Document of
The World Bank
FOR OFFICIAL USE ONLY
Report No: 73677 – YE
PROJECT APPRAISAL DOCUMENT
ON A
PROPOSED GRANT
IN THE AMOUNT OF US$3.72 MILLION
FROM THE MIDDLE EAST AND NORTH AFRICA TRANSITION FUND
TO THE
REPUBLIC OF YEMEN
FOR AN
ENTERPRISE REVITALIZATION AND EMPLOYMENT PILOT PROJECT
June 4, 2013
Finance and Private Sector Development Group
Middle East and North Africa Region
This document has a restricted distribution and may be used by recipients only in the
performance of their official duties. Its contents may not otherwise be disclosed without World
Bank authorization.
CURRENCY EQUIVALENTS
(Exchange Rate Effective May 29, 2013)
Currency Unit
YR 215.00
=
=
Yemeni Rial (YR)
US$1
FISCAL YEAR
January 1
–
December 31
BDP
BDS
CSO
DB
EOF
EPA
EU
GIZ
GNR
GoY
IEG
IFAD
IFC
IFRs
ISDB
ISN
ISO
M&E
MAF
MENA
MFIs
MIS
MOPIC
MTVET
OFID
PDO
PSD
SEDF
SEZ
SFD
SME
SMED
SMEPS
SNACC
TA
TEVT
TPSD
UNDP
WBG
ABBREVIATIONS AND ACRONYMS
Business Development Plan
Business Development Services
Civil Society Organizations
Doing Business
Economic Opportunities Fund
Environmental Protection Agency
European Union
Deutsche Gesellschaft für Internationale Zusammenarbeit
Government of National Reconciliation
Government of Yemen
Independent Evaluation Group
International Fund for Agricultural Development
International Finance Corporation
Interim Financial Reports
Islamic Development Bank
Interim Strategy Note
International Organization for Standardization
Monitoring and Evaluation
Mutual Accountability Framework
Middle East and North Africa
Microfinance Institutions
Management Information System
Ministry of Planning and International Cooperation
Ministry of Technical and Vocational Education and Training
OPEC Fund for International Development
Project Development Objectives
Private Sector Development
Small Enterprise Development Fund
Special Economic Zones
Social Fund for Development
Small and Medium Enterprise
Small and Micro Enterprise Department
Small and Micro Enterprise Promotion Service
Supreme National Authority for Combating Corruption
Technical Assistance
Technical Education and Vocational Training
Transitional Plan for Security and Development
United Nations Development Programme
World Bank Group
Regional Vice President:
Country Director:
Sector Director:
Sector Manager:
Task Team Leader:
Inger Andersen
Hartwig Schafer
Loic Chiquier
Simon C. Bell
Nabila Assaf
YEMEN
Enterprise Revitalization and Employment Pilot (EREP) Project
TABLE OF CONTENTS
I.
Page
STRATEGIC CONTEXT .................................................................................................1
A. Country Context ............................................................................................................ 1
B. Sectoral and Institutional Context ................................................................................. 2
C. Higher Level Objectives to which the Project Contributes .......................................... 6
II.
PROJECT DEVELOPMENT OBJECTIVES ................................................................7
A. Project Development Objective (PDO) ........................................................................ 7
Project Beneficiaries ........................................................................................................... 8
III.
PROJECT DESCRIPTION ..............................................................................................9
A. Project Financing ........................................................................................................ 10
Lending Instrument ........................................................................................................... 10
Project Cost and Financing ............................................................................................... 11
B. Lessons Learned and Reflected in the Project Design ................................................ 11
IV.
IMPLEMENTATION .....................................................................................................13
A. Institutional and Implementation Arrangements ........................................................ 13
B. Results Monitoring and Evaluation ............................................................................ 16
C. Sustainability............................................................................................................... 16
V.
KEY RISKS AND MITIGATION MEASURES ..........................................................17
A. Risk Ratings Summary Table ..................................................................................... 17
B. Overall Risk Rating Explanation ................................................................................ 17
VI.
APPRAISAL SUMMARY ..............................................................................................17
A.
B.
C.
D.
E.
F.
Economic and Financial Analyses .............................................................................. 17
Technical ..................................................................................................................... 18
Financial Management ................................................................................................ 19
Procurement ................................................................................................................ 20
Social (including Safeguards) ..................................................................................... 21
Environment (including Safeguards) .......................................................................... 21
Annex 1A: Results Framework and Monitoring ............................................................................22
Annex 1B: Beneficiary Profile and Performance ..........................................................................24
Annex 2: Detailed Project Description ..........................................................................................25
Annex 3: Implementation Arrangements .......................................................................................30
Annex 4: Operational Risk Assessment Framework (ORAF) .......................................................48
Annex 5: Implementation Support Plan.........................................................................................52
Annex 6: Country At-A-Glance .....................................................................................................54
MAP
PAD DATA SHEET
Yemen
Enterprise Revitalization and Employment Pilot Project
PROJECT APPRAISAL DOCUMENT
Middle East & North Africa
Financial and Private Sector Development
Basic Information
Date:
June 4, 2013
Sectors:
Private Sector Development (100%)
Country Director:
Hartwig Schaefer
Themes:
Private Sector Development, Micro and
Small
Finance, Market Access, Innovation
EA Category:
C
Sector Manager/Director: Simon C. Bell/ Loic Chiquier
Project ID:
P143715
Lending Instrument:
Investment Project Financing
Team Leader(s):
Nabila Assaf
Joint IFC:
Recipient: Republic of Yemen – Ministry of Planning and International Cooperation (MOPIC)
Responsible Agency: The Small and Micro Enterprise Promotion Service (SMEPS)
Contact:
Wesam Qaid
Title:
Telephone No.: +967 1 450910/11-205
Executive Director
Email: wqaid@smeps.org
Project Implementation Period:
Start Date: June 4, 2013
Expected Effectiveness Date:
June 16, 2013
Expected Closing Date:
December 31, 2015
End
Date:
July 1, 2015
Project Financing Data(US$M)
[ ]
Loan
[ ]
Grant
[ ]
Credit
[ ]
Guarantee
[ X ] Other (Trust Fund Grant)
For Loans/Credits/Others
Total Project Cost (US$M) : 4.15 million
Total Bank
Financing :
Total Cofinancing (US$M) : 4.15 million
Financing Gap :
i
Financing Source
Amount(US$M)
BORROWER/RECIPIENT
IBRD
IDA: New
IDA: Recommitted
Others
3.72
Bank-Executed TF
0.43
Financing Gap
Total
4.15
Expected Disbursements (in USD Million)
Fiscal Year
2014
2015
2016
Annual
1.50
1.80
0.42
Cumulative
1.50
3.30
3.72
Project Development Objective(s)
The objective of the Project is to improve individual employability of college and university graduates and to improve the
business capabilities of enterprises participating in the Project
Components
Component Name
Cost (USD Millions)
Component 1: SME Internship and Upgrading Program
3.72
Component 2: Bank-Executed activities: Impact Evaluation, Technical Assistance,
and Support
0.43
Compliance
Policy
Does the project depart from the CAS in content or in other significant respects?
Yes
[ ] No
Does the project require any waivers of Bank policies?
Yes
[ ]
No
[X]
Have these been approved by Bank management?
Yes
[ ]
No
[ ]
Is approval for any policy waiver sought from the Board?
Yes
[ ]
No
[X]
Does the project meet the Regional criteria for readiness for implementation?
Yes
[X]
No
[ ]
Safeguard Policies Triggered by the Project
Yes
No
Environmental Assessment OP/BP 4.01
X
Natural Habitats OP/BP 4.04
X
Forests OP/BP 4.36
X
ii
[X ]
Pest Management OP 4.09
X
Physical Cultural Resources OP/BP 4.11
X
Indigenous Peoples OP/BP 4.10
X
Involuntary Resettlement OP/BP 4.12
X
Safety of Dams OP/BP 4.37
X
Projects on International Waterways OP/BP 7.50
X
Projects in Disputed Areas OP/BP 7.60
X
Legal Covenants
Name
Recurrent
Due Date
Frequency
Description of Covenant
Team Composition
Bank Staff
Name
Title
Specialization
Nabila Assaf (TTL)
Senior Private Sector Development Specialist
Private Sector Development
Sara Al Rowais
Private Sector Development Specialist
Private Sector Development
Amir Althibah
Economist
Macroeconomics
Moad Alrubaidi
Financial Management Specialist
Financial Management
Samira Al Harithi
Procurement Specialist
Procurement
Alaa Sarhan
Environmental Specialist
Environmental Safeguards
Concepcion Esperanza Del Castillo
Social Specialist
Social Safeguards
Hassine Hedda
Finance Officer
Loan Accounting
Steve Wan
Operations Analyst
Operations
Suzanne Parris
Program Assistant
Program Assistant
Nikolai Soubbotin
Lead Counsel
Legal
David Mckenzie
Lead Economist
Impact Evaluation
Mira Hong
Operations Officer
Social Protection
Non Bank Staff
Name
Title
Sami Soufan
Short-term Consultant
Office
Phone
iii
City
I.
STRATEGIC CONTEXT
A. Country Context
1.
The complex challenges facing Yemen today must also be understood in the context
of Yemen’s broader economic and social context and the effects of the recent crisis on
social and economic conditions. A contraction of economic activity, due to the crisis, affected
all sectors of the economy and continues to do so. Since 2011, the economy has contracted by
almost 11 percent, and the number of people living below the poverty line increased by an
estimated 12 percentage points in two years.1 Even prior to this latest crisis, Yemen was already
one of the poorest countries in the world. The country has a GDP per capita of US$1,160 (2010)
compared with an average US$2,321 for lower middle-income countries and US$3,597 for the
Middle East and North Africa (MENA) region. The population living below the national poverty
line was 35 percent in 2005/2006, increasing to 54.5 percent by the end of 2011 with poverty
more widespread and persistent in rural areas.2 On the United National Development Programme
Human Development Index, Yemen ranked 154th out of 187 countries in 2011.3 On the other
hand, indicators have improved over the past few decades. The report shows that average life
expectancy is up from 41.6 years in 1970 to 62.7 in 2010. Enrollment rates in basic education
have increased significantly (up from 68 percent to 76 percent from 1999-2011), and enrollment
in technical education and vocational training (TEVT) has increased 15 times from 2000-2009.
While there have been gains over the years, women’s inclusion in development gains is an acute
challenge in Yemen. Female literacy rates stood at only 44 percent in 2006, but that was almost
double the level of ten years earlier. Maternal mortality stood at 210 per 100,000 births in 2009,
the highest in the region, but that is down 38 percent since 2000. Women’s economic
participation has not progressed as well; at 21 percent female labor force participation is among
the lowest in the world and women’s participation in business is even more limited.4
2.
Despite the serious and complex challenges facing Yemen today, the Government of
National Reconciliation (GNR) has an opportunity to start addressing the underlying factors of
instability and social strife to rebuild Yemen’s social and economic base and restore
macroeconomic stability. Regional and international partners have pledged their support to help
Yemen to overcome the short term social and economic impact of the crisis and sustain
development. At the donor conference in Riyadh in September, 2012, the international
community committed to support Yemen in its recovery. Donor countries and agencies
(Kingdom of Saudi Arabia, United States of America, Germany, United Kingdom, Netherlands,
Switzerland, France, Spain, Arab Fund, Arab Monetary Fund (AMF), World Bank, European
Union (EU), Islamic Development Bank (ISDB), OPEC Fund for International Development
(OFID), and International Fund for Agricultural Development (IFAD)) pledged US$6.372 billion
towards the priorities of the Transitional Plan for Security and Development (TPSD). The
subsequent Mutual Accountability Framework (MAF) committed both the GNR and donors to a
set of specific actions towards recovery and growth.
1
Joint Social and Economic Assessment, World Bank, UN, EU, Islamic Development Bank, and MOPIC, 2012.
Ibid.
3
Human Development Report, UNDP, 2011.
4
Micro and Small Enterprise Baseline Survey – Yemen: Final report of a nation-wide baseline survey among micro
and small business enterprises (MSEs) in Yemen, Social Fund for Development, prepared by NEI Macro and Sector
Policies, 2000.
2
1
3.
In October, 2012, Yemen joined the Deauville Partnership with Arab Countries in
Transition, in which G-8 countries, regional partners, and international financial institutions
committed to working in partnership with countries undergoing historic political and social
transitions in MENA.5 At the October 2012 meeting in Tokyo, the Partnership launched a new
Transition Fund to provide Partnership countries with technical assistance to undertake policy
reforms to build more inclusive and transparent economies, boost trade and integration of the
region, and enhance the environment for private sector growth.6
4.
Key among the objectives, actions, and commitments made in Riyadh, the subsequent
MAF, and the Deauville Partnership Transition Fund are those related to private sector
development and job creation, particularly for youth and through Small and Medium Enterprises
(SME). This pilot project proposes to create such a program for SME revitalization and
employment that can inform public policies for job creation and SME development.
B. Sectoral and Institutional Context
5.
Private Sector Development can be a vital tool in conflict-affected environments. In the
World Bank’s 2011 World Development Report on Conflict, Fragility and Development (WDR)
and elsewhere, it is now recognized that low GDP per capita and unemployment are major
drivers of conflict. This is supported by survey data cited in the WDR: Asked for the reasons
why young people join rebel groups or gangs, the biggest share of respondents indicated
unemployment as the main reason. The report concludes that the path to longer-term
development and peace "is dependent on a healthy private sector". 7 Private Sector Development
(PSD) is therefore crucial, "especially if creating jobs and incomes is to out-last donor-funded,
short-term emergency works." Since in Yemen, as in many other developing countries, the
private sector consists predominantly of micro, small, and medium enterprises, this places their
competitiveness and growth at the top of the development agenda in fragile and conflict
situations.
6.
In addition to these typical challenges, private enterprises in Yemen face a particularly
difficult business environment and the need to overcome the impacts of the 2011 crisis on their
businesses with limited resources. Overcoming these combined factors will require an
intervention that can address both the short-term challenges of revitalizing businesses after the
2011 crisis and the challenge of competitiveness and growth in the longer term. The 2011 World
Development Report on Conflict, Fragility and Development emphasizes the importance of early
results and confidence building measures that promote jobs and business confidence, including
5
Countries in the Partnership currently include the Partnership countries (Egypt, Tunisia, Jordan, Morocco, Libya,
[and Yemen]), the G‐8, Saudi Arabia, the United Arab Emirates, Kuwait, Qatar, and Turkey. The International
Financial Institutions include the African Development Bank, the Arab Fund for Economic and Social Development,
the Arab Monetary Fund, the European Bank for Reconstruction and Development, the European Investment Bank,
the Islamic Development Bank, the International Finance Corporation, the International Monetary Fund, the OPEC
Fund for International Development, and the World Bank. The Organization for Economic Cooperation and
Development is also a Partnership member.
6
The United States, United Kingdom, Saudi Arabia, Canada, Japan, France, Kuwait, Russia, and Qatar all
announced their proposed contributions, totaling about $165 million towards a goal of $250 million over several
years.
7
World Development Report: Conflict, Security, and Development, World Bank, 2011.
2
initiatives for private sector recovery. The WDR takes note of approaches that have been found
effective in fragile and conflict situations, including matching grant facilities for new market
development that exploit the private sector’s capacity to innovate and help entrepreneurs develop
new product lines while sharing the risk of investment, and value chain approaches that address
breakdowns in business and market linkages.8
7.
Yemeni private enterprises demonstrate relatively low productivity and innovation,
the underpinnings of competitiveness. Total factor productivity in Yemen is the lowest among
several comparator countries in the region (including Lebanon, Egypt, Saudi Arabia, and Syria). 9
Only a minority of small enterprises demonstrate uptake of technology, innovation, or best
practices, the very types of activities that tend to be correlated with higher growth SMEs and
competitiveness.10 According to the 2011 Yemen Investment Climate Assessment (ICA) update:
only three percent of surveyed firms have International Organization for Standardization (ISO)
quality system certification, 22 percent developed a new product line, 33 percent upgraded an
existing product line, 13 percent obtained a new licensing agreement, and 9 percent provided
formal training to employees. This is in contrast to medium and large enterprises, which had
significantly higher rates of uptake of these activities across the board. The use of these services
by microenterprises is expected to be even more limited.11 However, a micro and small
enterprise baseline study in 2000 showed a significant interest among such firms for advisory
services on marketing and investment plans.12
8.
Micro and small enterprises are particularly important in Yemen since the vast majority
of private firms have less than five workers (88 percent). Of the remainder, about 4.7 percent
(19,000 enterprises) had less than 10 workers, 3.5 percent (14,000 enterprises) had more, and the
remainder was unspecified.13 These smaller firms tend to face even greater challenges in
improving competitiveness, largely due to more limited resources and information.
9.
And yet, there are rich opportunities for gains in enterprise performance that would lead
to growth and improved competitiveness. Increasing the penetration of foreign licenses, quality
systems and certification, good management and marketing practices, and export activities can
increase firm level productivity and provide a demonstration effect that can improve Yemeni
private enterprise competitiveness overall in the medium term. There are also distinct sector and
cluster-based opportunities. For example, value chain analysis and programs offered to the coffee
industry showed that farmers and traders lack information on lucrative final market opportunities
and requirements. It was also found that consistent systems for quality grading, certification, and
traceability are lacking; as is origin-based branding. In the fisheries sector, there is a need for a
regulatory framework to safeguard the fish population, and to build awareness of consumer
8
Ibid
Yemen Investment Climate Assessment Update, World Bank 2011
10
SME Innovators and Gazelles in MENA – Educate, Train, Certify, Compete!, MENA Knowledge and Learning
Quick Note Series, Andrew Stone and Lina Tarek Badawy, September 2011, No. 43.
