世界银行-也门-将也门私营部门与世界连接起来 CONNECTING THE YEMENI PRIVATE SECTOR TO THE WORLD

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REPUBLICOFYEMEN

CONNECTINGTHEYEMENIPRIVATESECTORTOTHEWORLD

©2023TheInternationalBankforReconstructionandDevelopment/TheWorldBank

1818HStreetNW

Washington,DC20433

USA

Allrightsreserved.

ThisanalyticalworkisaproductofthestaffoftheWorldBank.Thefindings,interpretations,andconclusionsexpressedinthispaperdonotnecessarilyreflecttheviewsoftheExecutiveDirectorsoftheWorldBankorthegovernmentstheyrepresent.TheWorldBankdoesnotguaranteethe

accuracyofthedataincludedinthiswork.Theboundaries,colors,denominations,andother

informationshownonanymapinthisworkdoesnotimplyanyjudgementonthepartofthe

WorldBankconcerningthelegalstatusofanyterritoryortheendorsementofacceptanceofsuchboundaries.NothinghereinshallconstituteorbeconsideredtobelimitationuponorwaiveroftheprivilegesandimmunitiesoftheWorldBank,allofwhicharespecificallyreserved.

REPUBLICOFYEMEN

CONNECTINGTHEYEMENIPRIVATE

SECTORTOTHEWORLD

YEMENFUND

RESILENCE,RECOVERY

ANDRECONSTRUCTION

ukaid

fromtheBritishpeople

kingdomoftheNetherlands

Thisreportwasco-financedbytheYemenResilience,Recovery,andReconstructionTrustFund

(YemenFund),whichwasestablishedbytheWorldBankin2022asapooledfundingmechanismandapartnershipplatformtosupporttheRepublicofYemen’stransitionovera10-yearhorizon.

TheYemenFundissupportedbytheUnitedKingdom’sForeign,CommonwealthandDevelopmentOfficeandtheKingdomofTheNetherlands.Theteamwouldliketoexpresstheirgratitudeforthisimportantandtimelycontribution.

