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Document of

The International Fund for Agricultural Development

For Official Use Only

The International Fund for Agricultural Development

REPUBLIC OF YEMEN

FISHERIES INVESTMENT PROJECT

Project Final Design Report

Volume I: Main report and Annexes

Near East and North Africa Division Project Management Department

CONFIDENTIAL REPORT No. 2306-YE September 2010

REPUBLIC OF YEMEN: FISHERIES INVESTMENT PROJECT (FIP) PROJECT FINAL DESIGN REPORT MAIN REPORT

REPUBLIC OF YEMEN

FISHERIES INVESTMENT PROJECT (FIP)

PROJECT FINAL DESIGN REPORT

MAIN REPORT

Table of Contents

 

Page

Currency equivalents

iii

Weights and measures

iii

Abbreviations and acronyms

iii

I.

INTRODUCTION

1

II. STRATEGIC CONTEXT AND RATIONALE FOR IFAD INVOLVEMENT, COMMITMENT AND PARTNERSHIP (KSF 1)

1

 

A. Rural Development Context

1

B. Policy, Governance and Institutional Issues, Political and Economic Issues

8

C. The IFAD Country Programme

10

III. POVERTY, SOCIAL CAPITAL AND TARGETING (KSF 2)

11

 

A. Rural Poverty, Information and Analysis

11

B. The Target Group, including Gender Issues

13

C. Targeting Strategy and Gender Mainstreaming

15

D. Geographic Coverage of the Project

17

IV. PROJECT DESCRIPTION (KSF 3)

17

 

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

17

B. Opportunities for Rural Development and Poverty Reduction

18

C. Project Goal and Objectives

20

D. Alignment with Country Rural Development Policies and IFAD Strategies

20

E. Project Components

21

V. IMPLEMENTATION AND INSTITUTIONAL ARRANGEMENTS (KSF 4)

31

 

A. Institutional Development and Outcomes

31

B. The Collaborative Framework

35

C. Results-Based M&E

36

VI. PROJECT BENEFITS, COSTS AND FINANCING

39

 

A. Summary Benefit Analysis

39

B. Summary Cost Table

41

C. Project Financing

42

VII. PROJECT RISKS AND SUSTAINABILITY (KSF 5)

42

 

A. Risk Analysis

42

B. Exit Strategy and Post-Project Sustainability

43

VIII. INNOVATIVE FEATURES, LEARNING AND KNOWLEDGE MANAGEMENT (KSF 6)

44

 

A. Innovative Features

44

B. Project Knowledge Products and Learning Processes

44

C. Regional Knowledge Networking

44

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REPUBLIC OF YEMEN: FISHERIES INVESTMENT PROJECT (FIP) PROJECT FINAL DESIGN REPORT MAIN REPORT

TABLES

Table 1: Active Fishers and Boats

2

Table 2: Fishers and Fish Production, 2000-2010

3

Table 3: Rural Poverty by Governorate, 2005

11

Table 4: Fishers’ Households – Indicative Incomes

12

Table 5: Estimated Project Beneficiaries

39

Table 6: Project Phasing – Value Chain Development

39

Table 7: Project Phasing – Sustainable Resource Management

40

Table 8: Indicative Fishing Boat Models

40

Table 9: Indicative Aquaculture and MSE Models

40

Table 10: Summary Project Cost

42

Table 11: Project Financing by Component (all figures in USD million)

42

FIGURES

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

3

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

5

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

5

Figure 4: Increase in Global Aquaculture Production, 1970-2006

6

Figure 5: Poverty in Fishers’ Communities - Characteristics

12

Figure 6: Fishers’ Households in Yemen - Characteristics

13

Figure 7: Landing Site Selection Process

16

Figure 8: Fisheries Sector – Indicative SWOT Analysis

19

Figure 9: Government, IFAD, and EOF Strategic Consistency

20

Figure 10: EOF Strategic Framework

32

Figure 11: EOF Management Structure

33

ANNEXES

ANNEX 1: CONTENTS OF THE PROJECT LIFE FILE

1

ANNEX 2: LOGFRAME

3

ANNEX 3: SUMMARY COST TABLES

9

ANNEX 4: DRAFT PROJECT IMPLEMENTATION MANUAL

13

ANNEX 5: KEY FILES

57

ANNEX 6: ENVIRONMENTAL AND SOCIAL REVIEW NOTE

67

ANNEX 7: PROJECT ALIGNMENT WITH IFAD STRATEGY, PROCEDURE AND POLICY

83

WORKING PAPERS

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

WP 2: Sustainable Resource Management

WP 3: Value Chain Development

WP 4: Rural Finance and Financial Mechanisms

WP 5: Economic Opportunities Fund

WP 6: Project Costs and Financial Analysis

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REPUBLIC OF YEMEN: FISHERIES INVESTMENT PROJECT (FIP) PROJECT FINAL DESIGN REPORT MAIN REPORT

Currency equivalents

Monetary Unit

=

Local currency

1 US$

=

YER 230

1 YER

=

US$ 0.00465

Weights and measures

1 kilogram (kg)

=

2.204 pounds

1 000 kg

=

1 metric ton (t)

1 kilometre (km)

=

0.62 miles

1 nautical mile (nm)

=

1.15 miles

1 meter (m)

=

1.09 yards

1 square meter (m 2 )

=

10.76 square foots

1 acre (ac)

=

0.405 hectares (ha)

1 hectare (ha)

=

2.47 acres

1 gallon (gl)

=

3.785 litres (l)

Abbreviations and acronyms

AFD

Agence Française Développement

AGFUND

Arab Gulf Programme for United Nations Development Organisations

AMB

Al-Amal Bank

ARC

Aquaculture Research Centre

CACB

Cooperative and Agricultural Credit Bank

CFC

Coastal Fisheries Corporation

CGAP

Consultative Group to Assist the Poor

DFI

Direct Foreign Investment

DPPR

Development Plan for Poverty Reduction

EEZ

Exclusive Economic Zone

EIA

Environmental Impact Assessment

EOF

Economic Opportunities Fund

EOP

Economics Opportunities Project

EPA

Environmental Protection Authority

EU

European Union

FA

Fisheries Authority

FAO

United Nations Food and Agriculture Organisation

FCU

Fishers' Cooperative Union

FIP

Fisheries Investment Programme

FMP

Fisheries Management Plan

FRA

Fisheries Research Authority

GDP

Gross Domestic Product

GNI

Gross National Income

GoY

Government of Yemen

GTZ

Deutsche Gesellschaft für Technische Zusammenarbeit

IFAD

International Fund for Agricultural Development

IFC

International Finance Corporation

IMF

International Monetary Fund

KfW

German Development Bank

KSF

Key Success Factor

LLC

Limited Liability Company

MFI

Micro-Finance Institution

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REPUBLIC OF YEMEN: FISHERIES INVESTMENT PROJECT (FIP) PROJECT FINAL DESIGN REPORT MAIN REPORT

MFW

Ministry of Fish Wealth

MoF

Ministry of Finance

MOPIC

Ministry of Planning and International Cooperation

MSE

Micro/Small Enterprise

MSRRC

Marine Science and Resources Research Centre

MWE

Ministry of Water and Environment

NCFSM

National Corporation for Fisheries Services and Marketing

PDRY

People's Democratic Republic of Yemen

RB-COSOP

Results Based Country Strategic Opportunities Paper

SEDF

Small Enterprise Development Fund

SFD

Social Fund for Development

SMART

Sector Management Adjustment and Restructuring Team

SME

Small/Medium Enterprise

SNACC

Supreme National Authority for Combating Corruption

SO

Strategic Objectives

TMI

Tadhamon Microfinance Institution

UFC

Union of Fisheries Cooperatives

UN

United Nations

UNDP

United Nations Development Programme

USD

United States Dollars

WB

World Bank

YAR

Yemen Arab Republic

YSEA

Yemen Seafood Exporters Association

GOVERNMENT OF YEMEN

Fiscal Year

1 st January – 31 st December

iv

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REPUBLIC OF YEMEN: FISHERIES INVESTMENT PROJECT (FIP) FINAL DESIGN REPORTPROJECT REPORTMAIN
REPUBLIC OF YEMEN: FISHERIES INVESTMENT PROJECT (FIP)
FINAL DESIGN REPORTPROJECT
REPORTMAIN

REPUBLIC OF YEMEN: FISHERIES INVESTMENT PROJECT (FIP) PROJECT FINAL DESIGN REPORT MAIN REPORT

REPUBLIC OF YEMEN

FISHERIES INVESTMENT PROJECT (FIP)

PROJECT FINAL DESIGN REPORT

MAIN REPORT

I. INTRODUCTION

1. In 2009, the Government of Yemen (GOY) requested IFAD to finance a fisheries sector

development project which would focus on enhancing incomes within fishers’ communities without increasing pressure on the over-exploited resource base. An IFAD preliminary design mission visited Yemen in late 2009 to define constraints and identify opportunities across the fisheries

value chain and develop a project concept note. The project concept was agreed with Government and approved by IFAD by early 2010. Subsequently, an IFAD mission visited Yemen in February- March 2010 to design the Fisheries Investment Project and produce the project design document.

2. An IFAD mission 1 visited Yemen in June-July 2010 to finalize the design of the Fisheries

Investment Project and produce the final design report. In Sana’a, the mission worked closely with

key Government authorities (Ministry of Planning and International Cooperation (MOPIC), Ministry of Fish Wealth (MFW), Ministry of Agriculture and Irrigation (MAI), Central Bank of Yemen (CBY), Environmental Protection Authority/MWE, General Investment Authority), public institutions (Yemen Coast Guard, Yemen Standardisation and Metrology Organization), financial institutions (Al Amal Microfinance Bank, United Insurance Company), and fisheries value chain stakeholders (Yemen Seafood Exporters’ Association (YSEA), Yemen Fisheries Cooperative Union (FCU), fish processors and exporters). Field visits were undertaken to Abyan, Aden, Hadramaut, Hodeida and Shabwah governorates, where the mission met with fishers, representatives of fishers’ cooperatives, and other members of fishers’ communities including women and their organisations. The mission also met with the governorate branches of MFW and other public or parastatal entities such as the Marine Science and Resources Research Centre (MSRRC), the Aquaculture Research Centre (ARC) and the National Corporation for Fisheries Services and Marketing (NCFSM).

3. The mission worked in close coordination with the representatives of other external

financiers involved in the fisheries sector, particularly the European Union and the World Bank. It also met with officials of the United Nations Development Programme (UNDP), and the Japanese

International Cooperation Agency (JICA).

4. The mission held numerous meetings with major departments of the Ministry of Fish Wealth.

The mission’s Aide-Memoire was discussed in detail and agreed with MFW, and was endorsed by

Government at a Wrap up meeting on 21 July 2010 which was chaired by the Deputy Prime Minister and Minister for Planning and International Cooperation.

