Republic of Yemen Fisheries Investment Project - Sept 2010

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REPUBLICOFYEMEN:FISHERIESINVESTMENTPROJECT(FIP)PROJECTFINALDESIGNREPORT

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REPUBLIC OF YEMEN

FISHERIES INVESTMENT PROJECT (FIP )

PROJECT FINAL DESIGN REPORT

MAIN REPORT

Table of Contents

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Currency equivalents iiiWeights and measures iiiAbbreviations and acronyms iiiI. INTRODUCTION 1II . STRATEGIC CONTEXT AND RATIONALE FOR IFAD INVOLVEMENT, COMMITMENT AND

PARTNERSHIP (KSF 1) 1A. Rural Development Context 1B. Policy, Governance and Institutional Issues, Political and Economic Issues 8C. The IFAD Country Programme 10

II I. POVERTY, SOCIAL CAPITAL AND TARGETING (KSF 2) 11A. Rural Poverty, Information and Analysis 11B. The Target Group, including Gender Issues 13C. Targeting Strategy and Gender Mainstreaming 15D. Geographic Coverage of the Project 17

IV. PROJECT DESCRIPTION (KSF 3) 17A. The Knowledge Base: Lessons from Previous/Ongoing Projects 17

B. Opportunities for Rural Development and Poverty Reduction 18C. Project Goal and Objectives 20D. Alignment with Country Rural Development Policies and IFAD Strategies 20E. Project Components 21

V. IMP LEMENTATION AND INSTITUTIONAL ARRANGEMENTS (KSF 4) 31A. Institutional Development and Outcomes 31B. The Collaborative Framework 35C. Results-Based M&E 36

VI . PROJECT BENEFITS, COSTS AND FINANCING 39A. Summary Benefit Analysis 39B. Summary Cost Table 41C. Project Financing 42

VII . PROJECT RISKS AND SUSTAINABI LITY (KSF 5) 42A. Risk Analysis 42B. Exit Strategy and Post-Project Sustainability 43

VII I. INNOVATIVE FEATURES, LEARNING AND KNOWLEDGE MANAGEMENT (KSF 6) 44A. Innovative Features 44B. Project Knowledge Products and Learning Processes 44C. Regional Knowledge Networking 44


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TABLES

Table 1: Active Fishers and Boats 2Table 2: Fishers and Fish Production, 2000-2010 3Table 3: Rural Poverty by Governorate, 2005 11Table 4: Fishers Households Indicative Incomes 12Table 5: Estimated Project Beneficiaries 39Table 6: Project Phasing Value Chain Development 39Table 7: Project Phasing Sustainable Resource Management 40Table 8: Indicative Fishing Boat Models 40Table 9: Indicative Aquaculture and MSE Models 40Table 10: Summary Project Cost 42Table 11: Project Financing by Component (all figures in USD million) 42FIGURES

Figure 1: Fishers and Fish Production, 2000-2008/2009 3Figure 2: Fish Production Total and Selected High Value Species - Selected Years 5Figure 3: Production of Selected Low Value Demersal Stocks, 2000-2007 5Figure 4: Increase in Global Aquaculture Production, 1970-2006 6Figure 5: Poverty in Fishers Communities - Characteristics 12Figure 6: Fishers Households in Yemen - Characteristics 13Figure 7: Landing Site Selection Process 16Figure 8: Fisheries Sector Indicative SWOT Analysis 19Figure 9: Government, IFAD, and EOF Strategic Consistency 20Figure 10: EOF Strategic Framework 32Figure 11: EOF Management Structure 33ANNEXES

ANNEX 1: CONTENTS OF THE PROJECT LIFE FILE 1ANNEX 2: LOGFRAME 3ANNEX 3: SUMMARY COST TABLES 9ANNEX 4: DRAFT PROJECT IMPLEMENTATION MANUAL 13ANNEX 5: KEY FILES 57ANNEX 6: ENVIRONMENTAL AND SOCIAL REVIEW NOTE 67ANNEX 7: PROJECT ALIGNMENT WITH IFAD STRATEGY, PROCEDURE AND POLICY 83WORKING PAPERS

WP 1: Rural Poverty, Target Group, Gender Issues and Targeting Mechanisms

WP 2: Sustainable Resource Management

WP 3: Value Chain Development

WP 4: Rural Finance and Financial Mechanisms

WP 5: Economic Opportunities Fund

WP 6: Project Costs and Financial Analysis


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MFW Ministry of Fish Wealth

MoF Ministry of Finance

MOPIC Ministry of Planning and International Cooperation

MSE Micro/Small Enterprise

MSRRC Marine Science and Resources Research Centre

MWE Ministry of Water and EnvironmentNCFSM National Corporation for Fisheries Services and Marketing

PDRY People's Democratic Republic of Yemen

RB-COSOP Results Based Country Strategic Opportunities Paper

SEDF Small Enterprise Development Fund

SFD Social Fund for Development

SMART Sector Management Adjustment and Restructuring Team

SME Small/Medium Enterprise

SNACC Supreme National Authority for Combating Corruption

SO Strategic Objectives

TMI Tadhamon Microfinance Institution

UFC Union of Fisheries Cooperatives

UN United Nations

UNDP United Nations Development Programme

USD United States Dollars

WB World Bank

YAR Yemen Arab Republic

YSEA Yemen Seafood Exporters Association

GOVERNMENT OF YEMEN

Fiscal Year

1st January 31st December


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REPUBLIC OF YEMEN

FISHERIES INVESTMENT PROJECT (FIP )

PROJECT FINAL DESIGN REPORT

MAIN REPORT

I. INTRODUCTION

1. In 2009, the Government of Yemen (GOY) requested IFAD to finance a fisheries sectordevelopment project which would focus on enhancing incomes within fishers communities withoutincreasing pressure on the over-exploited resource base. An IFAD preliminary design missionvisited Yemen in late 2009 to define constraints and identify opportunities across the fisheriesvalue chain and develop a project concept note. The project concept was agreed with Governmentand approved by IFAD by early 2010. Subsequently, an IFAD mission visited Yemen in February-March 2010 to design the Fisheries Investment Project and produce the project design document.

2. An IFAD mission1 visited Yemen in June-July 2010 to finalize the design of the FisheriesInvestment Project and produce the final design report. In Sanaa, the mission worked closely withkey Government authorities (Ministry of Planning and International Cooperation (MOPIC), Ministryof Fish Wealth (MFW), Ministry of Agriculture and Irrigation (MAI), Central Bank of Yemen (CBY),Environmental Protection Authority/MWE, General Investment Authority), public institutions(Yemen Coast Guard, Yemen Standardisation and Metrology Organization), financial institutions (AlAmal Microfinance Bank, United Insurance Company), and fisheries value chain stakeholders(Yemen Seafood Exporters Association (YSEA), Yemen Fisheries Cooperative Union (FCU), fishprocessors and exporters). Field visits were undertaken to Abyan, Aden, Hadramaut, Hodeida andShabwah governorates, where the mission met with fishers, representatives of fisherscooperatives, and other members of fishers communities including women and their organisations.The mission also met with the governorate branches of MFW and other public or parastatal entitiessuch as the Marine Science and Resources Research Centre (MSRRC), the Aquaculture Research

Centre (ARC) and the National Corporation for Fisheries Services and Marketing (NCFSM).

3. The mission worked in close coordination with the representatives of other externalfinanciers involved in the fisheries sector, particularly the European Union and the World Bank. Italso met with officials of the United Nations Development Programme (UNDP), and the JapaneseInternational Cooperation Agency (JICA).

4. The mission held numerous meetings with major departments of the Ministry of Fish Wealth.The missions Aide-Memoire was discussed in detail and agreed with MFW, and was endorsed byGovernment at a Wrap up meeting on 21 July 2010 which was chaired by the Deputy PrimeMinister and Minister for Planning and International Cooperation.

II . STRATEGIC CONTEXT AND RATIONALE FOR IFAD INVOLVEMENT,

COMMITMENT AND PARTNERSHIP (KSF 1)

A. Rural Development Context

5. Yemen is a low-income country with a population of about 22.9 million. GNI amounts to USD21.9 billion and per capita GNI averages USD 960 in nominal terms (2008). Yemen has a humandevelopment index of 0.575 and ranks 140th out of 182 countries rated in 2009. The genderdevelopment index is 0.538, reflecting gender disparities in human development. About 40% of

1 The final design mission consisted of Mr Thierry Mahieux (mission leader & microfinance specialist), Ms HelenLackner (sociologist), Mr Taoufik Jaballah (economist), Mr Leon Williams (fisheries specialist & countryprogramme analyst) and Mr Flavio Corsin (aquaculture specialist). The mission covered the period 20 June to23 July 2010. Mr. Anis Abdulla Shokah (civil engineer) accompanied the mission in Hadramout. Dr FathiaBahran (country programme officer) joined the mission from 20 June to July 23, while Mr Omer Zafar (countryprogramme manager) joined the mission from 14 to 23 July. Mr Giacomo Branca (economist) finalised theproject costing and financial/economic analysis in Rome.


