Private Sector Development

Project description

Title: Private sector development
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Country: Yemen
Lead executing agency: Ministry of Planning and International Cooperation
Overall term: 2013 to 2017

Context

Young, poor and unemployed – this sums up the situation of the Yemeni people. Even before fighting began in March 2015, there were barely any prospects for young men and women. In 2014, 50 per cent of Yemenites were unemployed, with the figure exceeding 60 per cent for young people. With a civil war currently raging, the situation is bleak. Infrastructure has collapsed and import and export activities are severely curtailed. Access to energy, fuel, gas, water and financial services is extremely limited. On average companies have already had to let half of their workforces go and lack strategies and support structures for dealing with the crisis. General conditions conducive to business development must be put in place again. The suffering of the population is being compounded by a lack of access to basic goods; even staple foods are in very short supply.

Objective

General conditions for developing value chains with high potential for employment creation are improved.

Approach

The project adapted its strategy in response to the new realities emerging when the civil war broke out in March 2015 and when the Arab Alliance started air attacks. While continuing its job creation measures, it has now added approaches for bringing swift relief to the population in the current conflict and its aftermath. To achieve this, it collaborates with institutions promoting micro, small and medium-sized enterprises (MSMEs), as well as with e.g. chambers of commerce, industry associations, banks, the Yemen Microfinance Network and the Ministry of Industry and Trade. During the current conflict, the project is prioritising cooperation activities with non-governmental organisations.

It is engaged in four areas of activity:

  1. Promotion of selected sectors as part of the value chain approach
    A strong focus is placed on the local production and marketing of urgently needed basic goods in order to create jobs as quickly as possible and simultaneously improve the situation of the population. These items are either rare in Yemen or serve as viable alternatives to expensive conventional products. New value chains have been established for cereal, biodiesel as an alternative fuel, and biomass stoves for households. The project is also continuing the work it started in 2013 in the solar and basket weaving value chains.
  2. Business services
    Many enterprises are unable to obtain high-quality services and the targeted support they need to keep their operations going, especially in times of crisis, and implement their business ideas. The project assists the Federation of Yemen Chambers of Commerce and Industry, the Yemeni Business Club and the Small and Micro Enterprise Promotion Services (SMEPS) to develop and make relevant services available. A pilot project is being run in 2015 in order to boost the resilience of enterprises during and in the aftermath of the civil war.
  3. Improvement of the business environment and strategy development
    Dialogue is being encouraged between private and public sector actors in order to eliminate obstacles to economic development, such as non-legitimate taxes. Additionally, Business for Peace is being vigorously promoted in order to facilitate the stabilisation process during and in the aftermath of the civil war.
  4. Financial systems development
    The project is working with its partners to implement strategies for boosting the resilience of microfinance banks in the face of the present crisis. Financial products continue to be developed for and offered to poor households. The aim is to improve access to capital for MSMEs, especially in the identified sectors.

These activities are being supplemented with training measures that enable the project to work closely with the Yemeni private sector to get young people into employment rapidly, and with initiatives to strengthen the partners’ resources and capacity.

Given the current civil war in Yemen, the project is also carrying out rapid response efforts to satisfy the existential needs of the population and fill the void left by the cessation of state services in the short term. These include waste disposal to reduce the risk of disease, first aid courses, and training for (solar) energy technicians and glaziers. Additionally, the project is assisting other programmes, for example, by helping to develop and implement sustainable solar power strategies for health centres.

Results
Measures implemented for enterprises, start-ups and the unemployed saw over 600 people find work in the regions of Sana’a, Taiz, Aden and Hadramaut in 2014. More than 130 of these men and women set up their own business and are employing up to 15 additional staff one year on. Over 500 other individuals were taken on by companies after completing needs-based training. The activities were carried out in close cooperation with chambers of commerce, the Yemeni Business Club, SMEPS and the Yemeni private sector.

Producers in selected sectors were able to increase their sales in 2014. The project provided assistance with tapping new markets, for example, by participation in trade fairs. In this way, new jobs have been created, especially for poor women in rural regions, whose work includes weaving baskets by hand.

Knowledge and technology transfer in the solar sector was initiated between Yemen and Tunisia with the help of the project in 2014. Over 100 planners, architects, technicians and vocational instructors received training in Tunisia. This has led to the development of a network in Yemen for introducing the new technologies locally and carrying out technical equipment maintenance. Newly developed financing mechanisms make this equipment affordable to poorer population groups as well. A steering committee comprising representatives from the private and public sectors is working to drive development in the solar sector.

A cross-sectoral strategy for promoting MSMEs has been approved following the provision of advice by GIZ. The key stakeholders can now coordinate their actions. Thanks to dialogue between the government and the private sector, it has been possible to abolish or reduce duties that had made it difficult for women to start their own companies, heavily reduced the income of small-scale fishermen in Hadramaut and negatively impacted on the competitiveness of the fishing sector.

With GIZ advisory support, Yemen has adopted the social and environmental market economy as its vision for a future economic system, incorporating it as a guiding principle into its national agenda.