II. STRATEGIC CONTEXT AND RATIONALE FOR IFAD INVOLVEMENT, COMMITMENT AND PARTNERSHIP (KSF 1)

A. Rural Development Context

5. Yemen is a low-income country with a population of about 22.9 million. GNI amounts to USD

21.9 billion and per capita GNI averages USD 960 in nominal terms (2008). Yemen has a human development index of 0.575 and ranks 140 th out of 182 countries rated in 2009. The gender development index is 0.538, reflecting gender disparities in human development. About 40% of

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

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REPUBLIC OF YEMEN: FISHERIES INVESTMENT PROJECT (FIP) PROJECT FINAL DESIGN REPORT MAIN REPORT

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

6. Population pressure is a major challenge which makes the fight against poverty increasingly

difficult. Although the annual population growth rate has dropped from 3.7% to 2.9%, Yemen still has one of the highest growth rates in the world. The proportion of those below 15 years of age is

45%, and over 62% of the population is under 25. It is projected that population will double over the next 20 years. Official unemployment rose from 12.0% in 2000 to 16.8% in 2005. Although women are increasingly joining the labour force to counteract declining real household incomes, female labour represents only 8.8% of total employment.

7. The Republic of Yemen was formed in 1990 when the Yemen Arab Republic and the People’s

Democratic Republic of Yemen were united. The social and cultural legacy of the previous division remains visible today and influences the fisheries sector and society in general, as evidenced by the stronger position of fisheries cooperatives, historically higher levels of gender equality, and lower levels of qat consumption in the Socotra Archipelago.

Fisheries Sector

8. Yemen’s 2,520 km coastline extends from Saudi Arabia in the northwest to Oman in the east

and is divided among the Red Sea (650 km), the Gulf of Aden (1,550 km) and the Socotra Archipelago (320 km). The 552,669 km 2 Exclusive Economic Zone (EEZ) contains a variety of important ecosystems including coral reefs and mangroves supporting about sixty-five commercially important species. These include invertebrates (shrimp, lobsters, sea cucumbers, cuttlefish), pelagic species (yellow-fin tuna, long-tail tuna, kingfish, Indian mackerel, Indian oil sardines) and demersal species (groupers, emperor, threadfin bream). The major environmental influence on Yemen fisheries’ productivity is the Indian Ocean monsoon system, in particular the south-west monsoon which blows from May to September. This results in a strong upwelling of cold, nutrient-rich waters in the Gulf of Aden which also enter the southern parts of the Red Sea, creating levels of primary productivity which are amongst the highest in the world.

Table 1: Active Fishers and Boats

Region

Governorate

Fishers

Boats

(est. #)

(est. #)

Red Sea (avg. 5.5 fishers/boat)

Hajjah

1

969

358

Hodeidah

33

969

6 178

 

Taiz

3

927

714

Gulf of Aden (avg. 3.5 fishers/boat)

Lahej

1

750

500

Aden

4

785

1 367

 

Abyan

5

831

1 666

Shabwah

1

635

467

Hadhramout

16

335

4 667

Al Mahara

8

166

2 333

Socotra (avg. 4 fishers/boat)

Hadhramout

5

000

1 250

Total

 

83

367

19 500

9. Due to high productivity and a long fishing tradition, fisheries is of major importance for the

Yemeni economy. The sector contributes about 3% of GDP and is consistently identified as a key sector in the Government’s economic development and poverty reduction strategies. Furthermore, after petroleum products, fisheries constitutes Yemen’s main source of export earnings and is a major source of employment, income and food security throughout the coastal zone. Yemen is the major regional fish producer, accounting for more than 50% of fish production and exports across the Red Sea and Gulf of Aden. The fishing industry is dominated by the small-scale sector, which currently supports the livelihoods of an estimated 83,367 small-scale fishers and 583,625 of their household members, for a total of about 667,000 people (Table 1). Government sees the fisheries sector as a critical source of employment in coastal areas and has encouraged its expansion; the number of small fishers has increased at an average rate of 7.5% p.a. over the past two decades, resulting in significant increases in fish production from the early 1990s to date. Artisanal fishers

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REPUBLIC OF YEMEN: FISHERIES INVESTMENT PROJECT (FIP) PROJECT FINAL DESIGN REPORT MAIN REPORT

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

10. Production. Official MFW statistics indicate that total fisheries production in 2009 amounted

to 107,000 mt, representing a major decline from the official peak level of 256,300 mt in 2004 (Figure 1, Table 2). However, these figures are likely to be grossly inaccurate due to logistical difficulties in data collection, poor auction management (including not weighing most of the fish sold), and deliberate under-reporting to avoid payment of the 3% levy on catch value introduced by Government in 2004. The MFW has unofficially indicated that total annual catch should be around 600,000 mt, and implies that fishers’ cooperatives are indeed misreporting catches to avoid the levy. Based on export and domestic consumption data as well as interviews with fishers across the coastal areas, the mission estimates that total annual catch is currently in the range of 247,000 – 264,000 mt, for an ex-vessel annual value ranging from USD 618 million to USD 660 million. In any case, it is evident that all estimates of total production are highly uncertain, and improved systems of data collection are required.

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

Figure 1: Fishers and Fish Production, 2000-2008/2009 (Source: MFW / FAO Fishstat / Mission Estimates) Table

(Source: MFW / FAO Fishstat / Mission Estimates)

Table 2: Fishers and Fish Production, 2000-2010

Indicator

Unit

1995

2000

2005

2010 (est.)

Fishers Boats Average Fishers / Boat Total Annnual Catch Average Annual Catch / Fisher

number

30 000

49 114

65 198

83 367

number

10 000

12 560

16 890

19 500

number

3.0

3.9

3.9

4.3

mt

107 790

142 198

238 400

256 000

mt

3.6

2.9

3.7

3.1

Source: MFW, FAO Fishstat, Mission estimates)

11. Vessels and Landing Facilities. In the small-scale sector virtually all fishing is carried out

using huris (long, narrow fibreglass boats of 7-16 m, with outboard engines, carrying 3-7 crew) and sambuks (larger wooden boats of 10-20 m, with an inboard or outboard engine, carrying up to 10 crew). Gillnets, traps and hook and line are the most common types of fishing gear, and fishing is highly seasonal with activity restricted by the monsoon winds (which peak in June-August) for reasons of safety and changes in fish behaviour. Huris were traditionally used for single day trips in inshore waters, but due to overfishing and low yields in Yemeni waters they now commonly travel to the EEZ edges and beyond and stay for up to 10 days. Sambuks are used for longer trips ranging from a few days to three weeks. Boats are generally privately owned with some individuals owning two or more, and occasionally up to five. Joint ownership is rare on the Red Sea coast but more common along the Gulf of Aden and Socotra, accounting for 30-40% of boats in some areas.

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12. Only 12 of the 88 landing sites have a harbour with paved or concrete pier. A further 42

have an open-sided auction shed, while less than half have any basic services. The remaining landing sites lack modern landing facilities, and fish are brought ashore directly onto the beach.

Boats are either moored near the beach or dragged up out of the water onto the beach itself. Fishers have no means of protecting their boats and gear from the monsoon winds and tropical storms to which the Yemeni coast is exposed. There are numerous ice plants (including those belonging to fish factories) which currently produce sufficient ice to meet the low demand; it is expected that ice demand will increase significantly as the fisheries value chain is upgraded.

13. Marketing. Domestic consumption of fish is around 5kg per capita per annum reflecting low

fish consumption in inland areas. About 57% of total production is exported (2008) to regional markets and high value markets in the EU and Asia 2 . There are 35 fish factories, concentrated in Hodeida, Aden, Mukalla, Qishn and Al-Ghaydah, of which 17 are licensed to export to the EU. Up to 70% of catch on the Red Sea coast is exported fresh to Saudi Arabia by small traders equipped with insulated vehicles; it is estimated that there are 975 trucks of 5 mt exporting to Saudi Arabia and Oman. However, due to poor handling and hygiene standards, Yemeni fish receives low prices and has a poor reputation in the Saudi market. Processors and exporters often report increasing difficulties in obtaining sufficient quantities of high quality fish due to limited use of ice, poor on- board handling and processing, and the long periods vessels stay at sea due to declining catches.

14. Since 2004, all fish must be sold through official auctions where the gross sale value is

subject to a 3% Government levy plus a service charge of up to 5%, for a total of 8%. The service charge is divided among the auctioneer (2%), the owner of the auction shed (1%) and the fishers’ cooperative (2%). Where the cooperative owns the auction shed and employs the auctioneer, it may charge as little as 2%. In other areas, particularly on the Red Sea coast where cooperatives are weak, wakeels (agents) have developed inter-locking factor markets and control the provision of fishing inputs and sale of fish, and often also act as auctioneers taking 5% of the value, while the owner of the auction shed gets 2%, the cooperative gets 1%, and the Government gets 3%, for a total to 11% of gross revenue. These auction systems are complex and not transparent, with significant opportunity for collusion between buyers and auctioneers. In areas where cooperatives do not control auctions, fishers often do not receive receipts for fish sold and are unaware of the

precise weights landed. It is common for agents/auctioneers to act as moneylenders to fishers for operating costs, deducting the debts from sale of fish.

15. There are three prevailing systems of revenue distribution amongst fishers:

Red Sea coast: net revenue is divided into two, with 50% for ‘the boat’ (kept by the owner) and 50% for ‘the crew’ which is divided equally among crew members and captain. If the captain is not the owner, it is normal that the owner still takes the 50% for ‘the boat’ while the captain takes two crew shares.

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

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

16. Overfishing and Declining Resources. Increases in the number of fishers and in fishing effort

have taken place in an uncontrolled manner, without adequate knowledge or consideration of the status of fish stocks, nor enforcement of measures for sustainable exploitation. Fisheries are currently effectively operating in an unregulated environment, although legislation and regulations

exist. Due to the lack of funds for enforcement, complex and time consuming court cases, and insufficient awareness within MFW of the damage being caused to Yemen’s marine resources, many existing regulations are simply not enforced.

17. Official time-series estimates of total and high value species fish production are indicated in

Figure 2. While the data may be somewhat unreliable, it is known that production of selected high value species is declining in recent years. All fisheries sector stakeholders report declining catches, particularly of high value species such as cuttlefish, tuna and shrimp. Some species such as lobster

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

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

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

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

– Total and Sele cted High Value Species - Selected Years (Source: MFW/FAO Fishstat) 18. There
– Total and Sele cted High Value Species - Selected Years (Source: MFW/FAO Fishstat) 18. There

(Source: MFW/FAO Fishstat)

Value Species - Selected Years (Source: MFW/FAO Fishstat) 18. There is evidence of increases in catches
Value Species - Selected Years (Source: MFW/FAO Fishstat) 18. There is evidence of increases in catches

18. There is evidence of increases in catches of low value species (Figure 3), suggesting shifts in

focus of fishing effort. Overfishing of high value species followed by a shift of target to lower value

species and an increase in fishing effort to maintain production levels is a phenomenon which has been repeated across the world in poorly managed fisheries.

