Part One – The Strategy Itself (DRAFT

)

Private Sector Development Project (PSDP)

Pool of Short-Term-Experts PN 2007.2031.8, VN 81098513 Yemen

National Micro, Small & Medium Sized Enterprise Development Strategy for Yemen – 2011-2021
January 2011
Short term expert: Mike Mann Dr. Nasr Mahmood Alshihab Maged Sultan

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Table of Contents
Table of Contents.................................................................................................................................. 2 The Rationale......................................................................................................................................... 3 The Evolution of the MSME Strategy.............................................................................................. 3 Purpose of the MSME Strategy......................................................................................................... 3 Methodology.......................................................................................................................................... 3 The Strategic Mission.......................................................................................................................... 5 Vision........................................................................................................................................................ 5 Basic Principles..................................................................................................................................... 5 The Strategy........................................................................................................................................... 7 Component 1 – Development and Co-ordination of the Institutional Framework for Delivery of the MSME Strategy......................................................................................................... 9 Component 2 – The Improvement of Financial Assistance to MSMEs.............................. 12 Component 3 – The Improvement of MSME Policy and Regulatory Reform..................18 Component 4 – Development of a Culture of Innovation and Entrepreneurship.........20 Component 5 – Development of Technical and Management Skills................................. 22 Component 6 – Top Quality Business Support......................................................................... 24 Component 7 – Start-up Support.................................................................................................. 34 Component 8 – Raising the Quality of Business Statistics.................................................... 41 Component 9 – Specific Sector Strategies.................................................................................. 43 Indicative Budget for Implementation of the MSME Strategy............................................. 51 The Yemen Charter for Micro, Small and Medium Sized Enterprises............................... 53

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The Rationale
The Evolution of the MSME Strategy
In 1995, the Government of Yemen responded to an approach from the G8 group of countries offering development assistance by the preparation of a nationalsmall and microenterprise development strategy in readily implementable form. In 2009, withthe support of GTZ, the Government of Yemen decided to update the original strategy, but at the same time, revised the SME definition (Small and Micro-enterprise) to that of Small and Medium. As a result, the emerging strategy became the MSME strategy and included small enterprises as well. The 2009 strategy failed to gain consensus from the stakeholders, and in 2010, a further attempt to finalise the strategy was made with a strong focus on consensus. Also, in 2010, with support from GTZ, the Ministry of Industry and Trade developed a concept for an Industrial Modernisation Programme, aimed at all industry in Yemen. Since support to large industry does not vary much from support to SMEs and also, since large enterprises constitute a very small percentage of total enterprises, the components of the Industrial Modernisation Programme have been incorporated into the MSME Strategy. Due to the fact that Yemen has relatively few large enterprises, the resulting strategy is effectively a “Private Sector Development Strategy”

Purpose of the MSME Strategy
The purpose of the MSME Strategy is first and foremost, communication. Previous efforts have suffered to an extent from “Paralysis by Analysis” and lack of consensus. For this reason, it has been decided that, although this strategy document is finalised, the strategy itself must be viewed as a dynamic living document in a constant state of updating, and refinement. For this reason, the strategy itself is a short functional document which is easily presented and communicated, and is drawn from the individual strategies of the individual stakeholders. The strategy is presented as a table where it is a simple matter to add an extra line if something should be added, and where a line can simply be removed in order to remove an element. In this way, we are not burdened by the need for perfection preventing the document from being completed.

Methodology
The Traditional Approach
The usual approach to strategy development is depicted in the diagram on the following page, which describes a logical process of internal and external analysis leading to SWOT Analysis and an emerging strategy. This process is the diligent process, which takes time and involves a significant level of stakeholder co-operation. All of the various stakeholders have developed their own strategies (or are in the process of developing their own strategies) so the traditional approach is deemed inappropriate as it would involve the repetition of the work of others 3

and would also require all the existing strategies to be revised in the light of the findings. In the circumstances, stakeholder consensus would be unlikely to be reached.

Figure 1: Traditional Strategic Planning Approach

The Consensus Approach
The “Consensus Approach” requires the simple summarising of the various strategies of the stakeholders into one all encompassing strategy and in the case of the MSME strategy, has involved a stakeholder group as is depicted by the following diagram:

Figure 2: Consensus Approach to Strategy Development

The emergent MSME Strategy is effectively a reclassification and merging of the individual strategies of the individual stakeholder institutions. At the time of writing, new strategies are being prepared (with the assistance of UNDP) for Tourism, Agriculture and also Fisheries and a new strategy is being prepared with the assistance of the World Bank 4

for the Ministry of Technical, Vocational Education and Training, so these strategies have been incorporated in draft and are subject to revision. It should be noted, that the use of the “Consensus Approach” does not mean that the “Traditional Approach” is abandoned. Indeed the traditional approach has been observed, drawing from the works of others as the Analysis Part of this document. However, the emerging recommendations have not been incorporated into the MSME strategy but remain as recommendations, which may be incorporated later. For the sake of ease of communication, this document is kept minimal. Those who are interested in the analysis should consult the Analysis Document, which accompanies this strategy.

The Strategic Mission
The MSME Strategy seeks to transform the industry of Yemen from a resource based industry dominated by very small family businesses and focused on the domestic market, to a competitive industry associated with high value addition, solid export orientation and driven by modern enterprises.

Vision
The vision of Yemen’s MSME Strategy can be summarised as “Improving the Competitiveness of the MSME Sector” it is however derived from the strategic vision of Yemen from the Strategic Vision 2025 document The Yemen’s Strategic Vision 2025 is: “The transformation of Yemen to the rank of countries with middle human development with a diversified economy and social, scientific, cultural and political progress.” The aims of the Strategic Vision are1: 1. To improve the level of human development 2. To improve demographic and health conditions 3. Eliminating illiteracy 4. Increasing school enrolment 5. Diversification of the sources of generating GDP 6. Diversification of the economic base; 7. Increasing Production and Exports 8. Turning the Country towards the “New Economy” 9. Improve Productivity and Competitiveness 10. Development of a National System for Creativity;

Basic Principles
The approach observes the 5 basic principles of economic intervention, namely:
1. Non-distortion of the market: Interventions that provide a competitive advantage to individual businesses or that allow the agencies that are providing the assistance to compete unfairly against other providers on an on-going basis result in distorted markets.

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Aims extracted from the Yemen Strategic Vision 2025
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2. 3. 4.

Demonstration effect: Where possible, interventions should show how they are likely to impact the Private Sector as a whole. Sustainability: The goal of sustainability should be built into the design of all interventions. Outreach: To maximise cost effectiveness, interventions should be designed so that significant numbers of each type of business are eligible. • Avoidance of bureaucratisation. Assistance should avoid making the agencies that provide assistance bureaucratic and so conflict with entrepreneurial culture. Avoidance of Bureaucracy: To maximise economic impact, bureaucracy should not impose restrictions on the effectiveness and efficiency of the intervention.

5.

Responsibility for Monitoring and Control of the MSME Strategy
The responsibility for development of the MSME sector is defined in Law No. 20 (2010) of the Republic of Yemen and places which places the burden of duty on the Ministry of Industry and Trade as follows: a) Preparation of studies, plans and programs to develop small industries and handicrafts. b) Encouraging the building up and the establishment of industrial cooperatives, craft and supervision of their activities and the provision of incentives and advantages to them and supervise their activities. Article (14) Forming of Committee from government agencies, institutions and specialized nongovernmental organizations, working in the development of small industries projects, thecommittee shall be constituted by resolution issues from Council of Ministers powers of and define it and determine its functions. Development of the MSME Sector is clearly the responsibility of many actors including line Ministries, Social Fund for Development and Agencies and NGOs, all of which influence the development of the sector in many ways. The role of MOIT is seen as the coordination of the various actors in order that a cohesive approach it taken to the task through stakeholder dialogue and active participation in the decision making process. The Ministry of Trade and Industry has a legal duty to implement this task in addition to its primary responsibility to support Industry and Trade.

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The Strategy
The emergent strategy consists of nine pillars or components, the first of which is the management of the strategy itself.

Figure 3: The Nine Pillars of the Emergent Strategy

Pillar 9 relates to support for the main sectors of the economy and all other pillars can be considered as crosscutting elements which all support the specific sectors.

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Figure 4: Overview of the MSME Strategy for Yemen (2011)

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Component 1 – Development and Co-ordination of the Institutional Framework for Delivery of the MSME Strategy
The main purpose of the MSME Strategy is communication and co-ordination to ensure that all stakeholders work together towards a common goal. Previous approaches have been through committees which tended to debate each issue and which involved power struggles between the actors. The concept of a “Charter” is to assign responsibility for the various tasks and to secure that the responsible stakeholder for each task acknowledges and binds them to the responsibility. Annex 1 – contains the actual text of the strategy to which the stakeholders have agreed.