TableofContents

Acknowledgments7

AbbreviationsandAcronyms8

Chapter1.ExecutiveSummary11

CountryContext13

TheConflict’sImpactonthePrivateSector(StructuralConstraints)20

TheImpactoftheConflictonSelectedEconomicSectors27

ThePrivateSector’sResiliencyDespitetheConflict29

Chapter2.PolicyandRegulatoryConstraintstoInclusivePrivateSectorDevelopment

intheRepublicofYemen35

Cross-BorderTrade,Investment,andFinance35

BusinessEntry,PrivateSectorInclusion,andCompetition36

AccesstoFinance36

RegisteringLandOwnershipandExercisingPropertyRights37

e-Commerce,Government-to-BusinessServices,ande-Payment37

EnforcingContractsbetweenPrivateSector–OwnedBusinesses37

Women’sParticipationintheEconomy38

BusinessExit,Insolvency,andRestructuring38

theEntrepreneurshipEcosystem38

Chapter3.ReformRecommendations41

ImmediateRecommendationsattheSubnationalLevel41

Mid-TermPrioritiestoPreparethePrivateSectorfortheReconstructionPhase42

PolicyRecommendationstoPreparethePrivateSectorfortheReconstruction

andRecoveryPhase42

AppendixA.OverviewoftheFinancialSectorandItsImpactonthePrivateSector49

TheCentralBankofYemen49

CommercialBanks52

MoneyExchangers56

Remittances59

TradeFinancing61

4

DonorCountryFunding62

·

Microfinance64

·

ThePostOfficeSystem66

··

Conclusion67

AppendixB.ListofKeyInternationalConventionsandModelLawsthatWillReintegrate

theYemeniPrivateSectorintotheInternationalTrade,InvestmentandFinancialSystem68

References70

FIGURESANDTABLES

Figure1.1TheRepublicofYemen’sCorruptionPerceptions14

Figure1.2LostOpportunityCostinRealGDP(US$billions)2015–1915

Figure1.3TheRepublicofYemen’sHumanDevelopmentIndex15

Figure1.4TheRepublicofYemen’sGlobalCompetitivenessRanking(140/141in2019)16

Figure1.5TheRepublicofYemenEconomyTracker18

Figure1.6TheRepublicofYemen’sExportsin2020byShareProductCategory19

Figure1.7TheRepublicofYemen’sImportsin2020byShareofProductCategories20

Figure1.8TheRepublicofYemen’sBalanceofTrade(US$millions)21

Figure1.9TheRepublicofYemen’sAnnualGDP(US$Millions)21

Figure1.10TheRepublicofYemen’sAnnualGDPGrowth22

Figure1.11TheRepublicofYemen’sPopulationGrowth22

Figure1.12TheRepublicofYemen’sAnnualGDPPerCapita(US$)23

Figure1.13TheImpactofConflictandWaronKeyCommercialExports:Cumulative

Changein2020Comparedto201424

Figure1.14TheImpactofConflictonKeyCommercialImports:CumulativeChangein2020

Comparedto201424

Figure1.15CurrentAccountDeficits(US$millions)25

Figure1.16TheRepublicofYemen’sWorldBankDoingBusinesscountryranking26

Figure1.17TheRoleofthePrivateSectorinLimitingEconomicContractionduringtheWar

andConflict30

5

6

Table1.1FarmingProduceSelf-SufficiencyRate(AgriculturalandLivestock)in201830

Figure1.18GDPPublicandPrivateSharebySectorsin201833

FigureA.1ExpansionofCentralBankofYemen’sBalanceSheet

(2013throughNovember2022)50

FigureA.2ExpansionoftheCentralBankofYemen’sLoansandAdvancesPortfolio

(2013throughNovember2022)51

FigureA.3GrowthofBroadMoneySupply(M2)(2013throughNovember2022)51

FigureA.4CorrelationsofExchangeRatesandFoodStaplePricesinAden

(July2016–December2020)52

TableA.1BanksCurrentlyOperatingintheRepublicofYemen53

FigureA.5GrowthofCBY’sBankDeposits(2013throughNovember2022)54

FigureA.6GrowthofCBY’sForeignandDomesticReserves(2013throughSeptember2022)55

FigureA.7BeneficiariesofBankLoansandAdvances(2012throughSeptember2022)56

TableA.2TheProsandConsoftheFormalBankingSystemandtheHawalaNetworks57

TableA.3MajorMoneyExchangeCompaniesintheRepublicofYemen58

FigureA.8RemittancesandFuelExports(2014–23)60

FigureA.9SourceofRemittancestotheRepublicofYemenbyCountry61

FigureA.10TotalReportedFundingtotheRepublicofYemen(US$millions)62

FigureA.11TotalReportedFundingtotheRepublicofYemenbyDonorCountry

(2021US$millions)63

FigureA.12TotalReportedFundingtotheRepublicofYemenbySector(2021US$billions)63

TableA.4MicrofinanceInstitutionsintheRepublicofYemen64

FigureA.13OverviewofMicrofinanceBanksandInstitutionsintheRepublicofYemen65

FigureA.14OverviewofMicrofinanceBanksandInstitutions66

TableB.1UNConventionsandUNCITRALModelLaws68

7

Acknowledgments

ThisreportwaspreparedbyaWorldBankteamledbyDobromirChristow(SeniorEconomist,EMNF1),

withVladAntikarov(SeniorValueChainandFinancialSectorConsultant),StevenDimitriyev(SeniorPrivateSectorConsultant),MikeDennis(SeniorBusinessEnvironmentConsultant),MohamedBaider(Senior

PrivateSectorSpecialist,EMNF2),andMohamedAlabsi(Consultant),asleadwritersundertheleadershipandguidanceofDjibrillaAdamouIssa(PracticeManager,EMNF1).Thereportreceivedsignificant

contributionsfromOmarAl-Aqel(PrivateSectorSpecialist),BenjaminHerzberg(SeniorPrivateSector

Specialist),GianlucaMele(LeadCountryEconomist),SafaAlMoayad(PovertyConsultant),CarolineCerutti(SeniorFinancialSectorSpecialist),GhadaIsmail(FinancialSectorSpecialist),JeanMichelMarchat(Lead

Economist),EllenOlafsen(SeniorPrivateSectorSpecialist),MoneefSultan(IFCCountryOfficerRepublicofYemen),andJohnSpeakman(SeniorPrivateSectorConsultant).

Thereportbenefittedfromthematerialsandinputsprovidedbyprivatesectordevelopmentpractitioners

frominsideandoutsidetheWorldBankGroup,theYemeniprivatesector,academia,andbusiness

diasporaaroundtheworld.TheregulatoryreviewoftheRepublicofYemenprivatesectorpoliciesintrade,investment,andfinancewasconductedjointlywiththeUnitedNationsCommissionforInternationalTradeLaw(UNCITRAL),theUnitedNationsConferenceonTradeandDevelopment,theInternationalInstitutefortheUnificationofPrivateLaw(UNIDROIT),andtheWorldTradeOrganization,withspecialthankstoMonicaCanafoglia(UNCITRALSecretariat)andProfessorMaria-ChiaraMalaguti(PresidentofUNIDROIT).

