Yemen Policy Note 5: Aid Coordination and Delivery WOLD BANK GROUP 1 B Table of Contents Acronyms 1 Acknowledgements 3 EXECUTIVE SUMMARY 4 INTRODUCTION 5 IMPACT OF THE CONFLICT ON THE PRIVATE SECTOR 6 Physical Damage 6 Impact on the Labor Market 7 Impact on Access to Input Materials and Markets 9 Impact on Access to Finance 10 SECTORAL ANALYSIS AND POLICY RECOMMENDATIONS 10 TRADE SECTOR 10 Institutional Constraints 11 Impact on Trade Flows 12 Trade Infrastructure 13 Road Network and Land Ports 16 Trade Costs and Trade Logistics 17 Trade Financing 18 Sector Recommendations 18 FINANCIAL SECTOR 19 Constraints in the Sector 21 Depletion of Foreign Exchange Reserves 21 Weak Banking Sector Solvency 21 Severe Restrictions in Correspondent Banking Relationships with Yemeni Banks 22 Weak Intermediation Capacity 23 Sector Recommendations 23 i CONSTRUCTION SECTOR 25 Constraints in the Sector 26 Financial institutions and the role of the CBY 28 Sector Recommendations 28 KEY RECOMMENDATIONS FOR ACCELERATING 29 The Role of the Private Sector in Socio-economic Resilience and Recovery 29 Recommendations for the short to medium term (3 to 24 months) 29 REFERENCES 35 List of Tables Table 1: Composition of and impact on employment by sector 8 Table 2: Impact of the Conflict on Yemen’s Critical Commercial Exports 12 Table 3: Impact of the Conflict on Yemen’s Critical Commercial Imports 13 Table 4: Current Status of Yemen Ports 14 Table 5: Assets, Deposits and Equity of Banks in Yemen (2014) 20 Table 6: Financial soundness indicators 22 Table 7: Imports of construction & building materials 27 Table 8: Wartime status of Yemen’s main cement plants 27 List of Figures Figure 1: Incidence of physical damage to businesses 7 Figure 2: Workers laid off by area 9 Figure 3: Logistics Performance Index for Yemen over time 12 Figure 4: Average delays in entering ports in Yemen, October 2016 14 Figure 5: Yemen road access map, December 2nd 2016 16 ANNEX 1: Overview on Damages to Commercial Road Network and Wartime Alternatives 34 ii iii Acronyms APA Alternative Procurement Arrangements ARTF Afghanistan Reconstruction Trust Fund CDR Council for Development and Reconstruction EB Executive Bureau EODP Emergency Operations Development Project EU European Union FCV Fragile, Conflict and Violence FIDIC International Federation of Consulting Engineers FPA Fiduciary Principles Accord GCC Gulf Cooperation Council GEMAP Governance and Economic Management Assistance Program GoY Government of Yemen HATC High Authority for Tender Control HTB High Tender Board IDPs Internally Displaced Persons IHIP Internationally Humanitarian Infrastructure Partnership IMF International Monetary Fund ISIS Islamic State of Iraq and Syria LIWs Labor Intensive Work Programs MAF Mutual Accountability Framework MDTFs Multi-Donor Trust Funds MENA Middle East and North Africa region MOPIC Ministry of Planning and International Cooperation OECD Organization for Economic Cooperation and Development PCU Project Coordination Unit PIU Project Implementation Unit PM Prime Minister PMTs Project Management Teams PMUs Project Managing Units 1 PPSD Project Procurement Strategy for Development PWP Public Works Project RPBAs Recovery and Peace Building Assessments SDF Social Development Fund SDRF Somalia Development and Reconstruction Facility SOEs Statement of Expenses SWF Social Welfare Fund TOR Terms of Reference UN United Nations UNDP United Nations Development Program UNICEF United Nations International Children›s Emergency Fund USAID US Agency for International Development WB World Bank WBG World Bank Group WHO World Health Organization Y-SECCG Yemen Socio-Economic Consultation and Coordination Group 2 Acknowledgements This policy note is the result of a team effort that relied on knowledge, experience, and guidance from individuals across the World Bank Group. The note was led by the Asbjorn Wee (Fragility, Conflict, and Violence) with significant collaboration with regional procurement expertise from the Governance Global Practice under the guidance of Yolanda Tayler (GOV). The core team consisted of Corey Pattison (FCV), Nabil Shaiban (FCV), Luis Prada (GOV), Jamal Abdulla Abdulaziz (GOV), and Simeon Sahaydachny (GOV) and Walid H. Al-Najar (GOV). Wilfried Engelke (MFM), Nadia Piffaretti (FCV) and Balakrishna Menon Parameswaran (GSURR) provided overall guidance and advice throughout the process. 3 Yemen Policy Note Five: Aid Coordination and Delivery 1. Summary: challenge of providing immediate peace dividends and humanitarian response to 1. This policy note outlines options Yemenis in need. At the same time such for aid coordination and delivery in arrangements should strengthen national Yemen. It draws on a vast amount systems and capacities that are needed to of experiences and lessons learned eliminate poverty, promote development from post-conflict recovery and objectives, and help to build peace. peacebuilding processes both in These challenges are compounded Yemen and elsewhere over the by the fact that expectations will be past decade. Its central message is extremely high during the immediate that timely international support and aftermath of the latest round of conflict, targeted financial aid will be critical to absorptive capacity will remain limited the implementation of a new peace for years to come, and the government agreement in Yemen, but delivery of capacity to deliver will be hindered by its this support will have to be carefully lack of access and legitimacy in certain designed, sequenced, and coordinated parts of the country even following a in order to overcome divisions and assist peace agreement. Yemen in addressing the challenges driving the cyclical nature of conflict 2. Key Challenges and in the country. The recent relapse into Considerations conflict reaffirms the need for a special emphasis on building institutions able to 2.1. Overview and challenges: address or balance key conflict drivers. This note highlights the importance of 3. Yemen has experienced repeated focusing efforts in the immediate term cycles of violence and several past on sequencing and coordinating while attempts to promote peace, recovery, the conflict is ongoing, and negotiations and reconstruction. The most recent move forward to support immediate round of conflict has its roots in a post- recovery programming once negotiations 2011 political transition process that was achieve a positive outcome. unable to produce consensus on key power sharing arrangements. It reflects 2. This note argues that the peace not just a breakdown in the National dividend, that is recovery and Dialogue Conference, the centerpiece development, and humanitarian of the 2011 political transition, but assistance need to be effective exposed continued contestation immediately to build peace and around fundamental ideas regarding overcome the causes of conflict. In the structure of the state, levels of particular, this note argues that planning, decentralization, and national identity. In coordination and implementation of parts of the country, the legitimacy and arrangements need to reflect the dual capacity of the central government’s 4 authority remains disputed, at times violently.1 6. Moving from a political agreement towards sustainable peace requires 4. Yemen’s cycles of conflict reflect a addressing the many challenging pattern of 