ECORYS IF ETHIOPIA - OECD.org - OECD · 2021. 4. 25. · WTO 12 2.3.4 ITC 12 2.3.5 UNCTAD 12 2.3.6 UNDP 12 2.3.7 European Commission 12 2.4 Existing Trade-Related Programmes of main

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policy and operations evaluation department

EVALUATION OF THE

INTEGRATED FRAMEWORK FOR

TRADE RELATED TECHNICAL ASSISTANCE

TO THE LEAST DEVELOPED COUNTRIES

COUNTRY REPORTS OF ETHIOPIA AND YEMEN

RICHARD LIEBRECHTS AND PAUL WIJMENGA

(ECORYS/NEI ROTTERDAM)

IOB Working Document | June 2004

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PREFACE

A major objective of Netherlands’ foreign policy is the integration of developingcountries in the world trading system. Trade-Related Technical Assistance (TRTA) isconsidered one of the key instruments to contribute to this integration, next to removalof trade barriers to developing countries. TRTA is a collective term for different typesof technical assistance aimed at strengthening the trade-related knowledge base,trade-related negotiation capacity, national trade policy and/or capacity to trade ofdeveloping countries.

Whereas many donors and agencies have strongly committed themselves atministerial conferences of the World Trade Organisation (WTO) to the provision ofTRTA, little is known about the results of such assistance. Though the percentage ofOfficial Development Assistance spent on TRTA has been declared an indicator ofthe Millennium Development Objective of ‘further developing an open trading andfinancial system that is rule-based, predictable and non-discriminatory’, very fewquestion actual effects.

To assess the efficiency, effectiveness, and relevance of various types of TRTA assupported by the Netherlands Ministry of Foreign Affairs, IOB started an evaluation ofthis instrument in June 2003. A major element of this evaluation is the assessment ofresults of seven selected programmes: four multilateral programmes and threeinternational NGOs or intergovernmental organisations. Each of them is considered tobe exemplary of the strategic principle of the Netherlands of providing supportthrough multilateral channels and international organisations.

This document contains the results of the evaluation of the Integrated Framework (IF)for Trade-Related Technical Assistance to the Least Developed Countries in Ethiopia(Part A) and Yemen (Part B). In three separate IOB-working documents the resultshave been published of the evaluations of the Joint Integrated Technical AssistanceProgramme (JITAP) in Burkina Faso and Tanzania, two major TRTA-programmes ofthe United Nations Conference on Trade and Development (UNCTAD), and threeGeneva-based international NGOs or intergovernmental organisations (ACWL, AITICand QUNO). IOB publishes such documents to make (interim and data-rich) productsof IOB evaluations accessible to stakeholders, specialists and a wider publicinterested in results of development aid (see www.euforic.org/iob for electronicversions).

A team of consultants of ECORYS-NEI has conducted the measurements of resultsof the seven selected programmes, following the general terms of reference for theIOB-evaluation and specifying these in a design for the measurement of results of theselected programmes. The team consisted of Mr. Paul Wijmenga (lead consultant),Mr. Piet Lanser, Mr. Richard Liebrechts and Mrs. Nora Plaisier. The field study of theIF in Yemen was done by Mr. Paul Wijmenga from October 29th till November 7th of2003. After completion of his field work, he de-briefed Mr. Richard Liebrechts whosubsequently conducted the field study of IF in Ethiopia from November 17th till 26th of2003. On behalf of IOB the team was supervised by Dr. Otto Hospes, who asevaluator of IOB also takes responsibility for the overall evaluation of TRTA.

Rob D. van den BergDirector Policy and Operations Evaluation Department (IOB)June 2004

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ACKNOWLEDGEMENTS

Several rounds of comments – including a workshop – were organised to discuss thedraft evaluation reports of the ECORYS-NEI consultants. These rounds involvedNetherlands embassies, executive directors of organisations targeted in the IOB-evaluation, two IOB-readers and six external readers.

Special and sincere thanks go to Mr. Jan-Peter Mout (former first secretary of theNetherlands Permanent Mission of Geneva) and Mr. Omer van Renterghem(Directorate for Sustainable Economic Development, Netherlands Ministry of ForeignAffairs) for providing detailed comments on an earlier draft of the two country-basedevaluation studies of the IF. Mr. Robert Malin did a great job as language editor.Hélène de Jong and Ingeborg Ponne, supporting staff of IOB, skilfully upgraded theformat of the working document to match IOB standards. The authors acceptresponsibility for any error or lack of clarity that may be left.

Finally, the authors – together with IOB – hope that the series of working documentson TRTA will contribute to the international debate on the role and results of theselected providers of TRTA and can be helpful for the methodological design of newevaluations meant to assess results of TRTA.

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ACRONYMS

ADLI Agricultural Development Led IndustrializationAGOA Africa Growth Opportunity ActCAS Country Assistance StrategyCAD Canadian DollarCB Capacity BuildingCBE Commercial Bank of EthiopiaCBI Centre for the Promotion of Imports from Developing

CountriesCET Common External TariffCOMESA Common Market of Eastern and Southern AfricaDAG Donor Assistance GroupDDE Directorate Sustainable Economic DevelopmentDFID Department For International DevelopmentDTIS Diagnostic Trade Integration Study€ EuroEBA Everything but ArmsEC European CommunityEEPA Ethiopian Export Promotion AgencyEPA Economic Partnership AgreementETB Ethiopian BirrEU European UnionFFYP First Five-Year PlanFMO Netherlands Development Finance CompanyFTE Full Time EquivalentsFY Fiscal YearGAFTA Greater Arab Free Trade AreaGCC Gulf Cooperation council

Gross Domestic ProductionIDAIF

International Development AssociationIntegrated Framework

IFSC IF Steering CommitteeIFTC IF Technical CommitteeIMF International Monetary FundIOB Policy and Operations Evaluation DepartmentITC International Trade CentreMOA Ministry of AgricultureMoIT Ministry of Industry and TradeMOR Ministry of RevenuesMOTI Ministry of Trade and IndustryNAO/MOFED National Authorising Officer/Ministry of Finance and

Economic DevelopmentNBE National Bank of EthiopiaNCPN-WTO Ministry of Industry and TradeNGO Non Governmental OrganisationPESP National Committee for Preparation and Negotiation with

WTOPRGF Poverty Reduction and Growth FacilityPRSP Poverty Reduction Strategy PaperPSD Private Sector Development

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PUM Poverty Reduction Strategy PaperRCA Revealed Comparative AdvantageRNMCP Netherlands Management Cooperation ProgrammeRNE Royal Netherlands EmbassySDPRP Sustainable Development and Poverty Reduction

ProgrammeSFD Social Fund for DevelopmentSFYP Second Five-Year PlanSNNPR Southern Nations, Nationalities and Peoples RegionSPS Sanitary Phyto-Sanitary MeasuresSWF Social Welfare FundTA Technical AssistanceTBT Technical Barriers to TradeToR Terms of ReferenceTRTA Trade-related Technical AssistanceUNCTAD United Nations Conference on Trade and DevelopmentUNDP United Nations Development ProgrammeUSAID United States Agency for International DevelopmentUSD United States DollarWTO World Trade Organisation

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CONTENTS

Preface iiiAcknowledgements vAcronyms vii

PART A: IF IN ETHIOPIA

1 INTRODUCTION 11.1 Background of the IF Programme 11.2 Trade Policy regime of Ethiopia 21.3 Trade Performance of Ethiopia 3

2 DEVELOPMENT PERFORMANCE AND THE ROLE OF TRADE 72.1 Poverty Situation 72.2 Development Plans 72.2.1 Sustainable Development and Poverty Reduction Programme 72.2.2 Industrial Policy Strategy Paper 92.3 Existing Trade-Related Programmes of IF Agencies 102.3.1 World Bank 102.3.2 IMF 112.3.3. WTO 122.3.4 ITC 122.3.5 UNCTAD 122.3.6 UNDP 122.3.7 European Commission 122.4 Existing Trade-Related Programmes of main bilateral donors 132.4.1 Netherlands 132.4.2 Germany 132.4.3 Italy 142.4.4 Canada 142.4.5 United States 15

3 IF SITUATION 173.1 Preparatory phase of DTIS 173.2 Diagnostic phase of DTIS 183.3 Follow-up phase of DTIS 19

4 MEASURING IF PERFORMANCE IN ETHIOPIA 214.1 Input 214.2 Output 224.3 Outcome 284.4 Impact 29

5 ASSESSING IF PERFORMANCE IN ETHIOPIA 335.1 Efficiency 335.2 Effectiveness 345.3 Relevance 365.4 Specific Issues 375.4.1 Country ownership 375.4.2 Differential effects 38

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5.4.3 Coordination 395.4.4 Coherence 405.4.5 Follow-up of earlier IF evaluation 405.4.6 Future Performance 405.5 Conclusion and policy issues 41

PART B: IF IN YEMEN

1 INTRODUCTION 451.1 Background of the IF Programme 451.2 Trade Policy regime of Yemen 461.3 Trade Performance of Yemen 47

2 DEVELOPMENT PERFORMANCE AND THE ROLE OF TRADE 532.1 Poverty situation 532.2 Development Plans 532.2.1 2nd Five Year Socio-economic Development Plan 532.2.2 Yemen Strategic Vision 2025 542.3 Existing Trade-Related Programmes of IF Agencies 562.3.1 World Bank 562.3.2 IMF 572.3.3 WTO 582.3.4 ITC 582.3.5 UNCTAD 582.3.6 UNDP 582.4 Existing Trade-Related Programmes of main bilateral donors 592.4.1 European Commission 592.4.2 Netherlands 592.4.3 Germany 602.4.4 United Kingdom 60

3 IF SITUATION 613.1 Preparatory phase of DTIS 613.2 Diagnostic phase of DTIS 613.3 Follow-up phase of DTIS 62

4 MEASURING IF PERFORMANCE IN YEMEN 634.1 Input 634.2 Output 644.3 Outcome 664.4 Impact 66

5 ASSESSING IF PERFORMANCE IN YEMEN 695.1 Efficiency 695.2 Effectiveness 705.3 Relevance 715.4 Specific Issues 725.4.1 Country ownership 725.4.2 Differential effects 725.4.3 Coordination 735.4.4 Coherence 745.4.5 Follow-up of earlier IF evaluation 74

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5.4.6 Future Performance 755.5 Conclusion and policy issues 75

REFERENCES 77PERSONS INTERVIEWED 79

ANNEXES1 Design of the Evaluation Research for the Integrated Framework for

Trade-Related Technical Assistance (IF)81

2 Rating Methodology 873 Results of IF Performance during the DTIS phase in Yemen vis-à-

vis the three IF pilot countries93

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PART AIF IN ETHIOPIA

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1 INTRODUCTION

1.1 Background of the IF Programme

During the first Ministerial Conference in Singapore in 1996 WTO Ministers adopted aPlan of Action for the Least-Developed Countries, which envisaged closer co-operation between the WTO and other multilateral agencies assisting least-developedcountries in the area of trade. There were six agencies involved: the IMF, ITC,UNCTAD, UNDP, the World Bank and the WTO. These agencies agreed that anIntegrated Framework for the provision of trade-related technical assistance to thesecountries had to be drawn up.

The Integrated Framework sought to increase the benefits that least-developedcountries derive from the available trade-related technical assistance with a view toassisting them to enhance their trade opportunities, to respond to market demands,and to integrate into the multilateral trading system.

The Framework aimed to ensure that the trade-related technical assistance activitieswere demand-driven by the least-developed countries and to enhance ownership bythese countries over the trade-related technical assistance being provided.

The trade-related technical assistance activities were based on assessment of needsdrawn up by the least-developed countries themselves. Upon completion of a needsassessment and a response of staff of the six agencies, a least-developed countryorganised a country-specific roundtable meeting to discuss a proposed agenda oftrade-related technical assistance projects to meet their needs.

A review of the integrated framework in 2000 found that many of the above aims werenot realised due to a number of principal issues, amongst which:

� Different perceptions regarding the objectives of the IF between least-developedcountries and donors (LDCs expected additional funding; donors expected betterco-ordinated trade-related TA);

� The IF process had no link to the overall development assistance architecture;� The IF was not sufficiently demand driven in the minds of LDC officials;� Co-ordination was found to be more complex than anticipated between the LDCs

and donors, amongst donors, and between the six agencies themselves.

On 12 February 2001, the WTO Sub-Committee on Least-Developed Countriesadopted a proposal for an Integrated Framework Pilot Scheme to improve thefunctioning of the Framework.

The most important element of this IF reform included selecting three pilot countriesthat had demonstrated a clear choice and commitment to mainstream trade as part oftheir country development strategies. This would ensure that the trade-relatedtechnical assistance that would follow would be fully supportive of the developmentobjectives of the country. For this purpose trade integration studies would be madewhereby the countries would be fully assisted and supported by the IF agencies withfield offices in the concerned LDCs.

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Although it was recognised that the integration studies had to be country-specific,broad terms of reference were formulated consisting of the following components:

I. A review and analysis of the country’s economic and export performance.Analysis of trends in export and import to GDP ratios, speed and extent ofexport diversification (across products and markets), intra-industry trade trends,sources of foreign exchange earnings by sector including services. Analysis ofthese indicators will be forward as well as backward looking.

II. A description and assessment of the macroeconomic environment and thecountry’s investment climate.

III. Analysis of the international policy environment and specific constraints thatexports from each country face in international markets.

IV. Analysis of a small number of key labour-intensive sectors where the privatesector perceives a potential for output and export expansion and the poor standto benefit either in terms of employment and/or lower prices.

V. Formulation of a pro-poor trade integration strategy with recommendations thattake into account the likely impact of proposed actions on the level and structureof poverty to ensure that the strategy has the desired positive impact on thepoor. Analysis of winners and losers from the policy changes and identificationof possible detrimental impact on the poor of specific policies.

A national workshop would discuss the diagnostic trade integration study andprioritise the technical assistance activities identified by this study. The tradeintegration study would also lead to mainstreaming trade into the country’sdevelopment strategies, including its Poverty Reduction Strategy Paper. The trade-related technical assistance programme following from the national workshop wouldbe presented to the donor community.

More background information can be found in a brief profile of the IntegratedFramework taken up in section A.1.1 of Annex 1. This Annex, in addition, presentsthe design of the evaluation research that has been applied in this country report.

1.2 Trade Policy regime of Ethiopia

In 1992/1993, the government of Ethiopia formulated a liberalisation reform packagewith a clear emphasis on the complementarity between trade liberalisation andmacroeconomic stability. The main pillars of the reform programme were liberalisationof foreign trade and exchange regimes, liberalisation of domestic input and outputprices, public sector reform to guarantee autonomy of state-owned enterprises andthe privatisation of other enterprises, financial market reform, and opening up thedomestic market to foreign investors.

The trade reform programme was geared to dismantling quantitative restrictions andreducing the level and dispersion of tariff rates. This programme was accompanied byan exchange rate reform and prudent monetary and fiscal policy that have basicallyled to stable prices and steady exchange rates. According to the Diagnostic TradeIntegration Study DTIS (Volume II, Annex 1), the unweighted tariff rate declined from28.9 percent in 1995 to 17.5 percent in 2002.

Ethiopia’s most recent liberalisation of its trade regime was a streamlining of its importduty scheme from twenty-two to six bands, ranging from 0 to 35 percent. A year ago,the highest tariff rate was still at a level of 235 percent.

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Many elements of the liberalisation reform package still have to materialise however.Although analysis of the development in the real exchange rate of the Ethiopian Birr(ETB) shows an improvement in the country’s competitiveness since the reformswere initiated in the early 1990s, it is reported the private sector has not really beenable to benefit through increased trade flows. Trade is still impeded by administrativebottlenecks, high transaction costs, prevailing (technical) barriers to internationalmarkets, and strong governmental interference.

Export promotion

Measures taken in the field of export promotion have included abolishing themandatory approval for export contracts by the National Bank of Ethiopia, theintroduction of a foreign exchange retention scheme, and the establishment of abonded warehouse scheme and import duty rebate scheme. Exports are further beingpromoted through the Ethiopian Export Promotion Agency, the establishment of anexport credit guarantee scheme at the National Bank of Ethiopia and throughcommercial attaches in diplomatic missions. According to the DTIS, a recent surveyby the Ethiopian Economic Association has concluded that exporters have so farhardly benefited from these initiatives due to various financial and institutionalconstraints.