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

Production of Selected Low Value Demersal Stocks, 2000-2007 (Source: FAO Fishstat) 19. This trend of decline

(Source: FAO Fishstat)

Low Value Demersal Stocks, 2000-2007 (Source: FAO Fishstat) 19. This trend of decline in Yemeni fish

19. This trend of decline in Yemeni fish production is consistent with fish production trends in the

wider Western Indian Ocean Region and globally. It is now believed that 52% of global stocks are fully or over-exploited, of which 28% are fully exploited, 19% are overexploited, 8% are depleted,

and 1% are recovering from depletion. In the Western Indian Ocean, the share of stocks which are fully exploited is amongst the highest in the world. The causes of the decline in Yemeni fish production are also consistent with global trends – uncontrolled increase in fishing effort, poor management, weak enforcement of regulations, and political preference for short-term increases in employment and revenue rather than the assurance of long term sustainability.

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REPUBLIC OF YEMEN: FISHERIES INVESTMENT PROJECT (FIP) PROJECT FINAL DESIGN REPORT MAIN REPORT

20. Aquaculture. The development of aquaculture has progressed very slowly in Yemen to date.

There is just one commercial shrimp farm in operation 3 , producing approximately 400 mt per year, while domestic research capacity and activity is limited. However, given the over-exploitation of wild fisheries resources, the global trend of increasing aquaculture production (Figure 4), and the continuous increase in global demand for fisheries products, accelerating the development of aquaculture in Yemen is essential to ensure sufficient fish production to meet domestic and export demand. Aquaculture development will create economic opportunities in coastal areas with rapidly growing populations and limited alternative opportunities.

Figure 4: Increase in Global Aquaculture Production, 1970-2006

4: Increase in Global Aquaculture Production, 1970-2006 (Source FA0 SOFA 2008) 21. Aquaculture development has been

(Source FA0 SOFA 2008)

21. Aquaculture development has been identified as a priority in Yemen’s Strategic Vision 2025.

The potential for aquaculture in Yemen is significant due to the existence of favourable locations mainly along the Red Sea coast and in some locations in the Gulf of Aden, and the availability of large areas of low-lying unused coastal land.

Micro and Small Enterprises (MSEs)

22. Based on a recent IFC credit demand survey 4 , it is conservatively estimated that there are

400,000 MSEs in Yemen (excluding the agriculture sector), of which 91% are micro enterprises and 9% are small enterprises. While 53% of MSEs are interested in obtaining loans, only 6% of this market is served by financial institutions. As typical loan sizes for MSEs range from USD 1 000 to USD 25 000, with an average of USD 2 500, the estimated financing demand for the MSE sector

(excluding agriculture) amounts to USD 530 million. Since 2000 the MSE sector has grown by an average of 5% annually. The bulk of MSEs are engaged in several sectors: trade (66%), services (20%) and production (14%). Within the trade sector, 83% of MSEs are engaged in retail.

23. It is estimated that microenterprises employ some 1.1 million people while small enterprises

employ another 0.3 million, for a total of 1.4 million jobs. Most employees are family members. About 24% of enterprises have an annual workforce growth of 10%, creating some 124,400 new jobs per year. It is estimated that women constitute only around 12% of the MSE workforce.

24. The MSE sector suffers from several key constraints. First, MSEs lack awareness about the

availability of loans and other financial products from the financial sector. Most MSEs are family- owned and have little capacity for further capitalisation; their limited financial resources prevent

them from leveraging sufficient funds to finance activity growth and investments. Second, insufficient MSE diversification resulting from inadequate markets and technical/business skills increases risks for both the entrepreneurs and financial institutions (women’s MSEs are even less diversified due to cultural factors regarding women’s roles). Third, the slow growth of medium and large enterprise sectors and limited direct foreign investment in Yemen constrains the growth of direct/indirect markets for the MSE sector.

3 The economic viability of shrimp farming in Yemen is currently threatened by rising fuel prices.

4 Assessment of MSE Financial Needs in Yemen, International Finance Corp., Dec. 2007.

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Financial Services

25. Supply. The commercial banking sector consists of fifteen active commercial banks, of which

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

26. Microfinance institutions (MFIs) which are actively involved in the provision of microfinance

services include eleven NGOs/foundations, Al-Amal Microfinance Bank, Tadhamon Microfinance Institution (TMI), and the Small Enterprise Development Fund (SEDF). Apart from Tadhamon, the other MFIs were created by the Social Fund for Development (SFD). These MFIs have an aggregate outreach of over 40 000 clients, a combined loan portfolio of around USD 15 million, and an average loan size of USD 115. The MFI with the largest outreach covers nine governorates, while others cover from one to four governorates each.

27. In October 2008, the Al-Amal Microfinance Bank (AMB) was created under Al-Amal Bank Law

23 of 2002, under Central Bank supervision. The AMB is owned by SFD (45%), the Arab Gulf Programme for UN Development (AGFUND, 35%), and 13 private investors/entities (20%). Trial period results and outcomes to date are well above projections, and indicate that AMB will break- even in 2010; however, it will need additional financial resources to sustain its activity growth and geographical expansion. Several investors including the Economic Opportunities Fund (EOF) being created under the IFAD-financed Economic Opportunities Programme have expressed interest to invest in the share capital of AMB. The AMB Board has expressed interest for the EOF’s proposed investment in the Bank’s share capital, which would enable financing of the Bank’s geographical

expansion in IFAD’s areas of operation as well as the growth of its activity. Parliament is currently discussing the repealing of the Al-Amal Bank Law to enable the Bank to fall under the Microfinance Law (this would indeed facilitate the EOF investment in the Bank’s share capital).

28. In March 2009, a new microfinance bank law was adopted by Parliament. It allows licensed

microfinance banks to collect savings and deposits and use them for lending, and places them under Central Bank supervision, to whom they have to submit audited financial statements. The Central Bank has developed a set of prudential rules and regulations. The AMB is licensed by the Central Bank, while TMI is licensed through its mother company. Due to their current structure and lack of compliance with CGAP microfinance best practices, it is unlikely that the SFD’s microfinance entities will be licensed. Unlicensed MFIs are not allowed to collect savings.

29. Outreach. Fishers’ villages are scattered along the coast, and most have low populations.

They are not well covered by microfinance institutions nor by commercial banks; the latter have developed relationships with the fisheries sector in large cities/ports such as Aden, Hodeida, and Mukalla. Financial outreach to coastal villages will require MFIs/banks to develop service points in these areas. Alternative financial products suited to the specific requirements and cash-flow cycles of fishers’ households and rural micro-businesses need to be developed. The Post Office is the only financial intermediary widely present in coastal areas and fishers’ villages.

30. Only those fishers who are members of cooperatives which are financially sustainable and

have a good credit record (about 5 to 10% of cooperatives) have access to commercial bank loans (revolving short-term credit for the fishing season). In such cases, credit funds are provided to the

cooperative and on-lent to fishers’ (individually or in groups) with a small cooperative mark-up to cover transaction costs. In some cases, cooperatives act as financial guarantors for their members, particularly for investment credits. Typically, however, cooperatives and their members do not have access to commercial credit due to bad credit ratings. In the Red Sea, access to credit for fishers is controlled by wakeels who serve as auctioneers, buyers, owners of boats, and financial service providers. An opaque and intricate financing system, partial repayment and social credit leave fishers in financial dependence of wakeels, without alternative means to access credit.

31. Demand. The WB/IFC Doing Business Report 2009 ranks Yemen 150 th out of 182 countries

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

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

B. Policy, Governance and Institutional Issues, Political and Economic Issues

32. From 1995 to 2000 Yemen implemented an Economic, Financial and Administrative Reform

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

33. Yemen’s strategic vision and objective is to reach middle-income prosperity by 2025. The

achievement of a GDP per capita level of USD 2 375 will require a GDP growth rate of least 6.3% per annum over the next 20 years. To facilitate economic growth and reduce poverty, Government has been introducing significant measures to improve the business regulatory environment and investment climate, in cooperation with IFC and other partners. Yemen’s composite ranking in the IFC/WB Doing Business report improved from 123 rd place in 2008 to 98 th in 2009; in terms of ‘starting a business’ Yemen jumped from 175 th place in 2008 to 50 th in 2009 (the top reformer in the world for this indicator). The reforms include streamlining business licensing and registration, restructuring taxation and customs systems, and further protecting investors. Government is fully committed to institute a private sector approach to economic growth and poverty reduction.

34. The Investment Law will be modified before the end of 2010. Tax and financial incentives will

no longer be flat but will be performance-based and proportional to the size of the investment and the number of jobs created. Temporary tax exemption will no longer be granted, and profits will be taxed at 15% for new enterprises/companies. To facilitate the creation of new businesses, the General Investment Authority is implementing a ‘one-stop shop’ mechanism where entrepreneurs can have their companies registered with all relevant governmental units, thereby reducing bureaucracy and red tape. These ‘one-stop shops’ are established in major cities (Sana’a, Aden, Hodeida, Mukalla) and will be used under the project for the establishment of the limited liability companies by the EOF and fishers’ organizations, and for providing services to these organizations.

35. Yemen’s Development Plan for Poverty Reduction (DPPR) 2006-2010 indicates that poverty

reduction depends on economic growth through private sector development, infrastructure, human resource development and social protection. In particular, economic growth led by the private

sector is seen as the major poverty reduction instrument. The three key DPPR objectives are:

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

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

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

36. Fisheries. Yemen’s fisheries sector policy as defined by MFW includes: (i) maximise fisheries

returns in a sustainable manner; (ii) develop the aquaculture sector to meet the rising demand for fish; (iii) ensure integrated development of fisheries communities; (iv) ensure stakeholder and community participation in fisheries and aquaculture by strengthening cooperatives; (v) promote private sector participation in all aspects of fisheries; (vi) increase quality, value addition, and fishers’ incomes through services and marketing efficiency; and, (vii) ensure basic food security.

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Major Institutional Stakeholders

37. Cooperatives. There are currently 129 fisheries cooperatives and an apex organisation, the

Fisheries Cooperative Union (FCU), located in Sana’a. The cooperative movement has a dynamic history in the coastal areas of the former socialist PDRY (including the Gulf of Aden and Socotra Archipelago), while in the Red Sea cooperatives are generally weak due to lack of a cooperative tradition, limited membership, and the influence wielded by wakeels who are at the centre of a system of interlocking factor markets and power relationships to keep fishers under their control.