21st century fragility and elements that triggered and fueled conflict: today, many countries face conflict in the past. This includes repeated cycles of violence, weak restoring public confidence in the governance, and instability driven ability of the government to provide by security, justice, and economic security to all citizens, re-capacitating stresses that compound weak government systems to provide key institutions.2 To break out of this cycle, public services throughout the country national governments need to build to facilitate livelihood, reduce poverty, legitimate institutions which can provide address inequality, tackle the needs of security, justice, and jobs. Transforming IDPs, to rehabilitate public infrastructure, institutions is a generational project that and encourage private sector activity requires building confidence of national to create jobs, and, critically, aligning stakeholders through inclusive coalitions state structures and levels of political, and early results that demonstrate ability administrative, and fiscal decentralization to deliver immediate peace dividends to create and further a national political and meet expectations of the population. consensus on the form and function of government systems. 5. Peace is not brought by the signature of a peace agreement but 7. Finding ways to address continuous by implementing the agreement. insecurity, weak institutional capacity, While prospects of a new peace deal in lack of cohesion among international Yemen are currently uncertain, proactive partners, and unrealistic expectations preparations, planning and coordination will be critical for the success of of international support in parallel to the national and international efforts in a active conflict will be critical to both: post-agreement Yemen: to facilitate immediate improvements in people’s lives and livelihoods, to • First, security will likely remain a kick-start the recovery process, and to challenge post-peace agreement. prepare to address the many underlying The current round of fighting has challenges and grievances that have witnessed a proliferation of armed fueled conflict and violence in the past. actors in the country, including Rebuilding Yemen’s economic and social fundamentalist groups that will not be infrastructure and providing services and part of any new political settlement. tangible benefits to the population will The fragmentation of security, become paramount once a political end particularly outside the capital, to the conflict has been secured, on which will considerably constrain the the viability of the political agreement resumption of normal service delivery and Yemen’s socio-economic future will and implementation of programming depend. to support improvements. Private 1 International Crisis Group, “Yemen: Is Peace sector investment and trade is also Possible?” 9 February 2016. likely to be severely affected. Security 2 World Bank, 2011 World Development Report: concerns were largely behind the Conflict, Security, and Development. 5 lack of attention paid to some areas of the country during the 2011-2014 • Fourth, the lack of coherence among transitional period; these conditions humanitarian, development, and will likely be exacerbated by the security partners might become intensification of the conflict since problematic given the proliferation 2014. of agendas and actors. To address the human security and development • Second, government reach and needs, it is important that security, institutional capacities have been humanitarian, and development severely damaged by the conflict. agendas mutually understand and The ability to deliver services—and reinforce each other during the pre- the legitimacy to do so in some and post-peace phases; however, parts of the country—will have to be coordinating these diverse agendas, rebuilt and regained, respectively. their disparate actors and expectations Development partners, who for will be a significant challenge. The the most part were forced to leave Ministry of Planning and International the country due to the conflict, will Corporation (MOPIC) is in charge of similarly be constrained by the need the coordination process between to re-establish a presence and re- international and governmental open their aid programs before partners. However, MOPIC faces its delivery can commence. The likely own institutional weaknesses related focus on humanitarian aid during the to public administration, project early stages of the re-engagement development and public investment period will also further constrain management. government efforts to rebuild critical capacity, given the preference for • Fifth, it is critical that the diverse third party delivery inherent in this international donors supporting instrument. Yemen, including OECD and GCC donors, dialogue, plan, and act in • Third, the peace agreement is likely to concert toward mutually agreed-upon be followed by a large-scale promise outcomes. This will require enhanced of international support, but Yemen’s coordination efforts in order to avoid past experience has shown the lack of coordination witnessed difficulties to absorb high levels of aid during the 2011-2014 period. In the pledges. Development aid pledges past, Western donors concentrated for Yemen doubled in volume from on government economic reform $3.7 billion in 1997 and 2006 to an delivery (and counter-terrorism) unprecedented $7.8 billion in 2012. as a precondition for aid, whereas However, only a limited amount of GCC donors linked aid with the this pledge actually materialized. implementation of the GCC Initiative, Over the 3-year period, only 30 and focused on capacity challenges percent of the total aid was disbursed in preparing and implementing including a $1 billion Saudi deposit in infrastructure projects the Yemen Central Bank.3 • Sixth, the assumed mismatch 3 World Bank briefing note to Yemen Economic between expectations that come Consultation and Coordination Group, 2 June 2016 6 with peace and the time it takes to planning, and implementation of deliver real improvements in people’s humanitarian response, recovery and lives imposes a significant risk. A reconstruction, peacebuilding and new peace deal will likely generate development efforts, including during expectations of large-scale and active conflict. Overall, there is a need immediate improvements, while to ensure that the immediate relief and implementation capacity will be recovery period promotes confidence constrained by the security situation and trust between former conflict parties, and a range of other interlinked allowing aid to have an assisting but also challenges impairing the state’s transformative impact to help break the service capability, as the 2011 World cyclical nature of violence. The signing of Development Report demonstrates, the political accord will need to be quickly creating legitimate institutions that underpinned by visible early action that can prevent falling back into violence builds confidence in the process within requires significant time: even the the population. The donor community will fastest transforming countries have need to engage in actions for post-conflict taken between 15 and 30 years to recovery, reconstruction, peacebuilding raise their institutional performance and socio-economic stabilization while from that of a fragile state—Haiti is continuing and possibly expanding an example—to that of a functioning humanitarian assistance. This includes institutionalized state, such as a broad spectrum of activities along Ghana.4 the path out of conflict and active coordination and collaboration between • Finally, given Yemen’s own history, security, humanitarian, and development international financial support risks agendas. becoming politicized as actors move to implement the peace agreements. 