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the population lives below the poverty line, and 80% of the poor reside in rural areas; anotherlarge population segment lives marginally above the poverty line and is vulnerable to economicand natural shocks. Almost half of the rural population is classified as poor.

6. Population pressure is a major challenge which makes the fight against poverty increasinglydifficult. Although the annual population growth rate has dropped from 3.7% to 2.9%, Yemen still

has one of the highest growth rates in the world. The proportion of those below 15 years of age is45%, and over 62% of the population is under 25. It is projected that population will double overthe next 20 years. Official unemployment rose from 12.0% in 2000 to 16.8% in 2005. Althoughwomen are increasingly joining the labour force to counteract declining real household incomes,female labour represents only 8.8% of total employment.

7. The Republic of Yemen was formed in 1990 when the Yemen Arab Republic and the PeoplesDemocratic Republic of Yemen were united. The social and cultural legacy of the previous divisionremains visible today and influences the fisheries sector and society in general, as evidenced bythe stronger position of fisheries cooperatives, historically higher levels of gender equality, andlower levels ofqat consumption in the Socotra Archipelago.

Fisheries Sector

8. Yemens 2,520 km coastline extends from Saudi Arabia in the northwest to Oman in the eastand is divided among the Red Sea (650 km), the Gulf of Aden (1,550 km) and the SocotraArchipelago (320 km). The 552,669 km2 Exclusive Economic Zone (EEZ) contains a variety ofimportant ecosystems including coral reefs and mangroves supporting about sixty-fivecommercially important species. These include invertebrates (shrimp, lobsters, sea cucumbers,cuttlefish), pelagic species (yellow-fin tuna, long-tail tuna, kingfish, Indian mackerel, Indian oilsardines) and demersal species (groupers, emperor, threadfin bream). The major environmentalinfluence on Yemen fisheries productivity is the Indian Ocean monsoon system, in particular thesouth-west monsoon which blows from May to September. This results in a strong upwelling ofcold, nutrient-rich waters in the Gulf of Aden which also enter the southern parts of the Red Sea,creating levels of primary productivity which are amongst the highest in the world.

Table 1: Active Fishers and Boats

Region Governorate Fishers Boats

(est. #) (est. #)

Red Sea Hajjah 1 969 358

(avg. 5.5 fishers/boat) Hodeidah 33 969 6 178

Taiz 3 927 714

Gulf of Aden Lahej 1 750 500

(avg. 3.5 fishers/boat) Aden 4 785 1 367

Abyan 5 831 1 666

Shabwah 1 635 467

Hadhramout 16 335 4 667

Al Mahara 8 166 2 333

Socotra Hadhramout 5 000 1 250

(avg. 4 fishers/boat)

Total 83 367 19 500

9. Due to high productivity and a long fishing tradition, fisheries is of major importance for theYemeni economy. The sector contributes about 3% of GDP and is consistently identified as a keysector in the Governments economic development and poverty reduction strategies. Furthermore,after petroleum products, fisheries constitutes Yemens main source of export earnings and is amajor source of employment, income and food security throughout the coastal zone. Yemen is themajor regional fish producer, accounting for more than 50% of fish production and exports acrossthe Red Sea and Gulf of Aden. The fishing industry is dominated by the small-scale sector, whichcurrently supports the livelihoods of an estimated 83,367 small-scale fishers and 583,625 of theirhousehold members, for a total of about 667,000 people (Table 1). Government sees the fisheriessector as a critical source of employment in coastal areas and has encouraged its expansion; thenumber of small fishers has increased at an average rate of 7.5% p.a. over the past two decades,

resulting in significant increases in fish production from the early 1990s to date. Artisanal fishers


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currently operate about 19,500 fishing boats and account for well over 90% of total production,despite the presence of both licensed and illegal foreign (and national) trawlers in Yemeni waters.

10. Production. Official MFW statistics indicate that total fisheries production in 2009 amountedto 107,000 mt, representing a major decline from the official peak level of 256,300 mt in 2004(Figure 1, Table 2). However, these figures are likely to be grossly inaccurate due to logistical

difficulties in data collection, poor auction management (including not weighing most of the fishsold), and deliberate under-reporting to avoid payment of the 3% levy on catch value introducedby Government in 2004. The MFW has unofficially indicated that total annual catch should bearound 600,000 mt, and implies that fishers cooperatives are indeed misreporting catches toavoid the levy. Based on export and domestic consumption data as well as interviews with fishersacross the coastal areas, the mission estimates that total annual catch is currently in the range of247,000 264,000 mt, for an ex-vessel annual value ranging from USD 618 million to USD 660million. In any case, it is evident that all estimates of total production are highly uncertain, andimproved systems of data collection are required.

Figure 1: Fishers and Fish Production, 2000-2008/ 2009

(Source: MFW / FAO Fishstat / Mission Estimates)

Table 2: Fishers and Fish P roduction, 2000-2010

Indicator Unit 1995 2000 2005 2010 (est.)

Fishers number 30 000 49 114 65 198 83 367

Boats number 10 000 12 560 16 890 19 500

Average Fishers / Boat number 3.0 3.9 3.9 4.3

Total Annnual Catch mt 107 790 142 198 238 400 256 000

Average Annual Catch / Fisher mt 3.6 2.9 3.7 3.1

Source: MFW, FAO Fishstat, Mission estimates)

11. Vessels and Landing Facilities. In the small-scale sector virtually all fishing is carried outusing huris (long, narrow fibreglass boats of 7-16 m, with outboard engines, carrying 3-7 crew)and sambuks (larger wooden boats of 10-20 m, with an inboard or outboard engine, carrying up to10 crew). Gillnets, traps and hook and line are the most common types of fishing gear, and fishingis highly seasonal with activity restricted by the monsoon winds (which peak in June-August) forreasons of safety and changes in fish behaviour. Huris were traditionally used for single day tripsin inshore waters, but due to overfishing and low yields in Yemeni waters they now commonlytravel to the EEZ edges and beyond and stay for up to 10 days. Sambuks are used for longer trips

ranging from a few days to three weeks. Boats are generally privately owned with some individualsowning two or more, and occasionally up to five. Joint ownership is rare on the Red Sea coast butmore common along the Gulf of Aden and Socotra, accounting for 30-40% of boats in some areas.


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12. Only 12 of the 88 landing sites have a harbour with paved or concrete pier. A further 42have an open-sided auction shed, while less than half have any basic services. The remaininglanding sites lack modern landing facilities, and fish are brought ashore directly onto the beach.Boats are either moored near the beach or dragged up out of the water onto the beach itself.Fishers have no means of protecting their boats and gear from the monsoon winds and tropicalstorms to which the Yemeni coast is exposed. There are numerous ice plants (including those

belonging to fish factories) which currently produce sufficient ice to meet the low demand; it isexpected that ice demand will increase significantly as the fisheries value chain is upgraded.

13. Marketing. Domestic consumption of fish is around 5kg per capita per annum reflecting lowfish consumption in inland areas. About 57% of total production is exported (2008) to regionalmarkets and high value markets in the EU and Asia2. There are 35 fish factories, concentrated inHodeida, Aden, Mukalla, Qishn and Al-Ghaydah, of which 17 are licensed to export to the EU. Upto 70% of catch on the Red Sea coast is exported fresh to Saudi Arabia by small traders equippedwith insulated vehicles; it is estimated that there are 975 trucks of 5 mt exporting to Saudi Arabiaand Oman. However, due to poor handling and hygiene standards, Yemeni fish receives low pricesand has a poor reputation in the Saudi market. Processors and exporters often report increasingdifficulties in obtaining sufficient quantities of high quality fish due to limited use of ice, poor on-board handling and processing, and the long periods vessels stay at sea due to declining catches.

14. Since 2004, all fish must be sold through official auctions where the gross sale value issubject to a 3% Government levy plus a service charge of up to 5%, for a total of 8%. The servicecharge is divided among the auctioneer (2%), the owner of the auction shed (1%) and the fisherscooperative (2%). Where the cooperative owns the auction shed and employs the auctioneer, itmay charge as little as 2%. In other areas, particularly on the Red Sea coast where cooperativesare weak, wakeels (agents) have developed inter-locking factor markets and control the provisionof fishing inputs and sale of fish, and often also act as auctioneers taking 5% of the value, whilethe owner of the auction shed gets 2%, the cooperative gets 1%, and the Government gets 3%,for a total to 11% of gross revenue. These auction systems are complex and not transparent, withsignificant opportunity for collusion between buyers and auctioneers. In areas where cooperativesdo not control auctions, fishers often do not receive receipts for fish sold and are unaware of theprecise weights landed. It is common for agents/auctioneers to act as moneylenders to fishers foroperating costs, deducting the debts from sale of fish.