38. Cooperatives are legally registered and fall under the responsibility and supervision of the

Ministry of Social Affairs. For technical matters and compliance with fisheries laws and regulations,

however, MFW serves as the supervising authority. A rapid assessment of fisheries cooperatives was carried out in 2007 to assess membership, basic organisation and services provided; it did not however include financial audit nor review of financial statements and liquidity positions. Despite its weaknesses, the assessment serves as an indicator of the quality of management of fisheries cooperatives, on the basis of which cooperatives have been ranked in three groups 5 :

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

developing cooperatives: these include 24 cooperatives mainly in the Gulf of Aden and Socotra Archipelago, and 2 along the Red Sea coast. They require technical assistance and advisory services to improve/expand the provision of services to their members and attain maturity. Financial statements are audited by local firms. Most of these cooperatives are just breaking even or suffering minor losses mainly due declining catch levels. They may be able to mobilise up to YER 2 million in cash from their own resources or from additional members’ contributions to cofinance productive investments.

underdeveloped cooperatives: these include 76 cooperatives mainly on the Red Sea coast. They have inadequate administrative structures, weak governance and management, poor financial statements and cash positions, absence of services for members, and lack of independence due to entrenched local political interference. They require substantial technical assistance and capacity building to improve; alternatively, they face closure. These cooperatives have very limited possibility to mobilise funds for investment purposes.

39. Fishers’ cooperatives and MFW have had a generally poor relationship. Cooperatives believe

that MFW does not protect the interests of small fishers by not enforcing fisheries laws and regulations, leading to unsustainable over-exploitation of the resource base. MFW believes that fishers avoid paying taxes and under-report catch accordingly, and has implied that cooperatives should be closed. However, recent confidence-building measures, such as joint MFW/FCU study tours, have started to lay the foundations for dispute resolution and improved relationships. It is reported that the Ministry of Social Affairs is facing difficulties in enforcing the Cooperative Law due to budgetary constraints, while the FCU lacks resources for auditing cooperative accounts, as mandated, and is thus unable to recommend the closure of financially non-compliant cooperatives.

40. In any case, cooperatives are the key driving force in the fisheries sector in the Gulf of Aden

and Socotra Archipelago; their history, large membership and often impressive levels of service provision (including healthcare, education, social welfare, water supply and electricity) mean that

closing them would be socially and economically unacceptable for many coastal communities.

41. Ministry of Fish Wealth. The MFW is responsible for management of Yemen’s fish resources.

Its current structure includes a Minister supported by eight Deputy Ministers. Professional roles are

unclear and the structure has changed in recent years. MFW maintains branches in each coastal governorate but few functions are decentralised, there is limited communication between branches and head office, and branches lack budgetary resources for operating costs. The Marine Science

5 Estimates of cooperatives’ contributions to productive investments are based on discussions with the FCU and selected cooperatives in Socotra, the Gulf of Aden and the Red Sea. These estimates will be reviewed during the due diligence exercise to be carried for all cooperatives at project inception. Comments on the financial statements based on the mission’s analysis.

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

42. The WB has undertaken a major institutional assessment of MFW, supported by the WB/EU-

financed Fisheries Resource Management and Conservation Project. Based on this assessment, a major restructuring of MFW, its branches, MSRRC and ARC has been designed and is currently under implementation. It involves significant reductions in staff numbers, reorganisation of MFW in Sana’a, and replacement of its branches with four Fisheries Authorities (FAs). MSRRC and ARC will be replaced by a new Fisheries Research Authority (FRA). The restructuring process is expected to be completed by end-2010. The MFW will subsequently operate with about 70 staff in Sana’a and retain its role as Government’s principal advisor on fisheries and fisheries management, with responsibility for monitoring the sector, planning strategic development, and formulating fisheries policy, legislation and regulations. MFW will also be responsible for international fisheries policy, export promotion, licensing of foreign vessels, and overseeing the FAs and FRA.

43. The responsibility for implementation of MFW fisheries policies will rest with the FAs, which

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

44. The Fisheries Research Authority will be responsible for research in support of fisheries

management and development, aquaculture development and marine environment management. This will include providing information on fish biology, population dynamics and stock assessment, scientific advice for fisheries management planning, and research support for private aquaculture development. The FRA will be governed by a Board consisting of representatives of MFW, FAs, and fisheries sector stakeholder groups. Its Aden head office will constitute the centre of a network of research stations at Hodeida, Mukalla and Aden operating with about 107 staff. The FRA will receive public budgetary resources but will also be required to raise funding from contract research for the FAs, private sector, external financiers and Government.

45. Environmental Protection Authority. The EPA constitutes part of the Ministry of Water and

Environment. It is responsible for enforcing the Environmental Protection Law and reviewing the EIA for projects which may have adverse impacts on the environment. The EPA can issue an unqualified or qualified opinion, or can reject a project for environmental reasons. It has a specific department dealing with the coastal and marine environment and will be represented in the management committees for integrated coastal area management.

C. The IFAD Country Programme

46. IFAD has supported nineteen development projects in Yemen valued at USD 610 million, of

which USD 201 million financed by IFAD and the rest covered by external financiers and domestic resources. Five projects with IFAD investment of USD 78 million are currently under execution,

focusing on area based participatory rural development, rainfed agriculture, and rural roads.

47. The December 2007 RB-COSOP indicates that IFAD’s response to rural poverty challenges

will focus on three strategic objectives (SO):

SO 1: empower rural communities; linked to DPPR 1.

SO 2: promote sustainable rural financial services & pro-poor SMEs; linked to DPPR 2.

SO 3: enhance rural household food security; linked to DPPR 3.

48. Government and IFAD are in continuous discussion regarding the country programme and

pipeline. There is consensus regarding the need to: (i) focus on the creation of sustainable pro- poor investments aligned with Government’s economic growth and poverty reduction policies and IFAD’s strategic objectives; (ii) introduce a private sector-led approach as the key instrument in

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REPUBLIC OF YEMEN: FISHERIES INVESTMENT PROJECT (FIP) PROJECT FINAL DESIGN REPORT MAIN REPORT

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

49. The IFAD country programme for the 2010-2012 resource allocation cycle, defined jointly

with Government, envisages three investments: (i) the Economic Opportunities Programme (EOP) focusing on pro-poor agricultural value chain development; approved by IFAD’s Executive Board in April 2010; (ii) the Fisheries Investment Project (FIP) focusing on sustainable fisheries resource management and value chain upgrading; (iii) the Rural Employment Programme (REP) focusing on the creation of sustainable rural employment opportunities through venture capital investments and other services for rural businesses with growth potential. All three investments will be managed by a new public-private partnership – the Economic Opportunities Fund (EOF) – which is being created under the EOP. External and domestic co-financing have been secured for the EOP, and discussions are underway for similar cofinancing arrangements for the FIP and REP.

III. POVERTY, SOCIAL CAPITAL AND TARGETING (KSF 2)

A. Rural Poverty, Information and Analysis

Table 3: Rural Poverty by Governorate, 2005

Governorate

Total

Rural

Rural

Rural

Rural

Population

Households

Population

Poor

Poor

(number)

(number)

(number)

(number)

(%)

Abyan

434,819

43,430

322,300

161,150

50%

Al Baidha

577,369

53,933

469,316

281,590

60%

Al Dhala

470,564

51,562

408,318

187,826

46%

Al Hodeida

2,157,552

236,549

1,396,495

502,738

36%

Al Jawf

443,797

51,008

385,735

204,440

53%

Al Maharah

88,594

8,125

51,347

3,081

6%

Al Mahweet

494,557

64,464

458,534

142,146

31%

Amran

877,786

87,359

728,310

517,100

71%

Dhamar

1,330,108

162,763

1,144,162

286,041

25%

Hadramaut

1,028,556

65,022

552,701

215,553

39%

Hajja

1,479,568

177,134

1,339,990

669,995

50%

Ibb

2,132,861

253,183

1,757,028

579,819

33%

Lahej

722,694

95,699

660,665

323,726

49%

Mareb

238,522

24,141

206,665

103,333

50%

Raymah

394,448

55,744

390,618

136,716

35%

Sa’adah

695,033

71,455

588,015

94,082

16%

Sana’a

919,215

113,948

893,796

250,263

28%

Shabwa

470,440

44,244

396,283

225,881

57%

Taiz

2,303,425

286,077

1,857,445

780,127

42%

Total

17,259,908

1,945,840

14,007,723

5,665,607

40%

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

50. Yemen is an overwhelmingly rural country with 71% of the population living in rural areas.

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

51. The over-exploitation of fisheries resources, the relatively low domestic and regional value of

fish, the inadequate access to lucrative international markets, and insufficient diversification of incomes has led to a stagnation of growth of fishers’ incomes. Despite the inability of the fisheries

sector to provide sufficient incomes, the limited alternative economic opportunities in the coastal areas means that most households remain dependent on fisheries activities (or on remittances). Insufficient incomes from fisheries activities increases the importance of casual urban labour for household income, and enhances the need for income diversification within fishers’ households. While male casual labour in urban areas is usually a first step in the rural-urban migration of the whole household, cultural factors as well as the costs of living and housing conditions in urban

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

52. On the basis of official MFW statistics, data on annual boat engine sales, average daily catch

estimates provided by fishers, and fish export statistics, it is estimated that the current number of active fishing boats is about 19,500. This implies there are about 19,500 boat captains and 63,867

crew members, for a total of 83,367 fishers in Yemen. With an estimated average of 8 people per fishers’ household, the fishers’ community contains over 667,000 people. In addition, it is estimated that about 9,000 people are working in fisheries related activities (processing, transport, storage). In total, fisheries and fisheries-related activities include at least 739,000 people. The incomes of fishers’ households in the Red Sea, Gulf of Aden and Socotra is illustrated in Table 4.

Table 4: Fishers’ Households – Indicative Incomes

Indicator

Indicative Household Income (USD/day)

Socotra

Gulf of Aden

Red Sea

Owner of one boat Owner of one share in boat Crew member (+ other activities) Fisheries-related labour

1.6

2.2

2.7

1.2

1.8

-

0.7

1.2

1.0

0.5

0.7

0.4

Source: mission estimates

53. The deteriorating poverty situation in coastal areas is confirmed by the mission’s field visits;

meetings with household members, supplemented by independent verification and triangulation, confirmed that standards of living are declining. Respondents also indicate that the development

efforts of Government and financiers have not reached the majority of the rural poor and have largely not addressed their needs for jobs, market opportunities, and technical information. The fishers on Socotra, in particular, have received very little assistance to date.

54. The characteristics of rural poverty within fishers’ communities are presented in Figure 5.

Figure 5: Poverty in Fishers’ Communities - Characteristics

Who are the poor fishers?

crew members who don’t own a share of a boat (casual labour); crew members and captains who own a share in a huri; households with high dependency ratios (adult unable to work or disabled); women-headed households;

young women and men living in extended households.