Accession to WTO

Ethiopia applied for WTO membership in February 2003 and currently undertakes acomprehensive review of trade policies, under the auspices of the Minister of Tradeand Industry (MOTI).

1.3 Trade Performance of Ethiopia1

Trends in total trade

Total trade of Ethiopia has shown a steady decline since 1998. Both imports andexports have fallen and total trade in Ethiopia represented 17 percent of total GDP in2001. The value of trade per capita amounted to USD 15 in 2001, as compared to forexample USD 252 for Yemen.

Table 1.1 Trends in total trade of Ethiopia, 1997-20011997 1998 1999 2000 2001

Merchandise Exports (mln. USD) 547.5 576.3 397.4 414.3 308.5Merchandise Imports (mln. USD) 1,096.8 1,282.7 1,145.7 948.1 704.6Total Trade (mln. USD) 1,644.3 1,859.0 1,543.1 1,362.4 1,013.1Trade Balance (mln. USD) -549.3 -706.4 -748.3 -533.8 -396.1Total trade/GDP (%) 26.6 29.5 25,0 22.6 16.7Total trade per capita (USD) 27.1 29.8 24.0 20.8 15.1Source: PC-TAS (2003) for trade data, UN (2003) for data on GDP and population

1 Data presented on trade flows are intended to provide an overall picture of trends in exports and

imports. Due to the limited availability of data on PC-TAS, these data should be interpreted withcaution.

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Merchandise Exports

The trend in merchandise exports showed a capricious course. In 1999 exportsdropped significantly, probably caused by the conflict between Ethiopia and Eritrea.Declining world prices of Ethiopian export commodities also had a negative impact onthe exported value. In 2001, exports represented a mere five percent of GDP. TheDTIS reports the average for the 1993-2001 period was seven percent. Incomparison, the export to GDP ratio is close to 25 percent in Africa, 31 percent inSub-Saharan Africa (excluding South-Africa), 23 percent in East Africa and 16percent for COMESA members.

Table 1.2 Merchandise exports of Ethiopia, 1997-20011997 1998 1999 2000 2001

Merchandise Exports (mln. USD) 547.5 576.3 397.4 414.3 308.5Annual export growth rate (%) 5.3 -31.0 4.3 -25.5Exports/GDP (%) 8.9 9.1 6.4 6.9 5.1Exports per capita (USD) 9.0 9.2 6.2 6.3 4.6

Source: PC-TAS, GDP and population: UN

Composition of merchandise exports

Ethiopia’s exports are dominated by agricultural produce. More than 90 percent oftotal exports are agricultural products such as coffee, hides and skins, and fruit andvegetables. The main types of agricultural exports are basically primary, non-processed products. Coffee has traditionally been the major export crop, accountingfor an average 60-70 percent of total exports. Since the recent decline of theinternational price of coffee, this share has fallen to 47 percent in 2001. Otherimportant agricultural export products are raw hides and skins (sheep and goat skinsand leather), and mustard and oil seeds.

The manufacturing sector has a fairly small share in total exports. Importantmanufacturing industry sub sectors are leather and textiles. The export data belowalso present exports of machinery, reportedly parts of turbo jets and turbo-propellers.

Ethiopia has considerable informal trade flows with neighbouring countries, of whichthe trade in live animals is a good example: While official trade in life animals wasonly 1.1 USD million in 2000, there is a thriving informal export, estimated to amountto USD 70 million.

Table 1.3 Composition of Ethiopia’s merchandise exports, 1997-20011997 1999 2001

Mln. USD % Mln. USD % Mln. USD %Coffee 358.3 65.4 252.7 63.6 145.8 47.2Raw hides, skins, leather 70.7 12.9 30.7 7.7 59.7 19.3Seeds 34.7 6.3 43.3 10.9 26.9 8.7Machinery 21.4 3.9 20.4 5.1 12.4 4.0Edible vegetables 1.6 0.3 1.4 0.3 11.8 3.8Ores 12.2 2.2 13.1 3.3 11.1 3.6Others 48.5 8.9 36.0 9.1 41.0 13.3Total 547.5 100.0 397.4 100.0 308.5 100.0

Source: PC-TAS

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Destination of merchandise exports

Ethiopia’s export bundle is concentrated, not only in terms of products but also interms of markets. According to the DTIS, more than half of Ethiopia’s exports went tothe European Union in 1995. Four destinations (EU, Japan, Djibouti and SaudiArabia) represented more than 80 percent of Ethiopia’s exports. By the year 2000, theEuropean Union only absorbed almost 40 percent of total exports. The top fourimporters of Ethiopia’s exports were still the same (EU, Japan, Djibouti and SaudiArabia), but their share fell to 65 percent. Within the EU, Germany and Italy are themain destinations of Ethiopian exports.

Table 1.4 Destination of Ethiopia’s merchandise exports, 1997-20011997 1999 2001

Mln. USD % Mln. USD % Mln. USD %Italy 55.5 10.1 34.3 8.6 46,4 14.9Japan 67.3 12.2 64.4 16.1 45,3 14.6Germany 128.6 23.4 82.5 20.6 36,0 11.6United States 72.3 13.2 32.0 8.0 32,2 10.4Saudi Arabia n.a. n.a. 34.6 8.6 26,0 8.4United Kingdom 27.3 5.0 16.2 4.0 22,0 7.1France 30.6 5.6 21.9 5.5 19,9 6.4Belgium 13.6 2.5 15.7 3.9 19,6 6.3Mexico 0.5 0.1 0.8 0.2 13,5 4.4Spain 6.6 1.2 1.9 0.5 4,1 1.3Canada 5.3 1.0 15.4 3.9 3,9 1.3Egypt 17.6 3.2 13.7 3.4 3,8 1.2Switz. /Liechtenstein 3.6 0.7 3.7 0.9 3,7 1.2Netherlands 9.6 1.7 6.8 1.7 3,5 1.1Greece 6.6 1.2 0.9 0.2 3.0 1.0Other 104.5 19.0 55.4 13.3 27.7 8.9Total 549.6 100.0 400.3 100.0 310.5 100.0Source: PC-TASNote: PC-TAS does not report data for Djibouti, Yemen, and Somalia.

Merchandise imports

Over the last few years, Ethiopian imports have shown a declining trend. Themerchandise imports amounted to USD 1.3 billion in 1998, but were halved by 2001.

Table 1.5 Merchandise imports of Ethiopia, 1997-2001Merchandise imports (mln. USD) 1997 1998 1999 2000 2001Merchandise imports (mln. USD) 1,096.8 1,282.7 1,145.7 948.1 704.6Annual import growth rate (%) 16.9 -10.7 -17.2 -25.7Imports/GDP (%) 17.7 20.3 18.6 15.8 11.6Imports per capita (USD) 18.1 20.5 17.8 14.5 10.5

Source: PC-TAS for trade data; UN for GDP and population

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Composition of imports

Ethiopian imports mainly consist of mineral fuels, machinery, vehicles, and electricaland electronical equipment.

Sources of imports

The major sources of Ethiopian imports are the EU, China, United States and Japan.Similar to the pattern of exports, Germany and Italy are Ethiopia’s main sourcecountries of imports within the EU. Imports of mineral fuels have been supplied byYemen, which took over this role from Saudi Arabia in 1999.

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2 DEVELOPMENT PERFORMANCE AND THE ROLE OF TRADE

2.1 Poverty situation

According to the analysis presented in the Sustainable Development and PovertyReduction Programme (SDPRP), 44 percent of the population in Ethiopia in 1999-2000 had a total consumption expenditure below the poverty line. Compared to 1995-1996, when almost 46 percent of the people lived below the poverty line, thissuggests a slight improvement.

About 37 percent of the urban population is classified as poor, as compared to 45percent of the rural population. Apart from the difference in urban and rural poverty,there is a regional disparity in poverty incidences. By 2000, the highest rural povertyincidence was recorded in Afar, followed by Tigray and Benishangul-Gumuz. Thehighest urban poverty was registered in the region of Tigray, followed by SouthernNations, Nationalities, and Peoples Region (SNNPR), Gambella and Addis Ababa.Urban poverty was relatively low in Somalia (province?), Afar and Benishangul-Gumuz.

Recent micro level studies conducted by Save the Children-UK and the World Bankhave shown that poverty is deep and wide; half of the population remains persistentlypoor and another 14 percent are likely to fall into poverty in the aftermath of a futureexternal shock. The most serious risks of such shocks relate to the weather, malaria,HIV/AIDS and idiosyncratic health shocks.

Coffee has traditionally been an essential source of income, employment, foreignexchange, economic growth, and tax revenue. The annual progress report of theSDPRP (APR 2003) reports that 25 percent of the Ethiopian population depends onthe production, distribution or export of coffee.

The persistently low world coffee price continues to have a detrimental effect on theincome level of households and especially affects the livelihood of smallholder coffeefarmers. Small farmers account for 95 percent of total coffee production, and many ofthem have been forced to sell assets, failed to pay tax or debts, and reducedhousehold food consumption. Business in towns in coffee growing regions has alsobeen seriously hit, resulting in loss of urban and seasonal employment.

The low coffee price also affected Ethiopia on a national level. APR (2003) calculatedEthiopia has lost an estimated USD 814 million in export revenue over the last fiveyears, and USD 16 million on withdrawn coffee taxes.

2.2 Development plans

2.2.1 Sustainable Development and Poverty Reduction Programme

The Sustainable Development and Poverty Reduction Programme (SDPRP) of thegovernment of Ethiopia was endorsed in September 2002. The fundamentalobjectives set out in the SDPRP are to build a free-market economic system, to end

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dependency on food aid and to allow poor people to benefit from economic growth.The strategy defined poverty reduction as the core objective of the government.Economic growth is seen as the principal, but not the only means of achieving thisobjective. Ethiopia’s poverty reduction strategy focuses on promoting agriculture-led,rural-based growth, while improving the environment for exports and private sectorgrowth.

In the SDPRP, the PSD strategy in particular focuses on (i) improving the investmentclimate, (ii) completing liberalisation of agricultural input and output markets, (iii)developing incentive structures to enhance export diversification, (iv) expandinginfrastructure by allowing domestic and foreign sector participation, and (v) improvingthe financial sector. In a separate chapter, the SDPRP describes in short the majorchallenges in each of these categories and indicates measures to be taken in closecooperation with private sector institutions. The details of these measures are notdescribed in the SDPRP.

In the same chapter, the SDPRP also recognises the importance of exports for pro-poor economic growth. Improving the country’s performance in agro-processed andmanufactured exports is said to reduce the incidence of poverty amongst the (urban)population. Profitable opportunities are expected to be derived from private sectoractivities in horticulture, organic coffee, commercial crops and the processing of highquality skins/leather and textiles. Apart from these activities, the tourism sector ismentioned as an important potential source of foreign exchange earnings as well.

The PRSP was developed via a broad-based participatory process with allstakeholders. Free and open consultations moderated by representatives of civilsociety were held in 117 out of 550 woredas (districts) in 2001. Altogether anapproximate 6,000 people participated, among which a high number of women.Independent and donor observers of the consultations concluded these were openand free of government or ruling party interference. An independent NGO task forcecontributed to (the monitoring of) the consultative process and the Chamber ofCommerce established sector working groups to feed into the consultations.

After the consultations at district level, about 2,000 people participated in regionalconsultations. These consultations aimed to discuss key findings of the districtmeetings and to gather information that represented the whole region.

Subsequently, 450 people participated in a federal PRSP consultation by the end ofMarch 2002, including high-ranking government officials, regional bureaux, donors,NGOs, professional associations and the business community.

The SDPRP of the government of Ethiopia has been implemented throughout the firstyear based around four pillars:

I. Agricultural Development Led Industrialisation (ADLI);II. Reform of the Justice System and the Civil Service;III. Decentralisation and empowerment; andIV. Capacity building in public and private sectors.

In a period of one year, the SDPRP has developed into the single main document ofEthiopia on poverty reduction and it has been used as the basis for Ethiopia’srelations with donors. The Donor Assistance Group (DAG) is committed to aligningmultilateral and bilateral development assistance around the SDPRP.

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A number of recent measures taken in the area of private sector development thatwere included in APR (2003) are:

� Approval of Urban Land Lease Proclamation, allowing the exchange of landleases and including the development of markets for primary and secondaryleasehold rights and the use of these for collateral;

� The undertaking of a study to establish industrial zones in 15 different cities andtowns, nine of which have already been made ready for potential investors;

� The establishment of the Public-Private Consultative Forum, meeting in quarterlysessions to (i) identify sector policies and strategies that warrant further scrutiny,(ii) address implementation bottlenecks related to newly issued proclamations,regulations, and directives, and (iii) review existing proclamations that areconsidered to impede private sector development;

� The upcoming restructuring of the Ethiopian Chamber of Commerce to supportthe transition to a federal form of government and to a market-oriented economy;

� The recent publication of the Trade Practice Proclamation, which will evolve intothe Competition Law of Ethiopia.

Specifically in the field of export promotion, the government has taken the followingmeasures:

� The establishment of the Export Duty Incentive Scheme Proclamation, bondedmanufacturing warehouse arrangement, voucher based duty exemption scheme;

� The provision of ETB 1.5 billion to the development bank of Ethiopia at aconcessional interest rate;

� The exemption of VAT payable on the purchase of local input to be processedand shipped to export markets;

� The Addis Ababa industrial estate was transferred to the Ministry of Industry andTrade to provide working premises for exporters. So far, nine buildings have beenmade ready for potential investors. It is unclear how many are currently in use.

APR (2003) also reports on the fact that Ethiopia has recently completed a DTIS, as afirst step in the IF, but restricts this to a description of the main objectives of the DTISin general. Nevertheless, the government does indicate in APR (2003) that it iscommitted to working together with the private sector and the donors in implementingthe recommendations of the DTIS.

2.2.2 Industrial Policy Strategy Paper

The Industrial Policy Strategy Paper (2003) is the first industrial policy paper to bedeveloped by the government. The core objective of the policy is export-led growthbased on the international competitiveness of the country’s economy. Industriesoperating on the world market should not depend on tariff barriers, but compete interms of quality, price and timeliness of supply. When there is a strong exportindustry, the capability to compete internationally will spill over in one way or anotherto other sectors and enhance economy-wide development.

The seven principles of this strategy are:

I. Private capitalism is the engine of industrial development.

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II. Agricultural development determines the pace and direction of industrialdevelopment.

III. Since agricultural development is the motor of the Ethiopian economy and theADLI strategy stipulates a development led by the world market, the industrialpolicy strategy focuses on exporting value added agricultural products.

IV. Focus on labour-intensive industries. As the economy is agriculture-led, thefocus should be on agro-processing industries that utilise labour extensively.

V. The strengths of foreign companies in terms of networks, advanced technologyand knowledge, and modern management are recognised. To this end a stable,peaceful and conducive environment should be created, in which security ofassets is guaranteed and an efficient justice system is maintained throughoutthe economy. This will also be to the benefit of the domestic investor. However,in the long run a foreign company “sends more capital abroad than it initiallybrings in”, and as such should only be allowed to have a minority stake whenworking together with a domestic partner.

VI. Strong state control. There is a leading role to play by the government inindustrial development. Since there are wide-ranging market failures in thecountry, e.g. corruption, lack of justice, accountability and transparency, but alsoin infrastructure and education, the government should take the lead in selectingthe market distortions to be removed.

VII. Mobilising the whole society. National consensus and a joint and co-ordinatedeffort are highly critical to ensure development in which everyone reaps thebenefits.

2.3 Existing Trade-Related Programmes of IF Agencies

2.3.1 World Bank

The World Bank has a resident office in Addis Ababa that was responsible for theinitial phase of the DTIS. During the preparatory field mission of the DTIS teamleader, the World Bank facilitated the meetings and contracted all local consultants.

Currently, the World Bank does not provide any trade-related TA in Ethiopia. TheBank in principal intends to (co-) finance a number of TA activities from the Plan ofAction that still has to be finalised in the DTIS. These activities will be financed out ofthe budget available under the SDPRP pillar of private sector development.

According to the joint IDA-IMF staff assessment of the SDPRP, the consultationswere unprecedented in terms of their participation intensity and openness. Althoughthe consultations all concentrated on reacting to existing government policies andprogrammes, rather than providing new ideas, IDA-IMF staff recognised thesignificance of the process as such with respect to public debate of policy issues.