11
Throughout this report, the Yemen 2011 ICA update definitions of firm size will be used: (1-4) = micro, (519)=small, (20-99)=medium, and (100+) = large.
12
Micro and Small Enterprise Baseline Survey – Yemen: Final report of a nation-wide baseline survey among micro
and small business enterprises (MSEs) in Yemen, Social Fund for Development, prepared by NEI Macro and Sector
Policies, 2000.
13
Establishments Census, Yemen Central Statistics Office, 2004.
9
3
expectations and support product differentiation. In the honey sub-sector of agro-business,
surveys show that consumers lack confidence in honey quality and reflect the need to build
quality systems, as well as improve packaging, export certificate facilitation and wholesaler
marketing and promotion.14
Table 1: Percent of Yemeni enterprises evaluating constraints
as “major” or “very severe”
Top Constraints in 2010 and 2012 Enterprise Surveys
2010 Investment Climate
2012 Rapid Assessment of Effects of
Assessment (ICA)
Crisis
Corruption (74%)
Electricity (83%)
Electricity (61%)
Macroeconomic Uncertainty (82%)
Access to Land (57%)
Political Instability (78%)
Political Instability (56%)
Corruption (77%)
Regulatory Policy Uncertainty (50%) Transport (61%)
Courts (45%)
Crime, Theft, and Disorder (54%)
Tax Rates (44%)
Price of Land (53%)
Source: MENA Knowledge and Learning Quick Note Series: The Plight of Yemeni Private Enterprises since the
2011 Crisis: A Rapid Assessment. Andrew Stone, Lina Badawy, Nabila Assaf. September 2012 – No. 72.
10.
However, the business environment in Yemen is increasingly challenging and not
conducive to investment. Even prior to the 2011 crisis, Yemen faced mounting challenges in
moving toward diversified, private sector-led economic growth. Yemeni enterprises have
consistently identified corruption as a leading constraint to private enterprise activity and growth,
and increasingly reported electricity, access to land, political instability, and regulatory policy
uncertainty as other key constraints.15 Corruption has been reported as the leading constraint
across firm size, ownership, and sector. These challenges continued through the 2011 crisis, as
reported in a rapid assessment of the effects of the crisis on private enterprises.16 The assessment,
which was undertaken in June 2012 of 200 enterprises in six urban centers, showed that the
negative effects were widespread and felt more acutely among smaller enterprises. Sales,
exports, employment and access to input and markets were all affected. On employment, the
developmental bottom line, over 40 percent of small enterprises reported having decreased
employment by 40 percent between December 2010 and June 2012. The latest Doing Business
(DB) indicators also provide evidence of the deterioration in the business climate. Yemen’s
overall DB rank fell from 101 to 118 last year, with the most severe deterioration in the rankings
on getting electricity, starting a business, and dealing with construction permits.
Institutions
11.
The Small and Micro Enterprise Promotion Service (SMEPS), a subsidiary of the Social
Fund for Development (SFD), facilitates business training services to businesses and
“Analysis of 5 Value Chains in Yemen” by the Yemen Small Micro Enterprise Promotion Service (SMEPS) and
Royal Tropical Institute (KIT) of the Netherlands, July 2009.
15
Yemen Investment Climate Assessment Update, World Bank 2011
16
MENA Knowledge and Learning Quick Note Series: The Plight of Yemeni Private Enterprises since the 2011
Crisis: A Rapid Assessment. Andrew Stone, Lina Badawy, Nabila Assaf. September 2012 – No. 72.
14
4
entrepreneurs, including services tailored to youth and women, reaching so far over 34,200 micro
and small enterprises. They also conduct value chain studies and activities with Dutch support
that have promoted innovation in key sectors, including fisheries, coffee, and horticulture. For
example, in the coffee sector, SMEPS has been working to introduce international standards to
local coffee growers and organized the Arabica Naturals International Conference in Sana’a with
participants from the global coffee market from 27 different countries.
12.
On the financing side, the Small Enterprise Development Fund (SEDF), a government
fund affiliated with the Ministry of Industry and Trade, provides finance to small enterprises as
its primary mandate. The Small and Micro Enterprise Development (SMED) department in the
SFD is the de-facto apex institution for microfinance in Yemen and supports Micro Finance
Institutions (MFIs) through the provision of loans for on-lending and through the provision of
grants for capacity and institution building. While most of SMED’s partners engage in
subsistence microfinance, targeting the low end of the market, some target the high-end of the
microfinance market as well as small businesses. In addition, the EU is currently about to launch
a Euro 8.5 million small finance project in the Yemeni market.
13.
Donors active in financial and private sector development are in various stages of reexamining their strategies and planned projects. Several donors currently provide assistance for
financial and private sector development, with a number of donors funding SFD activities,
including SFD’s micro and small finance, services, training activities, and some targeted value
chain work. However, a large number of these activities have come to a close, have been
discontinued, or are under re-examination at this time with new initiatives emerging. Throughout
2012, the World Bank has conducted a series of consultations with donors active in private sector
development to coordinate efforts and better identify the Bank’s value added in this sector. A
brief summary of current donor activities is provided below:
Table 2: Key Programs in Private Sector Development in Yemen
Country/Agency/
Program Name
Economic
Opportunities Fund
(IFAD/ EU, ISDB)
European Union
GIZ (Deutsche
Gesellschaft für
Internationale
Zusammenarbeit)
Arab Fund
Netherlands
Ministry of Foreign
Affairs
Program Description
The Economic Opportunities Program (EOP) has begun providing support to rural
enterprises by funding cluster-level infrastructure and services, establishment of
Producers Associations, and provision of business services to producers and their
associations. The EOF also funds a Fisheries Project.
The EU has nearly concluded a call for proposals to provide a line of credit and
technical assistance for small finance (scaling up from microfinance) in the
amount of Euro 8.5 million.
GIZ will launch the next phase of its private sector project (Euro 3 million with
additional Euro 3.5 million likely within the next 2-3 years) in April 2013 with a
focus on technical assistance for value chain development and business
development services, as well as support for local public-private dialogue. GIZ
also plans to continue to support the Ministry of Technical and Vocational
Education and Training (MTVET).
The Arab Fund has financed a US$10 million line of credit for micro and small
finance through SFD.
The Dutch have introduced a Private Sector Investment (PSI) program which
provides matching equity investments for joint domestic-foreign investments in
the productive sectors. The assistance is contingent on having a Dutch partner and
5
IFC (International
Finance
Corporation)
UNDP
Islamic
Development Bank
provides Euro 6 million for investments in eight MENA countries.
IFC’s main areas of focus during this transition period include plans to provide
direct technical assistance to Al-Amal microfinance bank for upgrading to small
finance, with possible interest in taking an equity position, and a broader TA
program with Al-Kuraimy microfinance bank. They are also working on some
parts of their previous regulatory reform agenda, primarily the Public-Private
Partnership (PPP) regulation.
UNDP is preparing a large scale youth economic empowerment project. A needs
assessment is currently planned and the project would aim to provide training and
job placement to 4,000 youth with an estimated budget of US$2 million.
The Islamic Development Bank has provided a US$4 million loan to SMEPS for
the development of value chain studies and initiatives.
Source: World Bank staff interviews with donors and implementing agencies.
14.
The World Bank has undertaken significant analytical and technical assistance work in
the financial and private sector in Yemen, including the World Bank’s investment climate
assessments, the World Bank’s 2012 Rapid Assessment of the impacts of the 2011 crisis on
private enterprises, the Doing Business reports and studies of the micro and small finance
market, and technical assistance on the financial sector and business climate.17 These products
have diagnosed the limitations of the business environment and the factors contributing to the
low competitiveness of the Yemeni private sector. Work undertaken by the Yemeni institutions
SMEPS and SFD, as well as recent interventions by IFAD, IFC, and GIZ have begun to respond
to micro-enterprise and SME needs but are far from meeting them. Building on the World
Bank’s analytical foundation, partnerships with active stakeholders already on the ground, and
the Bank’s successes in market-based approaches in Tunisia and the West Bank & Gaza among
others, the World Bank is now well positioned to pilot a market-based mechanism to catalyze
new market and product development towards higher competitiveness, productivity, and job
growth among private enterprises.
C. Higher Level Objectives to which the Project Contributes
15.
The recently released Transitional Program for Stability and Development (TPSD)
of the GNR lays out two main national priorities addressing the political and economic
transition for the next two years: i) political and security stability and state building, and ii)
socio-economic recovery. Under the latter priority, one of the focus areas is economic recovery
which comprises an agenda for private sector recovery and growth including jobs, revival of the
productive sectors, public-private partnership, and enhancement of the investment environment.
16.
The national priority of economic revival and growth through the private sector will
need to focus to a large extent on micro, small, and medium enterprises, particularly in the
short term. The Yemeni economy is comprised primarily of micro and small enterprises.
Medium and especially large enterprises are few, with a heavy presence of state-owned
17
Prior to 2011, much of the private sector development work in Yemen was informed by donor programs focused
on the regulatory environment including microfinance regulation, credit registry, tax law, private public dialogue,
and other related regulatory issues. Microfinance regulation is perhaps the greatest success among these, with
Yemen having passed laws and regulations to allow the functioning of commercial, deposit taking microfinance
banks and the operation of traditional banks in the microfinance space
6
enterprises (so not part of the private sector per se, although many are operating in the
commercial sphere) and a few family owned enterprises and conglomerates. Although more
recent figures are not available, the enterprise census conducted in 2004 showed a tendency
towards micro and very small enterprises in Yemen – 93 percent of enterprises had less than ten
employees.18
17.
The overriding objective of the World Bank Group’s Interim Strategy Note (ISN) for
Yemen, discussed by the Board of Executive Directors on November 13, 2012, is to help the
Government produce tangible results that stabilize the transition in the short term, while laying
the groundwork for medium-term reforms and sustainable longer-term benefits. The ISN
proposes to support these objectives across three strategic pillars: (i) achieving quick wins and
protecting the poor by creating short-term jobs, restoring basic services, improving access to
social safety nets, and revitalizing livelihoods; (ii) promoting growth and improving economic
management by helping maintain macro stability, strengthening fiscal policies and public
financial management, and improving the enabling environment for private sector growth and
competitiveness; and (iii) enhancing governance and local service delivery by supporting
transparency, accountability, capacity building, institutional strengthening, and improved citizen
engagement. It recognizes the centrality of the private sector in ensuring national stability and
well-diversified growth, but limits private sector development activities during the transition
phase (through February 2014) to technical assistance with a view to building a medium term
agenda. This pilot project is in line with the proposed technical assistance and envisages
opportunities for job creation even during early recovery and aims to complement the ISN’s
focus on economic stabilization and social protection with a program that includes small
enterprises in the recovery, which has potential medium term development benefits as well.
18.
This project is complementary with other projects and activities ongoing or recently
prepared in Yemen. The Social Fund for Development IV Project (P117949) also provides US$5
million in support to small and micro finance through the SME Department in the SFD. The SFD
IV project, however, is limited to technical assistance to improve the performance of MFIs and
of SFD’s oversight of the MFIs.
19.
The recently approved Labor Intensive Public Works Project (P122594), and the labor
intensive works component under SFD IV both promote immediate/short-term job creation, a
very appropriate objective for this transition period in Yemen. This proposed Enterprise
Revitalization and Employment Pilot (EREP) Project complements that job creation objective
and looks forward to the short/medium term by supporting the potential of small and medium
enterprises to create sustainable private sector jobs by supporting their recovery and improving
their competitiveness and growth.
II. PROJECT DEVELOPMENT OBJECTIVES
A. Project Development Objective (PDO)
20.
18
The objective of the Project is to improve individual employability of college and university
Establishments Census, Yemen Central Statistics Office, 2004.
7
graduates and to improve the business capabilities of enterprises participating in the Project.
Project Beneficiaries
21.
The EREP project’s direct and indirect beneficiaries fall into three categories i) private
enterprises, ii) unemployed youth, and iii) Government of Yemen (GoY) entities and private
sector organizations concerned with private sector development in Yemen. The pilot components
will be implemented in two locations, Sana’a and Aden.
22.
Private enterprises. The project aims to provide direct support to an estimated 400
enterprises, although additional firms are expected to benefit indirectly. The focus is on SMEs
that exhibit initiative towards market, product, and process development and innovation, the
types of behaviors associated with enterprise growth. Research has shown that firms that
innovate in products or processes, or attain higher productivity have higher employment growth,
including both skilled and unskilled labor.19 Research in MENA has confirmed these findings,
showing that high growth SMEs are more likely to have introduced/ upgraded a new product,
created a company website, or provided formal training to employees.20
23.
The project will focus on small and medium enterprises; although the project will not
limit eligibility by firm size, its design is geared towards SMEs.21 According to the latest census
data (conducted by the Central Statistics Organization), over 400,000 enterprises were operating
in Yemen in 2004. Most private enterprises (88 percent) in Yemen are microenterprises (less
than five employees). Of the remainder, about 4.7 percent (19,000 enterprises) had less than ten
workers, 3.5 percent (14,000 enterprises) had more, and the remainder was unspecified.22 The
knowledge gained on policies and programs will also be SME focused but will also have indirect
benefits to microenterprises and large enterprises as well (e.g., through the proposed TA on
financial literacy, special economic zones, and other elements).
24.
Unemployed youth. The project seeks to leverage facilitation and support for SME
development towards engaging the private sector on internship programs that improve
employability and employment outcomes for recent graduates. The project will focus on recent
graduates of vocational colleges and universities who can contribute towards the SME business
upgrading activities envisioned to be supported in the project.
25.
Government of Yemen. The technical assistance component will be provided to the
Ministry of Planning and International Cooperation (MOPIC), the implementing agency (Small
and Micro Enterprise Promotion Service), and other government agencies and private sector
organizations with a mandate or direct interest in private sector development in Yemen as
defined by the emerging policy priorities. Ultimately the benefit of any policy or program
initiatives or reforms will flow to the private sector.
Competition and innovation-driven inclusive growth, Mark A. Dutz et al, in Promoting Inclusive Growth –
Challenges and Policies, Luiz de Mello and Mark A. Dutz eds, World Bank and OECD, 2012.
20
SME Innovators and Gazelles in MENA – Educate, Train, Certify, Compete!, MENA Knowledge and Learning
Quick Note Series, Andrew Stone and Lina Tarek Badawy, September 2011, No. 43.
21
Throughout this report, the Yemen 2011 ICA update definitions of firm size will be used: (1-4) = micro, (519)=small, (20-99)=medium, and (100+) = large.
22
Establishments Census, Yemen Central Statistics Office, 2004.
19
8
26.
Women business owners and graduates. In both beneficiary categories, steps will be
taken in the design of operations and monitoring and evaluation to facilitate and support access
of women business owners and graduates as beneficiaries of the project, including the
recruitment of women as part of the project team and specific outreach activities to women’s
business organizations or groups
PDO Level Results Indicators
27.
Progress towards achieving the project’s development objectives will be measured by a
series of quantitative and qualitative indicators at the PDO level and at the component level. The
expected key results of the pilot project are:
 Participating youth employed (percentage female)
 Participating firms have improved capabilities after completion of services.
 Policies and programs utilize the outcomes of the pilot project.
 Direct project beneficiaries (percentage female)
III. PROJECT DESCRIPTION
28.
The project aims to inform private sector development policies and programs in Yemen,
with a particular emphasis on SME development and employment. This focus on SMEs and
employment stems from the conflict-affected nature of the country context and evidence of the
importance of SMEs in private sector development and employment generation. (See Annex 2
for detailed project description).
Project Components
Component 1: SME Internship and Upgrading Program (US$3.72 million)
This component will finance three sub-components:
29.
Sub-component 1A: Internship Pilot: This Sub-component would aim at providing paid
internships for an estimated 400 graduates through private enterprises on a cost-sharing basis
(typically a 50 percent match is required by the firms). The program would facilitate and support
the placement of the interns through a matchmaking process, providing basic skills training to all
accepted applicants and basic orientation training to participating interns (work ethics, personal
productivity), and a subsidy of 50 percent or more of the internship cost (expected length of 6
months or longer). These activities would be implemented at firms in two locations, Sana’a and
Aden. Under this component, the project will finance partial grants for youth internships as well
as training costs for internship applicants.
30.
Sub-component 1B: Business Development Matching Grants Pilot: This program will
provide up to 400 firms, depending on uptake, with a matching grant (typically 50 percent of the
cost) for the procurement of business development services (BDS), training and goods (as a
minority component) to improve management practices, technology, or products or to reach new
markets (domestic or export) as defined in a Business Development Plan submitted by the firm.
9
Firms may apply to the business development matching grants in addition to the internship grants
(Component 1A). These activities would be implemented at firms in two locations, Sana’a and
Aden. Under this component, the project will finance partial grants for services (including both
consulting and non-consulting services) and minor goods (such as office and IT equipment,
measurement and test equipment, spare parts) within the scope of the business development
plans and outreach, communications, consulting services, and associated costs related t the
delivery of these business development grants.
31.
Sub-component 1C: Project Management: This Sub-component will support SMEPS
project management for this pilot. It will finance goods, services, travel (including international
travel), and incremental operating costs incurred by SMEPS in the implementation and
management of the project.
Component 2: Bank-executed activities: Impact Evaluation, Technical Assistance, and
Support (US$0.43 million, to be financed from a separate Bank-executed grant for an
analytical and advisory (AAA) activity)
32.