Responsible Stakeholder
The Ministry of Industry and Trade (MOIT) In collaboration with the signatories to the MSME Charter

Objective
To Ensure that all stakeholders work towards the common goal of MSME Development in a co-ordinated manner and with an integrated approach with each stakeholder responsible for specific elements of the strategy.

Purpose
MSME Competitiveness

Expected Results
1. A Yemen Charter for MSMEs whereby each Charter holder acknowledges responsibility for components of the MSME Strategy. 2. Periodic reporting on performance of the implementation of the MSME Strategy

Activities
• Establishment of the Yemen Charter for MSMEs; • Organisation of meetings of Stakeholders and Gathering of Quarterly reports and consolidation of findings into overall report; • Updating of MSME Strategy Document from contributions and individual strategies of Charter Holders • Annual Monitoring and Update of MSME Strategy

Timetable
The Charter should be introduced during 2011 with continuous updating of the strategy and annual monitoring and reporting thereafter.

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Budget
A provisional budget of US$50,000 is required for support to establishing the Charter with an additional US$ required annually for monitoring, evaluation and update.

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Component 1 – Development and Co-ordination of the Objectively Verifiable Indicators MSME Strategy OBJECTIVE 2 To develop Competitiveness of MSMEs International Competitiveness of MSMEs PURPOSE 1 To realise the contribution of the MSME Sector towards Reduced Unemployment the Yemen Vision 2020-25 Poverty Alleviation Economic Diversification 2 To Realise the Vision of the MSME Sector towards the Social stability Poverty Reduction Strategy EXPECTED RESULTS (The Vision) 1 Stakeholders work in harmony to achieve agreed vision Yemen Charter for MSME Development implemented, monitored and regularly updated ACTIVITIES 1 1 Establishment of Yemen Charter for MSMEs Charter document signed by institutional stakeholders with agreement to respective roles 1 2 Sign up of Stakeholders to Charter 1 3 Annual Monitoring & Evaluation ToR, contract and evaluation report 1 4 Annual Update MSME Strategy realignment agreed Indicative Budget for Component 1 1 1 Establish the Yemen Charter for MSMEs 1 2 Stakeholders Sign up to Charter 1 3 Annual Monitoring & Evaluation 1 4 Annual Revision and Update Responsible Institution MOIT and all stakeholders Total for Component 1 2011
50,000 50,000 10,000 110,000

Sources of Verification Trade Statistics Economic Statistics Employment Statistics Trade Statistics Yemen Charter for Small Enterprises Annual Evaluation Report

Conditions / Assumptions

Objectives of Strategy can be achieved Full Co-operation of MOIT Stakeholders agree and sign up to charter

2012
50,000 10,000 60,000

2013
50,000 10,000 60,000

2014
50,000 10,000 60,000

2015
50,000 10,000 60,000

Total
50,000 250,000 50,000 350,000

Basis of Estimate Consultants rough estimate to be verified by further analysis

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Component 2 – The Improvement of Financial Assistance to MSMEs
Objective
To improve “Access to Finance” of MSMEs on a nationwide basis

Purpose Expected Results
A sufficiency of funding available to support business propositions nationwide.

Activities
Activities are classified into two areas: 1. The development of Micro Finance (Principally delivered by SMED) 2. The expansion of Development Finance (Principally delivered by SEDF) Sub-activities are as follows:

Development of Micro Finance
• Delivery of Micro-Finance and Financial Support to Small and Micro Enterprises o o o o o Building and strengthening of Micro-Finance Institutions (MFOs) Funding for eligible MFIs to support portfolio growth Provision of grants to MFIs for institution and capacity building Introduction of new MFI products Supporting market awareness for micro-finance services • Developing the Financial Base of MFIs

• Developing the Outreach of MFIs especially to rural areas

• Development of New Entrants and Sector Innovations to close the demand gap and encourage competition o o o o o o Encouragement of local banks to enter the micro-finance market (downscaling) Encourage MFIs to service the missing middle (upscaling) Encourage the establishment of new MFIs through local and international players Integration with the rural outreach infrastructures of the General Postal Savings Authority Integration with the outreach infrastructure of the Social Welfare Fund Introduction of Mobile Banking

• Introduction of new methods to deliver financial services on a large scale

Expansion of Development Finance
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The main elements of the strategy for expansion of Development Finance are, according to SEDF, as follows: • Delivery of 32,200 credits; • Opening of 5 new branch offices; o o o o o o Training of Fund Employees; Development of New Products (Islamic Banking and Other Products); Marketing and Promotion; Study Tours (Visits to Arab and Other Similar Institutions); Conferences and Workshops (External and Internal IT Development

Timetable and Budget
To be defined in the framework of the MSME Strategy in collaboration with SMED SEDF and SMEPS

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MSME Strategy OBJECTIVE 1 To improve Access to Finance for MSMEs on a Nationwide Basis

Objectively Verifiable Indicators Strengthened MFIs Demand for finance reduced Reduced Unemployment Poverty Alleviation Economic Diversification Social stability Fully developed and funded micro-finance infrastructure Fully developed provision of finance for medium level business propositions

Sources of Verification Micro Finance& Development Finance Statistics Economic Statistics Employment Statistics Trade Statistics

Conditions / Assumptions o Funds are set aside to implement strategy

PURPOSE 1 To develop the competitiveness of MSMEs

Objectives of Strategy can be achieved

EXPECTED RESULTS (The Vision) 2 1 There is a sufficiency of funding available to support sustainable 2 2 business propositions nationwide

Annual MSME Evaluation Report

ACTIVITIES 2 The Improvement of Financial Assistance to MSMEs 2 1 Micro Finance and Financial Support to Small and Micro Enterprises 2 1 1 Building and Strengthening of MFIs 2 1 1 1 An Institutional Sustainability Strategy Document delivered and formally Strategy is published on SMED Strategy for MFIs adopted website 2 Implementation of Strategy Depends on indicators stated within strategy Strategy monitoring report 3 Revised institutional framework for merged and upgraded MFIs 2 1 2 Developing the Financial Base of MFIs 2 1 2 1 Provide funding for eligible MFIs to support portfolio growth 2 1 2 2 Grants to MFIs for Institution and Capacity Building 2 1 3 Developing the Outreach of MFIs especially to Rural Areas 2 1 3 1 Introduction of new MFI products 2 1 3 2 Supporting market awareness for micro-finance services 2 1 4 New Entrants and Sector Innovations to close the demand gap and encourage competition 2 1 4 1 Encouragement of local Number of commercial banks entering the Monitoring report commercial banks to enter the market that were not previously there.

It is commercially viable for Commercial banks to

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MSME Strategy 2 2 2 2 1 1 1 1

2 2 2 2 2 2 2 2 2 2 2

1 1 2 2 2 2 2 2 2 2 2

Objectively Verifiable Indicators micro-finance market (Downscaling) 4 2 Encourage MFIs to service the Amount to which MFIs raise maximum limit of missing middle (Upscaling) loans issued 4 3 Encourage the establishment of Amount of Increased number of MFIs operating new MFIs through local and in Yemen international players 5 Introduction of new methodologies to deliver financial services efficiently on large scale. 5 1 Integration with the rural GPSA provides banking services to microoutreach infrastructure of the finance customers General Postal Savings Authority 5 2 Integration with the outreach SWF provides banking services to micro-finance infrastructure of the Social customers Welfare Fund (SWF) 5 3 Introduction of Mobile Banking ?? Development Finance and Financial Support to Medium Sized Enterprises 1 Delivery of 30,200 credits 2 Opening of 5 new branches 2 1 Training of Fund Employees 2 2 Product Development Islamic and other products 2 3 Marketing and Promotion 2 4 Study Tours Visits to Arab and Other Similar Institutions 2 5 Conferences and Workshops External and Local 2 6 Development of MIS

Sources of Verification Monitoring report Monitoring report

Conditions / Assumptions enter market MFIs have sufficient funds to raise loan sizes It is commercially viable for new players to enter market. SMED reaches agreement with GPSA SMED reaches agreement with SWF

Monitoring report

Monitoring report ??