15. There are three prevailing systems of revenue distribution amongst fishers: Red Sea coast: net revenue is divided into two, with 50% for the boat (kept by the

owner) and 50% for the crew which is divided equally among crew members and captain.If the captain is not the owner, it is normal that the owner still takes the 50% for the boatwhile the captain takes two crew shares.

Gulf of Aden and Socotra: a more equitable system is applied; after costs are deducted,the revenue is divided with one share accruing for the boat (kept by the owner) and oneshare each for the fishers onboard, including the owner/captain and crew members.

Gulf of Aden: a third system is also applied in places along the Gulf of Aden, under which the boat receives one third of net revenue (kept by the owner), the captain receivesanother third, and the crew members divide the remaining third among themselves.

16. Overfishing and Declining Resources. Increases in the number of fishers and in fishing efforthave taken place in an uncontrolled manner, without adequate knowledge or consideration of thestatus of fish stocks, nor enforcement of measures for sustainable exploitation. Fisheries arecurrently effectively operating in an unregulated environment, although legislation and regulationsexist. Due to the lack of funds for enforcement, complex and time consuming court cases, andinsufficient awareness within MFW of the damage being caused to Yemens marine resources,many existing regulations are simply not enforced.

17. Official time-series estimates of total and high value species fish production are indicated inFigure 2. While the data may be somewhat unreliable, it is known that production of selected highvalue species is declining in recent years. All fisheries sector stakeholders report declining catches,particularly of high value species such as cuttlefish, tuna and shrimp. Some species such as lobster

and sea cucumber have collapsed completely. Stakeholders also report a decline in the average

2 These figures are based on mission calculations and detailed in the Working Papers.


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sizes of specimens caught, another indicator of overfishing and medium-term damage. As a result,fishing effort is increasing, fishing is taking place beyond the EEZ, and illegal/destructive fishingpractices are expanding. A decade ago the Red Sea fishers could catch 550 kg of fish in 2-4 days,five years ago it took 4-6 days, and it now takes 6-10 days. On the Gulf of Aden and in Socotra,most fishers undertake single day trips but now use more powerful engines (commonly 75 hp) totravel further, faster and remain at sea for more hours.

Figure 2: Fish Production Total and Selected High Value Species - Selected Years

(Source: MFW/FAO Fishstat)

18. There is evidence of increases in catches of low value species (Figure 3), suggesting shifts infocus of fishing effort. Overfishing of high value species followed by a shift of target to lower valuespecies and an increase in fishing effort to maintain production levels is a phenomenon which hasbeen repeated across the world in poorly managed fisheries.

Figure 3: Production of Selected Low Value Demersal Stocks, 2000-2007

(Source: FAO Fishstat)

19. This trend of decline in Yemeni fish production is consistent with fish production trends in thewider Western Indian Ocean Region and globally. It is now believed that 52% of global stocks arefully or over-exploited, of which 28% are fully exploited, 19% are overexploited, 8% are depleted,and 1% are recovering from depletion. In the Western Indian Ocean, the share of stocks which arefully exploited is amongst the highest in the world. The causes of the decline in Yemeni fish

production are also consistent with global trends uncontrolled increase in fishing effort, poormanagement, weak enforcement of regulations, and political preference for short-term increasesin employment and revenue rather than the assurance of long term sustainability.


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Financial Services

25. Supply. The commercial banking sector consists of fifteen active commercial banks, of whichfour are foreign-owned, three are publicly-owned, and eight are domestic privately-owned; four ofthe latter are Islamic banks. Commercial banks are over-liquid as indicated by their average creditto deposit ratio of 30% and their average investment in Treasury Bills (about 60%). The outreachof commercial banks is concentrated in the main cities and urban areas. Commercial bank loansare associated with high interest rates and sizable collateral requirements. Annual interest ratescan run as high as 60% and banks can request collateral (preferably houses or land) for amountsof up to 400% of loan size. Banks regard SME lending as a strategic future goal, but have not yetaddressed this market due to the high returns on Treasury Bills with low risk.

26. Microfinance institutions (MFIs) which are actively involved in the provision of microfinanceservices include eleven NGOs/foundations, Al-Amal Microfinance Bank, Tadhamon MicrofinanceInstitution (TMI), and the Small Enterprise Development Fund (SEDF). Apart from Tadhamon, theother MFIs were created by the Social Fund for Development (SFD). These MFIs have an aggregateoutreach of over 40 000 clients, a combined loan portfolio of around USD 15 million, and anaverage loan size of USD 115. The MFI with the largest outreach covers nine governorates, whileothers cover from one to four governorates each.

27. In October 2008, the Al-Amal Microfinance Bank (AMB) was created under Al-Amal Bank Law23 of 2002, under Central Bank supervision. The AMB is owned by SFD (45%), the Arab GulfProgramme for UN Development (AGFUND, 35%), and 13 private investors/entities (20%). Trialperiod results and outcomes to date are well above projections, and indicate that AMB will break-even in 2010; however, it will need additional financial resources to sustain its activity growth andgeographical expansion. Several investors including the Economic Opportunities Fund (EOF) beingcreated under the IFAD-financed Economic Opportunities Programme have expressed interest toinvest in the share capital of AMB. The AMB Board has expressed interest for the EOFs proposedinvestment in the Banks share capital, which would enable financing of the Banks geographicalexpansion in IFADs areas of operation as well as the growth of its activity. Parliament is currentlydiscussing the repealing of the Al-Amal Bank Law to enable the Bank to fall under the MicrofinanceLaw (this would indeed facilitate the EOF investment in the Banks share capital).

28. In March 2009, a new microfinance bank law was adopted by Parliament. It allows licensedmicrofinance banks to collect savings and deposits and use them for lending, and places themunder Central Bank supervision, to whom they have to submit audited financial statements. TheCentral Bank has developed a set of prudential rules and regulations. The AMB is licensed by theCentral Bank, while TMI is licensed through its mother company. Due to their current structure andlack of compliance with CGAP microfinance best practices, it is unlikely that the SFDs microfinanceentities will be licensed. Unlicensed MFIs are not allowed to collect savings.

29. Outreach. Fishers villages are scattered along the coast, and most have low populations.They are not well covered by microfinance institutions nor by commercial banks; the latter havedeveloped relationships with the fisheries sector in large cities/ports such as Aden, Hodeida, andMukalla. Financial outreach to coastal villages will require MFIs/banks to develop service points inthese areas. Alternative financial products suited to the specific requirements and cash-flow cyclesof fishers households and rural micro-businesses need to be developed. The Post Office is the only

financial intermediary widely present in coastal areas and fishers villages.

30. Only those fishers who are members of cooperatives which are financially sustainable andhave a good credit record (about 5 to 10% of cooperatives) have access to commercial bank loans(revolving short-term credit for the fishing season). In such cases, credit funds are provided to thecooperative and on-lent to fishers (individually or in groups) with a small cooperative mark-up tocover transaction costs. In some cases, cooperatives act as financial guarantors for their members,particularly for investment credits. Typically, however, cooperatives and their members do nothave access to commercial credit due to bad credit ratings. In the Red Sea, access to credit forfishers is controlled by wakeels who serve as auctioneers, buyers, owners of boats, and financialservice providers. An opaque and intricate financing system, partial repayment and social creditleave fishers in financial dependence ofwakeels, without alternative means to access credit.

31.

Demand. The WB/IFC Doing Business Report 2009 ranks Yemen 150

th

out of 182 countriesfor access to credit (up from 174th place in 2008). Demand for financial services in rural areas isgenerally unmet, mainly due to: (i) the absence of a rural network of commercial banks, with the


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exception of the Post Office, CACB and the Yemen Bank for Reconstruction and Development; (ii)the limited ability of rural enterprises to meet the terms, conditions and collateral requirements ofcommercial banks; (iii) the very limited outreach of MFIs; (iv) the lack of adaptation of financialproducts for rural activities, particularly agriculture and fisheries. Due to the decline in fish catchand related income, and lack of collateral as a consequence of the reluctance of insurers to insureunlicensed boats, fishers have limited access to credit for investments and working capital.