9. Lessons from successful international It will be important that international examples of post-conflict support donors agree upon support within a suggest the following as key points framework of mutual accountability of consideration:5 to avoid divergent, and even contradictory, approaches and • Ensure national strategic leadership outcomes. Such a framework, while of the process from the start. important, will also have to overcome Past support to recovery and skepticism related to the past use of peacebuilding in countries such as mutual accountability agreements in Indonesia and Nigeria shows that Yemen. the process needs to be coordinated and managed by Government and 2.2. Considerations national stakeholders, but that international support can be helpful 8. International experience suggests and instrumental both in terms that effective and close coordination of bringing necessary technical and collaboration will be required knowledge and financing, and in to address the many challenges, terms of supporting explicit efforts to along with early policy discussions, 5 World Bank, Review of Experiences with Post- 4 2011 World Development Report. Conflict Needs Assessments 2008-2015, April 2016. 7 generate national consensus around and accepted by the population. the recovery and peacebuilding project, which can include supporting • Focus on prioritizing efforts that can the development of the public immediately support reconstruction investment management systems. and give space for peace consolidation within a sequenced framework for • Use international support to promote longer-term development. Recent consensus around a new social, recovery and peace building plans economic and institutional vision in Northeastern Nigeria and Central that can guide recovery and peace African Republic have placed building. Experiences from the Eastern emphasis on immediate actions European transition economies have that are both critical, visible, and highlighted the need to define a vision possible to implement in the current that future support can be organized environment, while also moving around it. Yet, Yemen’s own example beyond the narrow reconstruction offers a reminder that this vision focus to promote inclusion, social also needs to be widely consulted cohesion and state legitimacy across and communicated to ensure that the country. Careful prioritization recovery priorities are understood and sequencing of activities have Box 1: Dual Accountability in Afghanistan and Liberia Examples from Afghanistan and Liberia show how aid instruments and different degrees of external oversight and accountability have been used to both build and speed up the transition toward using country systems: In Afghanistan, pooled donor financing was used to support state-building process and reconstruction. The Afghan Interim Authority Fund (AIAF) was established immediately following the liberation to support recurrent expenditure by the Afghan Interim Authority. The Recurrent Cost Window was carried forward by the larger Afghanistan Reconstruction Trust Fund, jointly set up and managed by the World Bank, the Asian Development Bank, the Islamic Development Bank, the United Nations Assistance Mission in Afghanistan (UNAMA) and UNDP. RCW started off as quasi-unconditional budget support disbursed against the submission of expenditure statements that met a set of eligibility criteria related to expenditure category and compliance with PFM laws and procedures. Eligibility was verified by an Independent Monitoring Agent (MA), contracted directly by the WB, who acted as additional layer of controls and monitored, supported, and reported on the efficient and effective implementation of program. While still a parallel structure, the MA acted as an additional layer of internal rather than external control, thus allowing it to produce valuable information that was used both to promote financial management and fiduciary standards and to help the finance ministry and national audit office to meet them. By way of demonstration, the ARTF’s standards have influenced how the government conducts the control and audit function for regular public expenditure. In Liberia, the Governance and Economic Management Assistance Program (GEMAP) was a multi-donor agreement signed by the National Transitional Government in early 2006, along with USAID, the EU, IMF, WB, African Union and the Economic Community of West African States. GEMAP was based upon the premise that in order to restore the public trust in government and attract investments, Liberia had to stem the diversion of state resources, manage public finances transparently, deliver services, and demonstrate the political will to prosecute corruption. The unique feature of GEMAP (and also the most controversial) was the placement of international financial controllers in key state-owned enterprises, and experts in the Ministry of Finance, Bureau of Budget and Treasury. These experts were granted co-signing authority on spending and were therefore managerial rather than advisory in capacity, as distinct from other public sector support programs. Source: OECD (2012) 8 been introduced in these plans • Build on existing capacity for oversight, over the short and medium term, fiduciary, and implementation, rather as well as recognition of the link than the creation of parallel structures. between humanitarian, security and Experiences from other countries in development tools and objectives, the MENA region, including Iraq and based on jointly agreed prioritization Lebanon, highlight the importance criteria. of utilizing existing oversight bodies • Recognize that conflict response for procurement, implementation, can be used to transform the way and oversight, which, with the World institutions and systems function Bank support, had been significantly post-crisis. The experiences from strengthened prior to the crisis. This Indonesia in particular suggest that would avoid undermining those the government, with international positive reforms and also avoid support, can use the post-conflict weakening rather than strengthening response to root out corruption and institutional development and improve accountability, procurement governance in Yemen. Between and oversight functions over time. By 2011 and 2014 Yemen’s Social introducing additional oversight to the Fund for Development and Public Trust Funds that are often established Works Project (Box 2), for example, to finance the recovery period, as was demonstrated capacity to effectively also done through GEMAP in Liberia absorb and disburse significant donor and the ARTF in Afghanistan (Box support, although scaling up support 1), the government was able to gain to these programs did not receive the a better overview of the full resource highest priority of the government. It envelope available for