Where are the poor fishers?

found throughout all coastal governorates; concentrated in dispersed villages with inadequate access to services.

Why are they poor?

improper and unsustainable resource management; inadequate enforcement of regulations; insufficient alternatives within the fisheries sector or outside the fishing season;

inadequate access to knowledge and technology; poor/inconsistent fish quality limiting access to remunerative markets; inadequate access to financial services; weakness of local organisations, constraining collective action/negotiation; interlocking factor markets centred around wakeels especially in the Red Sea; other social and non-economic aspects.

What are their coping strategies?

out-migration (overseas; in-country); casual wage labour and seasonal or long-term migration to urban areas;

borrowing from relatives and local traders; charity (e.g. Social Welfare Fund), further fuelling dependency; decapitalization.

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REPUBLIC OF YEMEN: FISHERIES INVESTMENT PROJECT (FIP) PROJECT FINAL DESIGN REPORT MAIN REPORT

55. The typologies of fishers’ households are characterised in Figure 6.

Figure 6: Fishers’ Households in Yemen - Characteristics

Very poor households:

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

Poor households:

high dependency ratio; living in a 2-room cement house; own a share of a boat and engine in average or mediocre condition;

part-time casual labour; owns not more than 5 small ruminants and up to 5 date palms; able to finance education for children, but not medical expenses; indebted for several months of the year.

Marginally Poor Households:

high dependency ratio; own a 3-room cement house with electricity and water if locally supplied; own a boat and engine in good condition; household member out-migrated for low-paid casual labour or employment; own up to 10 small ruminants, one cow, 10 date palms or agricultural land;

able to finance educational and medical expenses; not dependent on charity.

Non-poor Households:

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

B. The Target Group, including Gender Issues

56. The project will strengthen the fisheries value chain through improved vertical integration,

handling and processing, and will develop the aquaculture sector, to generate sustainable incomes and employment for fishers and others living in coastal areas. It will support the development of MSEs (fisheries and non-fisheries related) in coastal areas through business advice, training and improved access to financial services, to generate economic opportunities and reduce dependency on the fisheries sector.

57. Target groups. In the coastal zones of selected governorates, the project’s direct target

groups will consist of:

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

Fishers’ organisations (mature and potentially mature cooperatives, as well as new fishers’ organisations) which are interested to invest in and manage modern integrated landing complexes, mother/transport ships and ice plants. They will be offered business advice, training, access to financial services, and forward contracts with processors/exporters.

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

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

58. Institutional beneficiaries. The MFW, FAs and FRA will be supported to improve sustainable

fisheries resource management. The MFW will be assisted to upgrade the legal framework for aquaculture. The MFW and the Yemen Coast Guard will be supported to update safety-at-sea rules.

59. Gender issues. Yemeni women have heavy workloads and are largely deprived of the

benefits of modern society. In addition to child care and house maintenance, they are responsible for cooking and collecting water and fuel-wood. Despite their critical role in the economic life of households and society, women are faced with serious constraints that hinder improvement to their living conditions, such as limited control over fertility, inadequate access to assets, exclusion from marketing, restrictions on leaving the village, and limited decision-making roles at household and public levels. Rural women generally lack access to financing for micro-enterprises.

60. Within the fisheries value chain, women’s participation is essentially limited to working in fish

processing plants (where they constitute 45% of employees), small scale drying/salting and net mending, and quality control laboratories. Other than a few villages in Lahej where women have their own boats and are directly engaged in fishing, fishing at sea is a strictly male activity. Given that male fishers spend increasing amounts of time at sea, greater burdens are being placed on female household members with respect to child care, household tasks and shore-based income earning activities such as animal husbandry and agriculture.

61. Women continue to marry at a young age and have a high fertility rate. Although the total

fertility rate has dropped, it still remains very high at 6.2. Life expectancy improved by three years between 1994 and 2004. Women’s illiteracy levels, however, remain exceptionally high by international standards (69% in 2006), and as only 33% of rural school age girls are enrolled in primary school and the drop-out rate is high, adult female illiteracy is not about to be eradicated.

62. While 8% of households are officially women-headed, a further 10% are de-facto women-

headed as the male head is away for over six months per year. The incidence of poverty is not significantly different between women-headed households and other households, according to WB and FAO data; however, the household budget survey shows that resources are better allocated in women-headed households, which spend more on education and food than on tobacco and qat.

63. Fisheries-related activities are dominated by men, and in most places it is considered socially

unacceptable or ‘shameful’ for women to be involved. The idea to support women to increase their involvement in fisheries related activities faces fundamental social and cultural difficulties. Women who are involved in fisheries are members of the lowest social category within the Yemeni social structure; the involvement of other women is a result of extreme poverty. Most fishers’ households are of marginally less low social status; the suggestion that women from such households should assume fisheries related work is perceived as an attempt to further lower their social status, and is unwelcome. While deteriorating incomes for small fishers would encourage the women in their households to take up economic activities, this would be acceptable if done mainly in non-fisheries sectors. The project therefore needs to offer coastal women alternative activities in addition to fish processing, while supporting the poorest in increasing their incomes from fisheries related work.

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C. Targeting Strategy and Gender Mainstreaming

64. Targeting strategy. While the project is national in scope, it will use a variety of mechanisms

to ensure that the poorest fishers are given priority access to project investments. These include

the full range of mechanisms indicated in IFAD’s pro-poor targeting policy:

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

enabling measures ensuring that all project implementers and service providers are fully aware of the project’s aim to support the poor and are committed to this objective;

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

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

65. On this basis, the project will target very poor, poor, and marginally poor households for

upgrading fish quality and investing in micro-businesses and aquaculture. It will also target well- performing fishers’ organisations and their communities through investments and services to improve resource management, develop infrastructure and upgrade the fisheries value chain, with benefits accruing to all households including the poorest ones. The selection process for landing sites will include poverty-related criteria. The beneficiaries for micro-businesses will be selected through a participatory approach to identify vulnerable households in fishing communities that are capable of engaging in such businesses. Priority will be given to poor women and the youth.

66. Gender mainstreaming. Gender issues will have to be addressed with considerable cultural

sensitivity. As it will be difficult to encourage women to enter into fisheries related activities due to

social status issues outlined above, the project will invest in non-fisheries activities (such as micro- businesses) for most targeted women, and will concentrate the fisheries related activities to the social category of women which is already involved and which is mostly poor.

67. Where appropriate, the project will support women to increase their incomes through value-

addition in the fisheries sector, with a specific focus on processing, and through micro-businesses. The project will implement positive discrimination or affirmative action measures to increase

women’s participation in the planning and execution of activities, and to play an influencing role towards a better gender balance in its areas of operation. Several measures will be introduced: (i) ensuring the maximum participation of women in micro-business training; (ii) supporting women’s activities in processing; (iii) supporting women’s access to financial services, individually or in groups, to develop micro-businesses; (iv) encouraging the inclusion of women in the staff and management of fishers’ organizations; and, (v) encouraging women’s participation in shore-based fisheries activities such as quality control, fisheries management and research. Educated young women will be offered training for book-keeping and administration in fishers’ organizations.

68. Project staff and long-term consultants will participate in gender mainstreaming training in

the project’s early stages. Mobilisation teams will include female and male agents trained to

appreciate and address gender aspects throughout their work.

69. Landing sites selection. The project will finance, through a combination of loans, grants and

venture capital investments, the construction or rehabilitation of integrated landing complexes consisting of public fisheries infrastructure, social infrastructure, and productive infrastructure. It is

estimated that 3 new integrated landing complexes will be constructed and 4 existing landing sites will be rehabilitated; another 5 existing sites will be upgraded with public and social infrastructure.

70. To avoid selecting landing sites without clear prospects of ownership and management, the

selection of a site for project investment will be driven by the existence of a positively-evaluated fishers’ cooperative within the site’s catchment area. Since some landing sites might be located in remote locations, it is possible that no private investor would be interested to own and operate such facilities. Site selection will also be based on the ‘growth pole strategy’ being applied under IFAD’s fisheries investment in Mozambique and elsewhere, adapted to the Yemeni context. This strategy defines a growth pole as a development node that has accessibility to resources and markets and scope for developing services and infrastructure. Landing site locations chosen will

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REPUBLIC OF YEMEN: FISHERIES INVESTMENT PROJECT (FIP) PROJECT FINAL DESIGN REPORT MAIN REPORT

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

71. The site selection process for the development of integrated landing complexes under the

project is outlined in Figure 7.

Figure 7: Landing Site Selection Process

Step 1

Long-list of cooperatives

Methodology

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

Responsibility

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

Outcome

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

Step 2

Short-list of locations

Methodology

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

Selection criteria

Within the catchment area of a long-listed cooperative:

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

Responsibility

EOF mobilization teams.

Outcome

Short-list of 12 eligible geographical locations.

Step 3

Final list of locations

Methodology

(a)

Short-list of locations;

(b)

Pre-feasibility study;

(c)

For locations passing (b), technical feasibility study;

(d)

For locations passing (c), environmental study;

(e)

For locations passing (d), financial viability study;

Responsibility

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

Outcome

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

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

72. Once the integrated landing complexes are selected, the EOF will issue a tender to procure

an entity that will own the productive assets and manage/operate the complex. The tender will be open to the local fishers’ cooperative(s), as well as any qualified private third-party investor which may be interested including exporters/processors, private investors and private companies.

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D. Geographic Coverage of the Project

73. The project is national in scope and covers all nine maritime governorates along the Yemeni

coast, namely Hajjah, Hodeida, Taiz, Lahej, Aden, Abyan, Shabwah, Hadramaut and Al Mahara. It will initially cover fishers’ communities where positively-evaluated fishers’ cooperatives exist, and will then expand to other communities where new fishers’ organizations have been created.

74. Landing sites to be selected would share several characteristics: fisheries-related activities

constitute the main sources of income; most sites are in remote areas and may require investment in access roads; very poor and poor households constitute the majority of households; access to social and economic services is inadequate; and, alternative sources of income outside the fishing season are limited. It should be noted that, due to environmental and economic considerations, the project will not finance integrated landing complexes in Socotra; however, Socotra will be considered for public and social infrastructure. For micro-business and aquaculture activities, all fishers’ communities along the coast would be covered, with aquaculture focusing on the Red Sea coast where conditions are technically more favourable. Aquaculture will be guided by environmental assessment and zoning plans to be prepared with project support.

75. Fisheries resource management activities will be executed at MFW headquarters in Sana’a,

regional FAs in coastal areas, FRA headquarters in Aden and regional branches in Hodeida and Mukalla, and with fishers’ organisations themselves.