This component will include the implementation of an impact evaluation and provision of
technical assistance to the GoY to inform policies and programs on SME development and
employment based on the outcomes and demonstrated effect of the pilot. The component will
finance the costs of the impact evaluation and technical assistance (TA) provided to GoY entities
and SMEPS, particularly on monitoring and evaluation.
33.
The rationale for World Bank execution of this component lies primarily in the need to
conduct a robust impact evaluation, and SMEPS has requested that the World Bank take
responsibility for the implementation of the impact evaluation to ensure its independence.
Furthermore, the second element of this component is the provision of technical assistance to the
GoY by the World Bank, bringing the results of the impact evaluation as well as lessons learned
from this project and global practices to serve the GoY’s policies and programs, which is most
effectively undertaken by direct World Bank execution.
A. Project Financing
Lending Instrument
34.
The lending instrument is an Investment Project Financing in the amount of US$3.72
million, which will be financed through trust fund financing. The project has been submitted for
financing by MOPIC to the MENA Transition Fund and financing was approved on January 16,
2013. The project will be financed through a Recipient-executed grant agreement for Component
1 (US$3.72 million) and a separate Bank-executed grant for Component 2 (US$ 0.43 million),
processed separately as an analytical and advisory (AAA) activity.
10
Project Cost and Financing
35.
The project costs and financing are detailed in the table below.
Table 3: Project Costs and Financing
Project Components
Project cost
(US$M)
1.SME Internship and Upgrading
Program
1A. Internships
1B. SME upgrading
1C. Project Management
2.
3.72
Trust Fund
Financing
3.72
% Financing
90%
0.77
2.43
0. 52
Impact Evaluation, Technical
Assistance and Support
2A. Impact Evaluation
2B. Technical Assistance
0.43
0.30
0.13
0.43
Total Project Costs
4.15
4.15
Total Financing Required
4.15
4.15
10%
100%
Note: This grant will finance only Component 1 for US$ 3.72 million. Component 2 for US$0.43 million will
be financed from a separate Bank-executed grant as part of the Bank’s analytical and advisory activity, not from
this project grant.
36.
In addition to the trust fund financing, participating firms will jointly finance business
development plans and interns’ stipends (firms will cover at least 50% of the cost) at a total
estimated value of US$2.36 million (based on achieving full estimated uptake from firms for
interns and business plan support). SMEPS, the recipient and implementing agency, will also
contribute in-kind by providing additional staff support not financed by the project.
37.
Retroactive financing will be sought in accordance with the financing trust fund
requirements for the Recipient-executed component to cover costs of hiring of project team
members and other preparatory activities and the Bank-executed component in an amount not to
exceed 10 percent of the total grant amount incurred no more than six months prior to the grant
approval.
B. Lessons Learned and Reflected in the Project Design
38.
The degree of success of “matching grant” facilities has been shown to be mostly a
function of design rather than country circumstances. In the MENA Region, the export
promotion fund in Tunisia (“FAMEX”) supported by the World Bank under two projects (First
and Second Export Development Projects) and the Facility for New Market Development in
West Bank Gaza have been among the successful matching grant funds supported by the Bank.
The project would build on the successful designs of these projects as well as best practice
features derived from experience in other countries, particularly in Latin America and Africa
where the approach has been used extensively.
11
39.
Design principles are informed by both individual projects with similar programs, as well
as reviews, such as that of David Philips in 200023, which assessed Bank-supported projects in
business and export development that used matching grant schemes. Regarding design
implications, this assessment emphasized the importance of securing government understanding
and commitment to what may be an unfamiliar tool, and to defining flexibly organized and
demand-responsive support that finances competitive private service providers responding to the
evolving needs of client enterprises. It considered that grants should generally be for know-how
and not for equipment, but this does not account for special needs in conflict-affected situations.
It counseled use of a simple norm for grants, reimbursing 50 percent of costs subject to
indicative maximum per firm (allowing multiple grants per firm), with streamlined processing on
a first-in-first-out basis using clear eligibility criteria. It further considered that grants should be
available for both sides of the market, to enable service providers to provide the upgraded
services demanded by new and upgraded users and to enable a complete market matchmaking
approach by the facilitating entity and fund managers.
40.
A subsequent review by the Bank’s Latin America and Caribbean Region in 2008 of
Private Sector Development (PSD) and Competitiveness projects with matching grant schemes
across the Bank, concluded that particular importance should be given to identifying
obstacles/problems to be solved, well-designed matching grants and well-structured
implementation units. 24 Regarding design, it emphasized the need for demand-driven activities,
clearly defined eligibility criteria, attractive grant amounts and percentages, easy to understand
requirements and procedures, broad promotion and wide geographical access and consistency
with the government’s national plan. Regarding implementation, it pointed particularly to the
need for supportive government authorities, a transparent selection process, satisfactorily trained
staff, a complete operations manual, an independent approval process for grants to avoid political
intervention, and an efficient Management Information System (MIS).
41.
A more recent examination of attempted impact evaluations on matching grant projects in
Africa has highlighted a number of lessons focused on attaining sufficient uptake of matching
grants from businesses. These include simple eligibility criteria, simple procurement processes,
speedy reimbursement within a few days (or upfront payment of the matching grants), and
incentives for project staff for high uptake. Lessons learned for matching grant projects with an
intended impact evaluation also include advance agreement on random selection of recipients of
the grants with the implementing authorities. 25
42.
The design of the internship program is informed by recent empirical evidence assessing
the effectiveness of youth employment programs. Recent evaluations of temporary youth
employment schemes have found limited success on long-term employment outcomes of
participants. For example, a recent randomized control trial of a job voucher program (Jordan
Now) found that employment almost entirely dropped off after the subsidy period had ended.
“Implementing the Market Approach to Enterprise Support: A Comparative Evaluation of Matching Grant
Schemes” by David A. Philips for ECSPF, December 2000.
24
“Matching Grants – A review of Matching Grants System in Private Sector Development Projects” by the Finance
and Private Sector Development Unit, LAC, 2008.
25
Campo, Francisco et al. “Learning from the experiments that never happened: Lessons from trying to conduct
randomized evaluations of matching grant programs in Africa.” (to be published)
23
12
Business training services alone did not have a significant impact on the ability of women to find
work. Similarly, researchers found that in the Dominican Republic (Juventud y Empleo
program), extensive job training and job placements services led to limited effects on
employment outcomes, although some evidence of a modest effect on earnings (conditional on
working).
43.
A recent report from the World Bank Independent Evaluation Group (IEG) report noted
that “temporary wage subsidies paid to employers to hire youth can have a positive impact on
individual employment – mainly if work provides them with higher level skills.”26 The report
noted the importance of demand-side activities, sufficient subsidies to overcome tendency for
low-uptake, and ensuring interns are gaining higher level skills.
44.
The EREP project proposes to link the employment intervention to the demand side, as
recommended by IEG, by beginning with firms and their demand and providing facilitation and
wage subsidies to the employers (rather than the youth). This focus on firm demand is combined
with design elements meant to increase uptake and use of interns for higher level skills, including
a 50 percent subsidy requirement on the part of the firm, focusing on tertiary educated youth,
implementing monitoring of the interns’ activities, and reporting on the nature of the internship.
These design features are intended to provide interns with higher level skills. The project will
seek to determine the impact of the internships not only on the employment status of the
beneficiaries after the internship, but also the impact on the employability of the youth
completing the internships as judged by their hiring firms. This additional aspect of measuring
the success of the internship program is important in reflecting the benefits of internship
programs on creating a cadre of skilled graduates that can be created by private sector-led job
training and which may be a key to improving job skills, a constraint cited by firms in investment
climate assessments in Yemen and MENA.
45.
In addition, the project seeks to test the hypothesis that placing interns in firms also
undertaking the implementation of a Business Development Plan (BDP) will have better
employment outcomes, since the intern is likely to be associated with the incorporation of new
knowledge in the firm, and thus be more likely to gain higher level skills and be valued by the
firm. Overall, this combined approach is meant to test a specific approach for youth employment
in the Yemen context taking into account learning from previous experience.
IV. IMPLEMENTATION
A. Institutional and Implementation Arrangements
Institutions
46.
According to Law No. 10 of 1997 for the Establishment of the Social Fund for
Development (SFD), SFD is the institution mandated with, among other things, “financing
manufacturing and service projects, either directly or indirectly, for individuals, households,
Youth Employment Programs – An Evaluation of World bank and IFC Support. World Bank Independent
Evaluation Group. September 2012.
26
13
small enterprises, and other beneficiary groups under legitimate, soft terms”.27 The SMED
department in the SFD has been focused on finance and technical support for both micro and
small enterprises and provides SFD oversight over SMEPS. SMEPS is a subsidiary of SFD with
a focus on technical assistance, training, and value chain interventions. The project will be
implemented by SMEPS, as the recipient and implementing agency.
47.
Very few agencies in Yemen have capacity and experience working on overcoming
information gaps of small enterprises with respect to international best practices and
management techniques such as quality systems, cost accounting, and directed marketing.
SMEPS has an appropriate combination of internal business culture within it and a set of
operational experiences closely related to the kind of work that the EREP project would support.
SMEPS has carried out a survey of BDS providers throughout Yemen (providers of technical,
management, training, legal, and other services) and launched a BDS website
(www.istishaari.com). They have also conducted some specific interventions in the fisheries and
coffee value chains to introduce new technology, market research, and information to the supply
chain, and believe there is high demand and potential for further work in this area. SMEPS also
facilitates the provision of a range of management and entrepreneurship training courses,
including IFC’s Business Edge, through the qualification of trainers and training institutions,
including some subsidies to training costs. Moreover, SMEPS has undertaken a youth
employment program for internally displaced youth in Aden during the height of the crisis, with
good results in providing training, internship programs, and even permanent jobs for some of the
youth beneficiaries.
Implementation of Activities
48.
SMEPS will implement Component 1 of the project, including the internship program,
business development plan support program, and overall project management. Component 2, for
technical assistance, is a Bank-executed component, and will be implemented by the World Bank
as an analytical and advisory activity. Detailed implementation arrangements are available in
Annex 3.
49.
SMEPS has provided a Work Plan to the World Bank describing activities, timeline, and
budgets for activity implementation. SMEPS has developed an Operations Manual (OM)
acceptable to the Bank. The OM describes the policies and procedures to be followed for
activities 1A, 1B and 1C under Component 1 (see Annex 2, Detailed Project Description),
including grant making activities for the internships and BDP support activities; EREP Project
organization and roles and responsibilities; and the financial, procurement, and operational
systems supporting implementation. The OM will be supported by detailed instructions, and
templates, which will not require World Bank no-objection.
50.
Project Team: The Project will be implemented by leveraging the SMEPS in-house team
with a team of local consultants, managed by a dedicated Project Manager reporting to the
SMEPS Executive Director and supported by a Procurement Officer and Accountant hired for
the project. The local consultants will act as an extension to the SMEPS team, working directly
with firms and graduates to facilitate matching of services and interns with firms. These local
27
World Bank staff unofficial translation of the Arabic text of the Law.
14
consultants will include at least one female consultant in each location to facilitate outreach to
and participation of female business owners, managers, and interns. BDP Advisors support firms
in developing business plans and assess their viability, while Internship Advisors bring
internship applicants and host firms together. Both will be supervised by SMEPS Project
Officers (existing SMEPS staff) assigned to work on the EREP project and reporting to the
EREP Project Manager for the purposes of the project. SMEPS has followed this model of using
local consultants successfully in the past, including most recently in its implementation of an
internship program for IDPs in Aden. SMEPS has assembled the core Project team, including the
Project Manager, Project Officers, and Procurement Officer. The SMEPS Business Development
Director and Finance Manager also make up an important part of the team and are part of the
Management Committee that approves the grants and reviews the project portfolio.
51.
Ad-hoc Advisory Committee: An ad-hoc advisory committee comprising
representatives from the private sector, public sector, and academia will be formed to advise the
project based on ad-hoc briefings provided by SMEPS throughout the lifetime of the project.
52.
The BDP grant-making process: The grant-making process for partial support of BDPs
will follow a transparent process with clear and simple eligibility criteria with appropriate due
diligence measures and governance to ensure independence of the selection process from
application to approval and preventing capture, all of which will be documented in the OM. Key
aspects of this process are the BDP Advisors’ role in guiding and advising on the development of
these plans, and the EREP Project Management Committee’s role in the review and approval of
the plans. The BDP Advisor also has a key role in guiding the firm in the procurement of
services. This is particularly important as SMEs often have no prior experience in procuring
BDS, and this provides a learning experience to increase the likelihood of the firm’s repeated use
of BDS after the project. Selection of firms will be transparent, planned through a public lottery
with results posted on the project website.
53.
Internship process: The internship process will have clearly defined eligibility criteria
for both host firms and graduates. The key element of the internship process is the matchmaking
which will require the Internship Advisors to match internship applicants from a sorted pool to
firms based on the firm needs. The matchmaking process is expected to be an important
determinant of the successful outcome of the internship for both firms and recent graduates.
After screening and sorting, selection of intern applicants for interviews with firms is planned
through a random selection process.
54.
Bank-executed component: The Bank-executed component will be executed by World
Bank staff and consultants to provide an independent, robust impact evaluation and technical
assistance. Coordination and responsiveness to MOPIC and other agencies mandated with SME
development and employment will be central to this activity. Technical assistance will be
provided through policy notes, workshops, and direct support on a just-in-time basis as well as at
the end of the project in the form of a policy note based on the results of the impact evaluation.
The Bank will also provide technical assistance to SMEPS for improving Monitoring and
Evaluation (M&E) capacity by providing direct support in developing the M&E system for the
project as well as other learning opportunities.
55.
Coordination Activities: SMEPS will undertake to coordinate with other private sector
development activities throughout the implementation of the project. Steps will be taken to
15
identify synergies with other projects and to leverage linkages between them. For example,
outreach will be undertaken through the Economic Opportunities Program in Sanaa and Aden
governorates to inform them of matching grant opportunities available. Similarly, SMEPS will
seek opportunities to link supply-side BDS activities undertaken under the GIZ program with
demand-side matching grants. Linkages with micro and small finance projects will also be
established to better guide project beneficiaries in need of financing for capital goods or working
capital.
B. Results Monitoring and Evaluation
56.
The results framework for the project is centered around the PDO and specifies PDO
level and intermediate indicators which will be monitored to evaluate project performance
towards the objectives (see Annex 1A). Lower level output level indicators may be developed at
the beginning of the project for operational purposes in addition to supplementary performance
information on SME applicants and beneficiaries (see Annex 1B). Monitoring and evaluation of
project components, sub-components, and activities will be kept simple and integrated into
project implementation at every stage (application, implementation, and follow-up). Primary
responsibility for results monitoring will fall on SMEPS. SMEPS will present an M&E report to
the World Bank on a quarterly basis.
57.
M&E is an aspect of SMEPS capacity which will require reinforcement. To this end, the
Bank will provide implementation support for the development of the project’s M&E system and
to improve SMEPS staff capacity on M&E through training and technical advice provided by
Bank staff and consultants.
58.
In addition to the M&E integrated in the pilot project, the Bank will execute an
independent impact evaluation on the results of the project. Designed by Bank staff, the impact
evaluation will use data from the M&E system, particularly from the application stage, as well as
follow-up data collected after completion of implementation (using various methods as
appropriate, including online self-reporting, phone or in-person interviews for youth, and inperson interviews for firms conducted by an independently contracted survey firm). Subject to
adequate uptake and numbers of applicants, the impact evaluation will seek to identify the
impact of the internship facilitation, training, and subsidy on employability, as well as the impact
of matching grants for business development activities on the capabilities and performance of
firms.
C. Sustainability
59.
As a pilot project, the sustainability of the project’s results will be achieved through the
adoption of policies and programs informed by the evidence produced from the impact
evaluation and lessons learned from the project. If successful, the piloted approaches are
expected to be scaled up for implementation on a larger scale throughout Yemen (with IDA or
other funding). The sustainability of the project will also be demonstrated through the
demonstration effect of its activities. The implementation of BDPs with the facilitation and
matching grants provided by the project act as learning experiences, opening up new
opportunities for participating firms, creating incentives for firms to continue to develop and
innovate, and demonstrating benefits to other firms.
16
V.
KEY RISKS AND MITIGATION MEASURES
A. Risk Ratings Summary Table
Table 4
Substantial
Stakeholder Risk
Implementing Agency Risk
- Capacity
Substantial
- Governance
Substantial
Project Risk
- Design
High
- Social and Environmental
Low
- Program and Donor
Low
- Delivery Monitoring and Sustainability
High
- Other (Political and Security)
High
High
Overall Implementation Risk
B. Overall Risk Rating Explanation
The overall risk for this operation is High due to country context, as well as design and
delivery risks (see Annex 4). The volatility of the political, security, governance, and donor
environment pose risks both during preparation and implementation. The retail nature of the
operation, with services potentially being delivered to hundreds of firms throughout Yemen,
poses fraud and corruption and monitoring risks. Potential risks for Bank supervision of the
project are also high and require mitigation. The incorporation of control features into the
implementation structure, the use of local capacity, and provision of technical assistance to the
implementation agency is expected to mitigate these risks to the extent possible, but
implementation risks are likely to remain substantial throughout the duration of the project, so a
key mitigating measure will be to maintain flexibility and adaptability in the project design.
60.
VI. APPRAISAL SUMMARY
A. Economic and Financial Analyses
61.
The proposed Enterprise Revitalization and Employment Pilot (EREP) project is based
on a demand-driven approach with the aim of increasing employment, youth employability and
ultimately incomes through the development of internship programs and the support to private
enterprises. The development objective of the Project is to improve individual employability of
college and university graduates and to improve the business capabilities of enterprises participating
in the Project.
17
62.