recovery and is estimated that Yemen four major peace building efforts, and donors social safety net programs (SFD, gained higher degree of confidence PWP, SWF, and Rural Access Roads in the transparent and accountable Program) could absorb over $1.3 use of these resources. billion USD, and thus could serve as an effective platform for timely Box 2: Yemen’s Social Fund for Development and Public Works Project Entities such as SFD and PWP can be critical to quick reengagement of the World Bank once Yemen is on a path toward peace. For example, SFD and PWP have a good track record and are well reputed as regards their political neutrality, the technical quality of their projects, their contributions to building the capacity and quality of local community groups and of small and medium private sector contractors and enterprises, all of which are important for Yemen’s recovery and reconstruction. Despite the significant impact of security and funding challenges, SFD and PWP, which have well-established community networks, continue to operate and adapt to the current environment. SFD and PWP, have strong and extensive experience in mitigating risks related to service quality and social accountability. Moreover, the implementation capacity and fiduciary arrangements of SFD and PWP have been confirmed by a recent UNDP capacity and readiness assessment. Engagement with such groups will help to ensure the preserving of local implementation capacity and the resilience of much-needed employment and service delivery programs in the post-conflict recovery phase. Furthermore, SFD and PWP have extensive experience in labor-intensive works, community-based interventions, and small and micro enterprise development. Source: World SoSource: World Bank 9 and effective disbursement and front that the procurement rules of absorption. the UN implementing agency – as an “agency … of the Borrower” –would be acceptable to the Bank and could • UN agencies may play a critical be used, in line with the Alternative encompassing role in ensuring early Procurement Arrangements (APA) service delivery. To bring services provisions in the Bank’s new quickly up and running, established Procurement Policy Framework. procurement mechanisms are of high Under such an analysis, no waivers importance. Flexibility in designing on procurement policy matters would procurement arrangements be necessary, including waivers is available under the Bank of the United Nations Fiduciary Guidance on the use of streamlined Principles Accord (FPA) established Procurement Arrangements for pursuant to the World Bank and UN Projects in Situations of Urgent Fiduciary Principles Accord for Crisis need for Assistance or Capacity and Emergency Situations.”6 Constraints. The World Bank itself would be a source of advising 3. Lessons Learned from on flexible procurement options, available under the Bank’s new Yemen’s Transitional Procurement Framework. These Experience include the possibility of engaging 3.1. Planning UN agencies (e.g., UNIFEC, UNDP, WHO) which have a track 10. Yemen’s transitional experience record of service delivery through (2011-2014) demonstrates the need partnerships with local institutions for international development and stakeholders, especially at the partners to closely coordinate, community level, including having through government, humanitarian, a strong presence on the ground development, security and political and experience in partnering with agendas so that they are mutually SFD and Labor Intensive Work reinforcing. As outlined above, there Programs (LIWs) interventions in is a need to ensure that the immediate Yemen. For example, the UNDP relief and recovery period promotes has continued active presence in confidence and trust between former the country despite the conflict, and conflict parties, allowing aid to have has significant field presence with a transformative impact and help to over 100 national and international break the cyclical nature of violence. staff currently operating in Yemen in To this end, planning for a recovery crisis response and recovery efforts. strategy to guide efforts in the immediate From the point of view of the Bank’s period should not be delayed until the Procurement team, given the unique conclusion of the political dialogue FCV situation in Yemen, UN agencies but rather work in concert with it by may conduct project implementation/ support as needed using their own 6 World Bank and UN Fiduciary Principles procurement arrangements. In such Accord for Crisis and Emergency Situations, a scenario, the Bank would agree up- (SecM2008-0404), endorsed by World Bank Executive Directors 7 October 2008. 10 informing that process with an empirical due, as mentioned above, to challenges assessment of the needs and costs of of absorptive capacity but, critically, also recovery. International development to a deficit of effective planning and partners can support the Government management of the committed funds. through undertaking joint planning and This deficit, in turn, stemmed from analysis, such as that may lead to a insufficient matching of resources with formal partnership through a recovery empirically verified needs, inadequate and peace building needs assessment, prioritization and sequencing of aid in order to improve coordination from programming, and, generally, a deficit in the outset and commit to mutually- government ownership over the planning reinforcing sectoral agendas. process. 11. Special emphasis on proactive 12. Recovery efforts should be based planning for the recovery period is on a government-led, mutually based on Yemen’s experience after owned strategy that prioritizes 2012, when international development different needs and brings the efforts partners pledged approximately $10 together. This is the objective of a billion USD based on an estimated Recovery and Peacebuilding Needs gap of $11 billion proposed by the Assessment (RPBA), which is designed Government of Yemen. Only a minor as a joint assessment carried out by proportion of that total, however, was national stakeholders and multilateral actually disbursed—around 30%--largely agencies. An RPBA normally produces Box 3: Recovery and Peacebuilding Assessments (RPBAs) An RPBA is a joint, structured approach to assess and address recovery and peace building requirements in a country experiencing conflict or in transition from a conflict-related crisis; it therefore helps to gain a deep understanding of both needs and priorities. It has three primary purposes: • To help governments and their international partners to identify, prioritize and sequence recovery and peace building needs, priorities and related activities; • To provide an inclusive process to support dialogue and participation of stakeholders in the identification of recovery and peace building priorities, and resource mobilization; and • To coordinate international support through a joint assessment exercise and implementation planning. An RPBA fits within a broader and long-term process to support countries in conflict or recovering from a conflict-related crisis, and should therefore be grounded in a shared understanding of the impact and underlying causes of the conflict. The strategic value of the RPBA process is threefold; it provides an evidence-based assessment of recovery and peace building