TheteamisalsogratefulforthecontributionsofWaelMakki(OperationsOfficer,IFC),AnnaPecot

(Consultant,IFC),CarolineBahnson(SeniorOperationsOfficer,GTFS2),CarolineSergeant(Consultant,GTFS2),andTatianaLioneleWeber(SeniorOperationsOfficer,MNC03).

TheteamisespeciallythankfultotheUKForeign,CommonwealthandDevelopmentOffice—Yemen:LailaAnaam(EconomyandPrivateSectorDevelopmentAdvisor),VictoriaJames(Economist),andAlexanderPytka(HeadofEconomyandRecoveryTeam).

Thereports’authorswishtothanklocalinstitutionalpartnerswhohaveprovidedinputs,includingtheSocialDevelopmentFund,SmallandMicroEnterprisesPromotionServicesProgram,CentralBank

ofYemen,FederationofYemenChambersofCommerceandIndustry,YemenPrivateSectorCluster,EconomicReformTeam,YemenBusinessClub,YemenBankAssociation,PrivateHospitalUnion,

BusinesswomenCouncil,ContractorsUnion,YemenSeafoodExporterAssociation,YemenFoodBank,

YemenExchangersAssociation–Aden,AgricultureCooperativeUnion,GlobalEntrepreneurshipCouncil,Yemeni-AmericanBusinessDiasporaofNewYork,Michigan,andIllinois,UnitedStates,aswellasthe

individualfirmsandfinancialinstitutionsthatsharedtheirinsightsforthisreport.Datasourcesarereferencedthroughoutthereport.

Finally,theteamwishestothankNadirMohammed(RegionalDirector,EMNDR),MarinaWes(Country

Director,MNC03),TaniaMeyer(CountryManager,MNCYE),MarkEugeneAhern(LeadCountryEconomist,EMNDR),andtheentireMNC03WorldBankCountryManagementUnitfortheirsupportandguidancetotheauthorsofthereport,andallWorldBankteamswhocontributetotheprivatesectordevelopmentintheRepublicofYemen.

Acronym

Description

8

CBY

CentralBankofYemen

CISG

ConventiononContractsfortheInternationalSaleofGoods

DFA

defactoauthority

EU

EuropeanUnion

FDI

foreigndirectinvestment

GDP

grossdomesticproduct

ICT

informationandcommunicationtechnology

IEC

integratedeconomiccommunity

IFC

InternationalFinanceCorporation

IMF

InternationalMonetaryFund

INSOL

InternationalFederationofInsolvencyProfessionals

IRG

InternationallyRecognizedGovernmentoftheRepublicofYemen

LDC

least-developedcountry

LGA

localgovernmentauthority

MENA

MiddleEastandNorthAfrica

MFB

microfinancebank

MFI

microfinanceinstitution

MLETR

ModelLawonElectronicTransferrableRecords

MSME

micro,small,andmediumenterprise

NGO

nongovernmentalorganization

OECD

OrganisationforEconomicCo-operationandDevelopment

SFD

SocialFundforDevelopment

SMEPS

SmallandMicroEnterprisePromotionService

UNCITRAL

UnitedNationsCommissiononInternationalTradeLaw

9

UNDP

UnitedNationsDevelopmentProgram

UNIDROIT

InternationalInstitutefortheUnificationofPrivateLaw

WTO

WorldTradeOrganization

10

11

Chapter1.

ExecutiveSummary

INTRODUCTION

ThisPrivateSectorAssessmentReportontheRepublicofYemenisdeliveredaspartof

thePrivateSectorTechnicalAssistanceproject.1Thegoaloftheprojectistounderstandthedynamicsofthecountry’sprivatesectorduringconflict;identifyconstraintstotrade,investment,andfinance;andproposerecommendationsforinclusiveprivatesectorentry,survival,andgrowth.

Thereportalsoincludesanoverviewofthefinancialsector’simpactontheprivatesector,especiallyonthelatter’sresilienceduringconflict.Finally,thereportprovidesstructural

andpolicyrecommendationsthat,onceimplementedbytheauthoritiesonbothnationalandsubnationallevels,wouldpreparetheYemeniprivatesectortoparticipateinthe

country’spost-conflictrecoveryandreconstruction.Mostoftherecommendationsfocusonsubnationalactivities,hencetheirimplementationcouldstartimmediately,whilethe

conflictisstillongoing.Therefore,thisreportadvocatesthatinthecaseoftheRepublicofYemen,theclassicreformsequencingfromconflict-affectedcountries—peacetorecoverytodevelopment—couldbetriggeredinparallel,wherebysubnationalreformswould

contributetothepeacegoal(NoumbaUm2023).