The SDPRP adequately stresses the importance of private sector development, butaccording to the World Bank lacks specific implementation measures. The Bankrecommends developing these measures in consultation with the private sector.The World Bank is currently in the process of preparing its Country AssistanceStrategy (CAS). The CAS is being prepared in accordance with the SDPRPobjectives in a consultative manner with the government and other stakeholders. Thekey themes of the draft CAS are (i) Capacity Building, (ii) Decentralisation andService delivery, (iii) Private Sector Development (PSD), and (iv) Pro-Poor Growth.

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For each of the themes, extensive discussions have taken place in regionalworkshops with government representatives, the Bank, and regional representatives.For the pillar of PSD, workshops were organised in Dire-Dawa, Mekelle, Awassa,Nazareth, Bahir Dar, and Addis Ababa in the spring of 2002. The regionalconsultations were organised by the Public Private Consultative Forum, incollaboration with the regional bureaux of trade and industry, city chambers and theregional administrations. The objectives of these meetings were to identify importantconstraints to PSD in the specific region, to classify and prioritise the constraints andto formulate actions to resolve them. The discussions were organised aroundinfrastructure, access to land and government regulations, investment, technologyand finance, labour relations, and business environment and business relations. Inmost of the workshops, regional private sector participants introduced the discussionon each of these topics with a short presentation.

The results of the regional workshops were collected and discussed in a publicconsultation meeting that combined addressing the PSD pillar and the pro-poorgrowth pillar. In a joint communiqué issued on the occasion of this meeting, thegovernment, the private sector and the World Bank endorsed the joint vision thatprivate enterprise is at the heart of development, growth, and poverty reduction. TheCAS will be disclosed to the public in 2004.

2.3.2 IMF

During the interview with the Resident Representative of the IMF it was explained thatthe IMF does not currently implement any TRTA activities. Its latest financialarrangement with Ethiopia is the approved Poverty Reduction and Growth Facility,amounting to SDR 100.28 million to be disbursed between 2001 and 2004. So far,Ethiopia has drawn SDR 69 million from this facility.

IMF staff reviewed the progress in the second annual programme under thisarrangement in July 2003. A key element of the programme is the reform of thefinancial sector and developing a restructuring plan for the state-owned CommercialBank of Ethiopia (CBE). Apart from setting out a timeframe to reduce the percentageof non-performing loans, the IMF staff has encouraged the authorities to allow agreater role for the private sector and the entry of foreign banks into the bankingsector. The authorities, however, emphasise the strengthening of the financial sectorand enhancing the supervisory capacity of the central bank, stating not to be ready toallow the entry of foreign banks.

Another element stressed by the IMF staff in its assessment of Ethiopia’s economicperformance is to enhance the climate for private domestic and foreign investment tocontribute to job and income creation.

IMF staff and the Ethiopian authorities agreed on the strategy for the third annualprogramme under the PRGF arrangement. Inter alia, the strategy stresses budgetreallocation from defence to poverty reduction expenditures, and on strengtheningthe investment climate, the financial sector and the rural economy. Moreover, the staffare urged to adhere to the agenda for other structural reforms and to accelerate thepace of its implementation, to enable the attainment of PRGF objectives. Priority inthis should be given to reforms focusing on agriculture, food security, capacity

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building, export promotion, privatisation, legal and regulatory framework andsupporting private sector development.

In collaboration with the World Bank, the IMF assessed progress made inimplementing the SDPRP and stressed the need to include a strategy for privatesector development in APR (2003). In principal, the IMF is interested in financingTRTA and CB activities, but this will depend on the type of activities prioritised in thePlan of Action.

2.3.3 WTO

The WTO has no resident office in Ethiopia. According to the DTIS, the WTO hasorganised several TA activities in- and outside Ethiopia in which officials of thecountry participated. On trade policy and regulations, the WTO has conducted varioustraining programmes for Ethiopian officials on for example sanitary and phyto-sanitarystandards and technical barriers to trade, WTO accession, dispute settlement, andintellectual property rights.

Apart from this, one staff member of the WTO Secretariat has been part of the teamof DTIS consultants.

2.3.4 ITC

ITC has no resident office in Ethiopia.

2.3.5 UNCTAD

UNCTAD has no resident office in Ethiopia.

2.3.6 UNDP

The UNDP has a resident office in Ethiopia and plays an important role in the localDTIS work. The UNDP private sector expert is reportedly active on a full-time basis,involving donors, and supporting the EU being the lead facilitator of the process. Ithas invested an approximate USD 25,000 in this process, mainly used for the copyingand distribution of the draft DTIS, the organisation of the national workshop and thehiring of a consultant placed at the Ministry of Trade and Industry (MOTI). Aware ofthe capacity problem within the Ministry, UNDP decided to hire this consultant tosupport the IF focal point and facilitate the smooth organisation of the process.

UNDP stated its willingness to finance follow-up activities from the DTIS. ExistingTrade-Related Programmes of main bilateral donors

2.3.7 European Commission

Lately, the Delegation of the European Commission to Ethiopia has increased itsattention to trade matters and trade related support to Ethiopia. It has a € 20 millionfacility available for preparing an Economic Partnership Agreement (EPA) impact

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assessment, participation of the government in negotiations and meetings to adoptcommon positions with other ACP countries, and to carry out regional and sectoralstudies. There is a further € 10 million facility under which specialised training andsupport for specific studies is envisaged. General support to build local analyticalcapacity will be provided under the first component of TRADE.COM, supporting thecapacity of trade negotiators with a network of national and regional trade advisors.The Commission has also budgeted € 5 million for trade related capacity buildingsupport in the EC Micro and Small Enterprise Development Programme, starting from2004. The EU Centre for the Development of Enterprises has supported the leather,textiles, and food industries with an amount totalling € 485,000.

The EC Delegation started its role as lead facilitator at the request of the World Bank.The Delegation believes this was because the EU was the only donor that had abudget targeted at trade capacity building. In the opinion of the Delegation, a leadfacilitator would ideally be resourced and equipped to assist in consulting non-governmental stakeholders and donors to feed their input into the DTIS. Since humanresources were insufficient to follow this strategy, the Delegation has restricted itself(i) to providing its own technical input to the study and (ii) to mobilising donors.

Together with the UNDP and the World Bank, the EU gathered the donors prior to thenational workshop on IF to prepare for the workshop and develop a joint donoropinion on the DTIS.

2.4 Existing Trade-Related Programmes of main bilateral donors

2.4.1 Netherlands

The Netherlands’ bilateral development programme with Ethiopia focuses on ruraldevelopment, health and education. There is no separate programme for privatesector development and trade. Private sector development is enhanced by implicitattention in other existing activities in the bilateral programme. For example in ruraldevelopment: (i) cooperation among farmer cooperatives via training to both the co-operatives and the government, and (ii) training of bee holders in bee collectioncentres.

The annual programme for 2004 is currently being drafted and will opt for a smallbudget to become available for private sector development. Moreover, theNetherlands Embassy has applied for funding under the € 4 million budget availablefrom the Netherlands Ministry of Foreign Affairs for the support of the businessclimate in Ethiopia.

The Netherlands Embassy is in principal interested in the follow-up of the DTIS and inpossible TA activities to be financed. According to the Embassy, MOTI has taken upthe process very positively. The Netherlands Embassy is aware of the need for donorcommitment to the IF process. If the IF continues to progress positively, the Embassymight consider financing parts of the Plan of Action, as long as these activities fit intothe bilateral programme of the Netherlands with Ethiopia.

2.4.2 Germany

So far, trade and technical assistance have not been among Germany’s priorities inits development cooperation programme with Ethiopia. This might change in the nearfuture when its programme will be renegotiated for the next term.

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The German delegation was impressed by the scope of the DTIS, although in theirview it lacks sufficient detail. As regards the follow-up to the DTIS, it seems thegovernment, the Chambers of Commerce, and the private sector seem to beenthusiastic about trade, but there are some doubts on the commitment at mid-toplevel, such as the customs authority and the privatisation authority. Though sceptical,Germany is interested in the follow-up activities under the IF.

2.4.3 Italy

Italian development cooperation with Ethiopia is based on a country programme thatwas signed in 1999, originally for three years. Around 85 percent of a total budget of €150 million has been disbursed thus far. The bulk of the assistance flows toinfrastructure development and the other priority areas of education, ruraldevelopment and health. € 4.1 million has been reserved for private sectordevelopment. The Addis Ababa Chambers of Commerce and some other privatesector bodies have been assisted for specific activities by € 2.6 million and theremaining € 1.5 million is allocated towards an EU programme that is about to startand aims at enhancing the network of trade institutions. The available budget hasbeen fully disbursed and Italy will not be in a position to finance TA activities for thenext few months, until the new country programme has been negotiated in 2004.

Apart from this, Italy has provided some TA alongside its tied aid programme thattotals € 15 million. Half of this amount was spent on providing the governmentalLeather and Leather Production Technology Institute with hardware and TA for newtechnicians. The other half has recently been allocated to the revitalisation of sevenstate-owned textiles companies, mainly through the delivery of hardware.

The DTIS is regarded as a good document, sufficiently detailed. The practical use ofthe document will heavily depend on donor funding. Italy has trade as one of its mainpriorities and will seriously consider financing parts of the Plan of Action that comesout of it. The criteria for Italian financing will be a focus on a limited number of sectorsand a clear fit with the development goals as set out in the SDPRP.

At least on paper, the government seems to be rather committed to trade andespecially the Minister of Trade and Industry is very supportive. The Minister hasbeen strongly facilitating the investment process of two Italian companies and hasallowed investments in-kind and the import of Italian know-how.

2.4.4 Canada

In the approach of Canadian development cooperation, Ethiopia is one of nine so-called “enhanced partnership” countries. The official development assistance toEthiopia focuses on good governance, democratisation and food security. Animportant programme on food security and good governance is the programme “Hornof Africa”, in which Canada provides an annual amount of CAD 75-100 million to thetargeted countries in the region. Ethiopia receives an estimated CAD 20 million andthis is expected to be increased. CIDA is currently redrafting its overall supportprogramme to Ethiopia and the areas to be targeted are under consideration.

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Support to trade-related matters is restricted to the promotion of commercial tradebetween Canadian and Ethiopian companies through Canada’s trade attaché. NoTRTA is provided. In the New Partnership initiative for Africa’s Development(NEPAD), there is attention to joint TA and CB, as well as the establishment of atrade expertise centre, but the TA included in the action plan is not articulated indetail. Canada committed CAD 500 million to the NEPAD initiative, but did not yetdecide to which subjects the money will be allocated.

It is the opinion of the Canadian representative that the DTIS accurately presents allmajor sectoral and crosscutting impediments to trade, but calls for a more detailedstudy on a number of aspects. A failure of the DTIS and the IF in general is that itneglects the necessary provision of TA to the private sector. Canada is interested infinancing parts of the Plan of Action, probably with regard to agriculture.

2.4.5 United States

USAID’s activities on TRTA are basically integrated in its rural developmentassistance projects. These projects focus on management capacity building, makingmarket contacts, certifying fair-trade and formulating business development strategiesamong agricultural cooperatives and trade unions. Apart from this, USAID supportedthe Ministry of Trade and Industry with USD 400,000 for computer hardware andperipherals to modernise the trade registration system and cut down processing time.

According to the USAID representative, a lot is going on in Ethiopia these days, butthis is not due to the DTIS. Although “a lot of what the government says and some ofwhat it does moves in the right direction”, progress has been modest so far inimproving land availability, introducing one-stop trade administration, special creditsfor exports, and streamlining customs.

As regards the DTIS, USAID attended the national workshop midway November andparticipated in the working group on agriculture and livestock. The general impressionwas that the DTIS had not sufficiently spoken with sector authorities andrepresentatives, nor did it properly reflect recent government developments. Inconclusion, it was taken as a good, but insufficient initiative. Some recommendationswere superficial, others neglected current developments. Nevertheless, the Ministry,and the export and investment authorities all seem very committed to trade and thetrade dialogue. It was clear that the Minister of Trade and Industry will not accept theDTIS becoming yet another study that ends up on a dusty shelf.

It is too early to see whether the IF-Technical committee will come up with a goodPlan of Action, but the workshop was very encouraging in displaying a tremendousand vivid dialogue and in the fact that the government is actually allowing theseforums, no matter how critical comments on its policy are.

USAID considers providing a long-term expert to MOTI on WTO, trade, and COMESAissues. It is not clear to what extent it will finance follow-up activities of the DTIS.

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17

3 IF SITUATION

3.1 Preparatory phase of DTIS

Ethiopia already expressed its interest to participate in IF during the early stages ofthe programme in the 1990s. As one of forty LDCs, Ethiopia prepared a needsassessment, but the lack of a roundtable or consultative group meeting reportedlyprevented Ethiopia from receiving TRTA under the old IF. Given the indicated interestof the government, there was some disappointment among Ethiopian authorities thatit could not enter the revamped IF as one of the pilot DTIS countries.

The official request from Ethiopia to participate in the Integrated Framework wasmade early 2002. A technical review of the request to assess Ethiopia’s compliancewith the admission criteria does not appear to have taken place, but admission mayhave been granted based on the earlier expressed enthusiasm of the Ethiopiangovernment.

According to the IF website, IF activities actually started in Ethiopia in July 2002 withthe establishment of the IF National Steering Committee (IFSC) and the IF TechnicalCommittee (IFTC). The Minister of Trade and Industry chairs the IFSC, whichcomprises officials of the Ministry of Finance and Development (MOFED) who wereresponsible for the preparation of the PRSP, officials of the Ministries ofInfrastructure, Capacity Building, Agriculture (MOA), and Revenues (MOR),ambassadors of four key bilateral development partners, the three IF agenciesrepresented in Addis Ababa, the Ethiopian Chamber of Commerce, and the EthiopianManufacturing Industries Association.

The chairman of the IFTC is the head of the Foreign Trade Department of MOTI, andalso operates as the national IF focal point. Other members of the IFTC represent arange of trade-related state authorities, the Addis Ababa Chamber of Commerce, theleather producers’ association, Ethiopian Tourism Commission, the AfricanDevelopment Bank, three bilateral donors, the UNDP and the World Bank.

After a preparatory mission by the lead consultant in August 2002, the main missiontook place in November 2002. The IFSC confirmed its agreement on the DTISConcept Paper during the launch workshop on 7 November 2002. The followingtopics would be addressed in the study:

� Economic and export performance;� Macroeconomic environment and the investment climate;� Trade regime and incentive structure;� International trade policy environment;� Legal and regulatory framework for trade and investment;� Trade facilitation;� Institutions and institutional support for trade;� Trade and poverty issues;� Sub sector analysis (manufacturing, agriculture and services).

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For the sub sector analysis, it was decided to focus on textiles and garments, leather,cereals, coffee, horticulture, sugar, pulses and oil seed, and tourism.The World Bank then appointed a team of local consultants, based on a short listdrawn up by the World Bank, MOTI, and the EU. A team of 11 local consultants, teninternational consultants, and the team leader was put on the job.

The first draft of the DTIS was planned to be ready on 31 January 2003, after which asecond workshop was scheduled for 24 March 2003 to discuss the draft DTIS withthe main stakeholders. The deadline for the final report was set at 15 April 2003.

3.2 Diagnostic phase of DTIS

During the diagnostic phase, the international consultants each visited the country foran average period of ten days. During these missions the IF focal point at MOTIfacilitated the meetings with relevant stakeholders and further helped in collectinginformation.

The contributions of the local consultants were separately commented and integratedinto the overall document by each of the international consultants. The consolidateddraft was submitted to the World Bank in April 2003. The comments on the first draftconcentrated on a number of sensitive issues that needed to be revised in the finaldraft. These included sections in the report on party-affiliated companies and the (lackof) financial reform in the country. The second draft was ready by the end of August2003, after which the document was distributed in hard copy and on CD-Rom to awide range of stakeholders throughout Ethiopia. This distribution was organised andfinanced by UNDP, in cooperation with its consultant at MOTI. Along with the DTIS,the stakeholders all received a template for providing comments to the DTIS in astructured manner, and were asked to provide comments to the relevant chapters.Apart from the comments, the stakeholders were asked to take a closer look at therelevant action plan and prepare their thoughts and comments for the working groupdiscussions at the national workshop.

The national workshop took place on 10 and 11 November 2003 and was attended byapproximately 170 representatives of the national and regional governments,governmental institutions, the private sector and civil society. Several State Ministerswere present during the workshop, indicating the intentions of the Ethiopiangovernment.