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Indicative Budget and Timetable for Responsible 2011 2012 2013 2014 Component 2 Institution 2 The Improvement of Financial Assistance to MSMEs 2 1 Micro Finance and Financial Support to Small and Micro Enterprises 2 1 1 Building and Strengthening of MFIs Institutional 2 1 1 1 Sustainability Strategy for MFIs Implementation of 2 1 1 2 Strategy SMED Revised Institutional 2 1 1 3 Framework for merged and upgraded MFIs Total for Sub Component 2.1.1 2 1 2 Developing the Financial Base of MFIs Provide funding for 2 1 2 1 eligible MFIs to support portfolio growth Grants to MFIs for SMED 2 1 2 2 Institution and Capacity Building Total for Sub-Component 2.1.2 Developing the Outreach of MFIs especially to Rural Areas 2 1 3 Introduction of new MFI 2 1 3 1 Products Supporting market SMED 2 1 3 2 awareness for microfinance services Total for Sub-Component 2.1.3 2 1 4 New Entrants and Sector Innovations to close the Demand Gap and Encourage Competition Encouragement of local SMED commercial banks to 2 1 4 1 enter the micro-finance market (Downscaling) 2 1 4 2 Encourage MFIs to service the missing middle (Upscaling)

2015

Total

Basis of Estimate

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Indicative Budget and Timetable for Responsible 2011 2012 2013 2014 Component 2 Institution 2 1 4 3 Encourage the establishment of new MFIs through local and international players Total of Sub-Component 2.1.4 2 1 5 Introduction of new methodologies to deliver financial services efficiently on a large scale Integration with the rural outreach infrastructure 2 1 5 1 of the General Postal Savings Authority Integration with the SMED Outreach Infrastructure 2 1 5 2 of the Social Welfare Fund (SWF) Introduction of mobile 2 1 5 3 banking Total of Sub-Component 2.1.5 Total of Sub-Component 2.1 2 2 Development Finance and Financial Support to Medium Sized Enterprises 5,790,905 5,790,905 5,790,905 5,790,905 30,000 credits 319,831 319,831 319,831 319,831 5 new Branches SEDEF 6,110,736 6,110,736 6,110,736 6,110,736 Total of Sub-Component 2.2 Total of Component 2

2015

Total

Basis of Estimate

5,790,905 319,831 6,110,736

28,954,524 1,599,156 30,545,048

Figures extracted from SEDF Strategy, converted to US$ apportioned across the five years of the plan

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Component 3 – The Improvement of MSME Policy and Regulatory Reform
Objective
To identify and tackle regulatory and policy barriers to MSME development through policy and regulatory reform.

Purpose
To improve the environment for MSME development

Expected Results
The identification of barriers to MSME development at policy and regulatory level; Policy and Regulatory Reform to address the identified barriers

Activities
Activities include the elaboration of impact assessment studies in various identified areas leading to recommendations for policy and regulatory reform. Specific examples of reforms to reduce barriers to MSME development include: • Removal of Import Duty on Industrial Inputs; • Reduction of Transaction Costs on Trade • Faster Licensing and Registration

Timetable
On-going throughout the life of the strategy

Budget
A provisional budget of US$200,000 has been allocated for technical assistance.

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MSME Strategy – Component 3 Objectively Verifiable Indicators OBJECTIVE 1 To develop the Industrial and Commercial Increased Business Birth Rate Base of the Country Economic Activity pushed to neglected areas 2 To develop the Competitiveness of International Competitiveness of MSMEs MSMEs 3 To build a culture of Innovation and New products and export competitiveness of Entrepreneurship MSMEs PURPOSE 1 To realise the contribution of the MSME Reduced Unemployment Sector towards the Yemen Vision 2020-25 Poverty Alleviation 2 To Realise the Vision of the MSME Sector Economic Diversification Social stability towards the Poverty Reduction Strategy EXPECTED RESULTS (The Vision) 3 Yemen has a conducive business Laws and policies upgraded to best international environment for MSMEs practice ACTIVITIES 3 Improvement of MSME Policy and Regulatory Reform 4 1 Removal of Import Duty on Industrial Duty reduced or removed Inputs 4 2 Reduce transaction costs on trade Transaction Costs reduced 4 3 Faster Licensing and Registration Number of transactions and time involved
Responsible Indicative Budget and Timetable for 2011 Institution Component 3 3 Improvement of MSME Policy and Legislative Reform 3 1 Removal of Import Duty on 200,000 Industrial Inputs MOIT in 3 2 Reduce transaction costs on trade Collaboratio n with 3 3 Further Policy Initiatives to be appropriate defined Ministries -3 4 Faster Licensing and Registration 200,000 Total of Component 3

Sources of Verification MSME Statistics Employment Statistics Trade Statistics International partnerships and linkages Economic Statistics Employment Statistics Trade Statistics

Conditions / Assumptions o Funds are set aside to implement strategy o All Institutional Stakeholders co-operate towards common goals

Objectives of Strategy can be achieved

WB Doing Business Report

Monitoring Report Viability of action can be justified

2012

2013

2014

2015

Total

Basis of Estimate
Estimate for preparation of Impact Assessment Studies. Estimate for further studies to be later defined Supported by Netherlands CA

200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 600,000 1,000,000

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Component 4 – Development of a Culture of Innovation and Entrepreneurship
Development of a culture of Innovation and Entrepreneurship is a specific goal of the Yemen 2025 Vision

Objective
To develop a culture of Innovation and Entrepreneurship

Purpose
To increase the development and commercialisation of new innovative products with international market potential

Expected Results
New product development and commercialisation Manufacture under licence arrangements with new products developed in other countries.

Activities
1. A National Innovation Awards Programme 2. A Business Angels Programme 3. Developed linkages with international innovation and entrepreneurship networks leading to manufacture under licence agreements and joint ventures.

Timetable
On-going throughout the life of the strategy

Budget
Large companies and institutions should sponsor the innovation awards programme but a provisional budget of US$500,000 per year has been allocated for promotion and support.

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MSME Strategy – Component 4 OBJECTIVE 1 To develop a Culture of Innovation and Entrepreneurship PURPOSE 1 To realise the contribution of the MSME Sector towards the Yemen Vision 2020-25 2 To Realise the Vision of the MSME Sector towards the Poverty Reduction Strategy EXPECTED RESULTS (The Vision) 4 Yemen has a conducive environment for innovation and entrepreneurship

Objectively Verifiable Indicators New products New International Linkages

Sources of Verification Patent Registration Manufacture under Licence Agreements Economic Statistics Employment Statistics Trade Statistics

Conditions / Assumptions

Reduced Unemployment Poverty Alleviation Economic Diversification Social stability Creative Nation Branding Annual Innovation Competition Developed infrastructure for innovation support International linkages for technology transfer

Objectives of Strategy can be achieved

Annual MSME Evaluation Report

ACTIVITIES 4 Developing a Culture of Innovation and Entrepreneurship 4 1 National Innovation Award Programme National Innovation Awards Programme Introduced 4 2 Business Angels Programme Enterprise / Projects financed by Angels 4 3 International Linkages Networks Joined and cross fertilisation of new product development Indicative Budget and Timetable for Responsible 2011 Component 4 Institution 4 Developing a Culture of Innovation and Entrepreneurship 4 1 National Innovation Award 300,000 Programme 200,000 4 2 Business Angels Programme 500,000 Total of Component 4 2012 2013 2014

Annual Ceremony Monitoring Report

Sponsorship from Industry and Institutions

2015

Total

Basis of Estimate

300,000 200,000 500,000

300,000 200,000 500,000

300,000 200,000 500,000

300,000 200,000 500,000

1,500,000 1,000,000 2,500,000

Core costs only – Sponsorship t be obtained from various sources

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Component 5 – Development of Technical and Management Skills
Objective
• To develop technical skills • To develop Managerial and Entrepreneurial Skills

Purpose
Improved Competitiveness of the MSME Sector

Expected Results
1. Upgraded technical skills 2. Upgraded Entrepreneurial Skills 3. Development of a cadre of well qualified business service providers and advisers

Activities
Technical skills training to MSMEs delivered through the Business Upgrading Programme Entrepreneurship Training delivered through the Business Upgrading Programme and also by specific training initiatives delivered through the Chamber of Industry and Commerce, SMEPS and other training agencies Upgrading of Business Service Providers by the Business Upgrading Programme and through specific initiatives delivered by SMEPS

Timetable
On-going throughout the life of the strategy

Budget
The budget is to be elaborated after the delivery of the strategy currently being prepared by the Ministry of Technical and Vocational Training with support from the World Bank as we as contributions from other stakeholders. Note: A strategy for Technical, Vocational Education and Training is currently being prepared by the Ministry for Technical, Vocational Education and Training, supported by the World Bank. It is proposed that Component 5 is finalised in concert with this strategy and if possible, the Work Bank Technical Assistance Team may be encouraged to deliver output summarised in the format of the MSME Strategy.