Thisreportgrowsfrompublic-privatedialogue,regulatoryreview,andpolicydialogue

withactiveprivate-sectorinputs.ItpresentsaframeworkthroughwhichtheYemeni

authoritiesandtheinternationalcommunityshouldconsiderfinancial,structural,andpolicyinterventionstosupporttheRepublicofYemen’sprivatesectorreintegrationintothe

globaltrade,investment,andfinancialsystem.Itwillalsoaddresslong-standingbarrierstoinclusiveprivatesectorgrowth,especiallyforsmallandmediumenterprises,aswellaswomen-andyouth-ledbusinesses.

Inadditiontorecommendingdirectfinancialsupporttosuchkeysectorsassocial

protection,foodsecurity,energy,agriculture,andtransport,thereportidentifiespolicy

andregulatoryreformsthatwillimmediatelyelevatethestatusoftheYemeniprivateandfinancialsectorplayersasthebackboneoftheYemenieconomy.Ittherebyprepares

themforopportunitiesduringtherebuildingphase.Italsoidentifiesmeasurestoaddressstructuralandregulatoryproblems.Thisknowledgewillhelppreparethethreedistinct

segmentsoftheRepublicofYemen’sprivatesectorforinclusioninthereconstruction

phase:thelargeformalcompanies;the95percentinformalmicro,small,andmedium

enterprises(MSMEs);andthesizeableYemeniprivatesectordiasporaaroundtheworld.

1TheprojectnumberisP177361.

12

Thereportalsoproposesmeasurestoaddresslong-delayedreformsthat,beforetheconflict,

historicallyhinderedtheRepublicofYemen’sprivatesectordevelopmentandcontributedtothe

country’sdevelopmentasacasheconomywithsignificanteconomicandfinancialinclusiongaps.

Theexclusion,marginalization,andinformalitywithinhugepartsoftheprivatesectorareparticularlysevereintheRepublicofYemen,whereonly5percentofthepopulationandfirmsarebankedandregistered,andonly1percentofwomenhavebankaccounts.

Furthermore,thisreportexploresindepththeimpactoftheconflictontheentireYemenieconomy,withaparticularfocusontheprivateandfinancialsectors.Theconflict’simpactonimportsand

exports,markets,investmentclimate,businessenvironment,andfirmcapabilitiesamongkeysectorsisexploredinchapter2.Chapter3proposesreformrecommendationstoaddressstructuraland

policyconstraints.Onthepolicyrecommendationside,theemphasisisonreformsthatwillpreparelargefirmsfromtheYemeniprivatesectortofullyintegrateintotheinternationaltrade,investment,andfinancialsystemsandallowfortheirfullparticipationintherecoveryandreconstruction

phase.Atthesametime,thereformrecommendationsadvocateforgreatereconomicand

financialinclusionofthevastmajorityofinformal,unbanked,andexcludedsmallerprivatesector

players—MSMEsandwomen-andyouth-led(micro)firms.Consideringthefinancialcostofpolicy

andregulatoryreforms,thereportemphasizescost-freepolicyreforms—ratifyingandadopting

internationalagreements,conventions,andmodellawsthatdonotrequireanyfundingfromthe

internationallyrecognizedgovernment(IRG)oftheRepublicofYemenordonorsbutwouldprovidetremendousopportunitiesfortheYemeniprivatesector.These,inturn,wouldtriggermoretechnicalassistanceandcapacitybuildingfromtheUnitedNations,theInternationalMonetaryFund(IMF),theWorldTradeOrganization(WTO),theWorldBankandotherdevelopmentfinancialinstitutions.

ConsideringthedirectimpactofthefinancialsectorontheprivatesectoroftheRepublicofYemen,appendixAofthereportprovidesthefirstcomprehensivefinancialsectoroverviewoftheRepublicofYemensincetheconflictandproposesspecificreformactions.Thisfoundationalfinancial

sectorworkwillbeusedasabasisandanalyticalunderpinningforafollow-onfullfinancialsectorassessmentoftheRepublicofYemenduringtheconflict,whichwillbedeliveredundertheYemenCentralBanktechnicalassistanceeffortledbytheWorldBank.