The plenary session included a general presentation of the DTIS by the leadconsultant, after which the participants were divided into six different working groups,gathered to discuss the following matters:

I. Trade regime, market access, and trade and poverty;II. FDI, legal and regulatory environment, and trade facilitation;III. Institutions and institutional support for trade;IV. Agriculture, livestock and meat;V. Manufacturing sector;VI. Tourism.

High-placed government representatives chaired the six working groups. Thediscussions were summarised during the second day, after which the Minister of

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Trade and Industry indicated in his closing comment that he had appreciated thelively discussions, promised to seriously take note of the draft Plan of Action andexpressed his commitment to implement it. The Minister also called upon the majordonors not to disappoint all stakeholders present and actually come up with concretepledges to finance the Plan of Action.

3.3 Follow-up phase of DTIS

In its first Issue Note on the IF, the DTIS/IF Technical Committee (IFTC)communicated to all stakeholders that it had agreed on the following tentativetimeframe for the preparation of the Plan of Action as of 26 November 2003:

Dec. 2003 Early 2004 End of Jan. Early Feb. March March/April May

Consolidation

proceedings

of workshop

Finalisation

of DTIS by

lead

consultant

Review

workshop

proceedings

by IFTC to

define action

items

Submission

Plan of

Action to

IFSC

Submission

Plan of

Action for

endorsement

to MOTI

Finalisation

of the Plan of

Action by

IFTC,

including

costing and

timeframe

Project

formulation

Source: DTIS/IF Technical Committee Issue Note, Issue 1, December 2003, Ministry of Tradeand Industry

The Issue Note also communicated that the implementation of the DTIS/IF Plan ofAction is to be seen in close relation with the implementation of the SDPRP. Toensure coordination of interested donor partners in the financing of theimplementation of the Plan of Action, the IFTC is exploring the option of establishing adesignated budget line under the existing DAG-CG pooled fund arrangement for thesupport to the SDPRP. This pooled fund is currently facilitated by the UNDP.

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4 MEASURING IF PERFORMANCE IN ETHIOPIA

This chapter deals with the indicators that have been developed for the input, output,outcome and impact of the TRTA activities that are subject to this IOB evaluation. Thespecific set of indicators selected for the IF programme in Ethiopia (and Yemen) canbe found in the evaluation matrix in Annex 1. The indicators of impact have beenderived from two objectives of the Netherlands in supporting providers of TRTA.

4.1 Input

Amount of financial support allocated to the IF

Under Window I, the budget approved for the DTIS for Ethiopia amounted to USD300,000. On top of this, the World Bank indicated to the evaluator that it had spent anestimated USD 30,000 for the work of the local consultants. The UNDP provided USD25,000 to hire the local consultant placed at the IF focal point.

Number of preparatory meetings and working days spent for this purpose

Time input from the World Bank local office have been 1-2 days per week since thepreparatory mission in August 2002.

The UNDP had not been engaged with the IF until a consultant involved in the IFevaluation visited the private sector expert to assess the DTIS process thus far. Afterthis, the UNDP decided to become the focal agency among the six IF agencies.Moreover, the UNDP hired a local full-time consultant from early November to supportthe IF focal point at MOTI in preparing for the workshop and prioritising the draft Planof Action that was developed during the workshop. The assignment will probably beextended until February or March. The private sector specialist of the UNDP isinvolved in creating awareness amongst ministries (other than MOTI) and drawingdonors’ attention to IF on a daily basis. Total time put in, together with her supervisorand the resident representative of the UNDP, is estimated by the evaluator at fourdays a week since June 2003.

Time of the IMF representative office has been negligible. The remaining three coreagencies do not have a resident office in Ethiopia.

The EU input in the DTIS have been difficult to assess in terms of time. According tothe Delegation it was more than intended. The EU expects to spend more time on theIF now that the IFTC decided, after the national workshop, to meet on a weekly basis.This means the EU will spend approximately 1 to 1.5 days on the IF per week.

The time spent by bilateral donors has so far been negligible. Throughout the firstyear, there has been one DAG meeting to discuss the draft DTIS prior to theworkshop. The majority of all donors (including the Netherlands) attended thismeeting. The Netherlands further attended the plenary sessions of the nationalworkshop in November 2003. Apart from this, the time input of the NetherlandsEmbassy have been negligible.

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The IF focal point at MOTI has had a mere facilitating role during the drawing up ofthe draft DTIS and restricted itself to arranging meetings between consultants andstakeholders. After completion of the draft, the IF focal point has been engaged in theprocess almost full time, next to the consultant assigned by UNDP.

Both the IFSC and the IFTC have been very silent throughout the diagnostic phase.The Steering Committee never met and the Technical Committee started biweeklymeetings early July 2003, later on intensified to three times a month from Septembertill November. During these meetings, points of agenda were the preparation of thenational, distribution of the DTIS and creation of awareness among donors.Participation in these meetings has so far been limited to UNDP, World Bank, the EU,the Chambers of Commerce of Ethiopia and of Addis Ababa, and the Ministry ofFinance on a few occasions.

The involvement of the private sector, civil society, and the poor in the diagnosticphase of the work has been small. The individual consultants have had a number ofmeetings with representatives of the above parties, but a broad-based consultativeapproach similar to the one organised for the preparation of the SDPRP has not beentaken.

Time input from the six core agencies in Geneva on the DTIS/IF process in Ethiopiaamounted to a total of one day per month (consultant’s estimate).

Table 4.1 Summary of input Indicator Total (until 31-12-2003)Amount of financial support allocated to the IF USD 330,000 for the DTIS

USD 25,000 for the consultant supporting the IFfocal point

Number of meetings of the six core agenciesand donors

2

Meetings of the national IF Steering Committee 1Meetings of the national IF Technical Committee ± 15Working days spent by core agencies andbilateral donors

200 – 250 (consultant’s estimate)

Working days spent by IF focal point 200 – 250 (consultant’s estimate)Time span for preparing the draft DTIS ready forthe national workshop

10 months (November 2002 – August 2003)

Time span for preparing final DTIS, validated bythe IFSC

> 15 months (November 2002 - early 2004)

Time span between final DTIS and follow-upTRTA realised

Unknown

4.2 Output

DTIS

The first draft of the DTIS was delivered in April 2003. It took until 29 August 2003until the second draft was submitted.

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The second draft of the DTIS of Ethiopia has been compared with the required sixcomponents as set out in the broad Terms of Reference (ToR) that have beendeveloped for these integration studies:

The DTIS is composed of two volumes. Volume 1 contains the summary andrecommendations of the DTIS. Volume 2 contains 11 separate annexes with moredetailed analysis and 1 Synthesis annex. The titles of the annexes are listed below:

� Annex 1 The Synthesis� Annex 2 Trade and Incentive Structure� Annex 3 Market Access Opportunities� Annex 4 FDI and Trade� Annex 5 Legal and Regulatory Environment for Trade and Investment� Annex 6 Trade Facilitation� Annex 7 Institutions and Institutional Support for Trade� Annex 8 Agriculture and Trade� Annex 9 Livestock and Meat� Annex 10 Manufacturing Sector� Annex 11 The Tourism Sector� Annex 12 Trade and Poverty

The DTIS report follows a different organisation to the broad ToR and, to a lesserextent, the DTIS Concept Paper developed for Ethiopia in October 2002.

Review and analysis of the country’s economic and export performance

This is covered in a scattered way in Annex 1, 2, 3, 4 and 8. Some topics areaddressed in detail in a separate annex, e.g. dependence on agricultural productionin Annex 8 or FDI and trade in Annex 4. Trends in exports and imports to GDP ratioswere only addressed as part of an analysis in Annex 3. What is missing is an in-depthforward-looking analysis of the country’s economic and export performance, whichprovides a vision necessary for planning the economic development of the country.

Description and assessment of the macroeconomic environment and the country’sinvestment climate

In Annex 2, the DTIS elaborates on the macroeconomic environment in general andmore specifically on the real exchange rate. The importance of other macroeconomicpolicies that determine exchange rate movements are assessed, as well as the mainpillars of the trade policy reform. Property rights, the rule of law, and red tape costsare discussed in Annex 5, whilst the investment climate is described in Annex 4. Thelatter two annexes provide a relatively in-depth analysis when compared with theothers.

Assessment of the international policy environment and specific constraints thatexports from the country face in international markets

The impact of improved market access on trade and the welfare position of the poorare dealt with in Annex 3 and Annex 12 respectively. In Annex 3, the DTIS describesEthiopia’s main export products. A comparison is made of tariffs on products that areexported and not exported by Ethiopia. The DTIS concludes that the tariff barriers are

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not important for Ethiopia’s current large export items, like coffee, chat, (b?)ovineleather, gold and sesame seeds. The decline in demand for Ethiopia’s main exportproducts observed during the last 5 years can therefore not be attributed to excessiveprotection abroad. On the other hand, the study concludes, high tariff barriers abroadfor Ethiopia’s smaller export items might hinder the country’s export diversificationeffort.

Annex 3 then elaborates on non-technical barriers to trade, especially in the QUADcountries (Canada, EU, Japan, and the USA) and the lack of legislation andinfrastructure in Ethiopia to adopt modern testing, certification, and quality controlmeasures.

Annex 3 also assesses the potential export gains of a reduction of subsidies and areduction of tariffs across all WTO members, full duty free access to COMESAmembers, full duty free access to the EU under the Everything But Arms (EBA)initiative,2 full duty free access under the US AGOA initiative, and full duty free accessto two other important markets, Japan and Saudi Arabia. It is concluded a fullyeffective EBA would imply the most significant increase in Ethiopian exports.

In Annex 12, the same scenarios are analysed for their potential impact on thewelfare of the poor. The analysis suggests that a fully effective EBA initiative wouldresult in a welfare gain by the poor of 13 percent, as compared to figures betweenone and 2.5 percent for improved market access to COMESA, Japan and SaudiArabia. AGOA and WTO agriculture negotiations would only have a marginal impacton the welfare of the poor.

Assessment of a small number of key sectors believed to have significant potential forexpansion in output and trade in benefit of the poor

The broad ToR of the DTIS prescribe a focus on a number of key labour-intensivesectors where the potential exists for an expansion in output and exports and animproved position of the poor. According to the DTIS Concept Paper, the sub-sectorswith more detailed analysis were selected following consultations with MOTI and theChamber of Commerce, amongst other stakeholders. The selection has not beenbased on “any special process, but […] on consensus about most important activitiesin the economy.”

Annex 8, 9, 10 and 11 of the DTIS provide an assessment of the sub sectors relevantfor trade. Annex 8 studies the agriculture sub sectors cereals, horticulture, coffee, andsugar, whilst Annex 9 elaborates on the livestock and meat sector (a.o. hides andskins). Annex 10 deals with the manufacturing sub sectors leather goods and textilesand garments, and Annex 11 finalises with the tourism sector. When compared to theDTIS Concept Paper the sub sector “oil seeds and pulses” has not been studiedwhereas the sub sector “livestock and meat” has been added to the list of sub sectorswith potential. It is not explained in the study why this has been done.

All sector studies include a SWOT analysis of the sector and conclude with a matrixof proposed technical assistance. Especially in tourism the study suffers from a lack

2 Since February 2001, the EU grants duty-free and quota-free access to all imports from the least

developed countries (LDCs), except arms. The Regulation is referred to as the Everything But Armsinitiative.

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of available data. In the analysis of the sub sector livestock and meat the DTIS paysspecific attention to the relation between the sub sector and the position of the poor.

Annex 9 provides a good example of the level of detail required for successful andrelevant recommendations. The livestock and meat sector analysis is complementedwith an annex that contains a detailed Terms of Reference for a proposed study intothe “Benefits and costs of compliance with SPS rules: the Case of Rift Valley Fever inEthiopia.”

Assessment of national capacity (public and private) to formulate and implementtrade policy

Annex 2 analyses the trade and incentive regime in Ethiopia and the current state ofthe liberalisation programme initiated in the early 1990s. This includes a discussion ofkey elements of the trade and industry policy regime such as tariffs and quantitativetrade restrictions, liberalisation of domestic prices, tax reform, export promotion,foreign exchange market reforms and macroeconomic management. The annexconcludes that results have been mixed so far. Measures taken to facilitate privatesector exports suffer from a lack of confidence in the reform process. Mixed signalssent out by the government on its position towards the role of the private sector in theeconomy have contributed to the prevailing perception in the private sector that party-affiliated companies are still favoured by the government, meanwhile hindering afurther liberalisation.

Based on an analysis of effective rates of protection in Annex 2, the study concludesthere exists an “anti-export bias” in the country’s trade policy regime. However, thestudy did not take notice of developments during the last two years in support ofexport promotion. The Addis Ababa Chamber of Commerce argues these incentives,including preferential access to land and finance and lower transaction costs forexport processing activities, may well add up to compensating for the calculated anti-export bias.

Annex 5 elaborates on governmental efforts on several fronts to enhance exportdevelopment, including correcting the implicit anti-export bias inherent to a protectiveimport policy, the streamlining of export licensing, an export credit guarantee scheme,and a programme of export promotion co-ordinated by the Export PromotionAuthority. This is regarded to be a good strategy, but there is room to improve eachindividual aspect of the strategy.

This annex also discusses the export support provided by the professional businessassociations Addis Ababa and Ethiopia Chamber of Commerce, and the EthiopianCoffee Exporters Association. It is concluded that all these organisations can play aviable role in export development, but basically lack the financial and human resourcecapacity to effectively implement their mandates. The guiding principle that suchservices should be demand driven and managed by the private sector is not at allembedded in the way these organisations operate.

Part of the description of these organisations is repeated in Annex 7 andcomplemented by a description of the main governmental institutions involved in theformulation, implementation and monitoring of trade policy. This annex alsoincorporates a private sector assessment of the trade support institutions, as well asan appreciation of Ethiopia’s ability to analyse, formulate and monitor trade policy.

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The main conclusion of this annex is that the “institutional constraints faced byEthiopia are numerous and range from lack of adequate staff to lack of effectivecoordination amongst all stakeholders.” The annex winds up with a summary ofrecommendations to consider, and suggestions for technical assistance in this areataken up in Volume 1 of the DTIS.

In Annex 12 the DTIS analyses the potential impact on the poor of three scenarios oftariff liberalisation: a unilateral tariff liberalisation, a uniform 10 percent tariff, and acommon external tariff (CET) of COMESA members. See also the next section.

A pro-poor trade integration strategy

The DTIS Concept Paper sets out to discuss the relation between trade and povertyon the following issues: (i) determinants of poverty, (ii) impact of trade reforms onpoverty, (iii) impact of improved market access on poverty, and (iv) integrating thepoor in world markets.

Annex 12 of Volume 2 of the draft DTIS presents a detailed attempt to trace thechannels through which trade policies affect poverty.

On the macroeconomic determinants of poverty, the DTIS restricts the analysis to across-country analysis of poverty containing 25 low-income countries for a time spanof 1987-1996. It draws a general conclusion that regression analyses of these datashow that for countries such as Ethiopia poverty tends to be lower in the presence ofhigh economic growth, low inflation, low illiteracy rates and low-income inequality.

On the effective protection of the poor, the DTIS concludes that the existing tariffstructure seems to be biased against the poor. Although from a consumptionperspective the average tariff faced shows a positive correlation with income levels,from a production perspective the analysis concludes the existing tariff structureprotects the rich two times more than the poor.

The DTIS incorporates a detailed econometric analysis of the correlation betweentrade and poverty, as well as the channels of this relationship. However, it fails torecommend mainstreaming trade reform in general and to incorporate the variousrecommendations made in the DTIS into the Poverty Reduction Strategy of thecountry.

Assessment

In short, the DTIS of Ethiopia is a comprehensive document and is unique in thesense that it collects all major sectoral and crosscutting impediments to trade in onedocument. It will be an important “baseline” document and a general “to-do list” indealing with the development of trade in Ethiopia and the country’s integration into theworld economy.

Nevertheless, local stakeholders criticise it for not incorporating all existing and recentdata, policy measures and policy documents into the analysis. On a macro level, forexample, this has resulted in an analysis of effective rates of protection based oninput-output tables of neighbouring countries, while it was reported to the evaluatorthat such data have recently been developed for Ethiopia. The insufficientinvolvement of sector representatives and other local stakeholders led to studies that

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merely summarised previous studies, rather than came up with an actual analysis ofthe sectors’ impediments to trade. Moreover, the realism of assumptions in sometheoretical analyses is difficult to judge, e.g. on market access in Annex 3, and somesections are descriptive rather than diagnostic, e.g. Annex 5. The DTIS therefore stillcalls for further in-depth analysis on a sectoral level.Doubts were raised on the readability of a document with a total number of some 700pages. To this end, the Summary and Recommendations (Volume 1) are considereda necessary complement to the study, although the current draft of this volume mightneed some more focus on key issues.