requirements, a platform for consensus-building and prioritization, and mechanisms for identifying the implementation and financing arrangements required to deliver on these priorities. An RPBA should not be seen as a one-off data collection exercise or a sectoral needs assessment, but an on-going process of gathering and analyzing information that can inform the response. RPBAs are carried out through a three-step process: A pre-assessment is designed to provide some initial guidance on the process in order to dt ecide whether an RPBA is necessary, and to provide inputs on the scope, objectives and institutional arrangements; this stage of the process may also provide an initial indication of the recovery and peace building issues to consider if the assessment goes ahead. The second element, assessment, prioritization, and planning includes the assessment of recovery and peace building needs and their prioritization in the context of a strategic recovery and peace building plan, and is accompanied by a results matrix. It also presents options for implementation (including coordination and monitoring arrangements), and financing-related issues. The third element, validation and finalization, focuses on ensuring that the plan is agreed upon, and that the necessary arrangements to begin the implementation and financing are in place. Source: World Bank 11 an agreed upon strategic, prioritized already asked in informal discussions and sequenced recovery and peace for a new MAF. Especially in the early building plan and results matrix as well post conflict period (e.g. first 18 months), as proposals for implementation and it could also usefully fill the anticipated financing arrangements (Box 3). void of having no valid recovery plan. It would be ideal, if a future MAF could be 3.2. Coordination GoY driven instead of donor driven as in the past. 13. Based on the principle of coordination of support toward stabilization, 14. Building on the MAF and corresponding peacebuilding and recovery in Yemen agreements in other policy areas, should be based on accountability the GoY, development partners, and and transparency, the Government political and humanitarian actors of Yemen (GoY) and international should agree on a strategic continuous development partners agreed during coordination form to integrate the previous transition on a Mutual traditional development aid relief Accountability Framework (MAF). efforts, political reconciliation and The MAF aimed to bind the transitional security engagements. The proposed GoY to some agreed reforms. It was Yemen Socio-Economic Consultation considered a key component of the and Coordination Group (Y-SECCG) previous transitional architecture, in order would work with existing and emerging to (1) respond to the demands voiced national and international coordination in the upheaval of 2011 (e.g. improved mechanisms to build a better response governance), and (2) to facilitate aid covering overlapping objectives and delivery and growth (including through to coordinate (or be aligned) with staged and phased reform steps). humanitarian, development, political Reform milestones listed in the MAF were and security actors. The Y-SECCG also seen to bind and motivate donors in is envisaged as a forum for dialogue, delivering committed aid (Riyadh donor exchange and to coordinate support conference of September 2012) - the to Yemen that leverages the expertise, “mutuality aspect” of the MAF. By adding knowledge and resources of Yemen’s a time horizon to the various reforms national, regional and international steps and commitments made on both partners in addressing emergency and sides, a sequence of mutually planned post-conflict recovery needs, and to events could clearly and explicitly be support economic stabilization measures, established. The MAF also offered an planning for assistance, prioritization and important entry point for public scrutiny, program or project implementation. and guided also the GoY communication with citizens, and donors. As in the case 15. A successful MAF will need of the Executive Bureau (EB) of 2013, it to be grounded in a renewed remained unclear whether the MAF could partnership between Government have been effective as implementation and international partners based on time did not suffice due to the outbreak consensus at the highest level on of the most recent conflict. In a new post the top priorities for the short-term conflict scenario, it would be important and adapting the way of delivering to re-establish such a MAF. GCC donors international assistance. Lessons from 12 other transition situations suggest that the “Alternative Procurement Arrangements” MAF should be based on a very limited (APAs, i.e., procurement rules other number of priorities and associated than the Bank’s own Regulations for government commitments toward a set Borrowers, such as the rules of another of milestones. Commitments will need to donor, or the procurement arrangements be extremely selective and should reflect of an agency of the Borrower). Under support at the highest political level. the APA approach, the Bank may Progress against the milestones should rely rather on the application of the be reviewed regularly and can provide procurement rules and procedures of a useful basis for a political and policy another multilateral or bilateral agency dialogue. They can also provide a good or organization, and may agree to such a basis for more effective communication party taking a leading role in providing the with the population on progress on implementation support and monitoring delivery of critical recovery efforts and of procurement activities. The utilization reforms. of APAs can facilitate aid coordination and remove the burden placed on the 16. Procurement is an important tool government when it has to apply multiple for facilitating aid coordination and procurement systems – a burden that collaboration among donor and hampers efficiency and further strains relief agencies. Under the Bank’s capacity, especially in the FCV context. new Procurement Framework, which Box 4: New World Bank Procurement Framework and FCV context Outlined below are features of the Bank’s new Procurement Framework that enhance the ability to conduct procurement in FCV scenarios in ways that maximize efficiency and responsiveness. Project Procurement Strategy for Development (PPSD) – possibility to prepare a short-form PPSD in lower-value, less complex projects. Alternative Procurement Arrangements (APA) -- The Bank may agree to rely on application of procurement arrangements of another multilateral entity, or of a bilateral agency, or of an agency or entity of the Borrower, provided that the APA is consistent with the Core Procurement Principles and Anti-Corruption Guidelines of the Bank. Bank prior review – higher thresholds for prior review, coupled with increased delegation to procurement specialists on the ground. Enhanced Bank hands-on implementation support -- available in FCV and low capacity contexts Project start-up activities – possibility that those may be carried out by the Bank. Principle of “fitness-for-purpose” – allows greater flexibility in designing the procurement procedure to take into account applicable objectives and conditions. Retroactive financing – procurement must be conducted in a manner consistent