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MSME Strategy = Component 5 Objectively Verifiable Indicators OBJECTIVE 1 To develop technical skills Technical and Vocational Training 2 To develop entrepreneurial skills Entrepreneurship Training PURPOSE 1 To realise the contribution of the MSME Reduced Unemployment Sector towards the Yemen Vision 2020-25 Poverty Alleviation 2 To Realise the Vision of the MSME Sector Economic Diversification Social stability towards the Poverty Reduction Strategy EXPECTED RESULTS (The Vision) 5 Yemen entrepreneurs have access to Vocational Training Delivered to established education for the development of technical businesses through Upgrading Programme and management skills Training delivered in entrepreneurship skills Training in advisory skills delivered to Business Service Providers to develop local consultancy capacity ACTIVITIES 5 Development of Technical and Management Skills 5 1 Delivery of Vocational Training Training Delivered through the BUG programme 5 2 Delivery of Entrepreneurship Training 5 3 Developing the Capacity of Business Development of Premier Adviser Curriculum Service Providers Delivery of consultancy skills training to business service providers and consultants Indicative Budget and Timetable for Component 5 5 1 Delivery of Vocational Training 5 2 Delivery of Entrepreneurship Training 5 3 Developing the Capacity of Business Service Providers Total of Component 5 Responsible Institution MoTVET CIC / SMEPS SMEPS 2011
-

Sources of Verification Training Statistics Economic Statistics Employment Statistics Trade Statistics

Conditions / Assumptions

Objectives of Strategy can be achieved

Business Upgrading Reports Training Records Reduced dependency on international consultants

BUG Programme reports Monitoring Report Monitoring Report Monitoring Report Total
-

2012
-

2013
-

2014
-

2015
-

Basis of Estimate
Budget included in Business Upgrading Programme

Budget to be defined as a result of the TVET Strategy which is currently being prepared by the Ministry of Technical, Vocational and Educational Training assisted by the World Bank

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Component 6 – Top Quality Business Support
Component 6 (Top Quality Business Support) consists of two sub-components: • Business Upgrading Programme (Under the supervision of MOIT) • Specific Support to Small and Micro Enterprises (Under the control of SMEPS)

Objective
To improve the competitiveness of MSMEs

Purpose
• Economic Diversification • Job Creation • Economic Growth

Expected Results
The Expected Results from Component 6 are as follows: • At least 150 strategic Business Reviews / ToRs will be developed for manufacturing businesses and business service providers over a 3 year period; • At least 100 businesses or clusters will be upgraded over a three year period Targets to reviewed after 3 years);

Activities
Business Upgrading Programme
The following graphic outlines the concept of the proposed Business Upgrading Programme:

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The effectiveness of the Business Upgrading Process depends on scale, and it is proposed that the Business Upgrading Programme is open to all manufacturing businesses (including large enterprises), but this will be prioritised into: • Identified Clusters; • Emerging Sectors; • Traditional Sectors; In addition, the programme should be available to institutions which are partners in the delivery of the programme, including: Training providers, the vocational training network; Chambers of Commerce and Business Support Associations; Standards and Metrology Centres and Testing Stations and business incubators. These will all be supported through the programme to ensure quality of delivery of services. Furthermore, it is proposed that the programme should be available to State Owned Enterprise, which have strong privatisation potential or where a division of the SOE has potential for spinout to the private sector. The Programme Management should develop selection criteria and agree these criteria with a steering committee and selection should be made in a transparent manner according to the budget available and an agreed scoring system. Cost sharing It is proposed that companies are encouraged to participate in the business-upgrading programme by providing stage 1 free of charge. At the end of stage 1, the company will have the choice whether or not to move to stage 2. If the company chose to move to Stage 2, then it is proposed that the company pay a portion of the cost of delivery. It is proposed that this level of cost sharing is set at 10% for the first 4 months to encourage early participation. After the first 4 months, then the cost share can be increased to 30% (although this can be modified in accordance with demand) The cost sharing contribution should be passed to a special fund which is made available to the business incubators to build a cash balance to assist with sustainability after the technical assistance is withdrawn. Stage 1 – Strategic Business Review, Needs Analysis and Terms of Reference During Stage 1 – the beneficiary company will receive a short consultancy assignment consisting of 10 man-days to review the needs of the business for upgrading and at the same time, to develop a strategic business review. Furthermore, the main problems facing the business will be identified and placed within a central database, which can be used to analyse policy issues. It is proposed that Stage 1 is provided as a free service to companies, business support providers or clusters of small companies. The output in the form of a strategic business review should be a high quality deliverable, which clearly demonstrates the value of business upgrading in order that the beneficiary will be prepared to make a contribution to costs incurred in Stage 2. The Strategic Business Review will analyse the mission and vision for the business. It will analyse external and internal factors affecting the business and will identify a range of strategic options facing the business and make recommendations accordingly. This will be a tool that the business can use profitably whether or not the business decides to proceed to stage 2. The Terms of Reference delivered within stage one will specify the upgrading activities to be carried out during stage two. It will consist of up to 60 days of training or consultancy 25

depending on the nature of the problems and the potential for development of the company. Stage 2 – Business Upgrading Business upgrading activity to be delivered during Stage 2 will depend on the needs identified during Stage 1. It can be specific training or consultancy services and may be a single topic or a combination of various types of support such as: • Marketing o New product development o Packaging design o Development of a Marketing Strategy o Development of International linkages o Pricing Strategy o Introduction of Customer Relations Management Systems Accounting & Finance o Introducing or upgrading of computerised accounts o Capital Budgeting o Cost accounting systems o Economic Order Quantity review Production o Lean Manufacturing o GMB Audit and Accreditation o Quality Standards Audit and Support o Introduction of Enterprise Resource Management (ERP) Systems o Inventory Management Systems o Vocational Training Human Resource Management o Job Descriptions and Job Specifications o Procedures Manuals

At the same time, specific training can be proposed as part of the Business Upgrading Process and may take the form of specific workshops for company staff. Workshops may be: • Developing a Marketing Plan • Developing an Export Strategy; • PESTEL2 Workshop (Reacting to changes in the business environment) • Technology and Innovation Management Workshop • Product Development Workshop • Generic Training In addition to the Business Upgrading Programme, the project will run training courses, which are open to management and staff of beneficiary companies. These are of a more

2

PESTEL = Political; Economic; Social; Technical; Environmental; Legal
26

general nature and will be for members of several companies at once. Training subject might include: • • • • • • • Project Management; Understanding accounts; Developing a marketing plan Presentation skills Strategic Planning Pricing theory Cluster Development

A provision will be made whereby the MOIT can organise to participate in international exhibitions on behalf of groups of Yemen businesses. Stage 3 – Monitoring and Evaluation Stage 3 consists of a final review of the work carried out and its impact on the company. If the benefit is deemed to be substantial, then a second round of business upgrading may be proposed. Assumptions and Risks Risk 1. There is a risk that the demand for business upgrading is less than anticipated and that the project resources cannot be efficiently consumed. Mitigation The expected results are that 150 businesses will receive strategic business reviews and that at least 100 businesses will receive businessupgrading services. The risk that 100 suitable manufacturing businesses can not be identified is to be considered, however, the available industrial statistics (Annex 7) show that there are 390 very large businesses and 1,103 medium manufacturing enterprises in Yemen. By location, 91 very large enterprises are within the capital secretariat and 324 medium enterprises are in the capital secretariat. It is therefore likely that 100 suitable enterprises can be identified without going further than the Capital Secretariat. Extending the service to the target areas where incubators are located leads to a larger pool of potential clients. In addition, the 100 businesses to be supported include business service providers such as vocational training centres etc. so there is an even greater pool of enterprises to chose from. This leads to the next possible risk as identified in Risk no. 2 Any contractor implementing this project should be obliged to set targets for geographic spread ensuring outreach to other cities.

2. There is a risk that the demand for support from business service providers and businesses within the capital city are so great that the service does not extend to the remote locations and that the goal of economic diversification is lost 3 There is a risk that the businesses supported do not wish to/ or are unable

Any cost sharing element of payment for fees must be based and adjusted in respect of 27

to pay any cost sharing element of consultancy or training fees and as a result, services are given for free and are not valued. This also effects sustainability

services demanded. Providing the Strategic Business Review free of charge will give an opportunity to demonstrate the added value that the programme will bring to companies and should encourage them to cost share. It is strongly recommended that some element of cost share is introduced and that any contribution is set aside as a sustainability fund to support incubators.