The DTIS also fails to provide detailed and prioritised recommendations on technicalassistance activities.

Overview/inventory and analysis of existing TRTA programmes

The overview of existing TRTA programmes has been limited to the entries providedin the TRTA/CB database developed by the WTO and OECD. Purpose, currentstatus, outcome, experience, and lessons learnt of the TRTA have not been analysedin the DTIS.

Number of national workshops

A first national workshop took place on 10 and 11 November 2003. The mostimportant result of this workshop was a draft Plan of Action with TRTA activities. Thecurrent status of the process needs a follow-up on three major aspects: (i) thefinalisation of the DTIS, to be taken up by the lead consultant; (ii) the translation of thedraft Plan of Action into a reduced number of priorities that need to be translated intobankable projects; and (iii) the financing of the projects, which means donors have tobe approached to come up with actual financial pledges.

Number and type of prioritised TRTA/CB projects

The recommended types of TRTA activities and CB projects are being prioritised bythe IFTC, to be submitted for approval to the IFSC. This prioritisation is based on therecommendations provided in the DTIS and the initial prioritisation carried out duringthe separate working group sessions at the national workshop. In the third week ofDecember 2003, a draft list of five TA priorities for Window II was developed, focusingon small, quick-win activities. These five TA priorities are:� Establishment and operation of trade documentation and information centres

(TDIC) in Addis Ababa and other strategic locations;� Streamlining of the duty draw back system and bonded warehouse facilities;� TA and CB on e.g. standardisation and certification geared to widening and

deepening the export bundle;� Institutional support to MOTI, MOFED, commercial attaches, and exporters;� Preparation of a tourism strategy, restructuring the Ethiopian Tourism

Commission, and the design and launch of a campaign to promote Ethiopiaabroad.

Meanwhile, the main actions and recommendations of the DTIS not necessarilyrelated to TRTA/CB projects are being transformed into projects for which financingcan be attracted.

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4.3 Outcome

Given the current status of the IF process in Ethiopia, both outcome and impact haveso far been small. In this section and in section 4.4 an assessment will be made ofthe prospects of potential outcome and impact, respectively.

Number and type of follow-up actions undertaken on DTIS recommendations

The evaluator visited Ethiopia in the second half of November. At that stage, theresults of the national workshop still had to be processed. The results include asummary of the TRTA projects recommended to be implemented by each of the sixworking groups of the national workshop. As indicated earlier, theserecommendations will be prioritised by the IFTC. Follow-up actions on any of therecommendations have so far not been reported to the evaluator.

Number and type of follow-up actions on impact analysis of trade policy on the pooretc.

Follow-up actions have so far not been reported to the evaluator. A potential sourceof follow-up actions in this respect is the Public Private Partnership Forum. This forumwas set up under the SDPRP activities with the aim of enhancing coordination anddialogue between the private sector and public institutions. It may very well be thatthis forum will initiate further analysis on production chains and employmentopportunities in the future. At this stage, however, there are no actual indicatorspointing in that direction.

The proceedings of the national workshop show that the draft Plan of Action includesa number of studies to be conducted on e.g. the anti-export bias of protection, theimplementation of EPAs with the EU, a baseline study of measures that encouragethe export market, the diversification of Ethiopia’s export bundle and domesticcompetition among the public and the private sector. Given the draft status of thePlan of Action, it is not clear whether these studies will actually be carried out.Besides, the study on the implementation of EPAs with the EU had been plannedalready before the DTIS. It is unknown whether the other studies mentioned haveindeed been identified or merely summarised in the DTIS.

Active monitoring by all national stakeholders of recommended follow-up to DTIS

The national workshop was described earlier as rather successful, especially withregard to the animated discussions in a number of working groups. The active IFstakeholders in the country, i.e. the IF focal point and its staff, the three IF agenciesrepresented, and the lead facilitator have indicated their intention to quickly translatethe results of the national workshop into a detailed Plan of Action, with proposedactivities translated into concrete Terms of Reference and indicative costing plans.Based on the progress made since the national workshop, and the draft list of five TApriorities as presented in Section 4.2, it is the impression of the evaluator that thesestakeholders will come a long way in the first quarter of 2004 to realising thisobjective. The fact that the lead ministry, the three core agencies and the leadfacilitator have expressed their commitment enhances the probability of activemonitoring being pursued. Since all of the above are members of the IFTC, the

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planned weekly meetings of the IFTC will be highly instrumental to this outcome ofthe DTIS process.

There is a clear intention to integrate the DTIS monitoring into the PRSP, but this stillhas to be developed in detail. In this respect, the mention of the DTIS in APR (2003)of the SDPRP is promising. It will depend on the commitment of for example MOFEDwhether the implementation of the recommendations of the DTIS and the monitoringof the progress will be integrated in the monitoring of the SDPRP.

To enhance the implementation and monitoring of the Plan of Action, the IFTC iscurrently assessing the possibility of establishing a designated budget line under theexisting DAG-CG pooled fund arrangement administered by the UNDP. This fund wasestablished in 2001 to support the formulation and implementation of the SDPRP.

At this stage, it is too early to assess to what extent Ethiopian officials will attempt toco-ordinate and streamline the TRTA to be provided by the six core agencies. Itremains to be seen whether other ministries will be interested in TRTA and CBactivities. On the one hand, this depends on the awareness at these ministries of theimportance of trade and private sector development. On the other hand, thecommitment of these ministries will probably depend on the actual availability ofdonor financing of the Plan of Action in Window II and subsequent financing. If donorfunding fails to appear, the opportunity costs for these ministries will be an importantfactor in their commitment to the Plan of Action. When existing bilateral relationsprovide a higher chance of realising project investments and TA activities,commitment to the Plan of Action will diminish, especially given the limited humanresource capacity at the ministries.

Coordination of the TRTA of the six core agencies by officials of the IF country

Coordination on the ground between UNDP, World Bank and IMF is good. UNDP hasdone a good job in facilitating the work of the IF focal point and finds support from theother two organisations, especially the World Bank. The role of the IMF in the processso far has been small. The WTO Secretariat has attended the launch workshop andthe national workshop in November 2003. One WTO staff member was in the team ofDTIS consultants. Other than that ITC, UNCTAD, and WTO have not been involved inthe DTIS for Ethiopia.

4.4 Impact

Trade and economic sectors brought into PRSP or national development plan

It is clear that the initial important steps to mainstream trade into the SDPRP havebeen taken. The SDPRP of 2002 already recognised the importance of exports in thefight against poverty and pointed at broadly defined possible directions to induceexport growth. These directions have been further detailed in the DTIS and in thepreparation of the Plan of Action.

The national workshop was organised shortly before the CG meeting where theannual progress report of the SDPRP has been discussed. As indicated earlier inSection 2.2.1, the government indicates in APR (2003) that it is committed to working

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together with the private sector and the donors in integrating the recommendations ofthe DTIS in its poverty reduction programme.

In the DAG review of the APR, the donors clearly commit to “co-ordinate the responseto the capacity building needs highlighted by the Integrated Framework and DTISprocess” and to further integrate trade aspects in the SDPRP on the basis of thisstudy. This reflects the awareness amongst donors of the importance to streamlineboth processes, which might be crucial to trigger the process to integrate trade intothe national development priorities.

Country ownership of DTIS and the IF process at large

MOTI is committed and serious about private sector development and trade.According to the IMF this process is in good hands with the Minister. During hisclosing comment to the national workshop on the draft DTIS in November, theMinister of Trade and Industry indicated the government’s intent to integrate theresults of this workshop in the PRSP that is due to be revised in December 2003.Nevertheless, it remains to be seen whether the Ministry will succeed in convincingfor example MOR and MOA and institutions such as the national bank of Ethiopia andthe customs authorities of the importance of liberalisation and facilitating, rather thancontrolling, the private sector. It remains questionable whether the IF and the DTIShave thus far had any effect on this.

MOTI tried to obtain ownership of the document. Comments on the first draft werecommunicated directly with the lead consultant, showing the ministry’s commitment tothe quality of the study. It has also actively strived for involving the private sector inthe DTIS dialogue by co-chairing the Public Private Partnership forum, comprised ofthe National Bank, the ministries of Revenue and Infrastructure and sectorassociations.

Across other ministries, awareness of the IF and the DTIS is limited. The ministries ofInfrastructure, Capacity Building, Agriculture, and Revenues have so far not beeninvolved in the process, although they are all official members of the IFSC. MOFEDhas participated in IFTC meetings only occasionally.

Ownership of the IF process among the private sector and civil society is limited. Aparticipatory process with these stakeholders, similar to for example the SDPRPprocess or the workshops organised by the World Bank to prepare its CAS, has nottaken place in the compilation of the DTIS. Only after completion of the draftdocument, stakeholders in all districts were actively informed of the DTIS and the IF.It seems only comments made during the workshop in November will be incorporatedin the final DTIS. Civil society still has to be exposed to the concept of IF/DTIS.

In brief, only MOTI has been actively involved in the IF process. The involvement ofother ministries, the private sector and civil society has been limited.

It is the impression of the evaluator that the limited involvement of other bodies thanMOTI originated not only out of a lack of interest, but also out of a historicaldisinterest for private sector development and trade. It seems the country’s history asa planned economy has left its traces in the government’s approach towards thesecrucial pillars of an open market economy.

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For example, the limited availability of capital and land has been mentioned as acrucial impediment to trade. Both NBE and MOFED remain reluctant to liberalise thefinancial sector and to allow foreign banks to penetrate the market. This reluctancefrustrates the private sector, MOTI, and the process of mainstreaming trade intonational policy plans. The fact that representatives of MOFED and NBE chaired anumber of working groups during the national workshop could further be interpretedas a reflection of this reluctance. By chairing the workshop discussions, theseinstitutions might have tried to keep a grip on their contents. Also the government’s“leading role to play” as mentioned in the Industrial Policy Paper of 2003 bearswitness to its negligence to take up the role as facilitator of private sectordevelopment and industrialisation.

Since the DTIS has primarily been written by the team of consultants, the results ofthe IF process have probably not been influenced too much by the government’sapproach towards private sector development and trade. Nevertheless, it could be animportant determinant of the future impact of the IF process in Ethiopia.

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5 ASSESSING IF PERFORMANCE IN ETHIOPIA

Based on the analysis of the IF process presented in the previous chapter, thischapter presents the scores on the IF performance in Ethiopia. The scores on theefficiency, effectiveness and relevance follow from a uniform scoring methodologydeveloped for all TRTA activities subject to this IOB evaluation. The design of theevaluation is taken up as Annex 1 to this report. For the ranking, a five-point scale isapplied: Poor (P), Weak (W), Fair (F), Good (G), and Excellent (E). An explanation ofthe rating methodology can be found in Annex 2.

5.1 Efficiency

Relation between input and output (Score: F)

The total costs incurred by the international donor community to fund the DTIS areestimated to be USD 355,000. This has resulted in a draft document that has dealtwith the majority of issues as brought forward in both the broad ToR and the DTISConcept Paper for Ethiopia. The DTIS can be criticised, however, for its lack of in-depth analysis, as well as the length of the document (approximately 700 pages).

The long-list of recommendations for the Plan of Action reads well and follows fromthe diagnostic phase of the IF process (DTIS and national workshop). The sameapplies to the draft list of five TRTA projects identified for Window II financing.

Table 5.1 summarises the input-output relationship of the IF process in Ethiopia.

Table 5.1 Input-output relationship of the IF process in Ethiopia Input Output (as of 31-12 2003) EfficiencyFinancial support USD 355,000 Draft DTIS WSix man-months of local officescore agencies

One national workshop in November2003

F

Two man-months IF facilitator Long-list of recommendations for thePlan of Action

F/G

Two meetings six coreagencies with donors

(Incomplete) overview of existingTRTA/CB activities

W

One meeting national IFSteering CommitteeFifteen meetings national IFTechnical Committee

Draft list of five TA priorities ready forsubmission to Window II

F

Time span for preparing and delivering the DTIS (Score: W)

According to Solleveld (2003) the preparation of a DTIS takes between six and twelvemonths. Following the National Workshop, a donors’ programmatic meeting may takeplace a few months later. The starting date of individual projects depends on the

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capacity of donors to include these activities in their program cycle and the availabilityof Window II funding.

The first draft of the DTIS for Ethiopia was delivered in April 2003, which was aboutfive months from the start of the work in late 2002. The second draft was submitted bythe end of August 2003. Reasons for this delay include the time needed by the WorldBank to comment on the study and the comments of MOTI on sensitive sections inthe report dealing with party-affiliated companies and the unwillingness of thegovernment to take on the reform of the financial sector. The team of consultantscomplained there was a lack of available and reliable information. However, a generalcomplaint raised during the workshop was that the team of consultants had refrainedfrom talking to all relevant institutions to obtain data.

By the end of the year 2003, the DTIS for Ethiopia still had to be finalised. The leadconsultant should deliver the final DTIS in the first weeks of 2004. If this deadline isreached, the time span elapsed since the preliminary mission in August 2002 will beapproximately 16 months.

Table 5.2 Efficiency: indicators and scoresIndicators ScoreRelation input-output FTime span W

Overall score on efficiency: Weak (W)

5.2 Effectiveness

The IF focal point at MOTI, as well as some three other staff members of the ministrythat directly worked with the team of consultants during the IF/DTIS process, havegained experience in dealing with trade matters through working with the team.

The local consultants that participated in the process of writing the DTIS should havegained knowledge as well. Since these consultants only occasionally met with theteam of international consultants the transfer of knowledge to them has probablybeen limited. Apart from the ministry’s staff and the local consultants, knowledgegained among the local stakeholders has been negligible, given the limitedconsultations and interaction that the team of consultants had with them.

A result of the national workshop has been an increased awareness among theparticipants of the linkages between trade and poverty reduction. This subject wasexplicitly discussed during the national workshop, which was attended by all relevantministers, the private sector and NGOs.

As far as the effectiveness of the DTIS is concerned, the recommendations putforward on possible TRTA and CB activities to be carried out were rather general andthe chances are small that these recommendations will directly result in theirimplementation. The DTIS has been regarded by donors in Ethiopia as a masterdocument that has summarised practically all impediments to trade and theintegration of Ethiopia into the world economy. A trade document on Ethiopia of thismagnitude has never been produced before. In the SDPRP, the section on privatesector development comprised ten pages and was restricted to outlining the broad

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objectives. The DTIS has gone deeper into the selected sectors and came up withsector-related recommendations to enhance the sector’s performance andcompetitiveness. Yet, the failure to encourage active participation of all stakeholdershas prevented the study from shining a new light on the actual relation between tradeand poverty, the role of the government in fighting poverty with trade policyinstruments, and coming up with detailed and elaborated recommendations on bothgovernment policy and TRTA activities. More preparatory work on the planning,implementation and financing of recommended activities is needed.

The IFTC is currently prioritising the Plan of Action, together with the consultant hiredby UNDP. The prioritisation should lead to a more detailed preparation and costing ofrecommendations put forward in the DTIS. The current status of the draft list of fiveTA priorities is unclear. The ultimate effectiveness will depend on the prioritisation ofthe proposed activities. This also holds for the potential to set up a monitoring systemof the implementation of the activities in the Plan of Action, and the probability ofeffective coordination by local officials of the TRTA to be provided by the six coreagencies and bilateral donors. The sense of momentum created at the time of thenational workshop could evaporate if this process takes too long. This, in turn, mightaffect both the commitment of the other ministries and the willingness of donors tofinance part of the TA activities.

The intention to establish a designated budget line under the existing pooled fund thatwas established to enhance the implementation of the SDPRP is a clear indicator ofboth the government’s and donors’ attention to integrate the Plan of Action in theSDPRP. This would increase both the chances of implementation and monitoring ofthe recommended follow-up.

Coordination among the core agencies has been good, although the World Bankdominated the preparatory and diagnostic phase of the DTIS. The UNDP has taken asupportive approach from the second half of 2003 and has done a good job increating awareness by sending out the DTIS on CD-Rom to stakeholders in allregions. Both the World Bank and the UNDP take a leading role, together with the IFfacilitator, in creating awareness among donors of the IF process at large and thePlan of Action more particularly. Table 5.3 on the next page summarises the output-outcome relationship of the IF process in Ethiopia.