with the Core Procurement Principles and the governance requirements in Procurement Regulations, within limits specified in the Legal Agreement (up to 40% retroactive financing). Source: World Bank establishes—along with a number of 17. The Bank’s cooperation with UN other techniques especially relevant to agencies in procurement can support the FCV context (see Box 4 below)—the government effects by supporting possibility for the Bank to accept the use of coordination and collaboration between 13 humanitarian and development post-conflict context, including a multi- actors. A potentially relevant resource donor trust fund (MDTF); however, this in this regard is the International should follow from an assessment of Humanitarian Infrastructure Partnership existing instruments that have proven (IHIP), in which the Bank is playing a capacity to deliver significant aid inflows. leading role. IHIP joins humanitarian Specifically, the Social Welfare Fund, response and development agencies, as Rural Access Program, and the Public well as FIDIC, in developing tools and Works program, which are outlined other resources to facilitate humanitarian above, have proven capacity to achieve response, recovery and reconstruction effective and timely delivery of aid. in coordination with the development Subsequently, a financing strategy to strategies of FCV countries and donors. fill the gaps identified through such an assessment should then be articulated in the short term, which will inform the 3.3. Implementation creation of new financing instruments, and support project appraisal and capital 18. Demand for new financing instruments budgeting. and arrangements, like multi-donor trust fund (MDTF), need to be well 19. A key priority will be to ensure that balanced with existing instruments there is sufficient capacity to absorb, to avoid overstretching weak and to utilize the large sums that will implementation capacity. New be available in an effective and timely financing instruments may need to be manner. Such will entail maintaining a designed and implemented in order to balance between absorption capacity and absorb increased inflows of aid in the fiduciary obligations, with disbursements Box 5. Learning from the Somalia Experience The Somalia Development and Reconstruction Facility (SDRF) was established in 2014 as a coordination and financing architecture for implementing the Somali Compact. Closely aligned with the Compact’s principles, it serves as a platform for Government and development partners to provide strategic guidance and oversight for development activities in Somalia. The SDRF brings together several multi-partner trust funds under common governance arrangements administered by three technical agencies in areas based on comparative advantage: the UN, the World Bank and the African Development Bank. This coordinated financing facility has offered many benefits for improving aid effectiveness in Somalia: • The use of the SDRF pooled funds has helped to strengthen Government ownership and alignment with national priorities. The overall pipeline and specific projects financed through the SDRF are systematically brought through working groups and the Steering Committee for discussion and endorsement. • The pooling of resources through the SDRF generates economies of scale, and has allowed donors better leverage of their contributions through more coordinated assistance, avoiding fragmentation and duplication. • A joint risk management strategy has been established to support the delivery of the SDRF strategic objectives. By sharing the analysis and management of risk, Government, donors and the fund administrators are able to respond to the substantial risks of engaging in Somalia in a way that is more effective in meeting the goals of the Somali Compact Source: World Bank 14 and expenditures on investments in a growing number of countries is to and recovery. MDTFs are useful in depart from the PIU model for project this regard, as they allow pooling of implementation, and opt instead for resources behind a joint plan and state integrating project implementation into building effort (see Box 5). In cases existing ministry structures of the host where the WBG manages such funds, government (e.g., Bangladesh, Nigeria the new procurement policy would also and Zambia). Such an approach allow use of national institutions, even is increasingly being viewed as a in a fragile context, while balancing this more effective development strategy, with possible additional accountability because it avoids the creation of parallel requirements. structures and focuses on strengthening the host country structures and capacity. Especially in light of the significant 20. The strengthening of Yemen’s procurement reforms that had been regulatory and implementing accomplished prior to the crisis, Yemen institutions for public procurement will be well positioned to adopt such will provide a basis for avoiding having a progressive, development-oriented to establish a central PIU external to approach. line ministries for handling aid inflows 21. The overall advisability of the pure and implementing projects. The trend Box 6: Lessons Learned from Global Experiences with PIUs Iraq- EODP Lebanon CDR (Council for Development & Reconstruction) • Reconstruction Fund (Under PM Office) established by Government to reconstruct • CDR established in January 1977 under the PM, damages incurred from the liberation activities to assess infrastructural needs arising from civil from ISIS insurgency war and allocate international and Lebanese • Reports to Council of Ministers. finances for rebuilding the country • Borrower maintains a Project Coordination • CDR engaged in all phases of project Unit (PCU) responsible for: coordination and implementation from planning, feasibility facilitation of Project implementation (included analysis, detailed design, bidding, expropriation, among the PMTs), and providing overall strategy, and execution of most public facilities on behalf guidance, and monitoring and evaluation for the of Government.  Project; PCU helps in resolving macro level • In practice, CDR acts as a Mega PIU, capable of issues such as requirements of the budget law, handling large and complex projects through the or facilitating the required permits for the PMTs establishment of project-specific PMUs to make use of financing, • CDR has a large administrative system that • 4 PMTs established: 1- Roads & Bridges, 2- reviews and clears every TOR, advertisement, Municipalities & Public Works, 3- Electricity, and bidding document, PQ, shortlisting, award, 4- Health. Those PMTs handle specific project contract, and amendments to contracts, management & procurement of their respective effectively slowing down implementation. Ministries, and officials in each governorate. • Even though CDR usually tries to have the Line • PMTs are designated for specialized tasks, they Ministries involved with project Implementation still have a complex task as they need to deal from the beginning, usually over-reliance on with the requirements of various departments in CDR has left the ministries with low capacity to each city (currently 7 cities in 2 governorates). take over the implemented Projects, having a • PCU also exerts pressure on low performing negative effect on operations. PMTs, and