The EREP provides more than a few return benefits to the participants though mostly
additional generated income, client value-added within incremental revenues, and the generation
of youth employment especially within participant firms. Economic benefits and outcomes
include:
 Enhancing the growth of youth employment and opportunities while
increasing incomes through the hiring and training of the youth interns.
 Fiscal return for the government from taxation on incremental revenues,
income and employment.
 Positive spillover effects to the overall business community by: a)
enhancing firm potential to qualify for financing from the banking sector
by virtue of having a sound BDP; b) encouraging innovation and new
market ‘mindset’; c) promoting growth in local BDS.
 Substantial growth in firm sales and employment from market
diversification.
 Qualitative growth in sustainable business capacity to build new markets
for example, when national SMEs obtain new overseas business contacts,
partnerships and buyers from participating in trade fairs and study tours,
which could link them with potential buyers, suppliers, and distributors.
63.
The outcomes of capacity changes, incremental revenues, and employment effects
generated by the EREP would, as seen in other similar projects, be only visible at the completion
of BDPs. However, a full measure of results, upon which the above-mentioned are based, would
be most likely to be achieved within 1-2 years after their completion. An approximation of return
at the pilot scale may be through rough estimates of average value added within incremental
revenues generated, as well as the incremental fiscal revenues derived from value added taxes
and corporate and individual income taxes from the perspectives of the firm and of the project.
Using a ratio of additional sales against the EREP funded portion of cost-sharing funds (5 to 1),
and an estimated employment rate of 50% of interns trained, the Internal Rate of Return (IRR) of
the project including fiscal revenues to the government through taxation revenue can be
estimated at 17 percent. Likewise, looking at the firm and intern level only, excluding project
management costs and fiscal benefits to the government, an IRR of 16 percent can be expected.
64.
However, as both the internship and SME upgrading programs are both pilot activities,
the assumptions made in the economic analysis will be tested by the pilot, and ultimately the
economic and financial analysis will need to be determined based on the outcomes of the pilot
and the findings of the impact evaluation and calculated at full scale rather than at the pilot scale.
B. Technical
65.
The project is appropriate to Yemen’s needs and technically viable. It focuses on two key
economic development priorities in the Government of Yemen’s TPSD and the Mutual
Accountability Framework, youth employment and SME growth. The design is informed by
lessons learned from World Bank and other experiences, and is designed as a pilot project with a
strong impact evaluation component that will enable the extraction of learning from the project.
The technical assistance component ensures that the learning from the pilot project can be
appropriately leveraged to formulate policies and scaled up programs based on the evidence
provided by the project.
18
C. Financial Management
66.
The implementing entity of the project (Component 1) is the Small and Micro Enterprise
Promotion Service, SMEPS. A Financial Management (FM) assessment was conducted on
SMEPS with the objective of determining whether: (i) the implementing entity has adequate FM
arrangements to ensure Project funds will be used for the purposes intended in an efficient and
economical way and (ii) the controls and processes at the implementing entity can be relied
upon. The Assessment confirmed that SMEPS has adequate FM capacity to implement the
project with the need to establish a project’s operations manual and develop the accounting
software to generate the Interim Financial Reports (IFR).
67.
Although SMEPS maintains its own FM Manual that adequately describes the related
guidelines encompassing the authorization and internal control cycles, SMEPS has now prepared
a project FM Manual to reflect the special reporting requirements and to cover the activities
related to the proposed Project in addition to the related internal control procedures. This is part
of the OM (one of its sub-manuals) and sets forth the: (i) institutional and organizational aspects,
the interrelationships and the responsibilities of each party, including all the criteria and
procedures for the selection of grants and eligibility criteria; and (ii) a detailed technical and
financial audit mechanism to verify compliance of the eligibility conditions as the basis for
grants.
68.
SMEPS maintains adequate staffing arrangements in the FM department which is led by
a Financial & Administrative Manager and supported by three accountants. Additionally,
SMEPS has an internal auditor supported by an assistant. As the SFD is still the parent institution
of SMEPS, SFD will continue acting as SMEPS' Board of Directors, including SMEPS in their
internal audits. SMEPS has an acceptable accounting system which follows the cash basis of
accounting; however since the appraisal of the project, the reporting function has been developed
to generate the Interim Financial Reports (IFRs) automatically.
69.
To ensure that funds are readily available for implementation, SMEPS will open a
separate Designated Account (DA) in US Dollar for the Project in a bank acceptable to the
World Bank. The Withdrawal Applications will be signed by the Executive Director of SMEPS
and the Financial Manager.
70.
The proceeds of the Grant would be disbursed in accordance with the traditional
disbursement procedures of the Bank and will be used to finance project activities through the
disbursement procedures currently used in accordance with the procedures described in the
Disbursement Letter and the Bank's "Disbursement Guidelines". Interim Unaudited Financial
Reports and Annual Financial Statements will be used as a financial reporting mechanism and
not for disbursement purposes.
71.
SMEPS will prepare quarterly IFRs and submit them to the Bank within 45 days
following the end of each quarter. The IFRs shall be reviewed by an independent external
auditor. All project transactions are subject to annual independent audits by a private audit firm
and based on agreed terms of reference. The following audit reports along with the related
Management Letter will be submitted to the World Bank within six months from the end of each
calendar year:
19


Project audited financial statements
SMEPS consolidated audited financial statements.
72.
Given the nature of the inherent risks in the country system and the project and in view of
the FM arrangements already in place in the implementing entity, the overall FM risk rating of
the project has been assessed as High. The mitigating measures include the establishment of an
acceptable operations manual, developing the accounting reporting system to enable automatic
preparation of IFRs, continued oversight by the capable and well established SFD as SMEPS
Board of Directors and through its audit functions, and the use of consultants to review the
business plans and approve payments.
D. Procurement
73.
Procurement for the project will be carried out in accordance with the Bank's
Procurement Guidelines: “Guidelines: Procurement of Goods, Works and non-consulting
services under IBRD Loans and IDA Credits and Grants by World Bank Borrowers dated
January 2011” and “Guidelines: Selection and Employment of Consultants under IBRD Loans
and IDA Credits and Grants by World Bank Borrowers dated January 2011” and the provisions
stipulated in the Grant Agreement.
74.
The Small and Micro Enterprise Promotion Services (SMEPS) will be implementing the
project and will be responsible for the management and direct oversight of the financial
management and procurement.
75.
A Procurement Assessment of SMEPS was conducted in November 2012. Under that
assessment, the organizational structure, procurement staffing, and procurement administration
were carefully reviewed.
76.
The SMEPS team includes an executive director, financial and administrative manager,
accountant, internal auditor, IT officer, project officers, and a team assistant. SMEPS currently
does not have a procurement department and the technical team working with the financial
manager in SMEPS is responsible for handling all procurement activities according to the agreed
procurement manual of the SFD. Also, they hire consultants in case they lack the experience as
needed. Mostly national shopping procurement method will be used because the activities costs
are estimated between US$1,000 – US$10,000. Any procurement activity with cost exceeding
US$30,000 would require the prior approval of SFD’s Managing Director.
77.
Procurement Risk/Mitigations Measures: In terms of the procurement risk assessment,
the risk is considered ‘Substantial’.
78.
The key action proposed for mitigating the procurement risks is the hiring of a
Procurement Officer to provide support to both SMEPS and SMEs for handling procurement
activities. SMEPS and beneficiary SMEs will maintain proper filing for auditing and post
review. The Procurement Officer has been hired.
20
E. Social (including Safeguards)
79.
Social safeguard policies are not triggered, and the social impacts of this project are
expected to be positive. The activities will build confidence of small enterprises and help them
recover or grow their activities. The inclusion of unemployed graduates in the program will also
provide benefits through the training, job matchmaking, skills and experience gained through the
internships, and if successful, long-term employment. The OM describes design features to
facilitate inclusion of women as beneficiaries of the project. The OM describes how internship
health and safety will be adequately addressed.
F. Environment (including Safeguards)
80.
Environmental safeguards policies are not triggered. The expected size of the grants and
loans under this project are very small, in the range of up to US$10,000, but most will be less.
The nature of most of the activities will be procurement of services and other intangibles, with
possible small scale goods or equipment which are not anticipated to have any major or
irreversible environmental impacts. The OM will include a negative list of activities, the process
of screening out any activities with anticipated social or environmental negative impacts, and the
principles of giving due consideration to social and environmental implications of technical
advice provided.
21
Annex 1A: Results Framework and Monitoring
YEMEN: Enterprise Revitalization and Employment Pilot (EREP) Project
Results Framework
Project Development Objective (PDO): The objective of the Project is to improve individual employability of college and university graduates and
PDO Level Results
Indicators*
Core
to improve the business capabilities of enterprises participating in the Project
Unit of
Measure
Cumulative Target Values**
Baseline
YR 1
Indicator One: Participating
youth employed
(percentage women)
Indicator Two: Participating
firms with improved
capabilities after completion
of services
Percent
(percent
female)
Percent
0
0
-
-
YR 2
20 percent
(5 percent)
30 percent
YR3
50 percent
(5 percent)
65 percent
Frequency
3 months and
6 months
after the end
of the
subsidy
6 months
after
completion
Data Source/
Methodology
Responsibility
for Data
Collection
M&E System/
on-line selfreporting and
interviews
SMEPS
Independent
verification
for Impact
Evaluation
M&E System/
follow-up
visits
World Bank
SMEPS
World Bank
Indicator Three: Policies and
programs utilizing the
outcomes of the pilot project.
Number
0
-
-
3
6 months
after
completion
Indicator Four: Direct
project beneficiaries
(percentage women)
Number
(Percent
female)
0
(2.5
percent)
600
(3
percent)
1,200
(3 percent)
1,900
(3 percent)
Semiannually
28
Independent
verification
for Impact
Evaluation
Aide
Memoires
M&E System
World Bank
SMEPS
Description
(indicator
definition etc.)
Employed in the
same firm or
another job
(without subsidy)
Improved
capabilities
means the firm
demonstrates
improved
product/ process/
or market access
Policies and
programs could
be government
strategy, scaled
up project, or
other program.
Note 28
Direct project beneficiaries counted as total graduates receiving at least basic training (1000 receiving basic skills) plus total estimated employees of participating firms
(assuming average firm size 3 workers, 300 firms receiving services). The percent women baseline is based on the 2011 Yemen Investment Climate update which found less than
2% participation among labor force in small firms, and 11% women ownership among small firms. (Small firms were used as they are the most likely beneficiaries).
22
PDO Level Results Indicators*
Core
INTERMEDIATE RESULTS
Cumulative Target
Values**
Frequency
Unit of
Measure
Baseline
Number
0
200
400
600
Ongoing
Number
0
133
266
400
Ongoing
Number
0
50
150
300
Ongoing
Number
0
300
600
1,000
Number
0
50
100
Number
0
200
Number
0
Percent
0
Data Source/
Methodology
Responsibility
for Data
Collection
Description
(indicator
definition etc.)
YR
YR
YR
1
2
3
Intermediate Results (Component One): Successfully facilitate internships and business services to private enterprises.
Intermediate Result indicator One: Number of
firms requesting business services
Intermediate Result indicator Two: Number of
firms participating in BDS program
Intermediate Result indicator Three: Number of
firms procuring business services (with
percentage women owned or managed tracked)
Intermediate Result indicator Four: Number of
youth applying internships (with percentage
women tracked)
Intermediate Result indicator Five: Number of
youth selected for interviews but not placed
(with percentage women tracked)
Intermediate Result indicator Six: Number of
youth placed in internships (with percentage
women tracked)
Intermediate Result indicator Seven: Number of
youth completing internships (with percentage
women tracked)
Intermediate Result indicator Eight: Percent
participating youth with improved employability
upon completion of the internship (with
percentage women tracked)
Firm
applications
Firm
applications
M&E System/
follow-up visits
Project Officers
Ongoing
Youth
applications
Project Officers
200
Ongoing
M&E System/
status reports
Internship
Advisors
400
400
Ongoing
M&E System/
status reports
Internship
Advisors
-
180
360
Ongoing
M&E System/
follow-up visits
Internship
Advisors
-
50%
75%
Once upon
completion
M&E System/
follow-up visits
Internship
Advisors
23
Project Officers
BDP Advisors
As measured by
assessments from
employing firms
Annex 1B: Beneficiary Profile and Performance
YEMEN: Enterprise Revitalization and Employment Pilot (EREP) Project
In addition to the Results Framework that is designed to specifically target the objectives of this pilot
project, SMEPS will also monitor and report on specific indicators of beneficiary profile and performance
for all enterprises that receive grants and seek baseline information at least, but preferably beyond that,
for all those that apply for grants– irrespective of their receipt of grants. These indicators will be finalized
in the Operations Manual, but preliminary expected indicators are shown below.
A. Beneficiary Profile Data
Name of Enterprise:
Sector in which SME operates
Geographic Area of operation
Did firm apply for a BDP grant, internship grant or both?
Did firm receive the applied for grant? If no, why not?
Is this the first time the firm has accessed BDS?
Does the firm prepare annual financial statements?
Does the firm export? If not, does it plan on doing so in the near future?
B. Beneficiary Performance
Beneficiary Performance
Sales
Operating Margin
Exports (if any)
No. of full-time employees
Of which % women
Of which % youth (age<25 yrs.)
No. of indirect jobs (outsourced, contractors
and sub-contractors, suppliers or others in
value chain (estimate)
Volume of other sources of financing
a) Loans from commercial banks
b) Equity from other sources
Unit of
Measure
Baseline
Cumulative
Values
YR1
YR2
Frequen
cy
Data Source
$000
%
$000
Annual
Annual
Annual
Survey
Survey
Survey
Number
Annual
Survey
%
Annual
Survey
%
Annual
Survey
Number
Annual
Survey
Ratio
Annual
Survey
C. Innovative Practices
Do you currently have any accreditations and certifications for quality?
(Please describe)
Do you have plans to obtain accreditation/certification in the next 3 years?
(If yes, please describe nature of the certification and time planned)
Do you use online communication for business purposes? If so, please
explain how.
Do you provide training for your professional/technical staff? If yes,
please list kinds and frequency of the training
Do you provide managerial training for staff? If yes, please list kinds and
frequency of the training
Do you have access to market research and best practices in your
area/sector of operation? If so how?
24
Annex 2: Detailed Project Description
YEMEN: Enterprise Revitalization and Employment Pilot (EREP) Project
1.
The project aims to inform private sector development policies and programs in Yemen,
with a particular emphasis on SME development and employment. This focus on SMEs and
employment stems from the conflict-affected nature of the country context and evidence of the
importance of SMEs in private sector development.
2.
Private Sector Development can be a vital tool in conflict-affected environments. In the
World Bank’s 2011 World Development Report on Conflict, Fragility and Development and
elsewhere, it is now recognized that low GDP per capita and unemployment are major drivers of
conflict. This is supported by survey data cited in the WDR: Asked for the reasons why young
people join rebel groups or gangs, the biggest share of respondents indicated unemployment as
the main reason. The report concludes that the path to longer-term development and peace "is
dependent on a healthy private sector".29 PSD is therefore crucial, "especially if creating jobs and
incomes is to out-last donor-funded, short-term emergency works." Since in Yemen, as in many
other developing countries, the private sector consists predominantly of micro and small, and
medium enterprises, this places their competitiveness and growth at the top of the development
agenda in fragile and conflict situations.
3.
Literature on small and medium enterprises (SMEs) suggests that the majority of new
jobs in diverse economies are generated by a small percentage of fast-growing SMEs, or
“gazelles”. While accounting for some gaps in available data, being a high employment growth
SME in MENA is positively correlated with specific initiatives and activities including new/
improved product development, offering workers formal training, having international quality
certification, and having a company website.30
4.
And yet these are precisely the type of practices that smaller firms are particularly
challenged to adopt. Business owners are often reluctant to take the decisions to invest in
learning and innovation that are essential to meet market requirements. They under-invest in the
business and technical skills, know-how, information and advice and tend to seriously
undervalue the gains from using business development services (BDS) to deal with
competitiveness adjustments, or simply cannot afford them in the near term. They also tend to
be uncertain that the substantially higher initial investment costs in learning and pre-competitive
investments required to grow are justified by expected benefits. This is particularly true in
fragile and conflict contexts, where small businesses may be more isolated and less sophisticated
than their counterparts in other countries with similar income levels.31
5.
In addition to these typical challenges, private enterprises in Yemen face a particularly
difficult business environment and the need to overcome the impacts of the 2011 crisis on their
businesses with limited resources. Overcoming these combined factors will require an
29
World Development Report: Conflict, Security, and Development, World Bank, 2011.
SME Innovators and Gazelles in MENA – Educate, Train, Certify, Compete!, MENA Knowledge and Learning
Quick Note Series, Andrew Stone and Lina Tarek Badawy. World Bank, September 2011, No. 43.
31
Private Sector Development in Conflict Regions: Viable Support Options in the West Bank and Gaza, MENA
Knowledge and Learning Quick Note Series, John Nasir, Ranan Al-Muthaffar, and Rimal Kacem. World Bank,
January 2012, No. 52.
30
25
intervention that can address both the short-term challenges of revitalizing businesses after the
2011 crisis and the challenge of competitiveness and growth in the longer term. The 2011 World
Development Report on Conflict, Fragility and Development emphasizes the importance of early
results and confidence building measures that promote jobs and business confidence, including
initiatives for private sector recovery. The WDR takes note of approaches that have been found
effective in fragile and conflict situations, including matching grant facilities for new market
development that exploit the private sector’s capacity to innovate and help entrepreneurs develop
new product lines while sharing the risk of investment, and value chain approaches that address
breakdowns in business and market linkages.32
6.