B. Policy, Governance and Institutional Issues, Poli tical and Economic Issues

32. From 1995 to 2000 Yemen implemented an Economic, Financial and Administrative ReformProgramme proposed by IMF and World Bank. The programme was fairly successful and resultedin robust GDP growth averaging 5.2% per annum. Since 2000, economic growth decelerated tolevels below population growth due to internal security concerns, a slowdown in economic reforms,reduced private sector investment, and declining oil production. Between 2004 and 2008 GDPgrowth averaged 3.7% per annum. Oil and gas represented 66% of Government revenue in 2002,rose to 76% in 2006 and dropped to 70% in 2009. The budget deficit is maintained at about 2%largely due to significant oil price increases since 2004. Between 2001 and 2005, official inflationrates ranged from 11.8% to 12.2%, and increased to 18.9% in 2009. The Central Bank expectsinflation to be maintained under 10% in 2010, ranging from 7% to 9% over the next three years.

33. Yemens strategic vision and objective is to reach middle-income prosperity by 2025. Theachievement of a GDP per capita level of USD 2 375 will require a GDP growth rate of least 6.3%per annum over the next 20 years. To facilitate economic growth and reduce poverty, Governmenthas been introducing significant measures to improve the business regulatory environment andinvestment climate, in cooperation with IFC and other partners. Yemens composite ranking in theIFC/WB Doing Business report improved from 123rd place in 2008 to 98th in 2009; in terms of

starting a business Yemen jumped from 175th place in 2008 to 50th in 2009 (the top reformer inthe world for this indicator). The reforms include streamlining business licensing and registration,restructuring taxation and customs systems, and further protecting investors. Government is fullycommitted to institute a private sector approach to economic growth and poverty reduction.

34. The Investment Law will be modified before the end of 2010. Tax and financial incentives willno longer be flat but will be performance-based and proportional to the size of the investment and

the number of jobs created. Temporary tax exemption will no longer be granted, and profits will betaxed at 15% for new enterprises/companies. To facilitate the creation of new businesses, theGeneral Investment Authority is implementing a one-stop shop mechanism where entrepreneurscan have their companies registered with all relevant governmental units, thereby reducingbureaucracy and red tape. These one-stop shops are established in major cities (Sanaa, Aden,Hodeida, Mukalla) and will be used under the project for the establishment of the limited liabilitycompanies by the EOF and fishers organizations, and for providing services to these organizations.

35. Yemens Development Plan for Poverty Reduction (DPPR) 2006-2010 indicates that povertyreduction depends on economic growth through private sector development, infrastructure, humanresource development and social protection. In particular, economic growth led by the privatesector is seen as the major poverty reduction instrument. The three key DPPR objectives are:

DPPR 1: enhance partnership with the private sector, civil society, and external financiersto reduce poverty.

DPPR 2: (i) promote SMEs for sustainable income generation, particularly in foodprocessing, export-oriented agriculture, fisheries, tourism and related services; and, (ii)promote microfinance services for the poor, particularly for women in rural areas.

DPPR 3: (i) increase efficiencies in the agriculture sector; (ii) enhance household foodsecurity; (iii) ensure optimal and sustainable use of fishery resources.

36. Fisheries. Yemens fisheries sector policy as defined by MFW includes: (i) maximise fisheriesreturns in a sustainable manner; (ii) develop the aquaculture sector to meet the rising demand forfish; (iii) ensure integrated development of fisheries communities; (iv) ensure stakeholder andcommunity participation in fisheries and aquaculture by strengthening cooperatives; (v) promoteprivate sector participation in all aspects of fisheries; (vi) increase quality, value addition, and

fishers incomes through services and marketing efficiency; and, (vii) ensure basic food security.


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Major Institutional Stakeholders

37. Cooperatives. There are currently 129 fisheries cooperatives and an apex organisation, theFisheries Cooperative Union (FCU), located in Sanaa. The cooperative movement has a dynamichistory in the coastal areas of the former socialist PDRY (including the Gulf of Aden and SocotraArchipelago), while in the Red Sea cooperatives are generally weak due to lack of a cooperativetradition, limited membership, and the influence wielded by wakeels who are at the centre of asystem of interlocking factor markets and power relationships to keep fishers under their control.

38. Cooperatives are legally registered and fall under the responsibility and supervision of theMinistry of Social Affairs. For technical matters and compliance with fisheries laws and regulations,however, MFW serves as the supervising authority. A rapid assessment of fisheries cooperativeswas carried out in 2007 to assess membership, basic organisation and services provided; it did nothowever include financial audit nor review of financial statements and liquidity positions. Despiteits weaknesses, the assessment serves as an indicator of the quality of management of fisheriescooperatives, on the basis of which cooperatives have been ranked in three groups5:

mature cooperatives: these include 25 cooperatives in the Gulf of Aden and SocotraArchipelago, and 2 along the Red Sea coast. They have a clear mission and vision, providevarious production and social services to members, demonstrate good governance andhave sound financial statements and cash positions. Financial statements show positivereturns in recent years (despite declining catch levels) and are audited by local audit firms.These cooperatives are able to mobilise up to YER 8 million in cash from their ownresources to contribute to productive investments.

developing cooperatives: these include 24 cooperatives mainly in the Gulf of Aden andSocotra Archipelago, and 2 along the Red Sea coast. They require technical assistance andadvisory services to improve/expand the provision of services to their members and attainmaturity. Financial statements are audited by local firms. Most of these cooperatives are

just breaking even or suffering minor losses mainly due declining catch levels. They maybe able to mobilise up to YER 2 million in cash from their own resources or from additionalmembers contributions to cofinance productive investments.

underdeveloped cooperatives: these include 76 cooperatives mainly on the Red Sea coast.They have inadequate administrative structures, weak governance and management, poor

financial statements and cash positions, absence of services for members, and lack ofindependence due to entrenched local political interference. They require substantialtechnical assistance and capacity building to improve; alternatively, they face closure.These cooperatives have very limited possibility to mobilise funds for investment purposes.

39. Fishers cooperatives and MFW have had a generally poor relationship. Cooperatives believethat MFW does not protect the interests of small fishers by not enforcing fisheries laws andregulations, leading to unsustainable over-exploitation of the resource base. MFW believes thatfishers avoid paying taxes and under-report catch accordingly, and has implied that cooperativesshould be closed. However, recent confidence-building measures, such as joint MFW/FCU studytours, have started to lay the foundations for dispute resolution and improved relationships. It isreported that the Ministry of Social Affairs is facing difficulties in enforcing the Cooperative Lawdue to budgetary constraints, while the FCU lacks resources for auditing cooperative accounts, asmandated, and is thus unable to recommend the closure of financially non-compliant cooperatives.

40. In any case, cooperatives are the key driving force in the fisheries sector in the Gulf of Adenand Socotra Archipelago; their history, large membership and often impressive levels of serviceprovision (including healthcare, education, social welfare, water supply and electricity) mean thatclosing them would be socially and economically unacceptable for many coastal communities.

41. Ministry of Fish Wealth. The MFW is responsible for management of Yemens fish resources.Its current structure includes a Minister supported by eight Deputy Ministers. Professional roles areunclear and the structure has changed in recent years. MFW maintains branches in each coastalgovernorate but few functions are decentralised, there is limited communication between branchesand head office, and branches lack budgetary resources for operating costs. The Marine Science

5 Estimates of cooperatives contributions to productive investments are based on discussions with the FCU andselected cooperatives in Socotra, the Gulf of Aden and the Red Sea. These estimates will be reviewed duringthe due diligence exercise to be carried for all cooperatives at project inception. Comments on the financialstatements based on the missions analysis.


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and Resources Research Centre (MSRRC) and the Aquaculture Research Centre (ARC), both basedin Aden, are also under MFW control but lack operating budgets to implement research activities.

42. The WB has undertaken a major institutional assessment of MFW, supported by the WB/EU-financed Fisheries Resource Management and Conservation Project. Based on this assessment, amajor restructuring of MFW, its branches, MSRRC and ARC has been designed and is currently

under implementation. It involves significant reductions in staff numbers, reorganisation of MFW inSanaa, and replacement of its branches with four Fisheries Authorities (FAs). MSRRC and ARC willbe replaced by a new Fisheries Research Authority (FRA). The restructuring process is expected tobe completed by end-2010. The MFW will subsequently operate with about 70 staff in Sanaa andretain its role as Governments principal advisor on fisheries and fisheries management, withresponsibility for monitoring the sector, planning strategic development, and formulating fisheriespolicy, legislation and regulations. MFW will also be responsible for international fisheries policy,export promotion, licensing of foreign vessels, and overseeing the FAs and FRA.