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Table 5.3 Output-outcome relationship of the IF process in Ethiopia Output Outcome EffectivenessDraft DTIS Follow-up actions on DTIS

recommendations being preparedW

National workshop Follow-up actions on impact analysis oftrade policy on the poor, productionchains and employment opportunitiesincluded in the draft Plan of Action, butchances for implementation unknown

P

Long-list of recommendationsfor the Plan Action

No monitoring system yet, but point ofattention among donors and MOTI

W

(Incomplete) overview ofexisting TRTA/CB activities;Plan of Action currently beingprioritised and budgeted

Coordination of TRTA of the six coreagencies by local officials not yet reported,but MOTI committed to take leading role

F

Overall score on the effectiveness of the IF process: Weak (W)

5.3 Relevance

For the relevance of the IF-programme in Ethiopia, an assessment has been made ofthe contribution of the activities under this programme to the achievement of Dutchpolicy objectives. In the design for the evaluation, two questions were identified forthis assessment (see Annex 1):

I. To what extent has the outcome of IF-Ethiopia contributed to the formulation of anational policy by the developing country at the interface of trade anddevelopment?

II. To what extent has the outcome of IF-Ethiopia contributed to the capacity of thedeveloping country to negotiate and implement multilateral trade agreements?

Table 5.4 indicates whether or not these Dutch policy objectives are within the scopeof the TRTA programme, i.e. in the scope of the IF-programme in Ethiopia.

Contribution of IF/DTIS to national policy formulation at the interface of trade anddevelopment in Ethiopia (Score: W)

As indicated by the attention paid to export-led growth and private sectordevelopment in policy documents such as the SDPRP and the Industrial PolicyStrategy Paper, Ethiopia has considered trade and private sector development as apriority policy area for quite some time already. This is also reflected by its interest inthe early stages of the IF. The whole IF process in Ethiopia could therefore be seenas a result rather than a trigger of the current attention to trade and development.

The SDPRP dedicates 10 pages to private sector development without payinganalytical attention to the relation between private sector development and povertyalleviation. The DTIS did analyse the potential impact of trade liberalisation on the

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position of the poor in Ethiopia. The analysis provided a certain order of magnitude ofthe impact of trade liberalisation on poverty, but failed to elaborate on scenarios ofe.g. the effect of recommended government policy or TRTA activities on the incomeposition of the poor. To that extent, the DTIS did not provide new information for pro-poor policy formulation.

The DTIS has further developed the process of incorporating private sectordevelopment in policy formulation initiated in the SDPRP, most notably at MOTI,though did not succeed in providing an in-depth analysis by engaging stakeholdersoutside government circles.

Contribution of IF/DTIS to capacity to negotiate and implement multilateral tradeagreements (Score:P)

The WTO team at MOTI is headed by the IF focal point. With this organisational set-up, the DTIS work should, in theory, enhance both the IF process and the WTOaccession process. However, given the limited human resource capacity at theministry, MOTI does not seem to have taken advantage of the fact that theseprocesses are highly intertwined. Since there has been no local contribution to theDTIS, apart from a small team of local consultants, and staff members of MOTI haveonly been involved in arranging meetings, the IF/DTIS process did not contribute toincreasing capacity to negotiate multilateral trade agreements.

Table 5.4 RelevanceIndicators Indicator within the scope of the

TRTA programmeScores

National policy formulation at the interface oftrade and development

Yes W

Increased capacity to negotiate and implementmultilateral trade agreements

No P

Overall score on relevance of the IF process: Poor/Weak (P/W)

5.4 Specific issues

5.4.1 Country ownership

Country ownership of the IF process at large (Score: W/F)

MOTI has taken the DTIS study very seriously and clearly shows commitment andownership of the process. The minister is convinced that private sector developmentand exports should be key motors of economic development in Ethiopia and promisedduring the national workshop to implement the Plan of Action according to therecommendations made. It remains to be seen how committed the other ministriesare and whether MOTI will be capable of convincing the other ministries to removeimpediments to trade in their responsible areas. So far, only MOFED has occasionallyparticipated in the IFTC meetings.

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The ownership of the study amongst the private sector is different. The consultantshave failed to organise a consultative process similar to the SDPRP workshops or theWorld Bank workshops for the CAS. The private sector thus only became involvedduring the national workshop in November 2003. During the workshop, private sectorrepresentatives all stressed the need to remove the supply side constraint to trade aswell as to orient TRTA directly to the private sector, rather than to the government. Sofar, trade liberalisation has been slow and the private sector is sceptical about theprogress made by the government in facilitating rather than dominating the privatesector. Furthermore, the private sector has doubts whether donors will come forwardto finance the TA and capacity building process.

The diagnostic phase of the DTIS has certainly not been instrumental to enhanceownership of the study among the private sector.

5.4.2 Differential effects

Enabling environment for effective TRTA

In spite of the country’s low level of development, the comments of the private sectorduring the national workshop on the draft DTIS demonstrate the sector is aware of themain hurdles to take in order to enhance its exports. Based on the situation inEthiopia, it is concluded that the effectiveness of the diagnostic phase of the IF doesnot necessarily depend on the stage of economic development of the country.

Nevertheless, domestic conditions other than the country’s stage of development caninfluence the effectiveness of the diagnostic phase of the IF. The historical dominanceof the public sector in the economy seems to be of influence on the effectiveness ofthe diagnostic phase of the IF and the extent to which trade can successfully bemainstreamed into national development plans. The current relations betweengovernmental authorities and the mutual trust between governmental authorities andthe private sector can be seen as an inheritance of Ethiopia’s past as a plannedeconomy (see also Section 4.4).

Ethiopia currently has only a few sectors with export potential. The effects of TRTA onexport expansion would therefore stem from a low base. Starting from a low baseimplies that providing TRTA to sub sectors with potential can be very effective inimproving the export performance in these sectors and in signalling to other sectorsthe positive relation between trade and development. However, a low export basealso implies that the chances for effective TRTA are relatively small.

In order to obtain a more broad based and diversified export development, afavourable climate for private sector development is needed, a climate conducive todomestic and foreign entrepreneurship. TRTA and CB activities will most probablylead to higher scores on effectiveness and relevance, and will probably have moretrickle down effects to other sectors when such an enabling environment is in place.

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5.4.3 Coordination

Agency coordination

During the initial phase of the process, the World Bank practically drove the DTIS.The UNDP became more involved after the IF evaluation in spring 2003. Together,the World Bank, UNDP and the EC Delegation have assisted MOTI and successfullycalled upon donors to convene prior to the national workshop. The World Bankintends to integrate TRTA activities into its SDPRP support and according to theUNDP representative it is reasonable to assume that UNDP will provide funding aswell.

Donor coordination

Coordination among donors is taken to be good. A Private Sector Development donorgroup already existed for a longer period of time. The group is now called the PSD &Trade donor group. Under this umbrella, the donors met prior to the nationalworkshop. The PSD & Trade donor group provides the framework to discuss the TAPlan of Action and to co-ordinate donor assistance in the near future.

It remains to be seen however whether actual pledges can be made. The majority ofdonors are tied up in ongoing country support programmes, with little room tomanoeuvre in reallocating budget lines towards the financing of TRTA. Current donorprogrammes predominantly focus on food security, good governance and ruraldevelopment. For some donors, the current state of development of Ethiopia leavesno option than to focus on food security support. To a very limited extent, donors inthe process of renegotiating their country assistance to Ethiopia report that theremight be a reorientation towards trade and private sector development. So far, onlythe EC Delegation and Italy seem to have a budget line for private sectordevelopment and trade. The EC Delegation has made € 5 million available forcapacity building in Ethiopia.

In conclusion, the evaluator doubts whether the follow-up TA activities can befinanced out of the current donor programmes with Ethiopia and whether there will beadditional budgets available for that purpose.

Dialogue between The Hague and the Netherlands Embassy

The dialogue on IF between The Hague and the Netherlands Embassy has beenlimited. The Embassy has not paid much attention to the DTIS process, leaving this tothe IF agencies on the ground. Also the fact that the Netherlands’ bilateralprogramme does not include private sector development explains the low interest ofthe Embassy for the DTIS.

According to the Netherlands’ Embassy in Addis Ababa, The Hague assumed theDTIS was carried out according to schedule, while the delay was actually slowlyadding up to six to seven months. According to the Netherlands Embassy, the timeavailable to regularly communicate on the IF status with The Hague has been limited.

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5.4.4 Coherence

Since 2003, the PSOM programme has been open for Ethiopia. The NetherlandsEmbassy in Addis Ababa has cooperated closely with a PSOM-team undertaking anappraisal mission in Ethiopia. The first call for tenders resulted in 14 applications, ofwhich five have been approved. The sectors in which PSOM is active correspond withthe sectors of attention of the Embassy; applications are mainly in horticulture and afew in agricultural processing.

The Centre for the Promotion of Imports from Developing Countries (CBI) has anactive interest in Ethiopia and regularly organises workshops and trainings. CBInowadays clearly announces the activities it pursues.

The programmes administered by the Netherlands Development Finance Company(FMO) are not utilised in Ethiopia. The Investment Fund for Least DevelopedCountries (MOL-funds) is open for Ethiopia, but given the limited number of privatisedcompanies and interesting projects, there have been no concrete projectopportunities. For the FMO-TA programmes TAOM (Technical Assistance toEmerging Markets) and IBTA (Investment promotion & Technical Assistance),Ethiopia is not on the country list of beneficiaries. The Netherlands’ tied-aidprogramme Oret/Miliev was closed for Ethiopia in 2001.

As for the Netherlands Foreign Trade Agency, the cooperation with the Embassy islimited, which is in part due to the lack of a Dutch trade attaché in Ethiopia.

5.4.5 Follow-up of earlier IF evaluation

It seems that the recommendations of the earlier IF evaluation (Rajapathirana et al,2000) on linking the IF process to country development strategies and requiring LDCsto prioritise their TRTA needs have been properly taken into account in Ethiopia.

5.4.6 Future Performance

Currently, the IF process is at a decisive stage for its future performance. First, theDTIS needs to be validated by the IFSC. Although a number of donors want to focuson the draft Plan of Action, believing a revised DTIS will not be read anyway, it will beimportant for the credibility of the process towards the local stakeholders that the finalDTIS incorporates most comments made at the national workshop.

The national workshop delivered (i) a list of recommendations for the consultants tobe incorporated into the final DTIS, and (ii) a draft Plan of Action with a matrix of TAactivities. The IFTC also developed a draft list of five TA priorities to be submitted tothe IF Window II trust fund.

If the final DTIS will be approved, the timely prioritising of the Plan of Action will beopportune. MOTI has to come up with detailed and budgeted projects in order toattract TA funding. The list of five “quick wins” that was drafted by the IFTC within amonth after the national workshop is a promising start. It will however depend on thehuman resource capacity of MOTI and the further commitment of the IFTC whetherthe prioritisation and the costing of the projects can be completed in time.

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Apart from the developments at MOTI, it is crucial for the development of exports inEthiopia that the government addresses the crosscutting impediments such asaccess to finance, high collateral, and unavailability of land. The slow liberalisation ofthe financial sector, as well as the “leading role to play by the government” in thecountry’s industrial development are indicators pointing to the persistent attitude ofinfluential state institutions to dominate rather than to facilitate the private sector. Ontop of this, both the private sector and civil society should be more involved in theprocess.

According to the “IF Trust Fund Window II submission”, the set of five priority actionsneeds to be undertaken to “complete the mainstreaming process” and to “strengthenkey institutions and facilitate the coordination role of MOTI.” The extent to which thesetwo objectives will be reached not only depends on availability of Window II funding,but also on the commitment of the government.

The current draft Plan of Action includes a range of activities that directly concur withthe Dutch policy objective to enhance the local business climate. On a sector level,the focus on horticulture and agro-processing should provide opportunities toincorporate TRTA activities in the bilateral programme of the Netherlands in Ethiopia.

5.5 Conclusion and policy issues

Efficiency, effectiveness and relevance of the IF process in Ethiopia

The scores on efficiency and effectiveness of the IF process in Ethiopia are weak(W). The score on relevance of the IF process in Ethiopia is poor/weak (P/W).

Main objectives of the IF: mainstreaming of trade and enhanced agency coordination

As stated in the DTIS Concept Paper, the DTIS “derives its main thrust for tradestrategy and TA from the enabling environment framework provided by the PRSPand, as such, should become a necessary complement to it.” It is clear therecommendations put forward in the second draft of the DTIS have been too generalto label the DTIS as a “necessary complement” to the SDPRP. Nevertheless, the factthat the government committed itself to implement the recommendations of the DTIS(see APR 2003) reflects that, at least on paper, there is some sense ofmainstreaming of trade taking place in Ethiopia. The IF process may have contributedto this.

The responsibility of generic trade impediments such as access to and cost of land(MOR), access to finance (NBE) and access to infrastructure (Ministry ofInfrastructure) lays at other institutions than MOTI. The commitment and ability ofinstitutions such as NBE, MOFED, MOA, and MOR to mainstream trade into theirdevelopment strategies is questionable.

In short, the mainstreaming of trade as a result of the IF process in Ethiopia has notbeen convincing.

Coordination among the six core agencies has improved during the DTIS process.The World Bank dominated the initial stages of the DTIS, but the UNDP took up its

42

role as a core agency from the second half of 2003. From then on, the World Bankand the UNDP have taken a leading role in the process together. With the support ofthe lead facilitator, they have assisted the IF focal point and created awarenessamong donors of the IF process at large and the Plan of Action more particularly. TheWorld Bank, UNDP and IMF all expressed their intention to finance TRTA activitiesonce the government validates the Plan of Action.

Interaction with Geneva

Among donor delegations in Geneva, there is no clear view on the status of the IFprocess and on the interest of donors in the field. The general idea in Geneva is thatIF is the only way to reach an integrated multilateral donors’ effort to provideTRTA/CB activities to developing countries. The IF therefore deserves priorityattention. However, only a few donors are equipped to pay sufficient attention. Manydonors focus on the bilateral programme with the country and neither have the timenor the experience to be involved in trade-related matters in the DTIS. One donor thatplays a strong role in the IF process in Geneva reportedly was unaware of its statusas member of the IFSC in Ethiopia. The bilateral donors showed their interest in theprocess only after the delivery of the second draft of the DTIS and a strong push byUNDP and the EU..

In the case of Ethiopia, it is unclear to what extent its eligibility against the IFadmission criteria has been tested. In particular, indicators to assess the criterion of“a conducive operational country environment”, inter alia the probability of effectivedonor response and the pace of domestic reform, have apparently not been takeninto account.

Country ownership

The diagnostic phase of the DTIS did not include an active participatory process of allstakeholders. The ownership of the DTIS among the private sector and civil society islimited.

Coherence of Dutch policy objectives

If the Netherlands intends to intensify its TRTA activities to enhance the businessclimate in its partner countries, as indicated in the annual plan of DDE for 2004, it isimportant to equip the Embassy (in Addis Ababa) with the necessary financial andhuman resources to integrate these activities into its bilateral programme with thecountry.

PART B

IF IN YEMEN

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45

1 INTRODUCTION

1.1 Background of the IF Programme

WTO Ministers adopted a WTO Plan of Action for the Least-Developed Countriesduring the first Ministerial Conference in Singapore in 1996, which envisaged a closercooperation between the WTO and other multilateral agencies assisting least-developed countries in the area of trade. There were six agencies involved: the IMF,ITC, UNCTAD, UNDP, the World Bank and the WTO. These agencies agreed that anIntegrated Framework for the provision of trade-related technical assistance to thesecountries had to be drawn up.

The Integrated Framework sought to increase the benefits that least-developedcountries derive from the available trade-related technical assistance with a view toassisting them to enhance their trade opportunities, to respond to market demandsand to integrate into the multilateral trading system.

The Framework aimed to ensure that the trade-related technical assistance activitiesare demand-driven by the least-developed countries and to enhance ownership bythese countries of the trade-related technical assistance being provided.

The trade-related technical assistance activities were based upon an assessment ofneeds drawn up by the least-developed countries themselves. Upon completion of aneeds assessment and a response of staff of the six agencies, a least-developedcountry organised a country-specific roundtable meeting to discuss a proposedagenda of trade-related technical assistance projects to meet their needs.

