Yemen Port Cities Development Program: Challenges & Successes to Date

1. Yemen Port Cities Development Program: Challenges & Successes to Date LED Thematic Group Seminar “Enabling the Role of Cities: Analytical Approaches and Operational Implications” Stephen Karam Sr. Urban Economist Finance, Infrastructure & Private Sector Group Middle East & North Africa Region January 10, 2005

2. National Level Challenges • Trade growth in MENA has been a meager 2% compared to 8% annually worldwide, and MENA countries have the lowest non-oil export GDP ratios in the world. • The End of the Rentier State: Like many of its Gulf neighbors, Yemen is heavily dependent on its oil revenues (comprising over 50% of Yemen’s GDP today), but these are expected to be fully exhausted in less than 10 years, with virtually no FDI outside the oil sector. • Regional and National Security remains a significant concern • With high population growth, MENA countries need to create 5-6 million jobs each year just to keep pace…with decreasing prospects for emigration. • Regional growth, distribution and migration patterns reveal a consolidation of a few major urban areas, mainly Sana'a and coastal areas- Aden, Mukallah and Hodeidah. • The push from inland areas to coastal areas, where critical water aquifers are located, is likely to continue as rural Yemenis struggle to survive in the country’s arid climate.

3. Competitiveness Assessment • Strategic Location of Yemen • Comparative Advantage of its Port Cities: • Aden: Trans-shipment and Trade • Hodeidah: Agro-industry • Mukalla: Fisheries industry • Within Port Cities: • Backward and forward linkages (potential, existing, and barriers) between ports, airports, free zones, light industry and commercial areas, formal and informal sectors.

4. PCDP: Bank Intervention PROJECT TYPE: Adaptable Program Loan (with both vertical and horizontal elements) Duration: 12 Years Credit amount: US$97 million Phases: • Phase I: Strategic development, improving public/private interface (local reforms), and small investments in Aden clusters. • Phase II: National reforms on Customs and Ports and strategic investments in national assets in three major port cities. • Phase III: Implementation of reforms, private sector involvement in ports, and program rollout to small tertiary ports.

5. PCDP Approach The PCDP is assisting Yemen’s Port Cities to: • Develop a vision, a strategy and an action plan for local economic development; • Improve the performance of key Government agencies that interface with the private sector at the local level (customs, business licensing and registration, industrial land, public services); • Revitalize port city business districts/clusters that are key to growth and employment generation; and • Take a gradual approach, supporting community-driven initiatives in neighborhoods as a key foundation stone for larger, more strategic public investments. Example: Sira Fish Market

6. LED: Market Access • Example: Sira Fish Market • Goal: Physically reinforce business linkages and provide greater market access for poor • LED M&E Based on Measurement of Change in Physical Space (Market Access) and Capacity/Usage • Increase in avg daily number of fishsellers • Increase in avg daily revenue of fishsellers (based on auctioneer yield • Increase in sheltered/open market areas, planned to double and triple following completion of civil works • Improve sanitary conditions, facilities and attractiveness of area to potential customers • Provide better access to Sira Island • Link a potential tourism site (Sira Castle) with a commercial point of sale

7. Repairs to Causeway and Market Area at Entry to Sira Island (circled below) Secures Market Access for Traditionally Poor Fishermen and Fish Sellars to Aden’s Growing Tourism Market

8. Limited Shelter from the Sun and Run-down Facilities deter customers

9. Improved Point of Sale Displays and Sanitary Conditions Should Enhance Appeal of Sira’s Fish Market to Customers

10. Overcrowding and inability of fish sellers to access the market regularly hampers business and incomes for the poor

11. Underutilized but well-located public land will be more efficient in generating economic opportunities/tax revenues following market rehabilitation

12. New Public Sector Initiative has Spurred Private Sector Investment

13. Proposed Rehabilitation of Sira Fish Market and Island (involving new private sector initiative)

14. Other Achievements • Govt Buy-Back of Poor Performing Concession at Aden Container Terminal -- New Management Contract Under Tender • Govt Restructuring of Aden Free Zone Authority • Newly established 3P Fund (Private-Public Partnership Fund) with private sector contributions • Devolution of new private sector investment authorizations (regardless of amount) to port cities on pilot basis • Devolution of city urban planning, including masterplan updating to the port cities on pilot basis

15. Investment Project Identification Technical Preparation & Implementation Aden Local Council Office of the Governor Aden Local Economic Development Department CDS Workshops Remaining Challenges • Mainly Institutional: How to sustain LED strategy formulation and updating in weak institutional environment? • Incentives: City/ Governorate Level Staff are not incentivized given low compensation and expectation that they have second jobs

16. LED Going Forward • Scaling up from small-scale, confidence-building measures to larger scale, higher impact interventions • Data Shortages: Data limitations at the city level is a key problem • Measuring Impact: How to gauge impact of larger scale investments given difficulty of controlling for external factors. How do we know what impact an LED approach has had?