43. The responsibility for implementation of MFW fisheries policies will rest with the FAs, whichwill be located in Hodeida, Aden, Hadramaut and Al Mahara and will cover several governorateseach. The FAs will have about 285 total staff members and will be responsible for: (i) monitoring,control, surveillance and enforcement of regulations; (ii) administration of local fisheries licensing;(iii) revenue collection; (iv) drafting of fisheries management plans; (v) stakeholders coordinationand consultation; (vi) extension services; (vii) collection of landing site data; and (viii) fish qualitycontrol. FAs will be governed by Boards consisting of governorate representatives and fisheriessector stakeholders, and will report to MFW. The FAs will aim to develop strong relationships withstakeholders and involve them in decision making through the creation of local stakeholder liaisongroups. Planned project activities such as licensing, strengthening of fisheries inspectors andexecution of fisheries management plans will be carried out by the FAs.

44. The Fisheries Research Authority will be responsible for research in support of fisheriesmanagement and development, aquaculture development and marine environment management.This will include providing information on fish biology, population dynamics and stock assessment,scientific advice for fisheries management planning, and research support for private aquaculturedevelopment. The FRA will be governed by a Board consisting of representatives of MFW, FAs, andfisheries sector stakeholder groups. Its Aden head office will constitute the centre of a network of

research stations at Hodeida, Mukalla and Aden operating with about 107 staff. The FRA willreceive public budgetary resources but will also be required to raise funding from contract researchfor the FAs, private sector, external financiers and Government.

45. Environmental Protection Authority. The EPA constitutes part of the Ministry of Water andEnvironment. It is responsible for enforcing the Environmental Protection Law and reviewing theEIA for projects which may have adverse impacts on the environment. The EPA can issue anunqualified or qualified opinion, or can reject a project for environmental reasons. It has a specificdepartment dealing with the coastal and marine environment and will be represented in themanagement committees for integrated coastal area management.

C. The IFAD Country Programme

46.

IFAD has supported nineteen development projects in Yemen valued at USD 610 million, ofwhich USD 201 million financed by IFAD and the rest covered by external financiers and domesticresources. Five projects with IFAD investment of USD 78 million are currently under execution,focusing on area based participatory rural development, rainfed agriculture, and rural roads.

47. The December 2007 RB-COSOP indicates that IFADs response to rural poverty challengeswill focus on three strategic objectives (SO):

SO 1: empower rural communities; linked to DPPR 1. SO 2: promote sustainable rural financial services & pro-poor SMEs; linked to DPPR 2. SO 3: enhance rural household food security; linked to DPPR 3.

48. Government and IFAD are in continuous discussion regarding the country programme andpipeline. There is consensus regarding the need to: (i) focus on the creation of sustainable pro-poor investments aligned with Governments economic growth and poverty reduction policies andIFADs strategic objectives; (ii) introduce a private sector-led approach as the key instrument in


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this respect; (iii) institute a public-private partnership to effectively, efficiently and transparentlymanage development resources and create synergies.

49. The IFAD country programme for the 2010-2012 resource allocation cycle, defined jointlywith Government, envisages three investments: (i) the Economic Opportunities Programme (EOP)focusing on pro-poor agricultural value chain development; approved by IFADs Executive Board in

April 2010; (ii) the Fisheries Investment Project (FIP) focusing on sustainable fisheries resourcemanagement and value chain upgrading; (iii) the Rural Employment Programme (REP) focusing onthe creation of sustainable rural employment opportunities through venture capital investmentsand other services for rural businesses with growth potential. All three investments will bemanaged by a new public-private partnership the Economic Opportunities Fund (EOF) which isbeing created under the EOP. External and domestic co-financing have been secured for the EOP,and discussions are underway for similar cofinancing arrangements for the FIP and REP.

II I. POVERTY, SOCIAL CAPITAL AND TARGETING (KSF 2)

A. Rural Poverty, Information and Analysis

Table 3: Rural P overty by Governorate, 2005

Governorate Total Rural Rural Rural Rural

Population Households Population Poor Poor

(number) (number) (number) (number) (%)

Abyan 434,819 43,430 322,300 161,150 50%

Al Baidha 577,369 53,933 469,316 281,590 60%

Al Dhala 470,564 51,562 408,318 187,826 46%

Al Hodeida 2,157,552 236,549 1,396,495 502,738 36%

Al Jawf 443,797 51,008 385,735 204,440 53%

Al Maharah 88,594 8,125 51,347 3,081 6%

Al Mahweet 494,557 64,464 458,534 142,146 31%

Amran 877,786 87,359 728,310 517,100 71%

Dhamar 1,330,108 162,763 1,144,162 286,041 25%

Hadramaut 1,028,556 65,022 552,701 215,553 39%

Hajja 1,479,568 177,134 1,339,990 669,995 50%

Ibb 2,132,861 253,183 1,757,028 579,819 33%

Lahej 722,694 95,699 660,665 323,726 49%

Mareb 238,522 24,141 206,665 103,333 50%

Raymah 394,448 55,744 390,618 136,716 35%

Saadah 695,033 71,455 588,015 94,082 16%

Sanaa 919,215 113,948 893,796 250,263 28%

Shabwa 470,440 44,244 396,283 225,881 57%

Taiz 2,303,425 286,077 1,857,445 780,127 42%

Total 17,259,908 1,945,840 14,007,723 5,665,607 40%

Source: based on 2004 census data and WB analysis of 2005 household budget survey.

50. Yemen is an overwhelmingly rural country with 71% of the population living in rural areas.The most recent analysis of poverty, dated 2005, indicates that rural poverty is widespread (Table

3). Government estimates that there has been a modest reduction in rural poverty between 1998and 2005 (from 42% to 40%); however, World Bank figures indicate that the total number of therural poor is 1.75 million higher than Government data, due to population increase and worseningconditions in some areas. These estimates are considered as conservative by most institutionsaddressing poverty. The situation has deteriorated since mid-2007 due to the global food pricecrisis, the increasing frequency and severity of drought, and over-exploitation of fish resources.

51. The over-exploitation of fisheries resources, the relatively low domestic and regional value offish, the inadequate access to lucrative international markets, and insufficient diversification ofincomes has led to a stagnation of growth of fishers incomes. Despite the inability of the fisheriessector to provide sufficient incomes, the limited alternative economic opportunities in the coastalareas means that most households remain dependent on fisheries activities (or on remittances).Insufficient incomes from fisheries activities increases the importance of casual urban labour for

household income, and enhances the need for income diversification within fishers households.While male casual labour in urban areas is usually a first step in the rural-urban migration of thewhole household, cultural factors as well as the costs of living and housing conditions in urban


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areas are slowing the process of urbanisation in Yemen. Opportunities for income diversification inrural coastal areas include aquaculture, fish processing for export markets, processing of low valuefish for domestic markets, and non-fisheries related activities in line with market demand.

52. On the basis of official MFW statistics, data on annual boat engine sales, average daily catchestimates provided by fishers, and fish export statistics, it is estimated that the current number of

active fishing boats is about 19,500. This implies there are about 19,500 boat captains and 63,867crew members, for a total of 83,367 fishers in Yemen. With an estimated average of 8 people perfishers household, the fishers community contains over 667,000 people. In addition, it isestimated that about 9,000 people are working in fisheries related activities (processing, transport,storage). In total, fisheries and fisheries-related activities include at least 739,000 people. Theincomes of fishers households in the Red Sea, Gulf of Aden and Socotra is illustrated in Table 4.

Table 4: Fishers Households Indicative Incomes

Indicator

Socotra Gulf of Aden Red Sea

Owner of one boat 1.6 2.2 2.7

Owner of one share in boat 1.2 1.8 -

Crew member (+ other activities) 0.7 1.2 1.0Fisheries-related labour 0.5 0.7 0.4

Source: mission estimates

Indicative Household Income (USD/day)

53. The deteriorating poverty situation in coastal areas is confirmed by the missions field visits;meetings with household members, supplemented by independent verification and triangulation,confirmed that standards of living are declining. Respondents also indicate that the developmentefforts of Government and financiers have not reached the majority of the rural poor and havelargely not addressed their needs for jobs, market opportunities, and technical information. Thefishers on Socotra, in particular, have received very little assistance to date.

54. The characteristics of rural poverty within fishers communities are presented in Figure 5.Figure 5: Poverty in Fishers Communities - Characteristics

Who are the poor fishers? crew members who dont own a share of a boat (casual labour); crew members and captains who own a share in a huri; households with high dependency ratios (adult unable to work or disabled); women-headed households; young women and men living in extended households.

Where are the poor fishers? found throughout all coastal governorates; concentrated in dispersed villages with inadequate access to services.

Why are they poor? improper and unsustainable resource management; inadequate enforcement of regulations; insufficient alternatives within the fisheries sector or outside the fishing season; inadequate access to knowledge and technology; poor/inconsistent fish quality limiting access to remunerative markets; inadequate access to financial services; weakness of local organisations, constraining collective action/negotiation; interlocking factor markets centred around wakeels especially in the Red Sea; other social and non-economic aspects.