Engaging with SMEs on business capability upgrading also creates an opportunity to
leverage businesses’ interest in improving their capabilities for job creation by linking their
business development activities with job opportunities for youth. Inserting recent unemployed
graduates from vocational colleges and universities as interns into the participating businesses
can improve their employability and even their employment outcomes. An IEG evaluation of
wage subsidies to provide hiring incentives has found that this approach can have positive impact
on individual employment, but that the improved job outcomes can be dependent on the intern
acquiring higher-level skills during the internship period and that such programs can suffer from
low firm uptake. 33 Linking the internships with the support for business capability upgrading
may contribute positively towards both of these elements; the validity of this hypothesis will be
one of the aims of the impact evaluation.
7.
The project will seek to determine the impact of the internships not only on the
employment status of the beneficiaries after the internship, but also the impact on the
employability of the youth completing the internships as judged by their hiring firms. This
additional aspect of measuring the success of the internship program is important in reflecting
the benefits of internship programs on creating a cadre of skilled graduates that can be created by
private sector-led job training and which may be a key to improving job skills, a constraint cited
by firms in investment climate assessments in Yemen and MENA. The internship program can
also demonstrate to the GoY, academic institutions and the private sector a model of private
sector-led job training and inform the introduction of such programs in Yemen.
8.
Finally, the outcomes and lessons learned from these initiatives will inform the technical
assistance aspect of the project, whereby an impact evaluation and collection of lessons learned
will inform policies and programs of the GoY, donor community, and private sector
organizations. Job creation, particularly through SMEs, is a central pillar of the MAF and a
priority of the TPSD. This project will bring evidence and lessons learned to MOPIC and other
agencies mandated with SME development and job creation to inform public policies, strategies,
and programs throughout the life of the project.
32
Ibid
Youth Employment Programs – An evaluation of World Bank and IFC support. IEG, World Bank. September
2012.
33
26
Project Components
Component 1: SME Internship and Upgrading Program (US$3.72 million)
Sub-component 1A: Internship pilot
9.
Youth unemployment is particularly acute amongst university graduates and vocational
college graduates when compared youth with basic education.34 This component would aim at
providing paid internships for an estimated 400 fresh graduates (depending on demand) from
universities or community/technical and vocational colleges in Yemen through SMEs who
express an interest in hiring the interns. The program would facilitate and support the placement
of the interns through a matchmaking process, providing basic skills training to all eligible
applicants and basic orientation training to those participating in the program (work ethics,
personal productivity), and a subsidy of 50 percent or more of the internship cost for 6 months.
Sub-component 1B: Business development matching grants pilot
10.
The program would provide up to 400 firms, depending on uptake, with a matching grant
(typically 50 percent of the cost, defined in OM) for the procurement of business development
services (BDS), training and goods (as a minority component) to improve management practices,
technology, or products or to reach new
markets (domestic or export) as defined in a Indicative services (and some goods) eligible for
matching grants:
BDP submitted by the firm. Priority and  sustainable business recovery plans (possibly
possibly other incentives defined in OM, such
including small scale equipment, small scale
spare parts, software, advisory services);
as a higher match rate, increased grant ceiling,
or training vouchers may be granted to firms  quality assurance and control systems, quality
certification, Hazard Analysis and Critical
also hiring an intern. Services such as
Control Points (HACCP) or similar certification;
transport, maintenance, health, education and
minor measurement and test equipment
business service providers themselves; agro-  introduction of good management practices such
as cost accounting, operations management and
processing such as fishing, honey and coffee;
inventory control systems;
and light manufacturing, such as food

market strategies, plans, research, and trade fair
processing, stone, garments, and fabricated
participation;
metals, are expected to be prominent industries  new product development or improvement
as reflected in the composition of the economy.  production process upgrades or improvements;
A grant ceiling of US$ 10,000 is proposed,  packaging and labeling design and production
services.
defined in OM. By virtue of design the project

Introduction of information and
would aim to support mainly small scale firms,
telecommunication technology.
but micro or larger firms would not be  Training activities (particularly associated with
excluded. Both this and the internship
the employment of interns through the program)
component would be implemented in two  Minor goods associated with the plan (e.g.,
measuring and test equipment, IT equipment)
locations, Sana’a and Aden.
11.
While the project will pilot the effects
of firm-level interventions, proactive measures to generate demand and produce good quality
34
Unemployment rates for tertiary educated vs. basic educated youth were estimated at 15.9 percent and 10.7
percent respectively in 2009. Current comparable data is unavailable, however a recent UNDP report currently
estimates overall youth unemployment (ages 15-24) at 52.9 percent.
27
BDPs from SMEs for business development and upgrading services will also be undertaken.
Outreach activities will be undertaken to reach SMEs, with specific steps to reach women owned
and managed businesses. SMEPS will use its network of women entrepreneurs (developed
though past activities) and women’s business organizations to promote the project among women
business owners and managers. Direct assistance will be provided to firms in producing viable
BDPs. Furthermore, SMEPS will engage at a sector/cluster level by facilitating access to
information and services on good management practices, standards and regulations, quality
systems and certification, export market requirements, advanced buyer requirements, and
technology. Such initiatives may involve for example: workshops and training, transfer of
technology activities, facilitation of public-private dialogue, hosting of export buyers and market
experts, coordination and organization of BDS providers, and linkages between academic/
vocational education and specific sectors on job skill needs. Examples of such initiatives can be
found in some of the work already undertaken by SMEPS in collaboration with BMOs and
consortia of firms in various clusters, such as:
 the introduction of GPS technology in the fisheries sector,
 facilitating an international coffee conference in Yemen,
 transferring international expertise on greenhouse seedling production in agribusiness,
 initiatives to mobilize the BDS sector to better serve SMEs, and
 partnering with the Ministry of Technical and Vocational Education and Training to
introduce entrepreneurship and business training across its programs.
12.
These sub-components (1A and 1B) will finance the partial grants for the internships and
goods and services procured through the business plans.
Sub-component 1C: Project management
13.
The component will also cover the costs of SMEPS implementation and management of
these activities, including project team members hired for the project (Project Manager,
Procurement Officer, and Accountant), goods and services (including audit), travel (including
international travel), and financing of incremental operating costs, training and incremental fees.
Component 2: Bank-executed activities: Impact Evaluation and Technical Assistance
(separate Bank-executed trust fund: US$0.43 million)
14.
This second component is actually implemented directly by the World Bank as part of its
analytical and advisory activity (AAA) and is not considered part of this Recipient-executed
project. It is included here in this project document for the sake of a complete presentation of the
proposal submitted to the MENA Transition Fund, and its activities are tied to Component 1 of
this project.
15.
The Mutual Accountability Framework, an outcome of the Riyadh Donor Conference,
commits the GoY to “Adopt more conducive policies for micro, small and medium enterprise
development and expand micro and SMEs programs”, with specific commitments on
establishing facilities for providing TA and access to finance for SMEs. The MAF further
commits the donor community to provide “technical assistance to promote micro, small, and
medium enterprise employment, particularly targeting youth and women”. In line with these
28
commitments, this component will leverage lessons learned from the design and implementation
of the pilot project, information collected throughout the lifetime of the project from youth and
private enterprises, information gained on key clusters and sectors and their competitive
challenges, and finally the outcome of the planned impact evaluation and other data analysis
undertaken to evaluate project results, which will be used for the following purposes:
 To advise MOPIC on SME development and employment strategies and programs. This
will be in the form of a policy note and the impact evaluation report.
 To prepare for scaled up SME development and employment projects, financed by the
GoY or international assistance. The World Bank has a planned pipeline project for SME
revitalization and growth whose design is expected to be shaped by the outcomes of this pilot
project.
 To contribute to the knowledge base and share this knowledge with other GoY agencies,
donor community, and private sector on challenges to SME development and employment in
Yemen. This will be in the form of policy notes and workshops undertaken at intervals
during the lifetime of the project.
16.
The impact evaluation will examine the impacts of the piloted interventions on
participating graduates and SMEs. It will be executed through project M&E activities and
independent survey firms. The final impact evaluation study would be used to design scaled up
programs for private sector-based job creation and SME competitiveness programs in Yemen.
17.
Just-in-Time TA will be provided in areas prioritized by the MAF and as emerging from
public-private dialogue, which may include:
 TA to MOPIC and other GoY counterparts for the development of a SME Strategy. This
TA may be provided in partnership with the Islamic Development Bank.

TA on access to finance, the scope and nature of which will be determined to support the
GoY commitment in the MAF on improving access to finance. This may focus on less
analyzed demand side issues, such as financial literacy and financial product needs.35
 TA on Special Economic Zones (SEZ), including the draft SEZ law, in support of the
MAF commitment. This would be undertaken in collaboration with IFC, who are also
expected to provide support on the PPP legislation.
18.
This component will also cover TA to SMEPS related to the implementation of this
project, particularly on monitoring and evaluation and the sustainability of SMEPS.
19.
The rationale for World Bank execution of this component lies primarily in the analytical
nature of the activities and the need to conduct a robust impact evaluation, and SMEPS has
requested that the World Bank take responsibility for the implementation of the impact
evaluation to ensure its independence. Furthermore, the second element of this component is the
provision of TA to the GoY by the World Bank, bringing the results of the impact evaluation as
well as lessons learned from this project and global practices to serve the GoY’s policies and
programs, which is most effectively undertaken by direct World Bank execution.
35
Access to finance here is defined in the broad sense of access to financial services of all kinds, not just credit.
29
Annex 3: Implementation Arrangements
YEMEN: Enterprise Revitalization and Employment Pilot (EREP) Project
Institutions
1.
According to Law No. 10 of 1997 for the Establishment of the Social Fund for
Development (SFD), SFD is the institution mandated with, among other things, “financing
manufacturing and service projects, either directly or indirectly, for individuals, households,
small enterprises, and other beneficiary groups under legitimate, soft terms”. 36 The Small and
Micro Enterprise Development (SMED) department in the SFD has been focused on finance and
technical support for both micro and small enterprises. The Small and Micro Enterprise
Promotion Services (SMEPS), is a subsidiary of SFD with a focus on technical assistance,
training, and value chain interventions. Component 1 of the project will be implemented by
SMEPS as the recipient and implementing agency. Component 2 of the project will be executed
by the World Bank in coordination with government and other agencies, particularly the Ministry
of Planning and International Cooperation, to aid in setting the analytical agenda.
2.
The SFD is an autonomous organization under the Prime Minister’s Office. Its Board of
Directors has government representation, NGO representation, private sector representation, and
financial sector representation. The Board reviews policy issues and approves important
documents such as annual plans, and budgets and amendments to the Operational Manual.
Besides the SFD’s office in Sana’a, there are nine regional branch offices country-wide. SFD
acts as the parent agency and Board of Directors of SMEPS, its subsidiary which, consistent with
the law enacting SFD that allows it to form agencies to implement its functions, it formed in
2010 to focus on business services for small and micro enterprises.
SMEPS Assessment
3.
Very few agencies in Yemen have capacity and experience working on overcoming
information gaps of small enterprises with respect to international best practices and
management techniques such as quality systems, cost accounting, and directed marketing.
SMEPS has the appropriate combination of internal business culture, a set of operational
experiences closely related to the kind of work that this pilot project would support, a network of
relationships with public and private sector actors, and well developed fiduciary systems, that
make it well positioned to implement this project.
4.
SMEPS has carried out a survey of BDS providers throughout Yemen (providers of
technical, management, training, legal, and other services) and launched a BDS website
(www.istishaari.com) and Facebook page. Their Istishaari project creates an interactive space for
BDS providers in Yemen, organizes and facilitates training services (such as a recent training
event in Cairo on management consulting for SMEs). They have also conducted some specific
interventions in the fisheries and coffee value chains, with Dutch assistance, to introduce new
technology, market research, and information to the supply chain, with high potential for further
work in this area. SMEPS also facilitates the provision of a range of management and
entrepreneurship training courses, including IFC’s Business Edge and the International Labor
Organization’s (ILO) Know About Business (KAB), through the qualification of trainers and
36
World Bank staff unofficial translation of the Arabic text of the Law.
30
training institutions, including some subsidies to training costs. Moreover, SMEPS has
undertaken a UNDP funded youth employment program for internally displaced youth in Aden
during the height of the crisis, with good results in providing training, internship programs, and
even permanent jobs for some of the youth beneficiaries.
5.
SMEPS carries out its programs in partnership with a range of organizations: Yemeni
SMEs themselves that employee between 4-50 workers across all sub-sectors; service providers
across the full range of business service provision including: marketing, accounting, training,
advertising, information etc.; the SFD, German Technical Cooperation (GTZ) and Dutch
technical assistance, the IFC (Business Edge Program), the UK Department for International
Development (DFID), the Islamic Development Bank, and others.
6.
The SMEPS team is made up of project staff, a team assistant, financial and
administrative manager, accountant, information and technology officer and the executive
director. Please see Figure 2 for a full organizational structure of SMEPS. Its activities are
organized through corporate and operational manuals, including:
a.
b.
c.
d.
e.
f.
Statement of SMEPS mission and objectives
Organizational Structure and job descriptions
Human Resources Manual
Financial Policies Manual (includes procurement)
Accounting Manual
Accounting Procedures
7.
The Bank has assessed the financial management capacity of SMEPS and the assessment
concluded that with some defined improvements, SMEPS possesses a sound financial
management system which is capable of capturing, summarizing, recording, and reporting its
transactions in an accurate and timely manner. The improvements needed are revising the
financial manual to account for the nature of the activities of this project, and the improvement
of accounting reporting to enable automatic preparation of IFRs.
8.
SMEPS’ capacity deficiencies lie primarily in its MIS, and its monitoring and evaluation
systems (M&E). These two capacity areas will be addressed in the course of this project through
technical assistance provided by Bank staff and Bank contracted consultants, and through
SMEPS’ procurement of a client relationship management (CRM) system and development of a
monitoring and evaluation system for this project.
9.
Ineligibility as direct BDS provider. As the SMEPS is the recipient and implementing
agency, this makes it ineligible as a potential service provider to individual firms, consortia of
firms, and business associations under the cost-sharing financing (Component 1) under the
conflict of interest provision of the EREP Project.
31
Figure 2: Organization Structure of SMEPS
Board of Directors
(SFD Executive
Management)
Executive
Director
Finance & Admin
Manager
Sana'a
Branch
Aden
Branch
Business
Development
Project Officers (3)
Director
IT Manager
Accountant
Communications
Officer
Mukula
Branch
Branch
Manager
Project Officers (3)
Project
Coordinator
Project
Coordinator (2)
Admin Assistant
Project Officer
Admin Officer
Trust Fund Arrangements
10. Recipient-Executed Component (Component 1): The Deauville Partnership Transition
Fund (DPTF) first enters into a Financial Procedures Agreement with the World Bank as the
Implementation Support Agency. Upon approval by the Steering Committee of the DPTF of the
grant application for the proposed project the Bank, acting as Implementation Support Agency
(ISA), will enter into a Grant Agreement with the SMEPS which according to the provisions of
the DPTF OM and the TF Grant Application is a Recipient Entity for the purposes of this grant.
11. Bank-Executed Component (Component 2): The Deauville Partnership Transition Fund
(DPTF) approves a grant funding request from the World Bank as implementing agency.
Implementation of Activities
12.
SMEPS will implement Component 1 of the project, including the internship program,
business development plan support program, and associated implementation and management
32
activities. Component 2 for technical assistance, is a bank-executed component, and will be
implemented by the World Bank.
13. The EREP pilot project will be implemented through SMEPS using its staff and
organization. SMEPS has provided a Work Plan to the World Bank describing activities,
timeline, and budgets for activity implementation. SMEPS has adopted an Operations Manual
(OM), acceptable to the Bank. The OM describes the policies and procedures to be followed for
Component 1, including grant making activities for the internships and BDP support activities.
The Operations Manual will be supported by detailed instructions and templates which will not
require Bank no objection.
14.
SMEPS Project Oversight: SMEPS has ultimate responsibility for the implementation
of the project. This involves preparing the OM (with Bank no objection) and its policies and
procedures, recruiting the project manager and other project staff, developing work plans and
budgets, financial management and procurement for all project activities, operations and
implementation, and M&E of implementation progress.
Figure 3: Project Organizational Structure
SMEPS
Executive
Director
Business
Development
Director
EREP Project
Manager
Sanaa Project
Officer
Internal Auditor
Finance
Manager
Aden Project
Officer
BDP Advisors (6)
BDP Advisors (4)
Internship
Advisors (6)
Internship
Advisors (5)
Procurement
Officer
Accountant
15.
EREP Project Manager: The Project Manager will have the following responsibilities:
i) guarantee project team compliance with the OM and its policies and procedures; ii) establish
and maintain appropriate systems (i.e. client management, intern management, M&E, FM and
procurement, etc.); iii) manage staff and advisors to ensure proper skills, training and
performance; iv) provide adequate promotion of the project and private sector participation and
drive; and v) ensure quality of EREP process, FM and controls as well as periodic progress
reports to the Executive Manager of SMEPS and the WB.
33
16.
SMEPS Project Officers: SMEPS Project Officers are incumbent SMEPS staff that will
be assigned to the EREP project. Project Officers oversee the activities of the BDP Advisors and
Internship Advisors in their locations. Each SMEPS Project Officer in each location will be
assigned to manage either the group of the BDP Advisors or Internship Advisors. The Project
Officers will have the responsibility of: i) overseeing implementation activities by the BDP and
Internship Advisors and ensuring coordination between those working on the same firms; ii)
quality assurance of services (both design and implementation); iii) updating the project manager
and the management committee; and iv) supporting EREP outreach and dissemination.
17.