proposes re-allocation of funds. Source: World Bank 15 “mega PIU” approach is questionable, coherent and effective superstructure based on experiences in the region. for delivery of committed aid and project Experiences in Iraq and Lebanon, implementation. It is unclear whether the outlined in Box 6 below, with additional EB would have ever been successful as details in Annex A, show that the the conflict in Yemen arose shortly after mega-PIU approach may ultimately it had become effective (six months). hinder rather than facilitate institutional However, as its functions were also to development, and would not be in line with bind in or align line ministries’ functions the types of decentralized approaches and interests, there was increasing an that are widely seen as essential for overlap between and competition with defusing the conflict in Yemen. At the normal government ministry operations, same time, a hybrid approach, in which which in practice counteracted its project implementation is conducted purpose. While post-conflict periods on a decentralized basis by PMUs often require additional (policy) embedded within line ministry structures, coordination capacity—and especially in whilst certain planning, coordination the case of Yemen where large inflows and facilitation functions are performed of foreign assistance are expected – centrally (see example of Iraq EODP), based on previous experience – these might be considered a viable approach. inflows require beyond coordination also Such a hybrid approach would build on permanent political oversight, scrutiny, rather than stepping back from progress and ongoing political endorsement that has been achieved in institutional to remain manageable and to lead to strengthening, while promoting efficiency positive impacts. However, there is with respect to certain common a strong indication- also from cross supporting functions related to planning, country experience- that project and budgeting, facilitating permits, and the reform implementation should be left as like. a collective task across the Government based on established and tested procedures, instead of creating a parallel 3.4. Accountability and Monitoring nucleus government. 22. An immediate priority for the GoY in the post-conflict period will be 23. Planning for and executing public to strengthen GoY institutional Investment should become more capacity to manage and monitor aid transparent to the public and to the delivery during the recovery period. development partner. Inadequate Due to the immediate challenges of budget planning and allocation can cause coordinating and delivering aid in the delays in project implementation, and post-peace period, the GoY should may lead to weak contract management. seek to build on the experience and To ensure budget cohesion and to avoid architecture of the 2011-2014 transition. disconnects with the recovery programs, In 2012, the Executive Bureau (EB) was MOPIC and other future aid absorption established and was believed to provide institutions, must coordinate with the enhanced coordination and delivery. Ministry of Finance (MoF) to integrate The EB was initially located at MoPIC, and coordinate the budget process but in 2014 moved to the office of the that supports and accounts for external Prime Minister in order to offer a more aid. The request for an integrated 16 and continuous coordination needs will enable a more rapid procurement to cover planning for external aid, the processes and quicker restoration of public investment planning, allocation essential services and infrastructure; in of resources for such investments, and line with such an approach, the Emergency its implementation. In that sense, MoF Procurement Toolkit developed by the will need to lead the single formulation Bank’s MENA Procurement Team, of the capital investment and recurrent and currently being used in Iraq, is expenditure budgets, of which donor available to make use of in Yemen. In financed investment shares are to be accordance with techniques highlighted included in the state’s general budget. in the Emergency Procurement Toolkit, some preparatory steps and essential 24. Reliance on the existing procurement resources can be identified in the near institutions and procedures of Yemen term to lay the groundwork for rapid could be complemented by appropriate response once conditions on the ground fiduciary and technical monitoring and in Yemen permit. oversight mechanisms. This would be in addition to the enhanced hands-on 26. Monitoring and oversight should implementation support available under be a collective effort of the national the Bank’s new Procurement Policy, institutions involved so as to ensure and supported by further procurement expected goals will be achieved. reform and capacity-building initiatives. Throughout the public investment Moreover, provided certain conditions management cycle, internal controls are met, which Yemen fulfills, the should be applied in form of regular Bank’s new Procurement Policy and publically reported assessments to provides greater flexibility with respect provide reasonable assurance that aid is to allowing the use of the country’s absorbed in an efficient and economically own procurement procedures up to the or politically agreed manner promising to established country specific thresholds achieve the expected social or economic for National Procurement Procedures. goals. These assessments will include, The viability of such an approach is but are not limited to, financial audits, reinforced by the demonstrated capacity internal controls, effectiveness reviews, of the High Tender Board (HTB) and the project investment cycle management High Authority for Tender Control (HATC) and evaluations, and technical audits. structures, which prior to the crisis Stakeholders such as relevant target and had already taken on and effectively interest groups, line ministries, Supreme implemented a greater role, including Audit Institution (the Central Organization oversight of bidding documents and for Control and Auditing- COCA), and large projects, thus relieving some of the private consulting firms should be pressure on donors. involved by MOPIC at the different stages of the oversight and monitoring system, 25. The Bank’s new Procurement Policy thereby strengthening internal processes can be instrumental in enabling an of aid absorption & coordination as well expedited response, recovery and as assuring more success in achieving reconstruction process. The degree stated social and economic objectives of liberty and choice provided for in associated with the external aid. the Bank’s new Procurement Policy 17 18 Policy Priorities: 4. Based on the foregoing analysis, there are three main policy areas of high importance where government attention should be focused in the immediate (3 months), short-term (6 months) and medium-term (18-24 months) post-peace period: Policy Area Objective Immediate Term Action Short Term Action Medium Term Action • RPBA finalized, including • Rapid Plan for deliverables Incrementally priorities and implementation in first six months finalized and • Institutional arrangements develop nationally arrangements implementation underway established and functioning Planning owned recovery • Financing secured • Mechanism and • Regular monitoring of results, and