What are their coping strategies? out-migration (overseas; in-country); casual wage labour and seasonal or long-term migration to urban areas; borrowing from relatives and local traders; charity (e.g. Social Welfare Fund), further fuelling dependency; decapitalization.


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55. The typologies of fishers households are characterised in Figure 6.Figure 6: Fishers Households in Yemen - Characteristics

Very poor households: extremely high dependency ratio;

living in a 1 or 2-room cement house or shack; work as casual labour on other boats; not owing a share of a boat or engine; may own an old net; owns 1 or 2 goats but no agricultural land; unable to finance education and medical expenses; destitute; depend on charity; indebted most of the year.

Poor households: high dependency ratio; living in a 2-room cement house; own a share of a boat and engine in average or mediocre condition; part-time casual labour; owns not more than 5 small ruminants and up to 5 date palms; able to finance education for children, but not medical expenses; indebted for several months of the year.

Marginally Poor Households: high dependency ratio; own a 3-room cement house with electricity and water if locally supplied; own a boat and engine in good condition; household member out-migrated for low-paid casual labour or employment; own up to 10 small ruminants, one cow, 10 date palms or agricultural land; able to finance educational and medical expenses; not dependent on charity.

Non-poor Households: reasonable to high dependency ratio; own a 3-room stone/cement house with bathroom and kitchen; own a generator or access electricity and water (piped or large water tank); own one or more boats and engines in good condition; may own a truck with insulated container, a small shop, a vehicle; one member working as international long-term migrant; own more than 10 small ruminants, 2 cattle or camels; able to finance educational and medical expenses for all children; provides charity to poorest households within the community.

B. The Target Group, including Gender Issues

56. The project will strengthen the fisheries value chain through improved vertical integration,handling and processing, and will develop the aquaculture sector, to generate sustainable incomesand employment for fishers and others living in coastal areas. It will support the development ofMSEs (fisheries and non-fisheries related) in coastal areas through business advice, training and

improved access to financial services, to generate economic opportunities and reduce dependencyon the fisheries sector.

57. Target groups. In the coastal zones of selected governorates, the projects direct targetgroups will consist of:

Small fishers (small boat owners and crew members) who are interested to improve thequality of production. They will be supported to comply with regional and international foodhygiene and quality standards. They will be offered training and access to credit toimprove on-board cold storage and processing, and supported to comply with safety-at-sea rules.

Fishers organisations (mature and potentially mature cooperatives, as well as new fishersorganisations) which are interested to invest in and manage modern integrated landing

complexes, mother/transport ships and ice plants. They will be offered business advice,training, access to financial services, and forward contracts with processors/exporters.


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Poor households (fishers and non-fishers), particularly with entrepreneurial young womenand men, who are interested to develop coastal aquaculture. They will be supported toinvest in aquaculture production units and enter into contracts with processors/exporters.Support will include training, advisory services, access to credit and marketing facilitation.

Poor households (fishers and non-fishers), particularly with entrepreneurial young womenand men, who are interested to establish micro-businesses responding to market demandfor products and services. Project support will include skills/business training, advisoryservices, access to financial services and marketing support.

58. Institutional beneficiaries. The MFW, FAs and FRA will be supported to improve sustainablefisheries resource management. The MFW will be assisted to upgrade the legal framework foraquaculture. The MFW and the Yemen Coast Guard will be supported to update safety-at-sea rules.

59. Gender issues. Yemeni women have heavy workloads and are largely deprived of thebenefits of modern society. In addition to child care and house maintenance, they are responsiblefor cooking and collecting water and fuel-wood. Despite their critical role in the economic life ofhouseholds and society, women are faced with serious constraints that hinder improvement totheir living conditions, such as limited control over fertility, inadequate access to assets, exclusionfrom marketing, restrictions on leaving the village, and limited decision-making roles at household

and public levels. Rural women generally lack access to financing for micro-enterprises.

60. Within the fisheries value chain, womens participation is essentially limited to working in fishprocessing plants (where they constitute 45% of employees), small scale drying/salting and netmending, and quality control laboratories. Other than a few villages in Lahej where women havetheir own boats and are directly engaged in fishing, fishing at sea is a strictly male activity. Giventhat male fishers spend increasing amounts of time at sea, greater burdens are being placed onfemale household members with respect to child care, household tasks and shore-based incomeearning activities such as animal husbandry and agriculture.

61. Women continue to marry at a young age and have a high fertility rate. Although the totalfertility rate has dropped, it still remains very high at 6.2. Life expectancy improved by three yearsbetween 1994 and 2004. Womens illiteracy levels, however, remain exceptionally high by

international standards (69% in 2006), and as only 33% of rural school age girls are enrolled inprimary school and the drop-out rate is high, adult female illiteracy is not about to be eradicated.

62. While 8% of households are officially women-headed, a further 10% are de-facto women-headed as the male head is away for over six months per year. The incidence of poverty is notsignificantly different between women-headed households and other households, according to WBand FAO data; however, the household budget survey shows that resources are better allocated inwomen-headed households, which spend more on education and food than on tobacco and qat.

63. Fisheries-related activities are dominated by men, and in most places it is considered sociallyunacceptable or shameful for women to be involved. The idea to support women to increase theirinvolvement in fisheries related activities faces fundamental social and cultural difficulties. Womenwho are involved in fisheries are members of the lowest social category within the Yemeni socialstructure; the involvement of other women is a result of extreme poverty. Most fishers households

are of marginally less low social status; the suggestion that women from such households shouldassume fisheries related work is perceived as an attempt to further lower their social status, and isunwelcome. While deteriorating incomes for small fishers would encourage the women in theirhouseholds to take up economic activities, this would be acceptable if done mainly in non-fisheriessectors. The project therefore needs to offer coastal women alternative activities in addition to fishprocessing, while supporting the poorest in increasing their incomes from fisheries related work.


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C. Targeting Strategy and Gender Mainstreaming

64. Targeting strategy. While the project is national in scope, it will use a variety of mechanismsto ensure that the poorest fishers are given priority access to project investments. These includethe full range of mechanisms indicated in IFADs pro-poor targeting policy:

geographical targeting, giving priority to Socotra, Al Mahara and Shabwa on the Gulf ofAden, and to Hajja and Taiz on the Red Sea coast, where the incidence of poverty is high;

enabling measures ensuring that all project implementers and service providers are fullyaware of the projects aim to support the poor and are committed to this objective;

self-targeting will be applied in non-fisheries related activities through credit and training,which are not expected to be of interest to the better-off;

direct targeting will be applied to ensure that the poor are the primary beneficiaries oftraining in improved fish handling at sea and of associated equipment required to improvethe quality of their catch.

65. On this basis, the project will target very poor, poor, and marginally poor households forupgrading fish quality and investing in micro-businesses and aquaculture. It will also target well-

performing fishers organisations and their communities through investments and services toimprove resource management, develop infrastructure and upgrade the fisheries value chain, withbenefits accruing to all households including the poorest ones. The selection process for landingsites will include poverty-related criteria. The beneficiaries for micro-businesses will be selectedthrough a participatory approach to identify vulnerable households in fishing communities that arecapable of engaging in such businesses. Priority will be given to poor women and the youth.

66. Gender mainstreaming. Gender issues will have to be addressed with considerable culturalsensitivity. As it will be difficult to encourage women to enter into fisheries related activities due tosocial status issues outlined above, the project will invest in non-fisheries activities (such as micro-businesses) for most targeted women, and will concentrate the fisheries related activities to thesocial category of women which is already involved and which is mostly poor.

67. Where appropriate, the project will support women to increase their incomes through value-addition in the fisheries sector, with a specific focus on processing, and through micro-businesses.The project will implement positive discrimination or affirmative action measures to increasewomens participation in the planning and execution of activities, and to play an influencing roletowards a better gender balance in its areas of operation. Several measures will be introduced: (i)ensuring the maximum participation of women in micro-business training; (ii) supporting womensactivities in processing; (iii) supporting womens access to financial services, individually or ingroups, to develop micro-businesses; (iv) encouraging the inclusion of women in the staff andmanagement of fishers organizations; and, (v) encouraging womens participation in shore-basedfisheries activities such as quality control, fisheries management and research. Educated youngwomen will be offered training for book-keeping and administration in fishers organizations.

68. Project staff and long-term consultants will participate in gender mainstreaming training inthe projects early stages. Mobilisation teams will include female and male agents trained to

appreciate and address gender aspects throughout their work.

69. Landing sites selection. The project will finance, through a combination of loans, grants andventure capital investments, the construction or rehabilitation of integrated landing complexesconsisting of public fisheries infrastructure, social infrastructure, and productive infrastructure. It isestimated that 3 new integrated landing complexes will be constructed and 4 existing landing siteswill be rehabilitated; another 5 existing sites will be upgraded with public and social infrastructure.