Asanoutputofathoroughregulatoryreview,appendixBofthereportproposesacomprehensivelistofkeyprivate-sectorUNCITRALinstrumentsforadoptionbytheYemeniauthorities.These

internationalconventions,agreements,andmodellawswillimmediatelyallowthereintegration

oftheYemeniprivatesectorintotheglobaltrade,investment,andfinancialsystem.Thisisaveryhighpriorityconsideringthat90percentofthefoodandessentialcommoditiesareimported.Thelackofbasiclegalframeworkspreventsquickandreliablefoodimports,payments,andmovementofgoodsandcapitalasitincreasesthetimeandcostofdelivery,whichiseventuallybornebytheYemenipopulation.

13

Consideringthefragmentationofreliablegovernmentdata,thelackofWorldBankpresenceontheground,andtheoveralldifficultiesofdatagatheringinhighlyinformaleconomiesliketheRepublicofYemen,theteamhasinvokedandenlistedinnovativedata-gatheringsources,includingfromprivatesectorassociationsontheground,semigovernmentYemeniauthorities,andtheYemenidiaspora.Ithasalsoengagedwithabroadrangeofdevelopingpartners,includingtheYemeninationalsworkingfortheWorldBank,IMF,andtheInternationalFinanceCorporation.Ontheregulatoryreviewside,

theprojecthasconducteddata-gatheringexerciseswithkeyinternationalplayersinprivatesector

regulations,suchastheUNCommissionforInternationalTradeLaw(UNCITRAL),theUNConferenceonTradeandDevelopment(UNCTAD),theInternationalInstitutefortheUnificationofPrivateLaw

(UNIDROIT),andtheWTO.

Thereport’sstorylineiscenteredaroundthefollowingkeysections:

lTheuniquenessoftheYemeniprivatesectorcontextbeforeandduringtheconflict

lAssessmentoftheconflict’simpactontheprivatesectorbycomparativelyanalyzingkey

indicatorsbeforeandaftertheconflict—economywideandforspecifickeysectors

lIdentificationofkeystructuralandpolicyconstraintsforinclusiveprivatesectorgrowthandreformstosupporttheresilienceoftheprivatesector

lListofimmediatereformactionstopreparetheYemeniprivatesectorforthereconstruction

phasebyaddressingmajorregulatorybarriersintrade,finance,andinvestmentthatimpedethewholeprivatesectorintheRepublicofYemen—fromthebiggesttothesmallestplayers.

COUNTRYCONTEXT

TheRepublicofYemenisatthesouthernendoftheArabianPeninsula.ItshareslandborderswithSaudiArabiatotheNorthandOmantothenortheast,andmaritimeborderswithEritrea,Djibouti,andSomalia.Thecountry’spopulationofmorethan30millioncoversanareaof555,000squarekilometers(214,000squaremiles)withacoastlinestretchingabout2,000kilometers(1,200miles).

Today,theRepublicofYemenisoneoftheworld’spoorestandmostfragilecountries.Itranked

highestonthe2020FragileStateIndex,thesecondlowestontheGlobalHungerIndex,and

thelowestontheHumanDevelopmentIndex(UNDP2022).Inaddition,overseveralyears,the

countryhasrecordedadireperformanceindevelopmentindicatorssuchascorruption(figure1.1),economiccompetitiveness,inclusion(particularlyalonggenderlines),andthequalityofitsbusinessenvironmentandinvestmentclimate(TransparencyInternationaln.d.).

14

Figure1.1

TheRepublicofYemen’sCorruptionPerceptions

177

178

175

176

174

167

170

161

156

154

201220142016201820202022

Source:

T

,TransparencyInternational.

180

175

170

165

160

155

150

Followingthe1990unificationofNorthandSouthYemen,thecountryhasfunctionedasa

complex,multilayeredsocietywithpredominantlyinformaleconomicbehaviorsandhierarchies.Thiscontextfavorstraditional,tribalallegiancesandinstitutionsofgovernance,especiallyinthevastruralareas.Inparallel,urbanelitesandpocketsofcivilstructurescarrytherestofthesocietytogreatermodernizationintermsofaccesstoformaleducation,betterinfrastructure,andmorecosmopolitaninfluences.

Since2011,theRepublicofYemenhasbeeninastateofpoliticalcrisis,whichculminatedinaconflictthatstartedin2014.Theconflict’skeyplayersmirrorthecountry’sgeopoliticalcontrast.First,the

northernhighlands-basedsocio