IV. PROJECT DESCRIPTION (KSF 3)

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

76. The operational experiences of Government and financiers including IFAD in Yemen have

generated lessons which should be considered in project design and execution. The key lessons of

relevance for FIP which have been taken into consideration are outlined below:

Institutional arrangements. While projects have suffered from institutional constraints and weak implementation capacity, major improvements are noted in recent years. However, further performance improvement requires operating outside the purely public sphere. The FIP will be implemented through the EOF which constitutes a public-private partnership for management and which will operate under principles of good governance, transparency, equity, business ethics, efficiency, sustainability, and corporate social responsibility.

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

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

Fisheries infrastructure. Previous projects have invested in fisheries infrastructure without proper consideration of ownership and management, often resulting in poor management and maintenance leading to disputes among the MFW, projects and fishers’ cooperatives. Ownership arrangements must be finalised prior to commencement of works. Under FIP, public infrastructure will be owned by the public sector and managed by the private sector, while productive infrastructure will be privately owned and managed.

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

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REPUBLIC OF YEMEN: FISHERIES INVESTMENT PROJECT (FIP) PROJECT FINAL DESIGN REPORT MAIN REPORT

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

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

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

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

B. Opportunities for Rural Development and Poverty Reduction

77. The FIP’s rationale is anchored in IFAD’s mandate of poverty reduction and Government’s

policy to reduce economic and social disparities in coastal areas. The project has significant strategic poverty reduction and economic growth potential as it offers opportunities for export expansion, community empowerment and job creation in coastal areas, particularly for women. The project will also support micro-entrepreneurs to develop micro-businesses to meet market demand and support income diversification for fishers’ households.

78. The choice to invest in the fisheries sector is based on several elements: (i) the sector is of

strategic importance, accounting for 3% of GDP, generating substantial foreign exchange earnings, and providing direct employment to 83,367 fishers and at least 9,000 workers in fisheries related businesses; (ii) there is a high level of knowledge and skills amongst fishers, and technologies for upgrading the value chain are available; (iii) fish products have robust and growing demand on domestic and export markets; the global value of fish exports increased by 9% annually from 2000 to 2008, reaching USD 15.9 billion in 2008; (iv) upgrading the fisheries value chain and ensuring compliance with international quality and safety standards can generate significant increases in the export prices of Yemeni fish in regional and international markets; (v) it is possible to upgrade the value chain and increase returns to the sector while at the same time introducing measures to reverse over-exploitation of valuable species (tuna, shrimp, cuttlefish); (vi) the sector is critically important for under-developed coastal communities, the majority of whose inhabitants live below the poverty line; and, (vii) there is ample scope for vertical integration across the value chain.

79. There is increasing interest among small fishers and cooperatives in Yemen to adopt a

commercial approach to fisheries, and among fishers’ households to invest in aquaculture and rural micro-businesses; larger fish processors and exporters are also interested in the opportunities offered by aquaculture. These trends have been confirmed in meetings with fishers’ cooperatives and with the Fishers’ Cooperative Union. In this context, multiple areas need to be addressed: (i) access to investment and working capital and business services to facilitate business start up and growth; (ii) improved fishing and fish handling practices; (iii) improved access to technical services; (iv) development of contracts between fishers and exporters/ processors; (v) improved transparency in marketing systems; (vi) upgrading certification for compliance with international standards; (vii) improved legal framework for aquaculture; (viii) access to training and services.

80. The strengths, weaknesses, opportunities and threats facing Yemen’s fisheries sector are

outlined in Figure 8. The project has been designed to build on these strengths and opportunities

and address these weaknesses and threats.

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REPUBLIC OF YEMEN: FISHERIES INVESTMENT PROJECT (FIP) PROJECT FINAL DESIGN REPORT MAIN REPORT

Figure 8: Fisheries Sector – Indicative SWOT Analysis

 

strategic sector contributing to food security and exports

an Exclusive Economic Zone larger than the entire country

one of the highest level of marine productivity in the world

high level of fishing skills and traditional fishing knowledge

Strengths

some strong fishers’ cooperatives

desire amongst fishers to improve fisheries management

robust and growing domestic and global demand for fish

unexploited potential for aquaculture

improving business environment

 

inaccurate data and limited knowledge of stock status

poor regulation and enforcement, and lack of fisheries management

slow and complex process for MFW restructuring

weak Fishers’ Cooperatives Union

Weaknesses

low fish quality due to poor handling and storage

lack of compliance with international standards

seasonality of fishing and insufficient income diversification

high levels of poverty in fishers’ communities

limited access to financial services

 

improve sustainable fisheries management

strengthen fishers’ cooperatives or community-based organisations

reduce poverty and increase skills and incomes of poor fisher households

improve quality of fish and add value on exports

Opportunities

 

enhance compliance with international standards

develop untapped aquaculture potential

support micro-businesses in coastal communities

increase financial services outreach

 

uncontrolled expansion of fishing effort

uncertainty regarding stock status

Threats

potential sudden decline in stocks

insecurity on land and at sea

powerful local elites with monopolistic behaviour

81. Climate change. Yemen’s National Adaptation Programme of Action (NAPA) was endorsed by

Government in April 2009. It reports on the vulnerability of the country’s social and biophysical environment from climate variability and climate change, and lists the major impacts of climate change which may be summarised as follows: increased water scarcity and reduced water quality; increased drought frequency, increased temperatures, and changes in precipitation patterns; deterioration of habitats and biodiversity; reduced agricultural productivity; increased sea levels; increased climatic variability; and, impacts on coastal zones.

82. With respect to impacts on coastal zones, the NAPA includes three objectives which will be

executed under the project: (i) sustainable fisheries resource management through strengthened research, planning, regulation and monitoring; (ii) increased incomes from fisheries development through better fish handling, quality and marketing; and, (iii) establishment of rules and norms taking into consideration the requirements of fish habitats in planning costal development. The

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REPUBLIC OF YEMEN: FISHERIES INVESTMENT PROJECT (FIP) PROJECT FINAL DESIGN REPORT MAIN REPORT

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

83. Given the uncertainty surrounding the precise local or regional impacts of climate change on

fisheries, the main recognised means of adaptation is improving management and ensuring fish stocks and marine and coastal ecosystems are not under pressure from overexploitation, pollution or other environmental degradation. Improvements to integrated coastal zone management which take into account climate change adaptation are the focus of WB financing currently under design. The project will introduce aquaculture as a substitute activity for capture fishing and an alternative for non-fishers. Specific benefits in relation to climate change are outlined in the benefits section below and discussed in greater detail in the Environmental and Social Impact Assessment.

C. Project Goal and Objectives

84. The project’s goal is to improve the economic status of small fisher households. Its objective

is to create sustainable economic opportunities for poor women and men in fishing communities.

85. The project’s outputs are to: improve knowledge regarding the status of fisheries resources;

develop and implement plans for regeneration and sustainable management of fisheries resources; improve the licensing system and expand it to all value chain actors; empower fisheries inspectors to enforce conservation, management and quality regulations; develop safety-at-sea regulations

and improve awareness of safety aspects; stimulate the growth and technological improvement of the fisheries value chain and rural businesses; link fishers’ organisations with processors/exporters through contractual arrangements; promote compliance with international food quality and safety standards; develop modern economic infrastructure in support of the fisheries value chain; create

a legal framework and services for aquaculture; strengthen fishers’ cooperatives and assist fishers to form new organizations where cooperatives are very weak; and, expand the rural outreach of financial institutions and enhance access to sustainable rural financial services.

86. The project’s outcomes will be the enhanced sustainability of fisheries resource exploitation,

increased incomes in coastal communities, and increased access to economic opportunities across

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

D. Alignment with Country Rural Development Policies and IFAD Strategies

Figure 9: Government, IFAD, and EOF Strategic Consistency

National Strategy (NS) DPPR 2006-2010

IFAD COSOP Strategic Objective (SO)

Economic Opportunities Fund (EOF)

NS 1: enhance partnership with

 

the EOF constitutes a sustainable public-private partnership serving rural areas; it will buy equity shares in pro-poor financial institution(s) and provide venture capital financing to strengthened fishers' organisations and private sector

private sector, civil society, donors to reduce poverty

SO1: empower rural communities

NS2(a): promote SMEs for sustainable incomes; in food processing and export-oriented agriculture & fisheries

SO2: promote sustainable rural financial services and pro-poor SMEs

the EOF will support all value chain actors and promote financial services for export growth

NS2(b): promote micro finance services for the poor, especially for women in rural areas

the EOF will support microfinance services that focus on lending to women; and will support new financial mechanisms and products

NS3(a): increase efficiencies for agricultureand fisheries sector

SO3: improve rural household food security

the EOF will enhance efficiencies in the fisheries value chain

NS3(b): enhance household food security

the EOF will stimulate increased sustainable household incomes

NS3(c): ensure optimal and sustain- able use of fishery resources

the EOF will support government to enforce regulations and implement management plans for fisheries sector

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REPUBLIC OF YEMEN: FISHERIES INVESTMENT PROJECT (FIP) PROJECT FINAL DESIGN REPORT MAIN REPORT

87. The project concept has been developed jointly by IFAD and Government (MFW, MOPIC). Its

EOF management arrangement is closely aligned with the Government’s Development Plan for Poverty Reduction and IFAD’s COSOP Strategic Objectives for Yemen (Figure 10). It is consistent with IFAD’s Strategic Framework 2007-2010 and its Principles of Engagement which focus on the creation of economic opportunities for the rural poor, and with IFAD’s Innovation Strategy, Guiding Framework for Rural Finance in NENA, Gender Strategy, and Environmental and Social Assessment Procedures. It is complementary to WB, EU, UNDP, and JICA fisheries operations as well as public sector fisheries and coastal management programmes.

E. Project Components

88. The project consists of two investment components: (i) sustainable resource management;

and, (ii) value chain development. Consistent with IFAD’s country programme approach under the

2010-2012 PBAS cycle, the project will be managed by the Economic Opportunities Fund.

Component 1: Sustainable Resource Management

89. This component aims to enable MFW to develop, execute and enforce fisheries management

measures in order to ensure the sustainability of the fisheries resource base. It will create the required legal, institutional and human resource capabilities and will support the development of

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

90. Five important elements of an effective fisheries management system will be supported: (i)

the improvement and expansion of the licensing system to cover all fisheries value chain actors (fishers, transporters, traders, processors, exporters); (ii) the training and equipping of MFW and YCG inspectors to enforce compliance with fisheries regulations; (iii) improved safety-at-sea based on updated regulations regarding vessel construction and compulsory safety equipment; (iv) a programme of fisheries research, collecting oceanographic and biological data to accurately assess fisheries stocks and provide scientific management advice; and, (v) fisheries management plans for the most vulnerable stocks based on updated information on stock status and potential yields, defined in consultation with stakeholders such as fishers’ organisations and the private sector. All activities will be planned and implemented in consultation with fisheries sector stakeholders.