A review of the integrated framework in 2000 found that many of the above aims werenot realised due to a number of principal issues among which:

� Different perceptions regarding the objectives of the IF between least-developedcountries and donors (LDCs expected additional funding; donors expected bettercoordinated trade-related TA);

� The IF process had no link to the overall development assistance architecture;� The IF was not sufficiently demand driven in the minds of LDC officials;� Coordination was found more complex than anticipated between the LDCs and

donors, among donors, and between the six agencies themselves.

The WTO Sub-Committee on Least-Developed Countries adopted on 12 February2001 a proposal for an Integrated Framework Pilot Scheme to improve the functioningof the Framework.

The most important element of this IF reform included selecting three pilot countriesthat had demonstrated a clear choice and commitment to mainstream trade as part oftheir country development strategies. This would ensure that the trade-relatedtechnical assistance that would follow would be fully supportive of the developmentobjectives of the country. For this purpose trade integration studies would be madewhereby the countries would be fully assisted and supported by the IF agencies withfield offices in the concerned LDCs.

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Although it was recognised that the integration studies had to be country-specific,broad terms of reference were formulated consisting of the following components:

� A review and analysis of the country’s economic and export performance.Analysis of trends in export and import to GDP ratios, the speed and extent ofexport diversification (across products and markets), intra-industry trade trends,sources of foreign exchange earnings by sector including services. Analysis ofthese indicators will be forward- as well as backward-looking;

� A description and assessment of the macroeconomic environment and thecountry’s investment climate;

� Analysis of the international policy environment and specific constraints thatexports from each country face in international markets;

� Analysis of a small number of key labour-intensive sectors where the privatesector perceives a potential for output and export expansion and the poor stand tobenefit either in terms of employment and/or lower prices;

� Formulation of a pro-poor trade integration strategy with recommendations thattake into account the likely impact of proposed actions on the level and structureof poverty to ensure that the strategy has the desired positive impact on the poor.Analysis of winners and losers from the policy changes and identification ofpossible detrimental impact on the poor of specific policies.

A national workshop would discuss the diagnostic trade integration study andprioritise the technical assistance activities identified by this study. The tradeintegration study also would lead to mainstreaming trade into the country’sdevelopment strategies, including its Poverty Reduction Strategy Paper. The trade-related technical assistance programme following the national workshop would bepresented to the donor community.

More background information can be found in a brief profile of the IntegratedFramework taken up in section A.1.1 of Annex 1. This Annex, in addition, presentsthe design of the evaluation research that has been applied in this country report.

1.2 Trade Policy regime of Yemen

Yemen has a liberal trade regime. The current tariff structure consists of four tariffrates, 5, 10, 15 and 25 percent. According to the Diagnostic Trade Integration Study(DTIS), the simple average tariff is 12.6 percent and almost 90 percent of tariff lineshave a maximum rate of 15 percent. The higher tariff rates apply to processedproducts and valuables such as imported cars and cameras. Import licenses are notrequired except for products that bear clear risks regarding health, safety or security.

On the export side, there are no export taxes and export licenses are only required forthe preparation of trade statistics. Yemen scores a 2 on the IMF trade restrictivenessindex that has a scale of 1 to 10 (IMF Staff Report for the 2002 Article IV Consultationand Staff-Monitored Program).

The Ministry of Industry and Trade (MoIT) is in charge of formulating national tradepolicies. At sector level, important ministries with respect to trade matters are theMinistry of Agriculture and Irrigation, the Ministry of Fisheries, the Ministry ofTelecommunications and the Ministry of Tourism and Environment. The Ministry ofFinance and the Customs Authority are dealing with tariff matters. Tariff changes are

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discussed in a Tariff Council, which is chaired by the Minister of Finance. At the timeof the mission there was a discussion to reduce customs tariffs to lower the incentivefor smuggling of valuable goods.

Yemen has concluded bilateral trade agreements with Saudi Arabia in 1996 and withIraq in 2001. The government is also in favour of pursuing regional integration withthe Gulf Cooperation Council (GCC) and the Greater Arab Free Trade Area (GAFTA).

The Government furthermore wants Yemen to accede to the WTO and formallyapplied for accession in March 2000. To this end, a Communication and CoordinationOffice with the WTO has been set up within MoIT, in addition to a National Committeefor Preparation and Negotiation with WTO (NCPN-WTO). The latter Committee,which is made up of 22 members mainly from the public sector, has been occupiedwith delivering a Memorandum on the Foreign Trade Regime. This memorandum hadto be submitted by Yemen to the Working Party that discusses the terms andconditions of Yemen’s WTO accession.

1.3 Trade Performance of Yemen

Trends in total trade

The total trade of Yemen showed an increase of 8 percent from 1997 to 2001, with alow of USD 3.6 billion in 1998 and a high of USD 5.2 billion in 2000. The tradebalance of Yemen has been positive in all but one year (1998). The changes of thetotal trade and trade balance figures are caused by the merchandise exports, as themerchandise imports remained stable during the 1997-2001 period. The changes inthe merchandise exports of Yemen are almost solely caused by the large part of oil inYemen’s exports (over 90 percent) and show the same pattern as the development inthe crude oil price during the same period.

In 2001 the total trade per capita was USD 252, as opposed to USD 114 for non-oiltotal trade per capita. A similar picture is revealed by the ratio of total trade over GDP.With oil exports included, the ratio has been around 60 percent, without oil exports itis in the range of 25-30 percent.

Table 1.1 Trends in total trade of Yemen, 1997-20011997 1998 1999 2000 2001

Merchandise Exports (mln. USD) 2,362.4 1,619.9 2,314.2 3,203.3 2,752.4Merchandise Imports (mln. USD) 1,959.9 1,934.3 1,787.6 1,954.1 1,950.3Total Trade (mln. USD) 4,322.2 3,554.2 4,101.8 5,157.5 4,702.7Trade Balance (mln. USD) 402.5 -314.4 526.6 1,219.2 802.2Total trade/GDP (%) 62.9 56.9 56.4 60.4 58.6Total trade (non oil)/GDP (%) 29.9 32.8 26.5 24.8 26.5Total trade per capita (USD) 265.3 211.0 235.7 286.5 252.4Total trade (non oil) per capita (USD) 126.0 121.7 110.8 117.6 114.1

Source: UNCTAD, PC-TAS, 2003; United Nations GDP and population data

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Merchandise Exports

Merchandise exports rose from USD 2,362 million in 1997 to USD 2,752 million in2001. In 1998 merchandise exports declined, which was caused by low oil prices.Exports as part of GDP shows a constant level between 32 and 38 percent, with theexception of 1998. The exports per capita show a more capricious course, andranged between USD 96 and USD 178.

Table 1.2 Merchandise exports of Yemen, 1997-20011997 1998 1999 2000 2001

Merchandise Exports (mln. USD) 2,362.4 1,619.9 2,314.2 3,203.3 2752.4Annual export growth rate (%) -31.4 42.9 38.4 -14.1Exports/GDP (%) 34.4 25.9 31.8 37.5 34.3Exports per capita (USD) 145.0 96.2 133.0 178.0 147.7

Source: UNCTAD, PC-TAS, 2003; United Nations, GDP and population data

Because of the volatility of the oil price, the oil exports and oil exports per capita arebuoyant too (see Table 1.3). Contrary to the oil exports, the non-oil merchandiseexports show an upward trend during the 1997-2001 period. The non-oil merchandiseexports per capita have a less strong upward trend because of population growth.

Table 1.3 Oil and non-oil merchandise exports of Yemen, 1997-20011997 1998 1999 2000 2001

Merchandise exports (oil) (1997 = 100) 100.0 66.3 95.7 133.9 113.5Crude oil price (1997 = 100) 100.0 69.9 93.7 146.8 125.9Merchandise exports (mln. USD, oil) 2,270.0 1,504.0 2,173.3 3,040.2 2,577.1Exports per capita (USD, oil) 139.3 89.3 124.9 168.9 138.3Merchandise exports (mln. USD, non oil) 92.3 115.9 140.8 163.1 175.3Exports capita (USD, non oil) 5.7 6.9 8.1 9.1 9.4


Yemen needs to develop non-oil exports since the country is highly dependent on oilrevenues and labour remittances. A comparison with other countries in the MiddleEast confirms that the non-oil exports in Yemen have to be developed from a very lowbasis. According to World Bank (2003) the non-oil exports per capita of Yemen isUSD 11 measured over the 1998-2000 period; countries like Jordan, Syria and SaudiArabia score on this indicator an amount of USD 389, USD 76, and USD 309,respectively.

Composition of merchandise exports

Over 90 percent of Yemen’s exports consist of oil. Other (relatively) large productgroups are fish, coffee & tea, raw hides & skins and leather, machinery and ediblefruit, nuts and peel of citrus fruit. All these groups, except machinery, show growth inthe 1997-2001 period.

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Table 1.4 Composition of Yemen’s merchandise exports, 1997-20011997 1998 1999 2000 2001

Mln.

USD

% Mln.

USD

% Mln.

USD

% Mln.

USD

% Mln.

USD

%

Minerals 2,270.0 96.1 1,504.0 92.8 2,173.3 93.9 3,040.2 94.9 2,577.1 93.6

Fish 43.7 1.8 38.5 2.4 52.9 2.3 64.7 2.0 74.5 2.7

Coffee &

tea

6.1 0.3 10.9 0.7 14.8 0.6 11.2 0.4 14.6 0.5

Rawhides &

skins and

leather

8.6 0.4 8.2 0.5 4.7 0.2 5.6 0.2 10.4 0.4

Machinery 6.3 0.3 2.6 0.2 11.5 0.5 7.1 0.2 6.6 0.2

Edible fruit,

nuts and

peel of

citrus fruit

0.0 0.0 3.1 0.2 6.2 0.3 11.4 0.4 13.1 0.5

Other 27.8 1.2 52.4 3.2 50.7 2.2 63.0 2.0 56.2 2.0

Total 2,362.4 100.0 1,619.9 100.0 2,314.2 100.0 3,203.3 100.0 2,752.4 100.0Source: UNCTAD, PC-TAS, 2003

Yemen’s manufacturing export ratio (1.1 percent of total merchandise exports) issecond lowest among 230 countries in the world, only next to Iraq. In addition,Yemen’s manufacturing exports were stagnant during the late 1990s. The averagereal export growth rate of manufacturing exports from 1996 to 2000 was –1.4 percentcompared to 2.1 percent for the group of 41 low-income countries. The export ofmanufactures from Yemen to neighbouring countries is weak. The mainmanufactured exports are petroleum products, household cleaning products,beverages and tobacco products, textile and leather machinery, and non-electricparts and appliances.

A constant market analysis decomposes trade growth of manufactured exports intothree factors: i) world trade effect, representing the growth in Yemeni manufacturedexports due to the growth of world imports; ii) composition effect, which measures thechanges in Yemeni manufactured exports due to the fact that world consumption forvarious products is growing at different rates; iii) competitiveness effect, representingthe growth of Yemeni manufactured exports due to a change in Yemen’s marketshare.

Table 1.5 Constant market analysis of manufactured exports of YemenManufactured Exports1991-1994 1994-1999

World Trade Effect 214.8 97.1Composition Effect 26.6 4.2Competitiveness -141.4 -1.3Total 100.0 100.0

Source: Someya (2001)

Table 1.5 shows that the growth of manufactured exports in the 1990s was dominatedby the world trade effect (97 percent of the export growth during 1994-1999 and 215percent during 1991-1994). The competitiveness effect explained the poorperformance of manufactured exports, especially in the early 1990s. The modest

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composition effect suggests that Yemen’s export structure has not benefited muchfrom structural changes in world demand.

Destination of merchandise exports

The three largest destination countries of Yemen’s exports are Thailand, China andSouth Korea. These three countries account for almost 65 percent of the country’sexports. Exports destined to the EU and to neighbouring countries (Ethiopia andSaudi Arabia) appear to be either negligible or very limited.1

Table 1.6 Destination of Yemen’s merchandise exports, 1997-20011997 1999 2001 Average

Mln. USD % Mln. USD % Mln. USD % %

Thailand 479.8 20.3 642.7 27.7 673.8 24.5 24.4

China 650.9 27.5 556.9 24.0 451.4 16.4 23.8

South Korea 472.6 20.0 308.7 13.3 434.2 15.8 16.6

USA 18.2 0.8 20.0 0.9 233.1 8.5 4.7

Ethiopia 4.7 0.2 111.8 4.8 0.0 0.0 3.0

Singapore 43.7 1.8 195.9 8.5 367.1 13.3 7.2

Saudi Arabia 0.0 0.0 19.4 0.8 0.0 0.0 0.5

Japan 198.8 8.4 57.1 2.5 57.9 2.1 3.9

Brazil 229.3 9.7 0.0 0.0 37.0 1.3 2.7

Australia 0.0 0.0 19.4 0.8 0.0 0.0 0.5

Germany 38.9 1.6 4.5 0.2 1.1 0.0 0.9

Malaysia 0.0 0.0 0.0 0.0 295.3 10.7 2.6

India 11.8 0.5 261.4 11.3 0.0 0.0 2.4

Croatia 8.3 0.4 5.8 0.2 6.8 0.2 0.3

Other 207.9 8.8 74.7 3.2 122.2 4.4 5.1

Total 2,364.9 100.0 2,317.2 100.0 2,754.6 100.0 100.0Source: UNCTAD, PC-TAS, 2003Note: Average is the average share of the destination country over the 1997-2001 period.

Revealed Comparative Advantage (RCA) analysis is done for Yemen exports bySomeya (2001) at two levels, one against world exports and another against GCCand East Africa, -including Djibouti, Eritrea, Ethiopia, Somalia and Sudan. Yemen’sRCA’s against world exports show that there are 10 commodities which have a RCAgreater than unity in 2000, including live animals, fresh fish, coffee, hides and skins,silver and platinum ores, petroleum, but none of them manufactured export items.

RCA analysis against GCC and East Africa shows an increase from 10 to 27 exportcommodities that have RCA’s greater than unity in 2000. Major items that have highRCA’s are fresh fruits and nuts, fresh or dried vegetables, margarine and shortening,and tobacco products.

Merchandise imports

The merchandise imports amounted in 2001 to USD 1,950 million. The merchandiseimports remained stable during the 1997-2001 period, with a low in 1999 of USD 1 It should be noted that unregistered trade is taking place with Saudi Arabia. There is, however, onlyanecdotal information available on this informal trade.

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1,788 million. Both imports as part of GDP and imports per capita declined in the1997-2001 period.

Table 1.7 Merchandise imports of Yemen, 1997-20011997 1998 1999 2000 2001

Merchandise Imports (mln. USD) 1,959.9 1,934.3 1,787.6 1,954.1 1,950.3Annual import growth rate (%) -1.3 -7.6 9.3 -0.2Imports/GDP (%) 28.5 30.9 24.6 22.9 24.3Imports per capita (USD) 120.3 114.8 102.7 108.6 104.7


Composition of imports

Yemen imports a wide variety of products, as can be observed from the highpercentage of the category ‘other’ in Table 1.8. The major imported products can bedivided in two groups: equipment and food products. The largest imported productgroups were machinery, cereals, electrical and electronic equipment, transportationequipment, and milling products.

Table 1.8 Composition of Yemen’s merchandise imports, 1997-20011997 1998 1999 2000 2001

Mln.

USD

% Mln.

USD

% Mln.

USD

% Mln.

USD

% Mln.

USD

%

Machinery 196.4 10.0 231.3. 12.0 209.8 11. 209.9 10.7 232.9 11.9

Cereals 118.8 6.1 121.5 6.3 137.4 7.7 173.5 8.9 146.4 7.5

Electrical

equipment

139.0 7.1 137.8 7.1 120.2 6.7 114.2 5.8 146.4 7.5

Transportation

equipment

96.5 4.9 106.4 5.5 111.2 6.2 174.8 8.9 95.0 4.9

Milling products 172.4 8.8 149.8 7.7 107.8 6.0 69.8 3.6 37.4 1.9

Sugars and

sugar

confectionery

133.7 6.8 69.1 3.6 71.2 4.0 102.8 5.3 4.5 4.8

Iron and steel 82.5 4.2 69.5 3.6 75.5 4.2 68.4 3.5 92.5 4.7

Dairy products,

eggs and honey

61.7 3.1 72.8 3.8 67.2 3.8 75.8 3.9 87.8 4.5

Animal vegetable

fats and oils

68.6 3.5 78.4 4.1 67.1 3.8 55.9 2.9 37.4 1.9

Pharmaceutical

products

47.6 2.4 60.2 3.1 64.3 3.6 48.8 2.5 69.4 3.6

Other 842.7 43.0 837.6 43.3 756.1 42.3 860.2 44.0 910.1 46.7

Total 1,959.9 100.0 1,934.3 100.0 1,787.6 100.0 1,954.1 100.0 1,950.3 100.0Source: UNCTAD, PC-TAS, 2003

Sources of imports

The major sources of imports of Yemen are the USA, China, and France. These threecountries account for one fourth of the imports of Yemen. Imports from China, inparticular increased significantly in the 1997-2001 period.