peace building • Institutional arrangements for process for inclusive planning flows, and strategic impact strategy and vision implementation agreed agreed • MAF developed as part of • Agreement between Design and RPBA finalization • Six-monthly meetings donors and GoY on required operationalize • Secretariat fully operational and organized Coordination mechanism, and decree issued aid coordination staffed • MAF monitoring and • Coordination mechanism • Regular coordination meetings communication around results mechanism operational taking place • Assessment of existing instruments undertaken (Social Fund, Rural Access Program, Public Works, etc.) • New instruments designed • Hold MTDF steering committee Agree on financing • Gaps identified and process and operational based on RPBA meetings and learn from initial strategy, and agreed for filling them findings and capacity gap experience to adjust operations Implementation design required • MDTF design completed if assessment for smooth absorption. modalities requested • MDTF operational to absorb • Agreement reached on inflow of aid . structure of possible dual accountability mechanism for implementation • Finalize design of coordination/facilitation unit (EB) in executive, including capacity and institutional Strengthen GoY assessment, mandate and institutional resource requirements, while • Implementation assessments • DU/EB operational and able Accountability capacity to leaving project implementation based on monitoring results/ to coordinate GoY recovery and and Monitoring manage and to line ministries drawing first lessons to adjust peace building efforts monitor recovery • Restore reliance on the implementation period reformed procurement system architectures that had already been developed in alignment with international standards (HTB and HATC) 19 ANNEX 1 Summary Comparison of Central Project Implementation Units in Lebanon and Iraq   Lebanon - CDR Iraq - PCU (EODP) 1 The rationale for After Civil War, line ministries did Reconstruction Fund was established establishing the Mega PIU not have capacity to implement by the Government to manage the   Projects, and it was decided reconstruction with implementation by line to place the resources of the Ministries, and iron out the bureaucratic country for rebuilding under one requirements. umbrella 2 The initial role and scope of To assess infrastructural needs To reconstruct damages incurred from the the Mega PIU arising from Lebanon›s civil war liberation activities from ISIS insurgency.   and allocate international and Lebanese finances for rebuilding the country to line Ministries for implementation. 3 How was it managed? by CDR was established as a large Reconstruction Fund was established an individual person or by a government institution, managed as an office headed by a Director that is committee by a president, and a Board. equivalent to Deputy of Prime Minister.     Pros and Cons of a Mega Project Implementation Unit (PIU):   Subject Pro Con Usually linked with highest 1 Authority   level in the Government. Centrally linked Mega PIU may have the tools to force Line Ministries do not always abide by the 2 Enforcing implementation the project implementation on orders from central PIU. Ministries. Specialized PIUs that are linked with Ministries 3 Ownership   usually show a higher rate of ownership. Capacity building of one In any case, the capacity building is needed for 4 Capacity building of PIU mega PIU can be faster. specialized PIUs as well. Some Centralized PIUs might In most cases, a mega PIU would need to work have enough capacity to work through other specialized PIUs (at Ministries) 5 Implementation speed independent of line ministries effectively slowing down the decision making for faster implementation. process and implementation. Line Ministries might not benefit from the experience gained during implementations, 6 Sustainability   resulting in problems with operation and maintenance. Working directly with PIUs at line ministries, 7 Long Term engagement   helps in building direct relationship that facilitates future interactions. There is already a working relation with several 8 Yemen experience   PMUs in line Ministries that speeds up any future implementation. 20 ANNEX 2 Organizational elements of Yemen’s procurement system Central level High Tender Board (HTB) • Financially & administratively autonomous; suspension of chairman or member reports to Cabinet, of tender committee; establishment of single-portal website; regular reporting to • Chairperson and four members appointed President by President on referral by Prime Minister after Cabinet approval • Maintains a technical bureau (secretariat) • Conducts prior review of procurements High Tender Committee – Approves bids whose value is within its financial of SOEs exceeding threshold specified in authority and which are referred to it Executive Regulations. by tender committees at the Ministries’ Arrangements in procuring entities headquarters, public establishments, (Subject to financial authorities in accordance bodies and other central authorities, and with Tenders Law, as specified in Executive local tender committees in governorates Regulations) and the Capital (approval of bidding • Tender Committee established in documents, evaluation reports, contract headquarters of procuring entities final wording, finalization of award • Tender Board established at branch decisions) offices of procuring entities • Capacity building • Tender Board at branch offices of entities • Regular reporting to Cabinet and HATC at the governorate level • Has technical secretariat • Local Tender Committees in the capital and governorates, and in each district High Authority for Tender Control (HATC) • Procurement Units in procuring entities • Financially & administratively autonomous; to do the day-to-day work of procurement may establish branches in governorates processes • Run by a Board (chairperson and six Duties and responsibilities of tender members, appointed by President upon committees include: nomination by the Shura Council of a • Reviewing technical specifications, 14-person list, including representatives approving bidding documents and of business and industrial sectors, civil estimated costs society and Judicial Services) • Approving choice of procurement method • Functions include: control and supervision of procurement activities; development of • Reviewing bid opening procedures and policy and legislation; review of financial bid evaluations reports ceilings; data collection; adjudication of complaints; development of capacity • Deciding on tenders and auctions within building polices and strategies; issuance the respective authority level of directives, guidelines, instructions, • Approving wording of contracts standard bidding documents and contracts; conducting field inspections; • Periodically reporting to HATC referral of violations for legal action and notifications to anti-corruption committee; 21 Reference International Crisis Group. (2016, February 9). World Bank. (2016). Review of Experiences Yemen: Is Peace Possible? with Post-Conflict Needs Assessments 2008- 2015 OECD. (2012). International Support to Post-Conflict Transition: Rethinking Policy, World Bank. (2011). World Development Report: Changing Practice. Conflict, Security, and Development. 22