Timetable
The indicative timetable for implementation of Business Upgrading is as follows:
Description Component 2 - Business Upgrading Programme 1 Establish criteria for participation 2 Establish / agree cost sharing contribution 3 Identify Support institutions 4 Develop contracts template for beneficiaries 5 Develop template for Strategic Business Review 6 Develop Template for Terms of Reference 7 Develop Monitoring / Evaluation Criteria 8 Develop Initial List of Target Beneficiaries 9 Develop Publicity Materials 10 Training of local staff in consultancy skills 11 Business Upgrading Programme Launch 12 Stage 1 - Evaluations 13 Stage 2 - Delivery 14 Stage 3 Delivery 15 Evaluation Reporting 16 Evaluation of Programme and continuation proposals Year 1 Months Year 2 Year 3

Figure 5: Indicative Timetable for Component 2

(Programme to be re-evaluated after 3 years)

Budget
In order to achieve the expected results, the following resource allocation is needed: • One International long term Business Upgrading Expert to manage the process for the 3-year duration of the project. • Two Local Long Term Experts to carry out Strategic Business Reviews and to draft ToRs for Business Upgrading; • 1,074 man days of International Short Term Experts to deliver business upgrading and training • 3,222 man days of local short term experts to deliver business upgrading • • • 2 – vehicles will be required 2 – drivers will be required 1 administrator will be required

Incidental expenditure budget for study tours / conferences / public awareness and seminars of 50,000 will be needed. These figures are based on the following assumptions: • The project will last for 3 years • There are 220 working days per year 28

10 man days are required for each Strategic Business Review, Environment Survey and ToR • 40 days total have been allocated for each business upgrading project; The budget for Business Upgrading has been estimated at €2,173,040 over a 3 year period and has been extended proportionately over the five year period of the MSME Strategy.

29

MSME Strategy Objectively Verifiable Indicators OBJECTIVE 1 To develop the Industrial and Commercial Increased Business Birth Rate Base of the Country Economic Activity pushed to neglected areas 2 To develop the Competitiveness of International Competitiveness of MSMEs MSMEs 3 To build a culture of Innovation and New products and export competitiveness of Entrepreneurship MSMEs PURPOSE 1 To realise the contribution of the MSME Reduced Unemployment Sector towards the Yemen Vision 2020-25 Poverty Alleviation 2 To Realise the Vision of the MSME Sector Economic Diversification Social stability towards the Poverty Reduction Strategy EXPECTED RESULTS (The Vision) 6 1 Business upgrading is delivered to Business upgrading provided to 2,000 established businesses established businesses as well as clusters, and business service providers 6 2 A network of business incubators New incubators in Sana’a, Aden. Taiz, Al provides start up support Hodeidah and Al Mukalla 6 3 Specific clustering initiatives develop Specific co-operative initiatives for agriculture, competitiveness of key sectors fisheries and other sectors in accordance with specific sector strategies 7 1 An e-government business registration Electronic Company registration database is system is functioning efficiently complete and functioning 7 2 Comprehensive and accurate statistics Industrial Statistics database is complete and provide an effective tool for economic functioning decision making ACTIVITIES 6 Top Quality Business Support 6 1 Business Upgrading for existing manufacturing businesses 6 1 1 Business Upgrading Programme Identified criteria for support Operating Procedures Established / Agreed Cost sharing parameters Identified Support Institutions Developed Contract for Beneficiaries Developed Template for Strategic Business Review

Sources of Verification MSME Statistics Employment Statistics Trade Statistics International partnerships and linkages Economic Statistics Employment Statistics Trade Statistics

Conditions / Assumptions o Funds are set aside to implement strategy o All Institutional Stakeholders co-operate towards common goals

Objectives of Strategy can be achieved

Industrial Modernisation Reports and MSME charter Evaluation

Business Upgrading Programme Manual of Procedures and Annexes

Industrial Modernisation Programme implemented

30

MSME Strategy 6 1 2 Recruitment of Beneficiary Enterprises for Business Upgrading Programme

6

1

3

Business Upgrading Cycle

Objectively Verifiable Indicators Developed Template for ToR Developed Monitoring/ Evaluation Procedures Initial list of beneficiary companies Developed Publicity Materials Training delivered to local consultants in consultancy skills Launch of Business Upgrading Programme 180 Strategic Business Reviews Delivered 180 ToRs delivered for Business Upgrading Business upgrading delivered to 110 enterprises, clusters or Business Support Providers SMEPS Monitoring and Advice SMEPS Funding Technical Assistance to SMEPS Donor Funding for SMEPS Delivery of BDS for Micro Enterprises Provision of BDS in Rural Areas Training of MFIs in business facilitation Encourage MFIs to refer clients to BDS providers Monitoring of MFN Technical Assistance to MFN Proper Regulation of MFIs is introduced Supervision for MFIs is introduced Credit Bureau established Awareness programme for SMEs Policy Dialogue platform for Access to finance Qualification for External auditors Qualification of IT Specialists for delivery of

Sources of Verification Business Upgrading Programme Launch

Conditions / Assumptions

Technical Assistance Output Reports

Cost Sharing System established

6 6

2 2

Support to Small and Micro Enterprises 1 Capacity Building of SMEPS

6

2

2

6 6 6

2 2 2

3 4 5

Reduction of the demand for Business Development Services for micro enterprises and rural areas Develop Capacity of MFIs and BDS to co-ordinate activities Capacity Building of Yemen Microfinance Network Institutional Support to the Micro Finance Institutions

Specific MFI Regulation drafted and adopted MFI Regulation implemented All FIs information networked

6

2

6

MESO Level Institutions facilitate MFI Operations

31

MSME Strategy

Objectively Verifiable Indicators financial information, loan tracking and HR computerised systems YMN supported to establish a training institute Technical assistance to YMN to create reporting system Delivery of regular updates and periodic news on the micro-finance industry

Sources of Verification Curriculum developed Trainers recruited Facilities operational

Conditions / Assumptions Facilities provided within incubators

6

2

7

Dissemination of information to ensure transparency

Indicative Budget and Timetable for Responsible 2011 2012 2013 2014 2015 Component 6 Institution 6 Top Quality Business Support 6 1 Business Upgrading for Existing Manufacturing Businesses 6 1 1 Technical Assistance towards the 408,886 establishment of Incubator Operating Procedures MOIT 6 1 2 Delivery of Business Upgrading 578,398 725,000 725,000 725,000 725,000 Services 725,000 725,000 725,000 987,234 987,234 Total of Sub-Component 6.1 6 2 Support to Small and Micro Enterprises 6 2 1 Capacity Building for SMEPS 6 2 1 1 SMEPS Monitoring and Advice 6 2 1 2 SMEPS Funding 6 2 1 3 Technical Assistance for SMEPS 6 2 1 4 Donor Funding for SMEPS Total for Sub-Component 6.2.1 6 2 2 Reduction of the Demand for Business Development Services and BDS to Co-ordinate Activities 6 2 2 1 Delivery of BDS for Micro Enterprises 6 2 2 2 Provision of BDS in Rural Areas Total for Sub-Component 6.2.2 6 2 3 Develop Capacity of MFIs and BDS to Co-ordinate Activities

Total

Basis of Estimate

408,886

578,398 987,234

Budget assessment taken from the Design of the Industrial Modernisation Programme which allowed €2,173,040 over 3 years. This has been converted to USD and apportioned across subcomponents as well as being extended to the 5 years of the plan 987,234

Budget provision to be provided by SMEPS

Budget provision to be provided by SMED and SMEPS

32

Indicative Budget and Timetable for Responsible 2011 Component 6 Institution 6 2 3 1 Training of MFIs in Business Facilitation 6 2 3 2 Encourage MFIs to refer clients to BDS Providers Total for Sub-Component 6.2.3 6 2 4 Capacity Building for Yemen Micro-finance Network 6 2 4 1 Monitoring of MFN 6 2 4 2 T A to MFN Total for Sub-Component 6.2.4 6 2 5 Institutional Support to the Micro-Finance Institutions 6 2 5 1 Proper Regulation of MFIs Introduced 6 2 5 2 Supervision of MFIs introduced 6 2 5 3 Credit Bureau Established 6 2 5 4 MSME Awareness Programme 6 2 5 5 Policy Dialogue Platform for Access to Finance Total for Sub-Component 6.2.5 6 2 6 Meso Level Institutions Facilitate MFI Operations 6 2 6 1 Qualification for External Auditors 6 2 6 2 Qualification of IT Specialists 6 2 6 3 YMN Supported to establish training institute Total for Sub-Component 6.2.6 6 2 7 Dissemination of Information to Ensure Transparency 6 2 7 1 TA to YMN to create reporting system 6 2 7 2 Regular updates and periodic news on the micro-finance industry Total of sub-Component 6.2.7 Total of Component 6

2012

2013

2014

2015

Total

Basis of Estimate

33

Component 7 – Start-up Support
Component 7 (Start up Support) will be a joint initiative between the Ministry of Technical and Vocational Training and the Ministry of Industry and Trade, whereby the MTVET will provide premises for the incubators, and the MOIT will co-ordinate technical assistance in concert with the Business Upgrading Programme described under Component 6.