70. To avoid selecting landing sites without clear prospects of ownership and management, theselection of a site for project investment will be driven by the existence of a positively-evaluatedfishers cooperative within the sites catchment area. Since some landing sites might be located inremote locations, it is possible that no private investor would be interested to own and operatesuch facilities. Site selection will also be based on the growth pole strategy being applied underIFADs fisheries investment in Mozambique and elsewhere, adapted to the Yemeni context. Thisstrategy defines a growth pole as a development node that has accessibility to resources andmarkets and scope for developing services and infrastructure. Landing site locations chosen will


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become nodes for the development of not only fishing activities and services but also SMEsengaged in post-harvest activities, catalysing further growth in the area and multiplying thebenefits of the investment.

71. The site selection process for the development of integrated landing complexes under theproject is outlined in Figure 7.

Figure 7: Landing Site Selection P rocess

Step 1

Methodology

Responsibility

Outcome

Long- l is t o f coopera t ives

Assessment of all fishers cooperatives through a due diligence exercise.Priority given to Al Mahara, Shabwah, Socotra and the Red Sea.

Audit firm contracted by EOF, approved by GOY and IFAD.

Long-list of 25 eligible cooperatives classified as mature or potentiallymature that are financially sustainable or can be strengthened to reachsustainability. The long-list will be discussed with MFW.

Step 2

Methodology

Selection criteria

Responsibility

Outcome

Shor t - l i s t o f loca t ions

EOF staff to execute field visits to long-listed cooperatives to verifycompliance with selection criteria.

Within the catchment area of a long-listed cooperative: # of boats to benefit from infrastructure, within reasonable distance; # of fishers households within a reasonable distance; poverty level of fishers households (at least 70% should be poor); connection to main road, or feasibility of access road construction; sizeable market for fish within economic distance (up to 400km); availability of a site physically suitable for landing site construction; availability of environmentally acceptable site (EIA prior to civil works); current non-availability of mooring or protected beach landing site; physical condition & ownership/management of existing infrastructure; % of fishers who are members of cooperative; willingness of cooperative members to own productive assets, cost-

share construction, and manage the landing site complex.

EOF mobilization teams.

Short-list of 12 eligible geographical locations.

Step 3

Methodology

Responsibility

Outcome

Fina l l i s t o f loca t ion s

(a) Short-list of locations;(b) Pre-feasibility study;(c) For locations passing (b), technical feasibility study;(d) For locations passing (c), environmental study;(e) For locations passing (d), financial viability study;

EOF lead design engineer; engineering consulting companies contracted byEOF; EOF fisheries value chain manager; EOF mobilization teams.

Final prioritised list of 7 sites where landing site development is technically,environmentally and financially feasible and which ranked highest of the 12short-listed sites.

The other 5 short-listed landing sites will be supported, on demand-drivenbasis, with improvements to public and social infrastructure.

72. Once the integrated landing complexes are selected, the EOF will issue a tender to procurean entity that will own the productive assets and manage/operate the complex. The tender will beopen to the local fishers cooperative(s), as well as any qualified private third-party investor whichmay be interested including exporters/processors, private investors and private companies.


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D. Geographic Coverage of the Pro ject

73. The project is national in scope and covers all nine maritime governorates along the Yemenicoast, namely Hajjah, Hodeida, Taiz, Lahej, Aden, Abyan, Shabwah, Hadramaut and Al Mahara. Itwill initially cover fishers communities where positively-evaluated fishers cooperatives exist, andwill then expand to other communities where new fishers organizations have been created.

74. Landing sites to be selected would share several characteristics: fisheries-related activitiesconstitute the main sources of income; most sites are in remote areas and may require investmentin access roads; very poor and poor households constitute the majority of households; access tosocial and economic services is inadequate; and, alternative sources of income outside the fishingseason are limited. It should be noted that, due to environmental and economic considerations,the project will not finance integrated landing complexes in Socotra; however, Socotra will beconsidered for public and social infrastructure. For micro-business and aquaculture activities, allfishers communities along the coast would be covered, with aquaculture focusing on the Red Seacoast where conditions are technically more favourable. Aquaculture will be guided byenvironmental assessment and zoning plans to be prepared with project support.

75. Fisheries resource management activities will be executed at MFW headquarters in Sanaa,regional FAs in coastal areas, FRA headquarters in Aden and regional branches in Hodeida andMukalla, and with fishers organisations themselves.

IV. PROJECT DESCRIP TION (KSF 3)

A. The Knowledge Base: Lessons from Previous/Ongoing Projects

76. The operational experiences of Government and financiers including IFAD in Yemen havegenerated lessons which should be considered in project design and execution. The key lessons ofrelevance for FIP which have been taken into consideration are outlined below:

Institutional arrangements. While projects have suffered from institutional constraints andweak implementation capacity, major improvements are noted in recent years. However,

further performance improvement requires operating outside the purely public sphere. TheFIP will be implemented through the EOF which constitutes a public-private partnership formanagement and which will operate under principles of good governance, transparency,equity, business ethics, efficiency, sustainability, and corporate social responsibility.

Economic opportunities. The development of viable economic opportunities for fishers isfundamental for sustained increases in household incomes and the creation of employmentopportunities. Participatory community approaches should be combined with the promotionof economic opportunities to sustainably reduce poverty in coastal areas. Empowerment ofrural communities is necessary but not sufficient for sustained rural poverty reduction.

Fisheries resource management. Previous fisheries projects financed by IFAD, the WB andother partners focused on increasing fish catch without adequate investment in sustainablefisheries management. While these projects stimulated increases in catch, they contributedto the depletion of fish stocks, jeopardising the future of the sector. Governments laissez-faire approach to fisheries management, including inadequate research and enforcement,combined with the often unsustainable practices of fishers, have aggravated the situation.To ensure resource sustainability while maintaining fishers incomes, it is necessary toinvest in fish stock assessment, sustainable resource management, capacity building forregulatory enforcement, and alternative opportunities across the value chain.

Fisheries infrastructure. Previous projects have invested in fisheries infrastructure withoutproper consideration of ownership and management, often resulting in poor managementand maintenance leading to disputes among the MFW, projects and fishers cooperatives.Ownership arrangements must be finalised prior to commencement of works. Under FIP,public infrastructure will be owned by the public sector and managed by the private sector,while productive infrastructure will be privately owned and managed.

Financial services. Access to appropriate financial services by the rural poor is essential foradoption of improved technologies and establishment of micro-businesses in coastal areas.The current urban focus of the banking sector constrains the delivery of financial services.New modalities, such as cooperation with microfinance institutions, should be explored for


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the provision of adapted financial services to fishers and their organizations. Other types offinancial products should be proposed to fishers organizations for financing productiveinvestments (based on existing Islamic financing products such as musharaka).

Targeting. In working with fishers communities, it is essential to include all communitymembers to ensure that the poorest ones (crew members) are reached. When developinglanding site infrastructure it would be difficult and counter-productive to exclude better-offcommunity members, as exclusion can lead to undesirable social tensions. It would bepreferable to ensure inclusion of the poorest rather than exclusion of the slightly better off.

Marketing. When developing pro-poor value chains such as the fisheries value chain, it isimportant to apply a market-driven, private sector-led approach. When market trends areanalyzed and market opportunities identified, it is possible to promote linkages betweenfishers and exporters/processors, guaranteeing markets for fishers when production meetsmarket demand in terms of quality and quantity.

Fishers organizations. The formation/strengthening of fishers organizations is critical forempowering poor fishers and increasing their leverage with the market and the authorities.These organizations can channel resources and services to fishers communities, and canmanage and operate fisheries-related infrastructure.

B. Opportunities for Rural Development and Pover ty Reduction

77. The FIPs rationale is anchored in IFADs mandate of poverty reduction and Governmentspolicy to reduce economic and social disparities in coastal areas. The project has significantstrategic poverty reduction and economic growth potential as it offers opportunities for exportexpansion, community empowerment and job creation in coastal areas, particularly for women.The project will also support micro-entrepreneurs to develop micro-businesses to meet marketdemand and support income diversification for fishers households.

