In September of last year the international community gathered at two events to discuss support for the economic reconstruction and political transition in Yemen. The end result of the donor conference in Riyadh and the ‘Friends of Yemen’ meeting in New York City was pledges totaling US$7.5 billion. This amount will be enough to cover the budget shortfall in the Government of National Reconciliation’s own reconstruction plan, which is an ambitious effort to deliver urgent services to the neediest, create jobs, and stabilize the economy. Its implementation will be critical for creating an environment that can sustain the political process now underway.
In recognition that commitments only have value if they are fulfilled, the World Bank has begun converting its pledges into action. Three new projects totaling US$206 million are the first installment of a pledge made at last year’s donor conference of an additional US$400 million in support. We spoke with World Bank Country Manager for Yemen, Wael Zakout about the significance of the new projects and what role the international community can pay in helping create the conditions for a successful political transition in Yemen.
What is the current state of the rebuilding process in Yemen, and what are the greatest challenges?
Wael Zakout: President Abd Rabbuh Mansur al-Hadi just announced March 18th as the date for the start of the National Dialogue. This is a very important step in the transition process. The National Dialogue is expected to last for six months, culminating with the drafting of a new constitution and the holding of presidential and parliamentarian elections. The transition government, with support from donors, has managed to halt the economic contraction caused by the crisis. Central Bank reserves, which had sunk to US$3.7 billion at the height of the crisis, have risen to US$6.2 billion. The economy is expected to grow at a rate of around four percent this year, as compared to zero percent in 2012 and a 19 percent contraction in 2011. The local currency is stable and inflation is under control. The economy, however, has not generated the desperately needed jobs. . Poverty, unemployment, and food insecurity are all very high, with some of highest rates in the world.
How important were the pledges made last year in support of Yemen’s reconstruction and political transition?
WZ: The private sector will be the source of job creation and jobs and poverty reduction. . But it will take time. In the meantime, it is important the government accelerate the implementation of projects financed by donors to restore confidence, improve services and generate short-term employment. This will give Yemen some room to breathe as it completes the transition period and takes the necessary policy actions and investments to support private sector expansion. In this regard, the government needs to accelerate the establishment of the Fast Track Agency for the absorption of donor funding, and donors need to fulfill their commitment to Yemen by accelerating the delivery of their support.
If people feel improvement in their lives and livelihood and that tomorrow will be better than yesterday, the transition process will be successful. If people do not feel improvement in their lives, the transition process will not be successful regardless of what happens in the National Dialogue.
How will the three new projects contribute to the Bank’s overall program of support?
WZ: The Bank is setting an example among donors. We committed an additional US$400 million in Riyadh, and we are investing more than half of these funds in less than 5 months from the donor conference. The Bank’s Board of Directors has now approved three projects: The first is Basic Education II (funded by a US$66 million grant) which will support enhancing the quality of education by focusing on the reading skills of elementary school students, while promoting equal access to quality education for young girls as wella s poorer and rural children. The second project (funded by a US$40 million grant) will develop and maintain around 2300 kilometers of roads in four governorates: Al-Hodeidah, Ibb, Taiz, and Lahj. Not only will the project generate short-term construction jobs, but will also expand and rehabilitate the basic infrastructure, roads that people need to access key services such as health and education, and the means by which trade and commerce will grow. The third project (funded by a US$100 million grant) will provide cash transfers to 400,000 beneficiaries of the government’s own Social Welfare Fund, who are the poorest of the poor in Yemen. We want to make sure that the economic challenges they face do not force them to make decisions between feeding their families or sending their children to school. They need the support to be able to do both. These three projects will focus on helping the poor during these difficult times, reducing food insecurity, creating jobs and improving the quality of education so that everyone, regardless of economic circumstances, has the chance to acquire critical skills.
What is the timeline for the fulfillment of all the Bank’s additional pledges, and what areas will they focus on?
WZ: We focused our program of support in the first year of the transition on emergency needs, such as the creation of short-term employment and the reduction of food insecurity. We will now shift our focus to the medium and long term agenda of creating the conditions for economic expansion. A number of related projects are under development to be launched next year. We are currently in discussion with the government on plans to support the automation of Central Bank functions to create a platform for a modern financial sector in Yemen; the construction of the Mocha Wind Farm as an example of clean but economically viable energy generation; the Taiz Eden highway as the first phase of a national expressway system that links main population centers and connects Yemen with Saudi Arabia’s expressway system; and a project to establish a partnership between government and civil society for the delivery of services that are far better managed by civil society.
What else can be done to support the political transition in Yemen?
WZ: The success of the transition process will be judged by the people in the street rather than the corridors of the presidential palace. If people feel improvement in their lives and livelihoods and that tomorrow will be better than yesterday, the transition process will be successful. If people do not feel improvement in their lives, the transition process will not be successful regardless of what happens in the National Dialogue. With this in mind, the Bank is focusing on accelerating the implementation of our existing projects to generate jobs and restore basic services. We are also working with government to establish the Fast Track Bureau for accelerating the implementation of donor funded programs. The decree to establish the bureau has already been signed by the President and the government has initiated the selection process for the key staff to manage it. We hope this entity is up and running by the end of March.