Business Development Plan Advisors: The BDP Advisors are on the leading edge of
the EREP program and drive its pace, quality and, to some extent, its outcomes. They will be
independent consultants contracted to the project. It is critical to the success of the EREP that
consultants recruited as BDP Advisors fully meet job qualification criteria, including: i)
substantial entrepreneurial experience (min 5 years) running his/her own business or employed
as a senior employee of a substantially successful business in Yemen or elsewhere; and ii)
adequate training and practical experience in employing one or more good business practice
disciplines; market research, marketing, financial management, quality assurance management.
The essential responsibilities of these team members are to: i) work with the project team on
ensuring proper client firm demand, screening, and assessment; ii) support client firms in BDP
design, capacity building, procurement of BDS, and implementation of BDPs; iii) processing
claims for payment/ reimbursement; and iv) participate in portfolio reviews of the BDPs.
18. Internship Advisors: The Internship Advisors will act as the front line in creating
linkages between recent graduates and firms. They will be independent consultants contracted to
the project. The essential responsibilities of these team members are to: i) conducting a
marketing and communications program for graduates and firms to ensure demand; ii)
processing graduate and firm applications; iii) undertake matchmaking of graduates to firms; iv)
coordinate interviews and final selection; iv) Monitor and review internship programs; and v)
process and validate claims for payment/ reimbursement;
19.
EREP Project Management Committee: The EREP Project Management Committee
(MC) is made up of the Project Manager, Procurement Officer, Project Officers, the Business
Development Director, and the Finance Manager. The MC approves grants for Business
Development Plans (BDPs) and ex-post reviews of internship selections. It is responsible for
undertaking periodic portfolio reviews to assess the nature of the project activities and
beneficiaries.
34
Table 5: Project Management Resources
Expense Category
Human Resources
Dedicated Project team
members
Description
Project team members freshly hired for the project: Project
Manager and Accountant (to be hired when deemed necessary as
disbursements increase), acceptable to the World Bank
SMEPS staff team
Procurement Officer, Project officers, Assistants, Financial
members
Manager, Internal Auditor, and IT and Systems Specialist partially
or wholly allocated to the project by SMEPS (costs covered by
SMEPS)
Goods and Consulting Services
IT Systems and equipment Client relations management (CRM) and website, computer and
office equipment, and miscellaneous project related goods.
Consulting and audit
Marketing, legal, external audit, and other project related consulting
services
services.
Incremental Operating Expenses, Training, and Travel
Training fees
Project related training courses, workshops, study tours, materials,
registration, tuition, facilitator’s fees, translation and interpretation,
and other miscellaneous training costs all based on budgets
acceptable to the World Bank.
Travel expenses
Reasonable and necessary travel, accommodation, and per diem of
related to training and project management activities based on
budgets acceptable to the World Bank.
Incremental Operating
Reasonable and necessary incremental expenditures incurred by the
Expenses
recipient on account of Project implementation, management and
monitoring, including office rental and maintenance; operation and
maintenance of office equipment; stationary, office supplies and
utilities; office consumables; office administration including
translation, interpretation, printing and advertising, communication
costs, costs associated with the production of bidding documents;
reasonable commercial bank charges; reasonable and necessary
transportation and travel costs of members of the Project Team,
maintenance, insurance and fuel of vehicles; costs of carrying out
meetings and any other miscellaneous costs directly associated with
Project implementation, all based on periodic budgets acceptable to
the Bank, but excluding salaries or honoraria of SMEPS staff.
35
BDP Grant-making process
20.
The following steps represent the core workflow practiced by the EREP Project Team in
client identification, business development plan preparation, plan appraisal and grant approval,
plan implementation and impact evaluation.
Figure 4: BDP Grant Process
Reimbursement
Reporting
Service
provision/
implementation
Procurement
Approval
BDP
development
and appraisal
Screening
Firm
Applications
Monitoring & Evaluation
21.
Key Elements in Due Diligence. The EREP Project Team undertakes the following key
steps to help produce a strong positive impact of the client’s business development plan –
application appraisal, grant approval, procurement support and supervision oversight. Each is
described in some more detail below.
a) Applicants for the matching grants will be screened to ensure meeting of simple
eligibility criteria. The screened applicants will be assigned for processing to receive a
matching grant or to a control group through random drawing, this will allow for the
implementation of the impact evaluation. However, if uptake is not sufficiently high, this
will not be possible, and first come first served processing will be adopted.
b) The BDP Advisor appraises a client application for cost-sharing financing. Upon receipt
of a plan and a request for grant financing from an individual firm or association, the
BDP Advisor will visit the firm and appraise the plan. The plan will be assessed
primarily as to its ‘plausibility’, which means: i) it has realistic business development
objectives and targets with verifiable indicators, which are pertinent to its overall
business aims; ii) it has adequately considered various strategies to achieve such
objectives and adopted a plausible and coherent set of activities, services inputs, cost
estimates and work plan sequence to achieve them; iii) it currently has an adequate
product offering locally (or to another national or export destination); and iv) it has
adequate implementation capability and the full commitment of firm or association
leadership to its implementation.
36
c) The EREP Management Committee considers and, as appropriate, approves a costsharing financing application. The Committee will review the prospective client’s
application and recommendation of the BDP advisor on a fully technical and impartial
basis then make a positive or negative decision on 50-50 grant financing (or 70-30 in the
case of an association or consortia of firms) to support the implementation of the business
development plan.
d) The Committee may also return the plan and financing request to the firm or association
requesting additional information or plan modifications in order to give it positive
consideration (this is not common, given the expectation that BDP Advisors will have
worked sufficiently with potential recipients to ensure that all plan elements are present
upon a first submission).
e) The BDP Advisor oversees procurement of business development services, carries out
supervision oversight and assists clients, as needed, with the approved plans and
financing. The client signs a standard letter agreement with the selected BDS, which
executes the TOR under his/her supervision. Experience shows that the procurement
process may become a significant bottleneck to implementation of plans and gives the
impression to some clients that the matching grants require ‘a long process for little
money’. This might arise due to the fact that many SMEs have never engaged BDS
through a structured procurement process involving written terms of reference, multiple
bidders, structured evaluation and other written documentation. A careful balance will be
maintained between the role of the client to drive and manage the procurement process,
and the BDP Advisor’s role to inform and support the process, and to ensure compliance
with procurement rules. Accordingly, the BDP advisor will: i) clarify the EREP
procurement process for clients; ii) if requested, support the client in his/her procurement
process; iii) focus centrally on the quality of the individual TOR and the BDS provider
selected by the client; and iv) ensure conformity with procurement rules. Implementation
is monitored through, as possible, regular electronic communication (phone, email), and
periodic visits to each client under the BDP advisor responsibility to provide support and
to ensure compliance of BDP execution. Each BDP advisor also needs to ensure receipt
of regular quarterly reports from client recipients, and attach separate supervision
observations. The BDP Advisor’s monitoring work will be backed by a specific
supervision monitoring system to record and be a vehicle for discussion of aggregate
implementation progress and directing attention to any important issues;
37
Internship process
22.
The following steps represent the core workflow practiced by the EREP Project Team in
client identification, intern identification, internship matchmaking, placement, implementation
and impact evaluation.
Figure 5: Internship Process
Reimbursement
Monitoring and
reporting
Internship
period
Hiring
Matchmaking
Screening
Graduates
Applications
Firm
applications
Monitoring & Evaluation
23.
Key elements in due diligence. The team undertakes key steps to help produce a strong
positive impact of the internship on both firm and graduate.
a) The Internship Advisor undertakes a matchmaking process: For each firm requesting and
intern applicant, the Internship Advisor not only reviews the application to determine
qualifications needed, but is required to contact each firm to get a better sense of the
firm’s needs. The Internship Advisor will also take into account any BDP being
implemented at the firm during the project duration to better link interns to the BDP
objectives.
b) Applicants for the internships will be screened to ensure meeting of minimum
qualifications. After matching to required qualifications, screened applicants will be
assigned to interview for internships or to a control group through random drawing.
c) Internship Advisors and the Project Officer will conduct site visits to monitor the nature
of the internship activities.
38
Eligibility
24.
Eligibility - firms and associations. All individual Yemeni private firms in Yemen and
their business associations in agro-industries, manufacturing (including artisans) and tradable
services (including, for example, tourism, education and health) having qualifying business
development plans will be eligible to participate. Indirect exporters will also be eligible. In
addition, firms in the business development services sector itself will be eligible for grant
support under qualified business development plans (see below).
25. While the primary focus of the project is on SMEs, export market development and existing
firms, larger firms without new market development capacity or with weak local market
development, and newly established firms existing for at least six months with very sound
market development plans and strong prior related business experience will also be eligible for
grants. While participation in the EREP is largely self-selecting, approval of 50-50 (or 70-30 for
groups) co-financing support will be subject to the following additional conditions:
a) The firm has been established for at least six months;
b) the firm is willing and able to invest 50 percent of the its own resources to cover the costs
of a well-defined and time-bound BDP approved by the EREP Management Committee;
c) the firm has one or more existing products that has good potential to penetrate a new
local or international markets, or new products or services that can be developed and sold
to such markets within the duration of the plan;
d) the firm has the strong commitment and capacity to carefully implement its plan; and
e) EREP funding represents critical additionality needed for the project to be realized namely, if the EREP does not approve a grant, will the investment not be made, will it be
delayed or scaled back, or will it be carried out in a markedly less professional manner.
26. In addition, for business associations, approval will be subject to findings that the
association:



multiplies the EREP’s ability to reach firms,
expands the sustainable capacity of the association to provide business services, and
has sufficient commitment to develop a business service capacity.
27.
Eligibility - individual firm BDPs. A BDP is the basis for all EREP partial grant
assistance and will be prepared by the firm with the assistance, as needed, of the BDP Advisor
and outside consultants. To qualify, a plan must be of high quality standards; be presented
succinctly (usually in about 4 pages plus annexed supporting information, if necessary); provide
clear objectives, activities, and budget towards a defined positive result on the firm’s products,
process, or markets; and be achievable given the firm’s capacity and commitment. The plan must
not pose any social or environmental risks (no works will be approved).
28.
Eligibility – consortium and association business development plans. The EREP will
also enable participation of a self-defined group of businesses, or consortium that coalesces for
specific mutual benefit under a commonly agreed BDP. This might involve, for example, SMEs
that already partner in other supply, production or marketing arrangements, or micro enterprises
that would more spontaneously form a group under a sponsor firm as a ‘BDS club’ to reduce the
39
unit cost of BDS and share its results. It can also include business membership organizations
that provide services to member firms.
29.
Eligibility – activities under business development plans. Under an eligible business
development plan, there is a broad and expandable range of activities which may be eligible for
project financing insofar as they are required for and directly contribute to achieving the plan.
By (non-exhaustive) example,


















The cost associated with business registration
Company expansion or business improvement diagnostics
Business management or technical training
Domestic and international market research, market intelligence services, market
prospection travel
Trade fair participation
Surveys of competition of same or substitute products in prospective markets
Product design and prototype development
Forming strategic alliances and subcontracting
Production and efficiency diagnostics
Adoption of e-business systems and practices for market development, including
Databases and other information services
Product testing (internal lab and external) and certification services
Securing trademarks
Quality management systems development
Labeling and packaging design
Marketing campaigns, sales promotion materials, events and missions
Establishment of sales representation and distribution in export markets
Daycare services required for participating staff to execute the firm’s business
development plan
Minor goods associated with the activities, such as IT equipment, testing equipment,
spare parts for equipment rehabilitation and repair, or similar.
30. Otherwise, a client firm’s salaries, other recurring costs (such as ongoing office rental or
advertising) and the purchase of capital goods, other than small equipment and parts as noted
above, are not eligible. Goods may only constitute a minority component of the partial grant
(less than 50 percent).
Financial Management, Disbursements and Procurement
Disbursement and Flow of Funds Arrangements
31.
The Project funds will be channeled through SMEPS and deposited into a separate
segregated USD Designated Account (DA) in a commercial bank acceptable to the World Bank,
to be opened and maintained by SMEPS and under conditions acceptable to the World Bank.
Eligible expenditures will be financed out of the Grant proceeds including Goods, NonConsulting Services, Consultant' Services, Training, Incremental Operating Costs, Internship
Grants and Business Development Grants.
40
32.
The proceeds of the Grant would be disbursed in accordance with the traditional
disbursement procedures of the Bank and will be used to finance project activities through Direct
Payments, Advances, Reimbursements and Special Commitment. Replenishment and
Reimbursement Withdrawal Applications will be accompanied by Statement of Expenditures
(SOEs) in accordance with the procedures described in the Disbursement Letter and the Bank's
"Disbursement Guidelines". The quarterly IFRs and the Annual Financial Statements will be
used as a financial reporting mechanism and not for disbursement purposes. The minimum
application size for direct payment and reimbursement will be the equivalent of 20% of the
Advance ceiling amount. The Bank will honor eligible expenditures completed, services
rendered and delivered by the Project closing date. A four months' grace period will be granted
to allow for the payment of any eligible expenditure incurred before the grant closing date.
33.
Disbursement to the beneficiaries from the SMEPS’ DA will follow the SMEPS
Operational Manual and the World Bank Guidelines. Typically, client firms of the project will
make full payment to the service provider once business development services are rendered
under a Business Development Plan approved by the project management at the time the grant
was approved. The client firm will then submit a request for reimbursement for the approved
share or percent from the project. The project management will verify documentation, inspect
the systems, products, and other supporting evidence of the claim and, if verified, reimburse the
firm against the claim at the appropriate cost-share level (usually 50 percent). In some cases,
which will be defined in the operations manual, and particularly where warranted by limited
resources for smaller firms, payments may be made directly by SMEPS to the service providers
or to the beneficiary firm for payment to the service provider upon receiving evidence of
payment of the beneficiary’s share. For internships, client firms may submit claims for the costshared amount of the intern’s salary on a monthly basis or at the end of the internship. In this
case, evidence of the client firm’s payment of the intern’s salary and a report on tasks completed
by the interns signed by the client firm and the intern will serve as evidence of “service”
provided along with the SMEPS’ own HR advisor’s reports of the intern’s service at the firm.
Figure 1: Fund Flows
World Bank
Child Trust
Fund
Account
Funds
SMEPS Designated
Account
WAs +
SOEs
Invoices
Funds
Vendors and
service
providers
41
Reimbursement
claims &
Payments
Client firm
beneficiaries
Services, Funds
invoices
Service
providers,
vendors, and
interns
34.
It is essential to ensure that the turnaround time between presentation of invoices for
expenses incurred by SME clients to the project management and payment disbursements by the
project to such clients not exceed 10 days given the generally weak working capital position of
many Yemeni firms.
Financial Management Arrangements
35.
Accounting, reporting and auditing. SMEPS maintains a computerized financial
management system of records, accounts, and reports in accordance with consistently applied
accounting standards acceptable to the World Bank, adequate to reflect the operations, resources
and expenditures related to the project as defined in its Operations Manual. The Manual defines
the (i) roles and responsibilities for all financial management staff, (ii) documentation and
approval procedures for payments, (iii) project reporting requirements, and (iv) quality assurance
measures to help ensure that adequate internal controls and procedures are in place and being
followed. SMEPS has upgraded its accounting reporting to enable the automatic preparation of
quarterly Interim Financial Reports (IFRs) to be submitted to the World Bank within 45 days
from the end of each quarter. The IFRs shall be reviewed by an independent external auditor.
36.
All project transactions are subject to annual independent audits by a private audit firm,
acceptable to the Bank, covering all the expenditure categories of the project. Such audits would
include on a representative sampling basis the use of project funds at the client firm level. The
SMEPS will submit to the Bank the following audit reports within six months from the end of
each calendar year:

SMEPS consolidated audited financial statements

Project audited financial statements
37.
Organizing and Staffing. SMEPS has adequate staffing arrangements. SMEPS is staffed
with a finance and administrative manager who is supported by two accountants, and another
accountant will be hired for the project. In 2012, SMEPS hired an internal audit manager who is
in the process of hiring two internal audit staff.
Internal Controls
38.
Although the SMEPS maintains its own FM Manual that adequately describes the related
guidelines encompassing the authorization and internal control cycles, the proposed Project has
special activities related to grants, so the SMEPS had adopted an Operational Manual, in a form
and substance satisfactory to the World Bank.
39.
The SFD has developed a Complaints Handling Mechanism through which SFD
manages, responds and monitors complaints within its activities and other subsidiaries (like
SMEPS) as part of an ongoing process to improve its accountability.
40.
SMEPS uses a computerized accounting system, with the accountants having their
individual responsibilities which cannot be duplicated by another staff. Each maintains his own
passwords to perform his/her job.
42
41.
The SMEPS prepares monthly bank reconciliation, prepared by the accountant reviewed
and approved by the Finance Manager. For each of the SMEPS branches, one accountant makes
the monthly bank reconciliations and the monthly cash flow report signed by the branch
accountant and the branch officer.
42.
SMEPS has a qualified Internal Audit Department (IAD) led by the Internal Audit
Manager, supported by an assistant, and who reports directly to SMEPS’ Executive Director. The
department is responsible for conducting regular audits within SMEPS. The internal auditor
follows-up on any actions agreed upon with the concerned branches, departments or units. It
also coordinates and cooperates with the external auditors. In addition to that, as the SFD is still
the parent institution of SMEPS, SFD will continue acting as SMEPS' Board of Directors,
including SMEPS in their internal audits.
43.