Sub-component 1.1: Regulatory Compliance and Risk Management

91. The future of the fisheries sector is seriously threatened by weak management, uncontrolled

increases in fishing efforts, and limited enforcement of regulations, all leading to over-exploitation.

This sub-component will support the improvement and expansion of the licensing system and will train and equip MFW fisheries inspectors and YCG officers to enforce regulations, and improve at- sea and on-shore monitoring, control and surveillance. Licensing and enforcement capacity are pre-conditions for successful fisheries management. Safety-at-sea will be improved by introducing regulations on safety equipment and fishing vessel construction, and access to adapted insurance products will further reduce fishers’ vulnerability to risk.

Activity 1.1.1: Fisheries Licensing System

92. The licensing system will be improved and expanded to cover the entire fisheries value chain

in order to: control increases in fishing effort; facilitate enforcement of regulations and traceability

of fisheries resources; improve accuracy of data collection; and, create a valuable asset for fishers enabling them to obtain vessel insurance. In addition, a study will be undertaken to assess the feasibility of using the licensing system to replace the existing ineffective system of taxation and to generate revenue for Government. Provisions for a basic fisheries licensing system exist in Yemeni fisheries law, but they do not cover all value chain actors, do not facilitate fisheries management objectives, and are neither fully implemented nor enforced. Many boats and fishers operate without licenses, and there is no limit on the number of licenses that are issued. This makes it impossible to control the growth of the fishing fleet, hinders the enforcement of regulations and accurate data collection, and prevents fishers from obtaining boat insurance as individual vessels cannot be identified. A major source of Government revenue from the fisheries sector is a 3% levy imposed on revenue from fish at first point of sale. This acts as an incentive to under-report catch or land at unofficial landing sites; it also creates mistrust between fishers and the public sector.

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REPUBLIC OF YEMEN: FISHERIES INVESTMENT PROJECT (FIP) PROJECT FINAL DESIGN REPORT MAIN REPORT

93. International TA will be provided to review the existing licensing system, propose changes

and operational modalities, and study the feasibility of introducing an annual license fee to replace

the current 3% levy and fund fisheries management. While the enhanced licensing system should cover all value chain actors and help to control increases in fishing effort, it will be carefully designed, with extensive stakeholder consultation, to avoid potential adverse social consequences. National TA will be provided in PY1 and PY2 to support the creation of a licensing database linked to the national Fisheries Information System and the implementation of the new licensing system. An awareness campaign will also be supported. Registry departments in FAs and YCG branches will be provided with necessary equipment (computers, digital cameras, laminating machines).

Activity 1.1.2: Regulations and Inspection Capacity

94. This activity aims to strengthen the fisheries regulatory framework, establish the planned

monitoring, control and surveillance units within each new FA, and provide training for fisheries inspectors and YCG officers. The purpose is to improve the implementability and enforceability of fisheries regulations, including those related to food safety and hygiene, and to create a deterrent against illegal and destructive fishing practices. It is expected to improve the effectiveness of fisheries management measures and the quality of fisheries products, ensuring the sustainability of the sector and enhancing access to high value markets.

95. Fisheries regulations are currently weakly enforced and inspectors are poorly trained, under-

equipped and under-funded. This undermines MFW’s capacity to manage fisheries and renders most existing fisheries management measures ineffective. The regulations themselves are difficult to enforce due to contradictions and the absence of administrative fines. The mandate of YCG includes the protection of fisheries resources, but YCG officers lack appropriate training.

96. The project will provide international TA to review existing fisheries regulations and draft

amendments to remove contradictions. This will include the review and amendment of regulations on fisheries inspectors, to remove uncertainty about their appointment, status and responsibilities. The TA will also draft the regulations for a system of administrative fines which fisheries inspectors may administer. National TA will be provided to develop training curricula, materials and exams, to train the inspectors and to support MCS managers in the new FAs. Training will focus on fisheries regulations and fish quality/hygiene requirements. The successful completion of the training course and associated exam will be a statutory requirement to become a fisheries inspector. Four training sessions will be supported in each FA, two in PY1 and two in PY3. The project will also build the capacity of YCG to enforce fisheries regulations through training and curriculum development for its training centre in Aden. An inspection programme for fisheries inspectors and coast guards will be developed covering all licensed value chain actors. The FAs will be provided with 2 vehicles each and a total of 40 motorcycles, as well as portable inspection and communications equipment for inspectors. The achievements of the inspection programme will be reviewed by the TA in PY3, and training materials will be updated before the second round of training courses is executed. Support will be provided for an awareness campaign for fishers regarding fisheries regulations and penalties. The project will also finance the translation into English of existing fisheries regulations, in order to facilitate the activities of the FIP and other projects.

Activity 1.1.3: Safety-at-sea and Insurance

97. The project aims to reduce the incidence of death and injury at sea amongst fishers, and to

reduce the number of boats lost each year, by promoting the utilisation of safety equipment and enhancing fishers’ awareness of safety issues. It will also promote insurance products for fishers in order to reduce their vulnerability to such events. Fishers place themselves at great risk when they go to sea; due to declining fisheries resources, they are now forced to travel further and for longer periods in worse weather conditions, all of which increase the level of risk. Few artisanal fishing boats are equipped with safety equipment, and many do not carry communications equipment. It is believed that up to 180 fishers may be lost at sea annually. As insurance companies do not insure artisanal boats, when a boat sinks a household may be left without assets or compensation, though some cooperatives do provide members with support in such cases.

98. The project will provide international TA to: (i) update safety-at-sea rules and fishing vessel

construction regulations; (ii) develop extension materials on safety issues for fishers and boat builders, and training materials for inspectors and licensing officers; and, (iii) develop adequate insurance products. As appropriate, the issuance of the vessel license will be subject to compliance with safety-at-sea requirements and boat insurance. The project will also support the Coast Guard

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REPUBLIC OF YEMEN: FISHERIES INVESTMENT PROJECT (FIP) PROJECT FINAL DESIGN REPORT MAIN REPORT

to train safety-at-sea officers responsible for raising awareness on safety issues among fishers through training activities, and to administer a cost-sharing system for safety equipment on small boats. Vehicles and equipment will be provided to support the work of safety-at-sea officers.

99. The project will commission viability studies for insurance products such as boat, life, and

credit insurance, and will facilitate linkages with an insurance company to introduce such products. It is envisaged that the insurance products will be designed, tested and offered to fishers starting

in PY1, with the development costs borne by the participating insurance company. The project will also work with selected cooperatives to strengthen their existing welfare and insurance services.

Sub-component 1.2: Fisheries Research and Management

100. There has been no thorough stock assessment in Yemen since the 1970s-1980s, and existing

data on fishing effort and catch is inaccurate. As a result, while stakeholders report declining catches and the virtual disappearance of some species, the precise biological status of stocks is unknown and there is insufficient knowledge on which to base fisheries management measures. Fisheries management plans were drafted for some areas and species in the past, but were not implemented due to insufficient awareness, capacity and funding. The restructuring of MFW, the improvement of the licensing system and the capacity building of fisheries inspectors will increase MFW’s ability to enforce regulations. This justifies the proposed support for the re-establishment of fisheries research activities and the development and implementation of new and updated fisheries management plans. To ensure proper coordination of support to FRA, the latter will be contracted

(on performance basis) to implement fisheries research and management activities. The EOF and MFW will provide close support to FRA in this respect.

Activity 1.2.1: Fisheries Research Authority

101. The project aims to build FRA’s capacity to fulfil its mandate of providing research services

and technical, scientific and strategic advice for fisheries management. It will upgrade FRA’s equipment and facilities, train research staff, and strengthen management capacity for planning and coordination. There is currently no active fisheries research programme apart from occasional project-supported activities in which FRA has varied levels of involvement and which provide limited knowledge of fish stocks and little impact on staff skill levels. Project support for regulatory compliance and risk management will create a conducive environment for investment in fish stock

assessment and fisheries management planning.

102. The project will provide short-term international TA to FRA in PY1-PY4 to develop its

research capabilities and programme. This will be coordinated with the EU’s planned support to FRA, and will support specific research activities as well as extensive staff training (in quantitative

analysis, bio-economic modelling, etc). The network of research stations in Aden, Hodeidah and Mukalla will be provided with office, laboratory and research equipment. The FRA will be supported to obtain contracts to conduct research for the public and private sectors, to establish linkages with MFW’s management information system (currently being developed), and to regularly publish research results. Research facilities on Socotra will be enhanced, in cooperation with EPA, through the provision of research equipment. An agreement will be established between FRA and EPA for knowledge sharing and joint research, and for EPA participation in training events. The project will seek agreement with GOY/MFW for a fixed share of licensing revenue (or revenue from the 3% levy) to be retained by FAs and allocated for contracting research. The involvement of fisheries stakeholders in developing management plans and collecting research data will be encouraged through the planned fisheries liaison groups in the Regional Fisheries Management Units of FAs.

Activity 1.2.2: Fisheries Management Plans

103. The project will support the development and implementation of fisheries management plans

(FMPs) for a number of species/geographical regions of commercial and/or ecological importance which are currently threatened by fishing activities. The FMPs should be both strategic documents for planning and practical guides for achieving particular objectives (e.g. preventing overfishing, protecting fishers’ livelihoods) and targets (e.g. target biomass levels, target fishing mortality rates) by specifying the measures required to achieve them (e.g. restrictions on fishing effort, total allowable catch limits, temporal and spatial closures, minimum specimen sizes and restrictions on gear). The FMPs should include guidelines for monitoring implementation and procedures for regular updating based on emerging evidence regarding the impact of the management measures and on other stock assessment and research activities. As several key commercial stocks have suffered drastic declines in recorded catches in recent years, reducing fishers’ incomes and forcing

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many processors and exporters to close, it is essential that FMPs are rapidly implemented in order to reverse these trends and protect other stocks from collapse.

104. Over the last decade, various FMPs have been developed but not implemented due to lack of

funding, lack of MFW interest, absence of proper legal instruments, and insufficient enforcement capacity. However, with some updating and annual adjustment of objectives and measures based on ongoing research, these FMPs could be implemented rapidly and their impact monitored and evaluated. Several FMPs are tentatively identified as priorities: (i) Socotra archipelago; (ii) lobster in Al-Mahara/Hadramaut; (iii) shrimp in Hodeida; (iv) cuttlefish; (v) sea cucumber; (vi) sharks. Decisions on priority FMPs will be made during implementation based on discussions with the stakeholders involved in developing the plans themselves. The EU’s Fisheries Development Project is supporting efforts to improve tuna management; other species will be targeted under the FIP.