Objective
To provide start up support to MSMEs through a network of business incubators

Purpose
To raise the birth rate of

Expected Results
It is expected that five sustainable business incubators will be created in the following locations: 1. Sana’a 2. Taiz (also servicing IBB) 3. Al – Hodeida 4. Hadramout 5. Aden

Activities
Resource Allocation

34

• • • • • •

An International Expert has been allocated as the Team Leader of the Incubator Component to manage the overall process; A Local Long term Expert has been allocated for each planned incubator and it is expected that these experts will be retained as managers of the incubators after the project is complete; An administrator is required for each incubator and it is expected that the administrator will remain as an employee of the incubator after the project is complete; A driver is required for each incubator and it is expected that the driver would be retained after the project is complete; A vehicle is required for each incubator and the vehicle should be contributed to the property of the incubator at the end of the project An allowance for equipment has been made of €150,000 towards equipment for the incubators

Timetable
Month Description Year 1 8 Develop Initial List of Target Beneficiaries 9 Develop Publicity Materials 10 Training of local staff in consultancy skills 11 Business Upgrading Programm Launch e 12 Stage 1 - Evaluations 13 Stage 2 - Delivery 14 Stage 3 Delivery 15 Evaluation Reporting 16 Evaluation of Programme and continuation proposals Component 3 - Network of Business Incubators 1 Staffing / Organisation of Sana's Incubator 2 Developm ent of tenant criteria 3 Establishm ent of Incubator Services 4 Procurem ent / Installation of Equipment 5 Call for Incubator tennants 6 Initial screening of Incubator Tenants 7 Incubator Launch 8 On-going recruitment of tenants 9 On-going support to tenants 10 Identification / Feasibility of Incubator No. 2 11 Identification / Feasibility of Incubator No. 3 12 Identification / Feasibility of Incubator No. 4 13 Identification / Feasibility of Incubator No. 5 14 Procurem ent / Instalation for Incubators 2,3,4,5 15 Staff recruitm ent for Incubators 2,3,4,5 16 Staff training for Incubators 2,3,4,5 17 Call for tennants of Incubators 2,3,4,5 18 Launch of Incubators 2,3,4,5 19 On-going support / recruitment / Management 2,3,4,5 20 Incubator Project Reporting 21 Proposal for further funding if necessary Inception Phase Activity Implem entation Phase Close Down Phase Deadline

Timetable and budget to be reviewed after three years 35

Indicative Budget for Supporting a Network of Business Incubators
Provisional Budget for Supporting a Network of Business Incubators Item Rate Qty. Cost

Fees
International Long Term Experts International Incubator KE3 Expert International Non-key Experts Local Long Term Experts Local Incubator Expert 1 Local Incubator Experts 2,3,4,5 Senior Local Short Term Experts Junior Local Experts 800 660 528,000

90 80

660 2,37 6

59,400 190,080

TOTAL FEES

777,480

Per Diem
Local Per Diem 124 80 Total Per Diem 9 800 124 150 Total Flights 9,920 9,920 7,200 18,600 25,800

Flights
International Flights Local Flights

Administration
Administrator Driver 2,41 2 3,16 30 8 Total Administration Costs 30 20,000 5 72,360 95,040 167,400 100,000 150,000 250,000

Equipment
Vehicles Computers, Copiers and Printers 30,000 5 Total Equipment

Incidental Expenditure
Study Tours Conferences and Meetings Public Awareness Lump Sum Total Budget Expenditure Verification & Audit GRAND TOTAL 100,000 1,330,600 10,000 1,340,600

36

Assumptions Used in the preparation of the Incubator Programme
Assumptions Used in Preparation of Budget Project Duration 3 Years - Expected period of programme 220 Working days per year per person Team Leader - Key Expert 1 1 Full time Incubator Expert for duration of the project 800 Euro Per Day - International Expert Cost 3 International Flights a year for Team Leader 800 Average Flight Cost from Europe Living allowance included in fees Local Main Incubator Expert 1 Local Incubator Expert for Duration of the Project 90 Euro Per Day - Local Incubator Team Leader 27 594 2376 80 40 124 124 Months support to Incubators 2,3,4 and 5 Days support for each of Incubators 2,3,4 and 5 Days support for Incubators 2,3,4 and 5 Euro Per day for Incubator Experts Team Leader and Local Team Leader carry out Monitoring and Evaluations Nights away from Sana'a each Per night away from home base Local Flights

150 Cost of Local Flight Support Staff 1 Driver for 24 months - 4 drivers for 27 months 1 Administrator for 36 months - 4 Administrator for 37 months 30 30 Equipmen t 1 20,000 Daily Rate for Driver Daily Rate for Administrator

Vehicle per Incubator Cost per vehicle

30,000 Cost of equipment per Incubator Incidental Expenditure 100,000 Lump Sum Expenditure Verification 10,000 Lump Sum

37

MSME Strategy – Component 7 Objectively Verifiable Indicators OBJECTIVE 1 To develop the Industrial and Commercial Increased Business Birth Rate Base of the Country Economic Activity pushed to neglected areas 2 To develop the Competitiveness of International Competitiveness of MSMEs MSMEs 3 To build a culture of Innovation and New products and export competitiveness of Entrepreneurship MSMEs PURPOSE 1 To realise the contribution of the MSME Reduced Unemployment Sector towards the Yemen Vision 2020-25 Poverty Alleviation 2 To Realise the Vision of the MSME Sector Economic Diversification Social stability towards the Poverty Reduction Strategy EXPECTED RESULTS (The Vision) 6 2 A network of business incubators New incubators in Sana’a, Aden. Taiz, Al provides start up support Hodeidah and Al Mukalla ACTIVITIES 7 2 Start up Support 7 Establishment of a Network of Sustainable Business Incubators Staffing / Organisation of Sana’a Incubator Development of Tenant Criteria Establishment of Incubator Services Procurement of equipment 7 1 1 Pilot Incubator in Sana’a Call for Incubator Tenants Initial screening of incubator tenants Incubator Launch On-going Recruitment of tenants On-going support of tenants 7 1 2 4 new incubators Identification / Feasibility of Incubator No. 2 Identification / Feasibility of Incubator No. 3 7 1 3 Incubator Network Identification / Feasibility of Incubator No. 4 Identification / Feasibility of Incubator No. 5

Sources of Verification MSME Statistics Employment Statistics Trade Statistics International partnerships and linkages Economic Statistics Employment Statistics Trade Statistics

Conditions / Assumptions o Funds are set aside to implement strategy o All Institutional Stakeholders co-operate towards common goals

Objectives of Strategy can be achieved

Incubator Fully Operational

Incubators Operational

38

39

Indicative Budget and Timetable for Responsible 2011 2012 Implementation of Component 7 Institution 7 Start up Support 7 1 Establishment of a Network of Sustainable Business Incubators Establishment of Pilot 609,059 7 1 1 Incubator in Sana’a Establishment of 4 new 609,059 7 1 2 MoTVET Incubators Development of Incubator 7 1 3 Network 500,000 500,000 Total of Sub-Component 7.1.3 Total of Component 7
500,000 500,000

2013

2014

2015

Total

Basis of Estimate

609,059 609,059 609,059 273,000 340,000 340,000 609,059 609,059 273,000 609,059 609,059 1,155,059 609,059 609,059

MoTVET will provide the premises. The budget provision is taken from the design on the Industrial Modernisation Programme (€1,340,000 for 3 years converted to USD) and represents funding needed for technical assistance and equipment. Incubators should be self-sufficient after 3 years, but budget provision for supporting sustainability and expanding the network. 273,000 273,000

40

Component 8 – Raising the Quality of Business Statistics
Objective
To develop an accurate and comprehensive statistical basis for economic policy and strategic decision making

Expected Results
An efficient and effective company registration system A comprehensive, efficient, effective and current database of MSMEs

Activities
Development of Company Registration Basis (Currently in the process of implementation by the Ministry of Industry and Trade in collaboration with the Netherlands Co-operation Office) Expansion of the Company Registration Database into an all-encompassing database of MSME statistics

Timetable
Completion by 2013 with on-going maintenance

Budget
Netherlands Co-operation is financing the Company registration system A provisional budget of US$600,000 per year has been allocated for implementation of the MSME database.