External Audit. SMEPS has a contract with Grant Thornton as an External Auditor for
the entity itself and all the projects implemented by SMEPS. It is mentioned in the contract that
the auditor will prepare one annual audit report for the SMEPS (as an entity) and separate audit
reports for each project (The audit report for this Project will be prepared based on terms of
reference cleared by the Bank). The SMEPS will submit both entity audit report and a separate
audit report for the proposed project on an annual basis due within six months from the end of
each year.
44.
SMEPS Finance Manager responsibilities – the primary responsibilities of the project’s
Finance Manager at SMEPS will be to:
a) Ensure that the financial and accounting manual of policies and procedures prepared is
appropriately applied in managing the project funds;
b) Maintain the system of records and accounting of the transactions and expenditures and
reimbursements under project management;
c) Prepare the budget and ensure system of internal budget control over expenditures among
project staff;
d) Prepare quarterly project financial reports and explain variances between budget and
actual expenditures;
e) Prepare annual project financial statements and submit it for annual external audit;
f) Supervise the accountants and ensure proper implementation of the project based on the
Grant Agreement, project’s operations manuals and SMEPS’s financial and accounting
manual;
g) Establish a system for verifying payments to ensure that the expenditures have been
properly budgeted, authorized and recorded;
h) Obtain validation from Business Managers of invoices submitted by clients for partial
payment/ reimbursement of expenditures under approved business plans;
i) Maintain the archives of payment/ reimbursement applications, invoices, payments
j) Coordinate the work of the external auditors
k) Perform other project-related duties as requested by the project manager
43
Procurement
45.
Guidelines. Procurement for the project will be administered in accordance with the
World Bank’s Guidelines: Procurement of Goods, Works and non-consulting services under
IBRD Loans and IDA Credits and Grants dated January 2011 and Guidelines: Selection and
Employment of Consultants under IBRD Loans and IDA Credits and Grants by World Bank
Borrowers dated January 2011 and the provisions stipulated in the Grant Agreement. In
addition, the World Bank’s Guidelines on Preventing and Combating Corruption in Projects
Financed by IBRD Loans and IDA Credits and Grants dated October 15, 2006 and revised
January 2011 has been shared with the recipient. The World Bank’s Standard Bidding
Documents, Requests for Proposals, and Forms of Consultant Contract will be used.
Procurement of goods will follow National Competitive Bidding (NCB) procedures and shall be
procured using the agreed Standard Bidding Documents (SBDs) for Yemen. In the event of a
conflict between IDA Procurement/Consultant Guidelines, as per Article 4 (2) and the
Procurement Law of July 2007 and its bay-law 1999 of the GoY, the IDA
Procurement/Consultant Guidelines shall prevail.
46.
Given the very small financial dimensions of procurement for the SME business plans
matching grants (Component 1), procurement of goods and services financed under the SME
business plans will be carried out by firms following locally established commercial practices
acceptable to the Bank, and in accordance with the provision of paragraphs 3.13 of the Bank’s
Procurement Guidelines. Types of goods to be financed under the SME business plans for firms
and business associations would include computers, quality control equipment, spare parts and
other small equipment purchases associated with facilities repair.
47.
Technical assistance services, or business development services (BDS), for the firms
financed under the SME business plans will be procured by the firms following locally
established commercial practice acceptable to the Bank and or in accordance with the provision
of paragraph 3.13 of the Bank’s Consultant Guidelines. Consultants to be financed under the
SME business plans would include individual consultant and consultant firms. SMEPS will
prior-review the contracts under the first three SME business plans reviewed and submitted
through each BDP advisor, and then shift to ex post review.
48.
For procurement of goods and non-consulting services, it will be done using Bank’s SBD
for Goods for all contracts following International Competitive Bidding (ICB) procedures.
National SBDs agreed with IDA, or satisfactory to IDA, will be used for the procurement of
goods following National Competitive Bidding (NCB) procedures. Shopping shall be in
accordance with paragraph 3.5 of the Bank’s Guidelines. Any contract estimated costing more
than US$500,000 shall be procured following ICB procedures. Any contract estimated to cost
more than US$50,000 equivalent and less than US$500,000 shall be procured following NCB
procedures. Any contract estimated to cost less than US$50,000 equivalent shall be procured
following shopping procedures. Goods that meet the requirements of paragraph 3.7 of the World
Bank Procurement Guidelines may be procured following direct contracting procedures with
prior agreement with IDA. These goods, spare parts for example, are as indicated in 3.6 of the
World Bank Procurement Guidelines in “cases that no advantage could be obtained by further
competition and that the prices on the extended contract are reasonable”.
44
49.
Consultant firms and individuals will be selected in accordance with IDA Guidelines for
selection and Employment of Consultants (dated January 2011). For firms, all contracts above
US$300,000 would be procured using Quality and Cost Based Selection method (QCBS). Least
Cost-Based Selection (LCS) and selection based on consultant qualification procedures would be
used for small contracts of standard or routine nature estimated to cost less than US$300,000 or
equivalent. Shortlist of consulting firms for services estimated to cost less than US$300,000
equivalent per contract may be composed entirely of national consultants in accordance with the
provisions of paragraph 2.7 of the Consultant Guidelines. All consulting services contracts above
US$300,000 would be subject to IDA’s prior review. All individual consulting assignments
would be selected on the basis of comparison of CVs in accordance with Section V of the
Guidelines for Selection of Consultants.
50.
The procurement and selection procedures and contract model are detailed in the Project
Operations Manual.
51.
This means that there will not be a procurement plan for the SME business plans.
Eligible business development goods and services under approved cost-sharing grants will be
chosen by the client firm according to local or international commercial practices. This will
involve a process using the client’s own research and knowledge and references to the optional
business development services roster managed by SME business plans, and/or those of another
trusted source, like a business association or outside consultants.
52.
Procurement Conformity. To ensure conformity with even this basic requirement and
particularly to address risks of fraud, project management will require from clients: i) validation
of bidders existence and qualifications through written information reflecting this as submitted to
the SME client; ii) original written documentation of bid offers; iii) a brief written statement
describing the bid evaluations process; and iv) a review of the consistency of prices of selected
bidders with others readily available in the market place, as well as with the BDP budget
approved as part of cost-sharing financing approval. Specific procurement requirements and
steps will be published on the project website to ensure broad awareness and transparency.
53.
BDS roster. A voluntary roster, that is not limiting, will be managed by SMEPS of
potential local and international business service providers which will support the procurement
work of client firms. This roster will be updated and expanded regularly in collaboration with
beneficiaries. It will be designated clearly as one among other sources of service provider
options and will NOT be used presumptively as a requirement for non-objection of a client’s
procurement decisions. It is also very important that this roster not be viewed as a device mainly
to promote the development of only the Yemeni BDS market, effectively placing BDS
development above the recovery and growth interests of cost-sharing clients, but as a reference
tool for clients to find BDS most appropriate to their business objectives, be they from inside or
outside of Yemen.
54.
Areas of concern on procurement operations. Experience shows that the SME business
plan procurement process may become a significant bottleneck to implementation of plans and
yield the impression to some clients that these matching grants require ‘a long process for little
money’. A portion of this problem arises from the common observation that many SME clients
have never engaged BDS through a structured procurement process involving written terms of
reference, multiple bidders, structured evaluation and other written documentation.
45
55.
A careful balance will be maintained between role of the SME client to drive and manage
the procurement process, and SMEPS’ BDS Advisors role to inform and support the process, and
to ensure compliance with procurement rules without SMEPS becoming co-owner of
procurement decisions. Accordingly, the BDS Advisor will (1) clarify the project procurement
process for clients, (2) if requested, support the client in his/her procurement process, (3) focus
centrally on the quality of the individual TOR and the BDS provider selected by the client, and
(4) ensure conformity with procurement rules.
Environmental and Social Management (including safeguards)
56.
Safeguards policies are not expected to be triggered. The expected size of the grants and
loans under this project are expected to be very small, in the range of up to $10,000, but most
will be less. The nature of most of the activities will be procurement of services and other
intangibles, with possible small scale goods or equipment which are not anticipated to have any
major or irreversible environmental impacts. The OM includes a negative list of activities, the
process of screening out any activities with anticipated social or environmental negative impacts,
and the principles of giving due consideration to social and environmental implications of
technical advice provided. The OM also describes design features to facilitate participation of
women in the EREP, and how internship health and safety will be adequately addressed.
Monitoring and Evaluation
57.
Data for monitoring and evaluation will be collected wherever possible in a manner
integrated with project implementation. This means data will be extracted from application forms
received from both graduates and firms, from the BDP Advisors and Internship Advisors
implementation follow-up activities, and from Project Officers supervision activities.
58.
A monitoring and evaluation system will be developed with processes and
responsibilities for monitoring and data collection and evaluation defined in the OM.
59. Training activities on the project’s M&E system will be implemented to ensure consistent
data collection from BDP Advisors, Internship Advisors, and Project Officers. This will also be
reinforced by technical assistance provided to SMEPS on M&E systems through the Bankexecuted component of the project.
60.
SMEPS will provide the World Bank with quarterly reports on project progress based on
the data from the M&E system. SMEPS will also use the data from the M&E system on a more
regular basis to evaluate implementation and identify where corrective action is needed.
Impact Evaluation – Design and data collection
61.
The project will attempt a formal impact evaluation to measure the impact of this
internship program on the employment of youth. Youth will be invited to apply for the program
and basic background information collected on them through this application process. Since
more youth are expected to apply than it will be possible to place in internships during the pilot,
the pool of eligible youth will be divided randomly into three groups: a) a group of 300 youth
who will be matched (if possible) with firms that are given a subsidy to hire these interns; b) a
group of 300 youth who will be matched (if possible) with firms that are given a subsidy to hire
46
these interns and also have been offered a matching grant; and c) 400 youth in the control group.
(Numbers are approximate and will depend on the application rates).
62.
Data on firms will be collected from the application forms, through project M&E
activities throughout the lifetime of the project, and then through follow-up data collection after
the project implementation period (by an independent survey firm).
63.
Data will be collected from the application forms, through project M&E activities
throughout the lifetime of the project on the internship experience (internship completed, high
skills acquired or not) and immediate employment outcomes of the youth obtaining internships,
and then follow-up data will track the employment outcomes of all these youth after the
internship period has ended (either through phone interviews or incentivized online selfreporting). This will enable measurement of the impact of the internships on employment of
these youth, and determination of whether the internships have more effect if carried out in firms
that have also been provided with access to the matching grant program.
64.
The project will also explore the possibility of evaluating the impact of the matching
grant program on the firm’s performance and employment levels. Ideally this would involve
obtaining a sample of firms interesting in matching grants and also potentially hiring interns, and
randomizing whether they get the grants or not, stratifying this randomization by interest in
hiring interns through the intern subsidy. However, in practice many matching grant programs
have struggled to obtain sufficient take-up of firms to allow such a design to occur, and so this
component of the impact evaluation will be contingent on there being excess demand among
firms for the matching grants.
65.
Data on firms will be collected from the application forms, through project M&E
activities throughout the lifetime of the project, and then through follow-up data collection after
the project implementation period (by an independent survey firm).
47
Annex 4: Operational Risk Assessment Framework (ORAF)
YEMEN: Enterprise Revitalization and Employment Pilot (EREP) Project
Stage: Approval
Project Stakeholder Risks
Description:
(i) There may be limited uptake by SMEs for the cost-shared
activities, particularly the internships but also the enterprise
capability upgrading due to uncertainty of the benefits, limited
resources for the match, and other factors.
Rating
Substantial
Risk Management: The project may provide additional incentives for businesses to take on interns
(subject to considerations related to the design of the impact evaluation and other factors). In
addition, the project is designed to work in two phases to allow for adjustments to be made should
uptake be the constraining factor of the project. Finally, this project is a pilot and is in fact meant to
engage the market to determine the level of demand and interest for scaling up, so it is entirely
appropriate that this would be a relatively unmitigated risk.
Description:
(ii) Civil society and the general public may not perceive
assistance to the private sector as a priority.
Risk Management: Project outreach during implementation will include extensive project
information and promotion activities, which will include sessions with civil society organizations
and be designed to clarify that the project targets primarily micro and small enterprises and is linked
to the national priority of economic recovery in the TPSD. The inclusion of youth employment in the
project is also expected to mitigate this risk substantially. Finally, the project will also be fully
transparent on its eligibility criteria, processes, and grants and grant amounts approved, including a
website and periodic public reports.
Status: Not yet
Resp:
Client
Stage: Implementation Due Date : Dec. 2013
due
Implementing Agency Risks (including fiduciary)
Capacity
Description: SFD, the parent of SMEPS, has shown strong
capacity in implementing Bank and other donor projects. The
Implementation and Completion Results Report (ICR) from SFD
III and latest aide-memoires from the current SFD IV confirm
this. As a subsidiary of SFD, SMEPS benefits from SFD’s strong
fiduciary capacity and SMEPS has demonstrated strong
understanding and initiative in addressing access to business
development services and in youth employment, but its capacity
Rating:
Substantial
Risk Management: The Bank executed component will be used to provide technical assistance to
SMEPS on M&E, their highest priority, and the management of the grants component. SMEPS will
receive technical assistance to improve its M&E and MIS systems. In order to limit stress to its
implementation capacity, SMEPS will implement the project by outsourcing first-line client
interaction to local consultants (the BDP Advisors and Internship Advisors), incorporating the
market-based approach of the project in its own structure. Consistency of delivery by these
consultants will be ensured through the Operations Manual, training, supervision of the consultants
by SMEPS Project Officers, and approval of plans endorsed by the consultants by the project
48
in terms of size of staff and systems would be stressed by the
scale of this project.
Governance
Description: There is risk of political interference, particularly in
the matching grant facility. SMEPS may face challenges in its
implementation of the matching grant facility.
Management Committee. The implementation support plan will include strong support from World
Bank FM and Procurement Specialists, particularly at the outset of the project, and will include
actions to upgrade FM systems and both FM and procurement capacity (Procurement Officer and
Accountant to be hired).
Status: Not yet
Resp:
Client
Stage: Implementation Due Date : Dec. 2013
due
Rating:
Substantial
Risk Management: At this stage, the proposed governance structure for the matching grant facility
is to be set up to minimize discretion and firm selection will be undertaken in a transparent and
unbiased manner (planned by public lottery). In addition, monitoring and evaluation will be
integrated into the project and SMEPS will receive technical assistance to shore up capacity and
governance in relevant areas as part of the project.
Resp: Client
Project Risks
Design
Description: This is a pilot project meant to test a design for
improving employment outcomes and SME capabilities that
benefits from lessons learned from previous projects (through
Bank financing and otherwise).
Description: The impact evaluation planned to establish the
resulting benefits of the pilot for both interns and SMEs, and
which is at the heart of the learning value of this pilot, may be
threatened by low or asymmetrical uptake or other operational
complications related to assignment of beneficiaries to treatment
and control groups.
Description: Given the difficult security context, it may be
difficult to implement and supervise the project.
Stage: Preparation
and Implementation
Due Date Dec. 2013
Status: In process
Rating:
High
Risk Management: As a pilot project, this project design is innovative, and consequently risky, by
definition. However, all efforts were taken during preparation to incorporate lessons learned from
previous designs and to adapt quickly when it becomes clear that certain design features are not
workable. The project is designed to be implemented in two stages to allow for midway corrections
with the second group of beneficiaries as well.
Due Date : May 2013
(design stage), Jan.
Resp:
Both
Stage: Both
Status: In process
2014 (midway
correction)
Risk Management: The impact evaluation will be designed by the Bank, with expertise from the
Development Economics group. The impact evaluation specialists will inform the design of the
project, in particular the manner in which beneficiaries are targeted and selected, to best ensure the
success of the impact evaluation without threatening operational results. Due to expected higher
uptake among youth applications, the impact evaluation on employment benefits is considered less
risky, however it is quite possible that an impact evaluation on benefits to firm capabilities will be
unsuccessful. In such an event, other forms of statistical analysis, such as bivariate correlations, will
be used to document the pilot results.
Status: Not yet
Resp:
Client
Stage: Implementation Due Date : Dec. 2015
due
Risk Management: The pilot implementation will be limited to Sanaa and Aden, where SMEPS has
strong local presence. For implementation, SMEPS and the management team will use local capacity
(local consultants who will act as Internship advisors and BDP advisors) and relationships with local
institutions (such as chambers of commerce, industrial associations, CSOs, etc.) to facilitate
implementation. Finally, the project design is such that implementation focus could be shifted
between regions depending on the evolving security situation.
49
Resp:
Social & Environmental
Description: Safeguards policies are not expected to be triggered.
The expected size of the grants and loans under this project are
expected to be very small, in the range of up to $10,000, but most
will be less. The nature of most of the activities will be
procurement of services and other intangibles, with possible small
scale goods or equipment which are not anticipated to have any
major or irreversible environmental impacts.
Program & Donor
Description: As a pilot project driven by priorities and
commitments expressed in the Transitional Plan for Security and
Development (TPSD) and the Mutual Accountability Framework
(MAF), this project is well placed within the GoY and donor
agenda.
Delivery Monitoring & Sustainability
Description: Monitoring of project delivery will be a challenge
due to the prevalent security situation, the high costs associated
with monitoring, and the likelihood of weak reporting from
beneficiaries and service providers.
Description: SMEPS may face a challenge in sustaining activities
beyond the duration of the project.
Other
Description: Possibility of an upsurge in political unrest and
insecurity could derail project implementation, which could make
it difficult for firms to implement their business plans under the
Both
Stage: Implementation
Due Date : Dec. 2015
Status: Not yet
due
Rating:
Low
Risk Management: The Operations Manual includes a negative list of activities and the principles
and process of screening out any activities with anticipated social or environmental negative impacts.
