UNCLAS SECTION 01 OF 02 SANAA 002143

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TAGS: PREL PGOV ECON EFIN KMCA KMPI YM
SUBJECT: MEPI SUPPORT FOR IFC CONTRIBUTES TO REFORM IN YEMEN

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1. SUMMARY: After establishing its offices in Yemen over a
year ago, the International Finance Corporation (IFC) is now
addressing issues that are critical to reforms required by
the Millennium Challenge Corporation (MCC) and the World
Bank. At the request of the ROYG, the IFC will undertake an
initiative to reduce the number of days to establish a
business in Yemen. They have also undertaken other programs,
partially funded by the Middle East Partnership Agreement
(MEPI), for lease financing, lending to small and
medium-sized enterprises, and gender-specific business
training. END SUMMARY.

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IFC Helps Get Businesses Up and Running
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2. On July 18, Econoff met Saad Sabrah, Yemen Country Officer
for the IFC, a recipient of MEPI funding through the Private
Enterprise Partnership Middle East and North Africa
(PEP-MENA). Sabrah explained that he was recently approached
by the Ministry of Planning and International Cooperation
(MOPIC) to help the ROYG design an initiative to reduce the
number of days and the cost of opening a new business. This
objective has achieved special prominence in the ROYG's
reform agenda due to its inclusion as a key indicator for
both the MCC and the World Bank. (NOTE: The IFC is a
subsidiary organization of the World Bank. END NOTE.)


3. In the World Bank's 2006 Doing Business Report, Yemen
ranked 90th among 155 countries, and 151st in the catagory
measuring ease of starting a business. In reponse to MOPIC's
request, the IFC will launch a Business Start-up
Simplification Project, to reengineer the registration
process and create a "one-stop shop" for new businesses. The
project is expected to last 18 months and cost USD 800,000,
half of which will be funded by PEP-MENA and the other half
from the Royal Netherlands Embassy. Unfortunately, the
initiative's results will not be reflected in the Bank's

report until 2008, but in the interim MOPIC intends to
highlight the inauguration of the IFC program as evidence of
reform.


4. Sabrah noted that there are regionally specific issues as
well when it comes to business start-ups. Only 73 of the
1700 total official businesses registered over the the past
year were located in Aden, Yemen's second largest city.
According to the Sabrah, this is largely due to land
disputes, a situation the IFC hopes to improve by partnering
with ongoing World Bank programs in the area.

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Getting Finance to the People
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5. Sabrah has spearheaded several initiatives in the
financial sector. Over the past six months, the IFC trained
and advised the ROYG on a financial leasing law, and expects
a draft to be submitted to Parliament by the end of July.
Sabrah intends to introduce technical assistance to leading
Yemeni banks to support lending to small and medium-sized
enterprises, and may invest between USD 5-7 million. The IFC
is also shopping for donors to support a policy reform
project in Yemen's mining sector.

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Supporting Women in Business
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6. Econoff attended a separate meeting with Shaheen Sidi
Mohamed, Program Manager for Gender Entrepreneurship Markets
at the PEP-MENA center in Cairo. The IFC recently completed
a survey on gender and business in Yemen, which identified
business management training as a primary concern. In
response, the IFC is introducing a gender-specific version of
its Business Edge curriculum, which is currently offered at
three training institutes. They have begun training female
instructors, and are looking to obtain subsidies from
international donors and local companies. The existing
Business Edge curriculum has already been used to train 3700
businesspeople, 35 percent of whom are women. Mohamed also
expressed interest in partnering with another MEPI-funded
program, Women in Technology, managed by the International
Institute of Education.


7. COMMENT: The IFC office in Sanaa was a bit slow to get
off the ground, but is now poised to make a significant
impact on the reform process. If the program can succeed in
delivering improvements in the investment climate,
specifically in the number of days required to register a new
business, it will help build confidence within the donor

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community and improve Yemen's reputation as a place to do
business. The gender programming offers less immediate
benefit for reform in Yemen. The decision to expand Business
Edge (a for-profit enterprise of the IFC) to make it gender
specific is a relatively minor accomplishment, given the
broad needs of Yemeni women. The IFC's overall efforts to
help make financing available to small borrowers may
ultimately have more impact for the average Yemeni, both male
and female. END COMMENT.
Khoury