41

MSME Strategy Objectively Verifiable Indicators OBJECTIVE 1 To develop the Industrial and Commercial Increased Business Birth Rate Base of the Country Economic Activity pushed to neglected areas 2 To develop the Competitiveness of International Competitiveness of MSMEs MSMEs 3 To build a culture of Innovation and New products and export competitiveness of Entrepreneurship MSMEs PURPOSE 1 To realise the contribution of the MSME Reduced Unemployment Sector towards the Yemen Vision 2020-25 Poverty Alleviation 2 To Realise the Vision of the MSME Sector Economic Diversification Social stability towards the Poverty Reduction Strategy EXPECTED RESULTS (The Vision) 7 2 Comprehensive and accurate statistics Industrial Statistics database is complete and provide an effective tool for economic functioning decision making ACTIVITIES 8 Raising the Quality of Business Statistics Implementation of electronic business Company Registration Database fully 8 1 registration database functioning Implementation of Industrial database System capable of delivering robust business 8 2 statistics Indicative Budget and Timetable for Responsible Component 8 Institution 8 Raising the Quality of Business Statistics 8 1 Business Registration Database MOIT 8 2 Industrial Database Total of Component 8 2011 2012 2013 2014

Sources of Verification MSME Statistics Employment Statistics Trade Statistics International partnerships and linkages Economic Statistics Employment Statistics Trade Statistics

Conditions / Assumptions o Funds are set aside to implement strategy o All Institutional Stakeholders co-operate towards common goals

Objectives of Strategy can be achieved

Output Reports

2015

Total

Basis of Estimate
Already Funded by Netherlands Cooperation Estimate from IMP Project Design includes MOIT Cap Bld

600,000 600,000

600,000 600,000

600,000 600,000

-

-

1,800,000 1,800,000

-

42

Component 9 – Specific Sector Strategies
All the foregoing strategy components can be viewed as crosscutting components in support of the Key Sectors. In this way, the 9 pillars of the MSME strategy can be viewed as follows:

Note: In the above diagrams, the term “Manufacturing” has been used for convenience. More accurately, it describes all the sectors, including trade and services, which are not tourism, fisheries or agriculture.

Fisheries Sector
The Ministry of Fisheries is currently being assisted by UNDP to prepare a strategy for the achievement of their goals. This will be a 15-year strategy divided into three stages. It will be implemented through its authority institutions and branches in coastal governates along with local councils, NGOs (Fishery co-operatives union and fisheries co-operative organisations) The goals have been introduced to the logical framework of the MSME strategy, but it is not possible to identify at this stage in detail, the actual activities that will be carried out towards achievement of these goals. The activities introduced to the logical framework table may be improved in detail and developed as part of the strategy development process. The following diagram depicts the main goals of the Ministry of Agriculture with regard to the development of the sector:

43

Agricultural Sector
The Ministry of Agriculture is currently being assisted by UNDP to prepare a strategy for the achievement of their goals as stated within the fourth five year plan (2011 to 2015). The goals have been introduced to the logical framework of the MSME strategy, but it is not possible to identify at this stage in detail, the actual activities that will be carried out towards achievement of these goals. The activities introduced to the logical framework table may be improved in detail and developed as part of the strategy development process. The following diagram depicts the main goals of the Ministry of Agriculture with regard to the development of the sector:

Tourism Sector
The Ministry of Tourism is currently being assisted by UNDP to prepare a strategy for the achievement of their goals as stated within the fourth five year plan (2011 to 2015). The goals have been introduced to the logical framework of the MSME strategy, but it is not possible to identify at this stage in detail, the actual activities that will be carried out towards achievement of these goals. The activities introduced to the logical framework table may be improved in detail and developed as part of the strategy development process. The following diagram depicts the main goals of the Ministry of Tourism with regard to the development of the sector:

44

It can be noted that there is a great deal of focus on the development of handicrafts, which can be combined with the Business Upgrading Component and the Innovation and Entrepreneurship Component as well as drawing assistance from micro-credit and SMEPS SME Promotion.

Industry Sector (i.e. Remaining Industry and Service)
For the sake of simplicity, all business which does not fall under the headings of: Agriculture; Fisheries or Tourism has been classified as the Industry Sector (i.e. the Remainder). In general, all the crosscutting activity described in Components 2 to 8 support the Industry Sector, however, some additional activity can be identified such as: • Leather Sector Study; • Implementation of the recommendations of the Leather Sector Study; • Identification of other key sectors and appropriate individual sector studies (Such as Minerals and Textiles; Marine Industry; Chemicals and Bio-technology); • Development of Industrial Parts and Industrial Workspace

45

MSME Strategy Objectively Verifiable Indicators OBJECTIVE 1 To develop the Industrial and Commercial Increased Business Birth Rate Base of the Country Economic Activity pushed to neglected areas 2 To develop the Competitiveness of International Competitiveness of MSMEs MSMEs 3 To build a culture of Innovation and New products and export competitiveness of Entrepreneurship MSMEs PURPOSE 1 To realise the contribution of the MSME Reduced Unemployment Sector towards the Yemen Vision 2020-25 Poverty Alleviation 2 To Realise the Vision of the MSME Sector Economic Diversification Social stability towards the Poverty Reduction Strategy EXPECTED RESULTS (The Vision) 1 All Stakeholders work in harmony to Yemen Charter for MSME Development achieve an agreed vision implemented, monitored and regularly updated 2 1 There is a sufficiency of funding Fully developed and funded micro-finance available to support sustainable infrastructure 2 2 business propositions nationwide Fully developed provision of finance for medium level business propositions 3 Yemen has a conducive business Laws and policies upgraded to best international environment for MSMEs practice 4 Yemen has a conducive environment for Creative Nation Branding innovation and entrepreneurship Annual Innovation Competition Developed infrastructure for innovation support International linkages for technology transfer 5 Yemen entrepreneurs have access to Vocational Training Delivered to established education for the development of technical businesses through Upgrading Programme and management skills Training delivered in entrepreneurship skills Training in advisory skills delivered to Business Service Providers to develop local consultancy capacity 6 1 Business upgrading is delivered to Business upgrading provided to 2,000 established businesses established businesses as well as clusters, and business service providers 6 2 A network of business incubators New incubators in Sana’a, Aden. Taiz, Al provides start up support Hodeidah and Al Mukalla

Sources of Verification MSME Statistics Employment Statistics Trade Statistics International partnerships and linkages Economic Statistics Employment Statistics Trade Statistics

Conditions / Assumptions o Funds are set aside to implement strategy o All Institutional Stakeholders co-operate towards common goals

Objectives of Strategy can be achieved

Yemen Charter for Small Enterprises Annual MSME Evaluation Report WB Doing Business Report Annual MSME Evaluation Report Business Upgrading Reports Training Records Reduced dependency on international consultants Industrial Modernisation Reports and MSME charter Evaluation

Full Co-operation of MOIT

46

MSME Strategy 6 3 Specific clustering initiatives develop competitiveness of key sectors

Objectively Verifiable Indicators Specific co-operative initiatives for agriculture, fisheries and other sectors in accordance with specific sector strategies 7 1 An e-government business registration Electronic Company registration database is system is functioning efficiently complete and functioning 7 2 Comprehensive and accurate statistics Industrial Statistics database is complete and provide an effective tool for economic functioning decision making ACTIVITIES 9 Sector Specific Activities 9 1 Industry Sector 9 1 1 Individual Sector Strategies Strategies adopted and incorporated into MSME 9 1 1 1 Leather Sector Strategy 9 1 2 Cluster Development 9 1 2 1 Development of a Textile Cluster 9 1 2 2 Development of Minerals Cluster 2 3 Development of Food Industry 9 1 Cluster 2 4 Development of Marine Industry 9 1 Cluster 2 5 Development of Chemical and 9 1 Bio-Tech Cluster 9 1 3 Development of Industrial Work-space 9 2 Fisheries Sector 9 2 1 Fish Processing 9 2 2 1 Canning 9 2 2 2 Smoking 9 2 2 3 Salting Drying Fish Based Food Manufacture & 9 2 3 Restaurants Boat Maintenance and Equipment 9 2 4 Supplies 9 2 5 Sea Antiques and Heritage 9 3 Agricultural Sector 9 3 1 Increase agricultural production