The Operations Manual also describes design features to facilitate access of women to the project,
and how internship health and safety will be adequately addressed.
Resp:
Client
Stage: Preparation
and Implementation
Due Date : May 2013
Status: Completed
Rating:
Low
Risk Management: Consultations with donors implementing private sector development projects
and programs have been undertaken. As an active agency in the private sector development space,
particularly on small enterprises, SMEPS is well placed to establish links between the pilot activities
and other projects and programs where beneficial. Donor coordination mechanisms in Yemen,
namely the private sector coordination forum among others, will also be utilized to ensure continued
aid coordination.
Resp: Client and
Status: Not yet
Stage: Implementation Due Date : Dec. 2015
Bank
due
Rating:
High
Risk Management : Monitoring of delivery of services by BDS and finance providers will be
incorporated into the operations manuals for each component. Requirements for beneficiary
reporting will be incorporated into the grant and financing agreements. The use of third party
monitoring, through individual consultants or a firm, may also be used to mitigate this risk.
Resp:
Status: Not yet
Stage: Implementation Due Date : Dec. 2013
Client
due
Risk Management: SMEPS already operates in the areas of facilitation of financial services and
business development services for microenterprises and SMEs in Yemen. The capacity and mandate
is there for SMEPS to continue with these activities after the duration of the project, particularly if
the approach proves successful, which would bode well for attracting IDA and other funds and
external assistance for scaled up projects. At the base of the implementation chain, BDS providers
have clear business incentives to continue providing services and beneficiary firms are expected to
provide a demonstration effect that will spread the benefits of the project and sustain its effect
beyond its closing date.
Resp:
Status: Not yet
Stage: Implementation Due Date : Dec. 2015
Client
due
Rating:
High
Risk Management: There is little that can be done to mitigate for this risk. If there is a generalized
impact due to some exogenous deterioration in circumstances at the national level, the project can
only mitigate the risk by including crisis management processes in the operations manual that would
50
matching grants and affect internships. It could also diminish the
benefits of the project to public policies and programs.
likely include stabilization measures and potential shifts between sub-components of the program. In
terms of benefits of the project to GoY policies and programs, the Bank’s approach in the Bankexecuted component of providing just-in-time technical assistance notes that are responsive to GoY
priorities in private sector development , SME development, and employment are expected to
provide adequate flexibility to respond to changing priorities.
Stage: Preparation
Status: Not yet
Resp:
Both
Due Date : Dec. 2015
and Implementation
due
Overall Risk
Implementation Risk Rating: High
Comments:
The implementation risk for this operation is High because of country context, as well as design and delivery risks. The volatility of the political, security, governance,
and donor environment pose risks both during implementation and for Bank implementation support of the project are also substantial and require mitigation. The
incorporation of features into the implementation structures of the components as well as use of local capacity is expected to mitigate these risks to the extent possible,
but implementation risks are likely to remain substantial throughout the duration of the project, so a key mitigating measure will be to maintain flexibility and adaptability
in the project design.
51
Annex 5: Implementation Support Plan
YEMEN: Enterprise Revitalization and Employment Pilot (EREP) Project
Strategy and Approach for Implementation Support
1.
2.
3.
4.
5.
6.
The World Bank will support the implementation of this pilot project through a
combination of fiduciary and technical supervision, technical assistance, impact
evaluation, and coordination. These activities will be implemented through a combination
of Bank staff, consultants, and third-party monitors. Given the challenging security
context, the project will employ a range of solutions to provide adequate implementation
support.
Fiduciary and technical supervision. World Bank fiduciary staff in the San’aa country
office will provide routine supervision of FM and procurement activities. Review and
clearance of the operations manual, interim financial reports, withdrawal requests, and
procurement actions will provide the basic necessary controls over implementation. In
addition, technical assistance and guidance will be provided when necessary on fiduciary
issues, which are anticipated to most likely be on procurement issues but also on the
preparation of the first IFRs, so enhanced implementation support from the locally based
FM and Procurement Specialists is anticipated. Technical supervision will be provided
through Bank staff and local consultants at key design and implementation decision
points, including the clearance of the operations manual and adjustment of design
features during the course of the project. Technical supervision in terms of verification of
implementation of activities will also be undertaken, which is expected to be contracted
to a third-party monitoring contractor.
Technical assistance – implementing agency. SMEPS is expected to require technical
assistance on developing M&E and MIS. Technical assistance will be provided by Bank
staff and consultants to advise on the design of these systems and their implementation.
Technical assistance - policy. Providing ongoing, just-in-time technical assistance to the
GoY on policies and programs concerning SME development and employment is an
integral part of this project. The Bank will employ staff and consultants, including staff
from the anchor Financial and Private Sector Development Global Practices, to support
technical assistance needs.
Impact Evaluation: The impact evaluation will be designed and executed by the World
Bank. The impact evaluation will use data from the M&E system implemented by
SMEPS, and data from independent follow-up implemented by a contracted independent
surveyor (for firms).
Coordination: The Bank will maintain coordination with other national entities and
international agencies concerned with financial and private sector development,
particularly in the areas of SME development and employment, to ensure continued
synergy and complementarity with other interventions, and relevance of the project to the
economic development agenda.
52
Implementation Support Plan
7.
8.
9.
Technical inputs needed: SMEPS will need technical inputs on designing the operational
aspects of beneficiary outreach and selection in a manner consistent with the
requirements of the impact evaluation while at the same time not causing harm to the
project outcomes and relationships with stakeholders. In addition, technical inputs on the
design of the M&E system, as well as training to SMEPS staff on M&E principles and
implementation will be needed. Consultations with the planned Ad-Hoc Advisory
Committee will aid in finalizing design features, beneficiary relations and outreach, and
operational approaches prior to launching the call for applications.
Fiduciary requirements and inputs: SMEPS will hire a procurement officer. World Bank
fiduciary staff will provide implementation support including capacity building where
needed.
Safeguards: Social and environmental safeguards are not expected to be triggered. The
Operational Manual will clarify the principles of screening projects for negative social
and environmental impacts and a negative list of activities. It will also include provisions
necessary to guard against known or visible health or safety risks the interns placed under
the program.
What would be the main focus in terms of support to implementation:
Time
Focus
Skills Needed
Resource
Estimate
Throughout
Adapting design to
Design of experiments
US$50,000
project
uptake while
maintaining ability to
evaluate for impact
Adapting operations
to volatile
circumstances
Private sector development
in fragile and conflict
contexts
US$100,000
Ensuring high value
content of internships
and BDPs
SME consulting and BDS,
M&E
US$50,000
Skills Mix Required
Skills Needed
Private Sector Development
Specialists
Impact Evaluation Specialist
M&E Specialist
Fiduciary Specialists
Number of Staff
Weeks
1-2 weeks of time for
each
53
Number of Trips
1-2
Partner Role
Inform the
implementation
support team
on needs to
adapt design
based on
operational
imperatives
and beneficiary
response and
needs
Comments
Annex 6: Country At-A-Glance
Yemen, Rep. at a glance
3/15/13
K ey D evelop m en t In d icators
Yemen
M. East
& North
Africa
Lower
middle
income
337
8,775
1.7
59
2,533
20,842
1.6
39
Age distribution, 2011
( 2011)
Male
Population, mid-year (millions)
Surface area (thousand sq. km)
Population growth (%)
Urban population (% of total population)
24.8
528
3.1
32
Female
75-79
60-64
45-49
30-34
GNI (Atlas method, US$ billions)
GNI per capita (Atlas method, US$)
GNI per capita (PPP, international $)
26.4
1,070
2,170
1,279
3,866
8,052
4,488
1,772
3,837
GDP growth (%)
GDP per capita growth (%)
-10.5
-13.2
4.2
2.4
5.5
3.9
15-19
0-4
10
5
0
5
10
percent of total population
( m ost recen t estim ate, 2005–2011)
Poverty headcount ratio at $1.25 a day (PPP, %)
Poverty headcount ratio at $2.00 a day (PPP, %)
Life expectancy at birth (years)
Infant mortality (per 1,000 live births)
Child malnutrition (% of children under 5)
18
47
65
57
..
3
14
72
26
6
30.2
59.5
66
46
24
81
47
100
81
84
68
108
101
80
62
106
102
80
55
53
89
88
87
47
0
Under-5 mortality rate (per 1,000)
140
120
100
Adult literacy, male (% of ages 15 and older)
Adult literacy, female (% of ages 15 and older)
Gross primary enrollment, male (% of age group)
Gross primary enrollment, female (% of age group)
Access to an improved water source (% of population)
Access to improved sanitation facilities (% of population)
60
40
20
1990
Yemen, Rep.
N et A id F lows
(US$ millions)
Net ODA and official aid
T op 3 donors (in 2010):
Germany
United Kingdom
United States
1980
1990
2000
574
450
311
664
20
9
15
38
10
41
32
5
57
82
64
45
..
72
8.0
38
3.5
18
2.3
28
1995
2000
2011
Middle East & North Africa
2011
Growth of GDP and GDP per capita (%)
10
5
0
Aid (% of GNI)
Aid per capita (US$)
-5
-10
L on g - T erm E con om ic T ren d s
-15
95
Consumer prices (annual % change)
GDP implicit deflator (annual % change)
Exchange rate (annual average, local per US$)
T erms of trade index (2000 = 100)
..
..
4.6
..
44.9
12.0
26.2
80
8.1
23.3
-44.5
18.3
161.7
100
213.8
160
05
GDP
GDP p er capita
1980–90 1990–2000
2000–11
(average annual growth %)
Population, mid-year (millions)
GDP (US$ millions)
7.9
..
11.9
5,647
17.7
9,636
Agriculture
Industry
Manufacturing
Services
..
..
..
..
24.4
34.3
19.0
41.3
13.8
46.4
5.7
39.8
Household final consumption expenditure
General gov't final consumption expenditure
Gross capital formation
..
..
..
77.0
15.5
12.4
60.1
13.6
18.9
Exports of goods and services
Imports of goods and services
Gross savings
..
..
..
12.2
17.2
32.4
41.4
34.0
32.8
24.8
33,758
4.1
..
3.9
5.6
3.1
3.6
7.7
29.4
6.1
62.9
..
..
..
..
5.1
5.2
1.8
6.1
2.7
2.0
5.1
6.0
80.6
11.8
11.7
..
..
..
2.8
3.8
10.0
7.1
3.6
-0.6
30.5
34.6
8.8
..
..
22.9
11.9
1.8
5.4
(% of GDP)
Note: Figures in italics are for years other than those specified. .. indicates data are not available.
Development Economics, Development Data Group (DECDG).
54
Yemen, Rep.
Balan ce of P aym en ts an d T rad e
2000
2011
Governance indicators, 2000 and 2011
(US$ millions)
T otal merchandise exports (fob)
T otal merchandise imports (cif)
Net trade in goods and services
3,797
2,484
714
7,718
8,701
-1,688
Current account balance
as a % of GDP
1,337
13.9
-1,209
-3.9
Personal transfers and
compensation of employees (receipts)
1,288
Reserves, including gold
2,942
Voice and accountability
Political stability
Regulatory quality
Rule of law
1,404
Control of corruption
5,941
0
2011
Cen tral G overn m en t F in an ce
25
37.8
7.1
24.5
26.0
6.6
25.4
-1.3
-11.7
Highest marginal tax rate (%)
Individual
Corporate
..
..
100
higher values imply better ratings
Source: Worldwide Governance Indicators (www.govindicators.org)
T ech n olog y an d In f rastru ctu re
Overall surplus/deficit
75
Country's percentile rank (0-100)
2000
(% of GDP)
Current revenue (including grants)
T ax revenue
Current expenditure
50
Paved roads (% of total)
Fixed line and mobile phone
subscribers (per 100 people)
High technology exports
(% of manufactured exports)
..
35
2000
..
2
0.0
2011
8.7
51
0.3
E xtern al Deb t an d Resou rce F lows
E n viron m en t
(US$ millions)
T otal debt outstanding and disbursed
T otal debt service
Debt relief (HIPC, MDRI)
5,162
245
–
6,418
274
–
53.6
5.9
19.0
2.8
Freshwater resources per capita (cu. meters)
Freshwater withdrawal (% of internal resources)
6
0
-713
0
CO2 emissions per capita (mt)
T otal debt (% of GDP)
T otal debt service (% of exports)
Foreign direct investment (net inflows)
Portfolio equity (net inflows)
Agricultural land (% of land area)
Forest area (% of land area)
T errestrial protected areas (% of land area)
Composition of total external debt, 2011
Short-term, 131
112
161.9
44
1.0
0.5
85
169.8
0.83
1.0
GDP per unit of energy use
(2005 PPP $ per kg of oil equivalent)
7.9
8.0
Energy use per capita (kg of oil equivalent)
267
298
IBRD, 0
Private, 2
IDA, 2,135
W orld Ban k G rou p p ortf olio
Bilateral, 2,626
2000
2011
IBRD
T otal debt outstanding and disbursed
Disbursements
Principal repayments
Interest payments
0
0
0
0
0
0
0
0
IDA
T otal debt outstanding and disbursed
Disbursements
T otal debt service
1,216
65
23
2,135
13
70
12
12
8
136
90
0
0
7
–
–
–
–
(US$ millions)
IMF, 410
Other multilateral, 1,114
US$ millions
P rivate S ector Develop m en t
T ime required to start a business (days)
Cost to start a business (% of GNI per capita)
T ime required to register property (days)
Ranked as a major constraint to business
(% of managers surveyed who agreed)
n.a.
n.a.
Stock market capitalization (% of GDP)
Bank capital to asset ratio (%)
45
1.0
0.5
2000
2011
–
–
–
12
83.8
19
2000
2011
..
..
..
..
..
..
..
..
IFC (fiscal year)
T otal disbursed and outstanding portfolio
of which IFC own account
Disbursements for IFC own account
Portfolio sales, prepayments and
repayments for IFC own account
MIGA
Gross exposure
New guarantees
Note: Figures in italics are for years other than those specified.
.. indicates data are not available. – indicates observation is not applicable.
3/15/13
Development Economics, Development Data Group (DECDG).
55
Millennium Development Goals
Yemen, Rep.
With selected targets to achieve between 1990 and 2015
(estimate closest to date shown, +/- 2 years)
Y em en , Rep .
G oal 1: h alve th e rates f or extrem e p overty an d m aln u trition
Poverty headcount ratio at $1.25 a day (PPP, % of population)
Poverty headcount ratio at national poverty line (% of population)
Share of income or consumption to the poorest qunitile (%)
Prevalence of malnutrition (% of children under 5)
1990
..
..
..
29.6
1995
..
..
..
34.2
2000
12.9
40.1
7.4
..
2011
17.5
34.8
7.2
..
G oal 2: en su re th at ch ild ren are ab le to com p lete p rim ary sch oolin g
Primary school enrollment (net, %)
Primary completion rate (% of relevant age group)
Secondary school enrollment (gross, %)
Youth literacy rate (% of people ages 15-24)
..
..
..
..
..
..
..
60
66
58
45
..
76
63
46
85
G oal 3: elim in ate g en d er d isp arity in ed u cation an d em p ower wom en
Ratio of girls to boys in primary and secondary education (%)
W omen employed in the nonagricultural sector (% of nonagricultural employment)
Proportion of seats held by women in national parliament (%)
..
..
4
..
6
..
55
7
1
75
6
0
G oal 4: red u ce u n d er- 5 m ortality b y two- th ird s
Under-5 mortality rate (per 1,000)
Infant mortality rate (per 1,000 live births)
Measles immunization (proportion of one-year olds immunized, %)
126
89
69
112
80
40
99
71
71
77
57
71
G oal 5: red u ce m atern al m ortality b y th ree- f ou rth s
Maternal mortality ratio (modeled estimate, per 100,000 live births)
Births attended by skilled health staff (% of total)
Contraceptive prevalence (% of women ages 15-49)
610
16
10
520
22
21
380
..
..
G oal 6: h alt an d b eg in to reverse th e sp read of HIV /AIDS an d oth er m ajor d iseases
Prevalence of HIV (% of population ages 15-49)
Incidence of tuberculosis (per 100,000 people)
T uberculosis case detection rate (%, all forms)
0.1
137
28
0.1
137
69
0.1
116
67
0.2
44
79
G oal 7: h alve th e p rop ortion of p eop le with ou t su stain ab le access to b asic n eed s
Access to an improved water source (% of population)
Access to improved sanitation facilities (% of population)
Forest area (% of total land area)
T errestrial protected areas (% of land area)
CO2 emissions (metric tons per capita)
GDP per unit of energy use (constant 2005 PPP $ per kg of oil equivalent)
67
24
1.0
..
0.8
8.6
63
32
..
0.0
0.7
8.5
60
39
1.0
0.5
0.8
7.9
55
53
1.0
0.5
1.0
8.0
G oal 8: d evelop a g lob al p artn ersh ip f or d evelop m en t
T elephone mainlines (per 100 people)
Mobile phone subscribers (per 100 people)
Internet users (per 100 people)
Households with a computer (%)
1.0
0.0
0.0
..
1.2
0.1
0.0
..
2.0
0.2
0.1
..
4.3
47.0
14.9
4.0
Education indicators (%)
Measles immunization (% of 1-year olds)
100
100
200
36
28
ICT indicators (per 100 people)
60
50
75
75
40
50
30
50
25
20
25
0
10
2000
2005
2010
0
0
1990
1995
2000
2011
2000
2005
2010
Primary net e nrollme nt rati o
Ratio of girls to boys in primary & secon dary
education
Yemen, Rep.
Middle East & North Africa
Note: Figures in italics are for years other than those specified. .. indicates data are not available.
Development Economics, Development Data Group (DECDG).
56
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