78. The choice to invest in the fisheries sector is based on several elements: (i) the sector is ofstrategic importance, accounting for 3% of GDP, generating substantial foreign exchange earnings,and providing direct employment to 83,367 fishers and at least 9,000 workers in fisheries relatedbusinesses; (ii) there is a high level of knowledge and skills amongst fishers, and technologies for

upgrading the value chain are available; (iii) fish products have robust and growing demand ondomestic and export markets; the global value of fish exports increased by 9% annually from 2000to 2008, reaching USD 15.9 billion in 2008; (iv) upgrading the fisheries value chain and ensuringcompliance with international quality and safety standards can generate significant increases in theexport prices of Yemeni fish in regional and international markets; (v) it is possible to upgrade thevalue chain and increase returns to the sector while at the same time introducing measures toreverse over-exploitation of valuable species (tuna, shrimp, cuttlefish); (vi) the sector is criticallyimportant for under-developed coastal communities, the majority of whose inhabitants live belowthe poverty line; and, (vii) there is ample scope for vertical integration across the value chain.

79. There is increasing interest among small fishers and cooperatives in Yemen to adopt acommercial approach to fisheries, and among fishers households to invest in aquaculture and ruralmicro-businesses; larger fish processors and exporters are also interested in the opportunitiesoffered by aquaculture. These trends have been confirmed in meetings with fishers cooperatives

and with the Fishers Cooperative Union. In this context, multiple areas need to be addressed: (i)access to investment and working capital and business services to facilitate business start up andgrowth; (ii) improved fishing and fish handling practices; (iii) improved access to technicalservices; (iv) development of contracts between fishers and exporters/ processors; (v) improvedtransparency in marketing systems; (vi) upgrading certification for compliance with internationalstandards; (vii) improved legal framework for aquaculture; (viii) access to training and services.

80. The strengths, weaknesses, opportunities and threats facing Yemens fisheries sector areoutlined in Figure 8. The project has been designed to build on these strengths and opportunitiesand address these weaknesses and threats.


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Figure 8: Fisheries Sector Indicative SWOT Analysis

Strengths

strategic sector contributing to food security and exports an Exclusive Economic Zone larger than the entire country one of the highest level of marine productivity in the world high level of fishing skills and traditional fishing knowledge some strong fishers cooperatives desire amongst fishers to improve fisheries management robust and growing domestic and global demand for fish unexploited potential for aquaculture improving business environment

Weaknesses

inaccurate data and limited knowledge of stock status poor regulation and enforcement, and lack of fisheries management slow and complex process for MFW restructuring weak Fishers Cooperatives Union low fish quality due to poor handling and storage lack of compliance with international standards seasonality of fishing and insufficient income diversification high levels of poverty in fishers communities limited access to financial services

Opportunities

improve sustainable fisheries management strengthen fishers cooperatives or community-based organisations reduce poverty and increase skills and incomes of poor fisher households improve quality of fish and add value on exports enhance compliance with international standards develop untapped aquaculture potential support micro-businesses in coastal communities increase financial services outreach

Threats

uncontrolled expansion of fishing effort uncertainty regarding stock status potential sudden decline in stocks insecurity on land and at sea powerful local elites with monopolistic behaviour

81. Climate change. Yemens National Adaptation Programme of Action (NAPA) was endorsed byGovernment in April 2009. It reports on the vulnerability of the countrys social and biophysicalenvironment from climate variability and climate change, and lists the major impacts of climatechange which may be summarised as follows: increased water scarcity and reduced water quality;increased drought frequency, increased temperatures, and changes in precipitation patterns;deterioration of habitats and biodiversity; reduced agricultural productivity; increased sea levels;increased climatic variability; and, impacts on coastal zones.

82. With respect to impacts on coastal zones, the NAPA includes three objectives which will beexecuted under the project: (i) sustainable fisheries resource management through strengthenedresearch, planning, regulation and monitoring; (ii) increased incomes from fisheries development

through better fish handling, quality and marketing; and, (iii) establishment of rules and normstaking into consideration the requirements of fish habitats in planning costal development. The


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project will respond to these priority requirements by assisting MFW to enforce rules andregulations, by assisting stakeholders to develop and implement fisheries management plans, byproviding TA and advisory services to fishers and fishers organizations on international health andquality standards, and by linking fishers organizations with exporters/processors.

83. Given the uncertainty surrounding the precise local or regional impacts of climate change onfisheries, the main recognised means of adaptation is improving management and ensuring fishstocks and marine and coastal ecosystems are not under pressure from overexploitation, pollutionor other environmental degradation. Improvements to integrated coastal zone management whichtake into account climate change adaptation are the focus of WB financing currently under design.The project will introduce aquaculture as a substitute activity for capture fishing and an alternativefor non-fishers. Specific benefits in relation to climate change are outlined in the benefits sectionbelow and discussed in greater detail in the Environmental and Social Impact Assessment.

C. Project Goal and Objectives

84. The projects goal is to improve the economic status of small fisher households. Its objectiveis to create sustainable economic opportunities for poor women and men in fishing communities.

85.

The projects outputs are to: improve knowledge regarding the status of fisheries resources;develop and implement plans for regeneration and sustainable management of fisheries resources;improve the licensing system and expand it to all value chain actors; empower fisheries inspectorsto enforce conservation, management and quality regulations; develop safety-at-sea regulationsand improve awareness of safety aspects; stimulate the growth and technological improvement ofthe fisheries value chain and rural businesses; link fishers organisations with processors/exportersthrough contractual arrangements; promote compliance with international food quality and safetystandards; develop modern economic infrastructure in support of the fisheries value chain; createa legal framework and services for aquaculture; strengthen fishers cooperatives and assist fishersto form new organizations where cooperatives are very weak; and, expand the rural outreach offinancial institutions and enhance access to sustainable rural financial services.

86. The projects outcomes will be the enhanced sustainability of fisheries resource exploitation,increased incomes in coastal communities, and increased access to economic opportunities across

the fisheries value chain, in aquaculture and micro-businesses.

D. Alignment with Country Rural Development Policies and IFAD Strategies

Figure 9: Government, IFAD, and EOF Strategic Consistency

National Strategy (NS) IFAD COSOP Economic Opportunities

DPPR 2006-2010 Strategic Objective (SO) Fund (EOF)

NS 1: enhance partnership with SO1: empower rural the EOF constitutes a sustainable

private sector, civil society, donors communities public-private partnership serving rural

to reduce poverty areas; it will buy equity shares in pro-poor

financial institution(s) and provide venture

capital financing to strengthened fishers'

organisations and private sector

NS2(a): promote SMEs for sustainable SO2: promote sustainable the EOF will support all value chain

incomes; in food processing and rural financial services actors and promote financial services

export-oriented agriculture & fisheries and pro-poor SMEs for export growth

NS2(b): promote micro finance services the EOF will support microfinance

for the poor, especially for women services that focus on lending to women;

in rural areas and will support new financial mechanisms

and products

NS3(a): increase efficiencies for SO3: improve rural the EOF will enhance efficiencies

agricultureand fisheries sector household food security in the fisheries value chain

NS3(b): enhance household food the EOF will stimulate increased

security sustainable household incomes

NS3(c): ensure optimal and sustain- the EOF will support government to

able use of fishery resources enforce regulations and implement

management plans for fisheries sector


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87. The project concept has been developed jointly by IFAD and Government (MFW, MOPIC). ItsEOF management arrangement is closely aligned with the Governments Development Plan forPoverty Reduction and IFADs COSOP Strategic Objectives for Yemen (Figure 10). It is consistentwith IFADs Strategic Framework 2007-2010 and its Principles of Engagement which focus on thecreation of economic opportunities for the rural poor, and with IFADs Innovation Strategy, GuidingFramework for Rural Finance in NENA, Gender Strategy, and Environmental and Social Assessment

Procedures. It is complementary to WB, EU, UNDP, and JICA fisheries operations as well as publicsector fisheries and coastal management programmes.

E. Project Components

88. The project consists of two investment components: (i) sustainable resource management;and, (ii) value chain development. Consistent with IFADs country programme approach under the2010-2012 PBAS cycle, the project will be managed by the Economic Opportunities Fund.

Component 1: Sustainable Resource Management

89. This component aims to enable MFW to develop, execute and enforce fisheries managementmeasures in order to ensure the sustainability of the fisheries resource base. It will create therequired legal, institutional and human resource capabilities and will support the development of

fisheries research capacity to improve the scientific knowledge base on which informed fisheriesmanagement decisions can be taken. It will also integrate measures to enhance safety-at-sea andreduce vulnerability of fishers and their households to shocks by increasing access to insurance.

90. Five important elements of an effective fisheries management system will be supported: (i)the improvement and expansion of the licensing system to cover all fisheries value chain actors(fishers, transporters, traders, processors, exporters); (ii) the training and equipping of MFW andYCG inspectors to enforce compliance with fisheries regulations; (iii) improved safety-at-sea basedon updated regulations regarding vessel construction and compulsory safety equipment; (iv) aprogramme of fisheries research, collecting oceanographic and biological data to accurately assessfisheries stocks and provide scientific

Documents

Republic of Yemen Fisheries Investment Project - Sept 2010