Sources of Verification

Conditions / Assumptions

Strategy Document

47

MSME Strategy 9 9 9 9 9 9 9 9

9 9 9 9 9 9 9 9 9 9

Objectively Verifiable Indicators Sources of Verification Self sufficiency of wheat production improved 3 1 1 Expand Wheat Cultivation Grain imports reduced No. of head of cattle increased by 5.7% annually Red meat production increased by 5% per year 3 1 2 Livestock production improved Poultry production increased by 8% per year Feed production increased Increased role of women in rural Increased number of women benefitting from 3 1 3 areas agricultural support programme Coffee production increased by 4.2% per year Sesame Production increased by 4.1% 3 1 4 Cultivation of cash crops Cotton production increased by 1.7% Tobacco production increased by 2% 3 2 Poverty Alleviation in Rural Community Improved conditions and efficiency 3 2 Grain production increased by 4.4% annually of rain-fed crop production 3 3 Environmental and Natural Resource Sustainability through community participation Increase area covered by modern irrigation systems 3 3 1 Raise efficiency of water use Piped irrigation systems Increased proportion of ample water supply Modern irrigation to farmer pressure Development of valleys, barriers 3 3 2 5,950 dams, water barriers and caravan and small dams 3 3 3 Research Programmes Increased productivity of the research unit Promote and Develop the CoIncreased support for the co-operative 3 3 4 operative Movement movement Encouragement of farmers to Reduced proportion of cultivated Qat compared 3 3 5 diversify away from production to staple crops of Qat 4 Tourism Sector 4 1 Tourism Related Handicrafts 4 1 1 Tourism Industrial Survey Input to tourism products database Database Operational 4 1 2 Tourism Products Database On-line catalogue Tourism Products Marketing 4 1 3 Marketing study Study Study 4 1 4 Establishment of Sales Centres Operational sales centres Stores Operational

Conditions / Assumptions

48

MSME Strategy Objectively Verifiable Indicators 9 4 1 5 Reduction of Handicraft Imports Import restrictions 9 4 1 6 Craft Awards Programme Awards Programme launched Design Upgrade for small tourist 9 4 1 7 Improved tourist products crafts 9 4 1 8 Study for Quality Training Centre Report and Action Plan 9 4 2 International Outreach Participation in National and 9 4 2 1 International Tourism Exhibitions Credits to tourism products 9 4 3 producers

Sources of Verification Trade statistics New tourist products Output Report

Conditions / Assumptions

49

50

Indicative Budget for Implementation of the MSME Strategy
Component 9 Sector Specific Activities 9 1 9 1 9 1 9 1 9 1 9 1 Industry Sector 1 Sub-Sector Strategies 2 1 Ind Strategy 2 2 3 Responsible Institution 2011 2012 2013 2014 2015 Total Basis of Estimate

-

-

-

-

-

2 Leather Strategy MoIT 150,000 150,000 150,000 150,000 150,000 750,000 3 Further Strategies 700,000 700,000 700,000 700,000 700,000 3,500,000 Sector Strategy Implementation 500,000 500,000 500,000 500,000 500,000 2,500,000 Private sector Partnership 9 1 3 7 Industrial Workspace 1,350,000 1,350,000 1,350,000 1,350,000 1,350,000 6,760,000 Total of Sub-component 9.1 9 2 Fishing Sector - Budget to be refined in accordance with strategies planned or under development – Specifically UNDP Fisheries Sector Strategy Financed by UNDP 9 2 1 Sector Strategy 500,000 500,000 500,000 500,000 500,000 2,500,000 Say 5 studies per year 9 2 1 Fishery Sector Studies 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 10,000,000 Budget depends on studies developed MoF 9 2 2 Implementation of Subsector Strategies 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 12,500,000 Total of Sub-Component 9.2 9 3 Agricultural Sector – There is a new Agriculture Strategy in Progress – Table to be developed in accordance with this 43,940,000 43,940,000 43,940,000 43,940,000 43,940,000 219,700,000 9 3 1 Increase Agricultural Production MoA 6,400,000 6,400,000 6,400,000 6,400,000 6,400,000 32,000,000 9 3 1 1 Expand Wheat Cultivation 9 3 1 2 Improved Livestock 35,000,000 35,000,000 35,000,000 35,000,000 35,000,000 170,000,000 Taken from Budget of Ministry of Agriculture – Total figures apportioned production across years 9 3 1 3 Increased role of women in 300,000 300,000 300,000 300,000 300,000 1,600,000 rural areas 2,240,000 2,240,000 2,240,000 2,240,000 2,240,000 11,200,000 9 3 1 Cultivation of cash crops 9 3 2 Poverty Alleviation in Rural 46,800,000 46,800,000 46,800,000 46,800,000 46,800,000 234,000,000 Community Taken from Budget of Ministry of Agriculture– Total figures apportioned 9 3 2 1 Improved conditions and 46.800,000 46,800,000 46,800,000 46,800,000 46,800,000 234,000,000 across years efficiency of rain-fed crop production 37,800,000 37,800,000 37,800,000 37,800,000 37,800,000 189,000,000 9 3 3 Environmental and Natural

Financed by the Government of Malaysia Financed by GTZ Allowance for Strategy Dev. Allowance for Strategy Implementation against specific ToRs

51

Component

Responsible 2011 2012 2013 2014 2015 Institution Resource Sustainability through community participation 8,600,000 8,500,000 8,500,000 8,500,000 8,500,000 9 3 3 1 Raise efficiency of water use 9 3 3 2 Development of valleys, 20,000,000 20,000,000 20,000,000 20,000,000 20,000,000 barriers and small dams 7,800,000 7,800,000 7,800,000 7,800,000 7,800,000 9 3 3 3 Research Programmes 9 3 3 4 Promote and Develop the MoA Co-operative Movement 1,400,000 1,400,000 1,400,000 1,400,000 1,400,000 9 3 3 5 Encouragement of farmers to diversify away from production of Qat 128,540,000 128,540,000 128,540,000 128,540,000 128,540,000 Total of Sub-Component 9.3 9 4 Tourism Sector - There is a new Tourism Strategy in progress. Table will be developed in accordance with this 9 4 1 Tourism Related Handicrafts 2,325,581 9 4 1 1 Tourism Industrial Survey 7,442 9 4 1 2 Tourism Products Database 4,615 9 4 1 3 Tourism Products Marketing Study MOT 9 4 1 4 Establishment of Sales Centres With 9 4 1 5 Reduction of Handicraft Tourism Imports Council 9 4 1 6 Craft Awards Programme and 9 4 1 7 Design Upgrade for small Customs tourist crafts Authority, 13,954 9 4 1 8 Study for Quality Training MOPIC Centre and local 9 4 2 International Outreach Banks 9 4 2 1 Participation in National and International Tourism Exhibitions 9 4 3 Credits to Producers 13,954 2,337,638 Total of Sub-Component 9.4

Total

Basis of Estimate

43,000,000 100,000,000 39,000,000 Taken from Budget of Ministry of Agriculture– Total figures apportioned across years

7,000,000

642,700,000

2,325,581 7,442 4,615

Provisional Budget taken from figures provided by the Ministry of Agriculture

13,954

Budget to be set after Tourism Strategy is complete 2,351,592

52

The Yemen Charter for Micro, Small and Medium Sized Enterprises
An Agreement between: Charter Holder Ministry of Planning and International Cooperation The Ministry of Industry and Trade SMED SMEPS SEDF Ministry of Agriculture Ministry of Technical and Vocational Training Ministry of Fisheries Ministry of Tourism Specific Area of Responsibility: Strategy Oversight Co-ordination and Monitoring of the MSME Charter Development of the Micro-Finance Sector Development and Promotion of Small and Micro Enterprises Expansion of Development Finance Development of MSMEs in the Agricultural Sector Development of Technical and Vocational Skills Development of MSMEs in the Fisheries Sector Development of MSMEs in the Tourism Sector

Hereinafter known as the “Charter holders” We, the Undersigned hereby acknowledge our responsibility for development of the MSME Sector and pledge to uphold the aims of the Yemen Charter for Micro, Small and Medium Sized Enterprises, and to implement the MSME Strategy to the best of our ability. Specifically, the Charter holders agree to: 1. Jointly adopt the MSME Strategy for Yemen as the guiding document for co-ordination of MSME Development; 2. Acknowledge our responsibility for delivery of specific designated components and elements of the Strategy and agree to monitor performance and to report on progress towards the goals of the strategy in n our respective areas; 3. Contribute to the reporting and updating mechanism for the strategy and to maintain it as a live and dynamic up to date concept; 4. Provide reporting on performance in a transparent and co-operative manner; 5. Give equal opportunity for implementation of program projects and activities with fair share of the value of work; 6. Deliver a high level of efficiency and make decisions with fairness and impartiality 7. Provide each other with access to management information systems; 8. Support other Charter-Holders in the delivery of other components and elements where appropriate; 9. Co-ordinate all activities with other charter holders to develop synergy between the efforts of all charter holders; 10. Promote the MSME Charter and the MSME Strategy to a wider stakeholder group in order to ensure a common nationwide approach to MSME Development Signed:

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