout, Al-Mahrah, Shabwah Thursday * Local Communities & Hadramout University Voices of the poor 04/04/2002 * Gender & Poverty Al-Ahqaf University * Environment & poverty Planning Office – Seyoun Sana'a City Donors Wednesday Consultation with donors Ministry of Planning & 29/05/2002 Development Ibb - June Workshop Ibb University Dhamar Al-Baidha June Workshop Dhamar University Sa'adah Amran June Workshop Faculty of Education - Sa'adah Mareb Al-Jouf June Workshop Teachers' Institute – Mareb Ministry of General Directors in the ministry & in * The Reform Program Ministry of Planning & Planning & the branches in the governorates * PRSP Development Development Sana'a City Sana'a Conference PRSP Committee 139 TABLE 4: GDP AT PRODUCERS PRICES BY ECONOMIC ACTIVITY (CONSTANT PRICES ) FOR 1998-2005 (Million Rial) Item 1998 1999 2000 2001 2002 2003 2004 2005 A- Industries 1- Agriculture, Forestry and Fishing 171983 171973.5 183603 189314 196983 206439 218282 232197 Agriculture & Forestry 157368 157861.9 168275.7 173231.8 179956.5 188285.4 198704.8 210833.7 Agriculture & Forestry (without Qat) 113180 113544 121034 124599 129435 135426 142920 151645 Fishing 14615 14112 15327 16082 17026 18154 19577 21363 2- Mining and Quarrying 139170 150050.5 160866.5 160771 160151 147974 144095 136931 Mining and Quarrying 1412 1424 1434 1467 1532 1610 1712 1843 Oil And Gas 137758 148627 159432 159304 158619 146364 142383 135088 3- Manufacturing 86697 87143.58 91357.95 94881 99252 106217 111739 119295 Manufacturing 60467 60609 64519 66419 68799 71504 74959 79157 Oil Refining 26230 26534 26839 28462 30453 34713 36780 40138 4- Electricity, Water and Gas 7912 8455 8973 9327 9781 10332 11038 11933 5- Construction 44571 44755 48271 49932 52117 54686 57876 61701 6- Wholesale and Retail Trade 104855 107405.8 112429.2 115834 120139 125306 131787 139737 Wholesale and Retail Trade 87890 89559 93533 96287 99738 103857 108979 115193 Restaurants and Hotels 8338 8938 9689 10022 10460 10997 11694 12584 Maintenance 8627 8909 9208 9525 9941 10452 11114 11960 7- Transport, Storage & Communications 112828 114735 115515 123074 132584 144659 160834 176630 8- Financial Institutions & Real Estate 84635 95149.37 99392.65 102920 107417 112783 119555 127825 Financial Institutions 30643 37915 38728 39868 41416 43333 45774 48799 Real Estate & Business Serv. 53992 57235 60665 63051 66001 69450 73780 79026 9- Community Social & Personal Serv. 9054 9461 9917 10442 11052 11587 12485 13422 Total Of Industries 761705 789129 830325 856495 889476 919983 967691 1019671 B- Producers of Government Services 93635 98848 104307 108306 114369 119891 125426 130928 C- Producers of Private Non-Profit Serv. 305 319 352 363 379 396 406 445 Import Duties 29653 28608 28395 27952 29224 29085 30119 32185 Less: Imputed Bank Services Charge 27865 27731 28522 27369 28065 27966 28055 28216 GDP AT Market Prices 857433 889173 934857 965747 1005383 1041390 1095587 1155013 Non-Oil GDP 719675 740546 775425 806442 846764 895026 953202 1019926 140 TABLE 5: G ROWTH R ATE OF GDP AT PRODUCERS PRICES BY ECONOMIC ACTIVITY (CONSTANT PRICES) FOR 1998-2005 (Million Rial) Item 1998 1999 2000 2001 2002 2003 2004 2005 A- Industries 1- Agriculture, Forestry and Fishing 0.00 -0.01 6.76 3.11 4.05 4.80 5.74 6.37 Agriculture & Forestry 0.00 0.31 6.60 2.95 3.88 4.63 5.53 6.10 Agriculture & Forestry (without Qat) 0.00 0.32 6.60 2.95 3.88 4.63 5.53 6.10 Fishing 0.00 -3.44 8.62 4.93 5.87 6.62 7.84 9.12 2- Mining and Quarrying 0.00 7.82 7.21 -0.06 -0.39 -7.60 -2.62 -4.97 Mining and Quarrying 0.00 0.82 0.77 2.28 