105. International TA will be provided in PY1-PY3 for the development of at least six FMPs, which

would entail the coordination of research, policy and stakeholder consultations, and extensive on- the-job training for FRA and EPA staff. Funding will also be provided for focused research activities in support of these FMPs, and use will be made of the training and equipment provided to FRA. The technical advisors will work with appointed counterparts from the Regional Fisheries Management Units of FAs and will assist in updating/developing the FMPs. The advisors will also have nominated counterparts in FRA branches to coordinate research activities undertaken in support of each FMP. Fisheries stakeholder liaison groups to be formed by the Regional Fisheries Management Units of each FA will provide a forum for engaging stakeholders in developing FMPs. When FMP execution regulations are developed and approved, they will be enforced by fisheries inspectors as part of their regular duties. Each advisor, in coordination with counterparts and FA extension officers, will develop an extension programme and awareness campaign relating to each FMP.

Activity 1.2.3: Stock Assessment

106. While access to detailed knowledge on fish stocks is a prerequisite for the development and

implementation of effective fisheries management, the existing information is incomplete and out- dated, and fisheries sector management is currently lacking a scientific basis. It is likely that this is leading to severe damage of fisheries resources. The EU-financed Fisheries Development Project is financing a review of available data on the status of fisheries resources which will provide: (i) a baseline for what is known on the status of fish stocks in Yemen; (ii) a basis for the preparation of stock assessment reports for major species, which can guide the drafting of fisheries management plans; and, (iii) a platform upon which further sea-going surveys and stock assessment work can be planned. Subsequently, the FIP will support a major stock assessment programme (co-financed by the EU). This will generate updated data (spawning areas, biomass, recruitment levels, etc.) on the commercially important species in the Red Sea and Gulf of Aden, will enable the determination of the full extent of overfishing, will inform sustainable resource management, and will allow long- term strategic development of the fisheries sector.

107. The stock assessment is likely to start during the last stages of the baseline study (in PY3),

at which time licensing and inspection activities should be finalised and six fisheries management

plans developed and implemented. This will demonstrate MFW’s commitment to implementing improved fisheries management. The stock assessment will be conducted over a two year period, covering the entire Yemeni EEZ. The precise format of the assessment will be based on the results of the baseline study financed by the EU, which is expected to be completed in 2013.

Component 2: Value Chain Development

108. This component aims to sustainably increase the incomes of poor fishers, micro and small

entrepreneurs, and women and men workers in fisheries communities within the project area. It provides a systematic approach to the sustainable development of economic opportunities for the target groups, which is expected to generate increased incomes and employment. The approach is based on improving the integrity of the fisheries cold chain and quality of raw material produced, and on promoting profitable linkages among fishers and other value chain actors. A comprehensive package of appropriate technology and capacity building will be provided to increase access to high value export markets and to target profitable opportunities within domestic markets. Fisheries infrastructure and basic services will be developed or upgraded in selected coastal communities, fishers’ organisations will be strengthened, and access to microfinance services will be enhanced. Micro and small enterprises will be supported with training and credit, and aquaculture will be

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developed. Activities will be closely integrated with those of partners, and it is expected that the EU and IDB will cofinance different activities under the component.

Sub-component 2.1: Value Chain Modernisation

109. This sub-component will invest in fisheries value chain upgrading, aquaculture development,

export and domestic market expansion, and micro and small enterprise development.

Activity 2.1.1: Fisheries Value Chain Upgrading

110. A key constraint for fish processors and exporters to access high value markets for fisheries

products, and thus increase the prices they can pay fishers, is obtaining sufficient fish of adequate quality. The project will support fishers to improve the quality of landed fish, facilitate integration

with processors/exporters producing for premium markets, and foster the creation of contractual linkages between fishers’ organisations and processors/exporters. The fisheries value chain will be upgraded by providing fishers with training, enhancing access to improved technologies, improving fish handling practices, ensuring the integrity of the cold chain, and promoting compliance with hygiene and quality standards. In this respect the project will support the activities outlined below.

111. Processors/exporters. They will be selected based on a public announcement for expressions

of interest and an evaluation mechanism based on criteria such as proximity to upgraded landing sites, operational transparency, willingness to pay increased prices for higher quality fish, levels of poverty in their purchasing areas, and willingness to enter into contractual arrangements with fishers’ organisations. At least one processor/exporter employing one supply chain manager will be selected for each upgraded landing site.

112. Supply chain managers. The project will introduce supply chain managers who will constitute

the interface between fishers’ organizations and processors/exporters, provide technical advisory and supervision services to fishers’ organizations to ensure compliance with technical parameters, and train selected trainers within fishers’ organizations, enabling them to provide simple advise to other members. The selected processors/exporters will recruit one supply chain manager each, with the cost shared by the project on a declining basis (the project covering 70%, 30%, and 0%

of costs over three years). The recruitment of supply chain managers will be undertaken in PY1- PY2, and performance will be evaluated annually using focus groups including processors/ exporters, EOF staff, and members of fishers’ organizations. Continued project cost-sharing will be subject to positive evaluation of performance.

113. Improved fish handling. Fishers will be trained to improve fish handling from catch to landing

(particularly gutting, icing and properly storing catch on board) and from boat to landing site/ auction hall for weighing and sale. They will also receive training in proper boat cleaning and the

avoidance of fish contamination by bacteria and germs. The training sessions will be executed by local specialists contracted by the project.

114. Provision of credit. The project will assist fishers from Socotra Archipelago and the Gulf of

Aden 6 to access collateral-free micro-loans from licensed microfinance institution(s) to upgrade fishing boats with insulated cold storage for ice and fish 7 . These micro-loans will finance the purchase of insulated ice boxes costing USD 200 each. The EU’s Fisheries Development Project will design ice boxes that minimise impact on boat handling and fuel consumption, which the FIP will promote subject to acceptance by fishers. It is estimated that an ice box will increase the value of landed fish by an average of 20%.

115. Equity financing for mother/transport boats. The project will promote mother/transport boats

(typically 20m Abari boats) for fishers who currently travel long distances in small vessels (huris) to find fish or are based far from major markets. Each mother boat will serve a group of huris, towing them to fishing grounds, providing large and well-insulated storage facilities and supplying fishers with ice and services, allowing them to remain at sea for longer, reducing transport costs and improving the quality of landed catch. Fishers will benefit from higher prices for catch due to improved fish quality, and from reduced fuel consumption; they will also be able to travel further to catch species such as tuna whose migratory paths are shifting, possibly due to climate change. Transport boats will be used to transport fish to markets; they will serve cooperatives in Socotra

6 Fishers on the Red Sea coast already use ice, although in less than optimum quantities.

7 Cold storage facilities will be required by law under new boat construction and licensing regulations.

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which need to transport fish to mainland markets. Mother/transport boats will contain facilities and processes in compliance with food safety and hygiene standards. TA will be provided to advise on international food standards and HACCP requirements and develop standard operating procedures particularly for pricing and payment mechanisms for catches transhipped from fishing boats.

116. The project is expected to finance 28 mother ships/transport boats, of which tentatively 16

in Socotra (primarily transport boats), 6 in the Gulf of Aden and 6 on the Red Sea coast (primarily mother boats). It will also finance about 8 stand-alone ice plants on Socotra to provide ice for the transport boats, as the project will not finance integrated landing complexes in Socotra.

117. The financing of each mother/transport boat and ice plant will follow a typical venture capital

modality. This modality is analogous to the musharaka (joint venture) Islamic banking product and is well known in Yemen and within fishers’ communities. The key elements are outlined below:

Ownership. A limited liability company (LLC) will be created, the shareholders of which will be the EOF and the relevant fishers’ organisation(s), with the mother/transport boat and ice plant as the only productive assets of the LLC.

Management. The management of the LLC, the mother/transport boat and/or the ice plant will be vested with the relevant fishers’ organization(s). Training will be provided for the operation and maintenance of the boat and ice plant, and TA will be offered to selected members of the fishers’ organization(s) in business management.

Financing. The LLC share capital will amount to 70% of the proposed investment. The contribution of fishers’ organization(s) in the LLC share capital will range from 5% to 50% of the amount, depending on its financial and cash positions; the balance of LLC equity will be held by the EOF. The EOF will also provide to the LLC a grant amounting to 30% of the proposed investment and 100% of LLC registration costs.

Share Buy-Back Mechanism. A LLC share buy-back mechanism will operate as follows: the fishers’ organisation(s) will periodically receive dividends which it may use to gradually buy back the EOF’s shares in the LLC under a pre-established put option, eventually becoming the sole owner of the LLC and its assets. In this process, the EOF’s shares will be valued at nominal price. Dividends will be distributed according to the equity held by each partner, while the EOF grant may be integrated into the share capital of the fishers’ organization(s).

118. Investments in integrated landing complexes. Grant-financed public and social infrastructure

and equity-financed productive infrastructure will be developed at landing sites selected through the process outlined earlier. The 7 top-ranked landing sites will be targeted with grant and equity financing for investments in integrated landing complexes, while another 5 landing sites will be

upgraded with public and social infrastructure. Landing complexes will not be developed, however, in Socotra for environmental and economic reasons; it is a UNESCO World Heritage Site, and most fish caught is transhipped at sea for transport to auction markets on the mainland.

119. Each integrated landing complex will consist of: (i) public infrastructure on public property

including a jetty, a breakwater (where necessary to provide protection from waves), a sand barrier (where necessary to prevent siltation), a landing area, an access road from the landing complex to the nearest road, and basic services (water, electricity, dispensary, etc.); and, (ii) productive infrastructure within the public landing site area consisting of a fish handling facility which would include an enclosed air-conditioned auction hall, cold storage units, an ice plant, fish processing facilities and a small workshop. Facilities will be compliant with food safety and hygiene standards

and HACCP requirements (for eventual certification). These complexes will enable fishers to obtain higher prices (up to 30%) for catch due to improved fish quality and compliance with international standards. Integrated landing complexes will also provide safe places to moor vessels which are currently moored in exposed locations or dragged up on beaches, and will simplify the transfer of fish, ice and other goods on and off boats. The complexes will serve as focal points and catalysts for MSEs providing services to fishers or processing and trading fish products.

120. Each complex will be designed (and its construction supervised) by engineering consultants,

while civil works will be executed by contractors. The EOF will be responsible for preparing the pre-

feasibility study, drafting tender documents and supervising contractors. Each investment will be subject to a thorough Environmental Impact Assessment.

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121. The development of integrated landing complexes will also follow a typical venture capital

modality analogous to the musharaka (joint venture) Islamic banking product which is well known

in Yemen and within fishers’ communities. The key elements are outlined below:

Ownership. The public fisheries-related infrastructure will be owned by MFW, the social infrastructure by relevant ministries, and the productive infrastructure by a private limited liability company (LLC) the shares of which will be held by the EOF, the relevant fishers’ organisation(s) and possibly third party investors (such as processors/exporters).