4.41 5.12 6.33 7.63 Oil And Gas 0.00 7.89 7.27 -0.08 -0.43 -7.73 -2.72 -5.12 3- Manufacturing 0.00 0.52 4.84 3.86 4.61 7.02 5.20 6.76 Manufacturing 0.00 0.24 6.45 2.95 3.58 3.93 4.83 5.60 Oil Refining 0.00 1.16 1.15 6.05 7.00 13.99 5.95 9.13 4- Electricity, Water and Gas 0.00 6.87 6.13 3.94 4.87 5.63 6.83 8.11 5- Construction 0.00 0.41 7.86 3.44 4.38 4.93 5.83 6.61 6- Wholesale and Retail Trade 0.00 2.43 4.68 3.03 3.72 4.30 5.17 6.03 Wholesale and Retail Trade 0.00 1.90 4.44 2.94 3.58 4.13 4.93 5.70 Restaurants and Hotels 0.00 7.19 8.40 3.44 4.37 5.13 6.33 7.62 Maintenance 0.00 3.27 3.36 3.44 4.38 5.13 6.34 7.61 7- Transport, Storage & Communications 0.00 1.69 0.68 6.54 7.73 9.11 11.18 9.82 8- Financial Institutions & Real Estate 0.00 12.42 4.46 3.55 4.37 5.00 6.00 6.92 Financial Institutions 0.00 23.73 2.15 2.94 3.88 4.63 5.63 6.61 Real Estate & Business Serv. 0.00 6.01 5.99 3.93 4.68 5.23 6.23 7.11 9- Community Social & Personal Serv. 0.00 4.50 4.82 5.29 5.84 4.85 7.75 7.51 Total Of Industries 0.00 3.60 5.22 3.15 3.85 3.43 5.19 5.37 B- Producers of Government Services 0.00 5.57 5.52 3.83 5.60 4.83 4.62 4.39 C- Producers of Private Non-Profit Serv. 0.00 4.59 10.24 3.18 4.53 4.53 2.29 9.78 Import Duties 0.00 -3.52 -0.75 -1.56 4.55 -0.47 3.55 6.86 Less: Imputed Bank Services Charge 0.00 -0.48 2.85 -4.04 2.54 -0.35 0.32 0.57 GDP AT Market Prices 0.00 3.70 5.14 3.30 4.10 3.58 5.20 5.42 Non-Oil GDP 0.00 2.90 4.71 4.00 5.00 5.70 6.50 7.00 141 TABLE 6: THE STRUCTURE OF GDP AT PRODUCERS PRICES BY ECONOMIC ACTIVITY (CONSTANT PRICES ) FOR 1998-2005 (Million Rial) Item 1998 1999 2000 2001 2002 2003 2004 2005 A- Industries 1- Agriculture, Forestry and Fishing 20.06 19.34 19.64 19.60 19.59 19.82 19.92 20.10 Agriculture & Forestry 18.35 17.75 18.00 17.94 17.90 18.08 18.14 18.25 Agriculture & Forestry (without Qat) 13.20 12.77 12.95 12.90 12.87 13.00 13.05 13.13 Fishing 1.70 1.59 1.64 1.67 1.69 1.74 1.79 1.85 2- Mining and Quarrying 16.23 16.88 17.21 16.65 15.93 14.21 13.15 11.86 Mining and Quarrying 0.16 0.16 0.15 0.15 0.15 0.15 0.16 0.16 Oil And Gas 16.07 16.72 17.05 16.50 15.78 14.05 13.00 11.70 3- Manufacturing 10.11 9.80 9.77 9.82 9.87 10.20 10.20 10.33 Manufacturing 7.05 6.82 6.90 6.88 6.84 6.87 6.84 6.85 Oil Refining 3.06 2.98 2.87 2.95 3.03 3.33 3.36 3.48 4- Electricity, Water and Gas 0.92 0.95 0.96 0.97 0.97 0.99 1.01 1.03 5- Construction 5.20 5.03 5.16 5.17 5.18 5.25 5.28 5.34 6- Wholesale and Retail Trade 12.23 12.08 12.03 11.99 11.95 12.03 12.03 12.10 Wholesale and Retail Trade 10.25 10.07 10.01 9.97 9.92 9.97 9.95 9.97 Restaurants and Hotels 0.97 1.01 1.04 1.04 1.04 1.06 1.07 1.09 Maintenance 1.01 1.00 0.98 0.99 0.99 1.00 1.01 1.04 7- Transport, Storage & Communications 13.16 12.90 12.36 12.74 13.19 13.89 14.68 15.29 8- Financial Institutions & Real Estate 9.87 10.70 10.63 10.66 10.68 10.83 10.91 11.07 Financial Institutions 3.57 4.26 4.14 4.13 4.12 4.16 4.18 4.22 Real Estate & Business Serv. 6.30 6.44 6.49 6.53 6.56 6.67 6.73 6.84 9- Community Social & Personal Serv. 1.06 1.06 1.06 1.08 1.10 1.11 1.14 1.16 Total Of Industries 88.84 88.75 88.82 88.69 88.47 88.34 88.33 88.28 B- Producers of Government Services 10.92 11.12 11.16 11.21 11.38 11.51 11.45 11.34 C- Producers of Private Non-Profit Serv. 0.04 0.04 0.04 0.04 0.04 0.04 0.04 0.04 Import Duties 3.46 3.22 3.04 2.89 2.91 2.79 2.75 2.79 Less: Imputed Bank Services Charge 3.25 3.12 3.05 2.83 2.79 2.69 2.56 2.44 GDP AT Market Prices 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 Non-Oil GDP 83.93 83.28 82.95 83.50 84.22 85.95 87.00 88.30 142