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Table 1.9 Sources of Yemen’s merchandise imports, 1997-20011997 1999 2001 Average

Mln.

USD

% Mln.

USD

% Mln.

USD

% %

USA 153.2 7.4 155.6 8.6 184.5 9.1 8.6

China 100.5 4.9 126.7 7.0 209.7 10.4 7.2

India 57.6 2.8 80.2 4.4 0.0 0.0 3.6

Oman 59.8 2.9 91.1 5.0 46.7 2.3 4.9

France 382.6 18.5 130.2 7.2 174.4 8.6 9.8

Thailand 52.3 2.5 58.9 3.3 57.8 2.9 3.1

Italy 106.0 5.1 145.5 8.1 89.5 4.4 6.1

Germany 74.3 3.6 80.6 4.5 100.0 5.0 4.2

Japan 84.4 4.1 79.6 4.4 67.8 5.0 4.2

Brazil 107.9 5.2 60.4 3.3 105.3 5.2 3.8

Australia 105.6 5.1 15.4 0.9 17.8 0.9 2.4

Indonesia 64.5 3.1 55.8 3.1 88.6 4.4 3.4

United Kingdom 118.0 5.7 104.9 5.8 85.6 4.2 5.1

Turkey 86.3 4.2 89.0 4.9 100.4 5.0 4.1

Netherlands 73.3 3.5 52.1 2.9 48.8 2.4 2.9

Other 443.2 21.4 479.1 26.5 643.7 31.9 26.7

Total 2,069.4 100.0 1,805.0 100.0 2,020.5 100.0 100.0Source: UNCTAD, PC-TAS, 2003Note: Average is the average share of the source of imports over the 1997-2001 period.

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2 DEVELOPMENT PERFORMANCE AND THE ROLE OF TRADE

2.1 Poverty situation

Yemen is classified as a least developed country. About 42 percent of the country’shouseholds live below the poverty line. Poverty is a rural phenomenon in Yemen as83 percent of the poor lives in rural areas. Pockets of poverty are concentrated in fourGovernorates: Taiz, Ibb, Sana’a Governorate, and Hodeidah. About 84 percent of thepoor work in the private sector, of which some 47 percent is engaged in agriculture.Low agricultural productivity is a major impediment to getting better incomes in ruralareas.

In 1996, the Government began with setting up social safety net programmes,including the Social Welfare Fund (SWF) and the Social Fund for Development(SFD). The SWF provides cash assistance to poor families; the SFD supportscommunity development projects among others with micro credits.

2.2 Development plans

2.2.1 2nd Five Year Socio-economic Development Plan

The First Five Year Plan (FFYP) was implemented between 1996-2000. During thisperiod, the authorities decided to prepare the Second Five Year Plan (SFYP) for theperiod 2001-2005 within a long-term strategy, Yemen’s Strategic Vision 2025. TheSFYP was therefore the first medium-term development plan embedded in a long-term strategy.

The SFYP describes the development challenges, reviews the economic performanceduring the FFYP and gives a framework for macro policies and a developmentstrategy. The plan also has chapters on trends in economic growth, sectoral plans,labour market and employment, poverty and social safety net and enhancing the roleof the private sector.

The SFYP aims to create an effective partnership between the government and theprivate sector whereby the state will establish the legal framework, create necessaryinstitutions, provide economic stability, complete infrastructure, provide publiceducation and health services and protect the environment. The private sector shouldbe able to compete in domestic and foreign markets and contribute towards achievingthe goals of the SFYP. Among the quantitative targets of the SFYP is a real GDPgrowth rate of 5.6 percent per annum.

The agricultural and fishery sector is seen important by the SFYP as this sectoremploys 54 percent of the total work force and contributes about 20 percent to GDP.Private investments have been made recently in large-scale commercial farming incultivable valleys and in commercial deep-sea fishing.

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The SFYP mentions that the marginal contribution of the private sector to non-oilexports is due to the poor quality of products, deficiency of business andinfrastructure services, deficient performance of the judiciary and the high costs offinancing private investments.

Smuggling and dumping cheap goods that do not conform to market specificationscause (could cause, or has caused?) a fall in domestic production. The globalisationand liberal foreign trade regime, in combination with a weak national economicstructure and low level of competitiveness furthermore form a threat to local economicactivities according to the SFYP.

Directions given by the SFYP for strengthening the private sector in leading theeconomic development of the country include:

� Strengthening the investment environment;� Diversifying the productive capacity of the private sector; and� Developing export capabilities of the private sector in the fields of agriculture,

fisheries, tourism, free zone of Aden and low wage industries (garment andleather wear, assembling home appliances).

2.2.2 Yemen Strategic Vision 2025

In this strategic vision up to the year 2025, an annual real GDP growth of 9 percentand a GDP per capita growth of 2.5 percent per annum are targeted. These ambitiousgrowth rates are to be realised through investments in a number of promising sectors.These sectors and sources of growth include: ‘the rejuvenation of the Coastal Areas,accelerating the wheel of industrialisation, development of agriculture whilerationalising the use of scarce water resources, using the petroleum sector to play amajor role in stimulating the economy, balanced exploitation of fisheries, developmentof the tourism sector, orientation towards exports, and supporting duty free zones.’

The strategic vision takes stock of the need to persuade Yemenis themselves toinvest in their own country by creating a better investment environment. Thedocument mentions an investment environment free of red tape, corruption anddisputes over land ownership, cleaner and quicker litigation proceedings, and firmerprotection of property ownership rights. After that, …’we will find that Yemeniemigrants and Yemeni expatriates overseas throughout the world, will be the first torush towards pumping their capital funds, which are estimated to amount to USD 20-30 Billion, for investment in Yemen.’

2.2.3 PRSP

By constitution, the Government of Yemen is required to make five-year developmentplans. But for Least Developed Countries (LDCs) it is also a condition for obtainingIDA loans to make a Poverty Reduction Strategy Paper (PRSP). Since Yemen’sSFYP had a format different from the PRSP as required by the IMF and World Bank,the SFYP could not be accepted as a PRSP according to the Ministry of Planning.Therefore the Government wrote an interim PRSP in early 2000. The Governmenthas put poverty issues of this I-PRSP in the SFYP and the approach is to integratethe two documents into one by the end of 2005.

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The PRSP was developed via a broad consultative and participatory process. Draftsof the I-PRSP were presented in seminars and workshops in 2001 during whichleaders of the civil society, workers syndicates, NGOs, women and professionalassociations, academicians, political parties, the media, and private sectorrepresentatives participated. Meetings were also held at Governorate level,involving local authorities and regional universities. To hear the concerns of the poorand their priorities, the PRSP Preparation Committee, along with UNDP and the UK’sOXFAM undertook a survey in 20 districts where the poverty incidence exceeded 50percent of the total population.

A 21-member PRSP Preparation Committee was created to ensure that the PRSPwould be prepared in line with the SFYP, the comments on the I-PRSP, and theoutput of the seminars and workshops. The seminars, for example, revealed manyviewpoints, especially those related to social and basic services, infrastructure, theimportance of agricultural development and lifting the subsidy for diesel fuel, whichmany considered to be an essential cost element for the feasibility of agriculture.

The PRSP of May 31, 2002 is based on four main pillars for poverty reduction:

I. Achieving economic growth;II. Human resources development;III. Improving infrastructure; andIV. Ensuring social protection.

The general goal of the PRSP is to reduce poverty by about 13.1 percent during theperiod 2003-2005, to decline to 35.9 percent in 2005.

The private sector is expected to account for the first pillar of poverty reduction. Thecontribution of trade as one of the sources of economic growth is not mentioned in theExecutive Summary of the PRSP.

The goal under the first pillar is to attain an average growth rate of 6.3 percent fornon-oil GDP. Under external sector policies, the PRSP aims ‘to encourage exportsand to increase foreign investments so as to help in increasing job opportunities, ingeneral, and for the poor in particular, considering that the growth of exports, initiallyrests on commodities that are labour intensive and require minor skills, which can befound with the poor.’ For manufacturing industry, including textiles, clothing andhandicrafts, a role is seen in enhancing non-oil exports. Also industrial ores andconstruction rocks are to be studied for the potential promotion of investment in theirproduction and exportation.

The Yemen Cabinet issued a Decree in 2002 establishing the mechanism for theimplementation, monitoring and follow-up of the PRSP. A ministerial committee,chaired by the Deputy Prime Minister, oversees the execution of the PRSP; atechnical committee, chaired by the Vice Minister of Planning, is in charge of themonitoring and implementation of PRSP.

The IMF/WB joint staff endorsed the PRSP as providing a good framework for theefforts towards poverty reduction, credible to the joint assessment and providing asound basis for concessional assistance. In the staff assessment of July 15, 2002, theIMF/WB mention as a risk to the PRSP a weak implementation capacity and a weakpolitical commitment to the more difficult reforms. These reforms are needed tosustain fiscal adjustment and address governance issues to improve delivery of public

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services to the poor and provide an adequate business environment for private sectordevelopment.

2.3 Existing Trade-Related Programmes of IF Agencies

2.3.1 World Bank

The World Bank (2002) reports on economic growth in Yemen. The report, compiledat the request of the Minister of Planning and Development, studies the sources ofeconomic growth for the preparation of the country’s Poverty Reduction StrategyPaper. The report describes the private sector environment based on a private sectorsurvey held among 947 companies in five governorates in November 2001. The mainconclusions of this survey were:

� The business environment is characterised by weak governance and corruption,high taxes and inefficient tax administration, uncertain access to electricity, landand judicial remedies;

� The investment climate is characterised by lack of a level playing field for foreignand domestic firms;

� Small firms face significant obstacles to growth in value added and specialisation;� Larger firms tend to do better because they build up in-house capacity in critical

inputs and have better access to external markets and finance.

The main recommendation of the report is to improve the governance structure andprivate sector environment to accelerate economic growth in agriculture, fishing,tourism and manufacturing. Without tackling the governance and business climateobstacles, the medium and long-term growth and investment targets of theGovernment are unlikely to be met. Besides removing the above obstacles, the reportrecommends demonstration effects in the short run through enclaves in the form ofindustrial- and free zones.

In 2000, the World Bank financed a nation-wide Baseline Survey among micro andsmall-scale enterprises in Yemen. For this Baseline Survey, the Central StatisticalOffice went out to 120 enumeration areas spread over the country. Following a door-to-door approach 5,000 questionnaires of active enterprises were delivered. Thegeneral profile of the micro and small-scale entrepreneur came out as follows:

� He or she is of medium age; 90 percent are married;� Slightly more than half operate from a commercial building; one third is mobile,

while 10 percent is operating as a household enterprise;� Two-thirds of the entrepreneurs are illiterate or semi-literate;� Seventy percent of the entrepreneurs are dependent from the enterprise as the

single source of income;� The entrepreneurs almost entirely deliver to final consumers;� Female entrepreneurs are very rare; of the micro and small-scale enterprises only

three percent is female owned;� Female entrepreneurs are mainly in textiles and largely located in rural areas;� 86 percent of female entrepreneurs operate from within a housing unit;� 84 percent of female entrepreneurs are illiterate as opposed to 31 percent of male

entrepreneurs;

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� The trend in female participation in entrepreneurship is disappointing as femalesaccount for only two percent of the start-ups.

� The main business problems experienced by micro and small-scale entrepreneursinclude high competition, inflation, infrastructure and insufficient demand. Thehigh competition is felt mostly in medium and large cities.

From a menu of business support services, the micro and small-scale enterprisesdesire most strongly financial support, advice on domestic marketing and businessplanning. In manufacturing, more technological services were demanded such asadvice on production technology. The medium-sized enterprises with 5-50 workersexpressed a larger need for business support than the self-employed micros.

The Baseline survey recommended business support organisations to take account ofthe low literacy levels of the micro and small-scale entrepreneurs. Trainingprogrammes should include elementary courses and emphasise mastering basicbusiness skills. For more educated entrepreneurs more advanced training can beoffered to upgrade their marketing and to diversify their client base. The Baselinesurvey identified potential high growth target groups, including self-employedengaged in the hotel, travel agent and phone services and food products, as well assmall-scale enterprises in grain milling, manufacturing and personal services.

The Country Assistance Strategy of August 6, 2003 is based on the Government’sPRSP and is the World Bank’s business plan for FY03-05 in support of Yemen’sPRSP. The main objectives of this CAS are:

� Improved governance;� Attractive investment environment to generate job opportunities;� Better human capital; and� Ensuring environmental sustainability.

World Bank projects under the heading of private investment support include: a tradefacilitation project in three ports (Port Cities Development Project); projects ongovernance (civil service reform, legal and judiciary system); roads, water and powerprojects; and the multi-donor, Bank-led diagnostic study under the IntegratedFramework.

The World Bank has a resident office in Sana’a, which has led the work for the DTIS.

2.3.2 IMF

IMF (2002) mentions that Yemen’s short-term outlook is stable but that widespreadpoverty, inadequate per capita growth and a projected steady decline of oil revenueare core medium-term challenges.

Structural reforms targeted for civil service reform and customs and taxadministration, and fiscal decentralisation are welcomed by IMF (2002).

IMF (2002) mentions that the ambitious growth objectives of the PRSP will depend onimprovements in governance and removal of structural impediments to private sectoractivity.

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IMF (2002) points to the difference between the average tariff rate of 12.6 percentand the actual customs revenues collected at present. The staff appraisal reportestimates that the actual customs revenues could be nearly doubled. Hence, theprogress in implementing the ASYCUDA system at Sana’a airport and other entrypoints is welcomed by the report.

In October 2002, the Board of IMF authorised a three year renewal of thePoverty Reduction and Growth Facility, with the remark that the pace of reforms wasdisappointing, which was quantified by the country only meeting two out of fiveperformance targets.

Technical Assistance of the Fund is mainly through missions; for example, missionsby peripatetic experts on customs reforms. The IMF was represented with oneinternational expert in the DTIS team of consultants.

2.3.3 WTO

The WTO Secretariat has provided some technical assistance to the Communicationsand Coordination Office with WTO. Yemeni trade officials furthermore attended tradepolicy courses in Geneva.

In addition, according to the Doha Development Agenda Data Base the WTO hasheld a number of regional workshops and seminars for Yemen in 2001 and 2002among others on SPS and TBT, trade facilitation, dispute settlement, trade-relatedintellectual property rights and tariff negotiations.

The WTO was represented by one international expert in the DTIS team ofconsultants.

2.3.4 ITC

The ITC has no resident office in Yemen but participated actively with a Senior TradePromotion Officer in the part of the DTIS dealing with export promotion.

2.3.5 UNCTAD

UNCTAD has no resident office in Yemen.

2.3.6 UNDP

The UNDP has a resident office in Yemen. The UNDP Resident Representative alsocoordinates activities for UNCTAD, ITC and WTO.

In May 2003 this resident office was instructed by UNDP Headquarters to support theimplementation of the IF process in Yemen. The total budget available for this supportin Yemen amounted to USD 38,000.2 This amount is mainly for logistics at the MoIT(including secretarial support and translation of documents) to facilitate the Integrated

2 UNDP implements a capacity building programme in IF countries for which a total budget of USD500,000 is available from the IF Trust Fund.

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Framework activities. The UNDP also supported the MoIT with writing amemorandum on foreign trade required for WTO accession.

The UNDP resident office is dissatisfied with the DTIS report. UNDP has not beeninvolved in the drafting of the ToR and the implementation of the study. It regards theDTIS to be incomprehensive, among others lacking the links between poverty andtrade from a human development perspective. According to the UNDP resident officethere is no clarity in the DTIS how the PRSP should address trade.

In the opinion of the UNDP resident office, coordination between the World Bank andUNDP on this has been poor. The UNDP resident office approached the MoIT for theneed to undertake an additional study to repair the above omission in the DTIS. Sincethe MoIT was not interested, the UNDP now cooperates with the Ministry of Planningon this subject.

2.4 Existing Trade-Related Programmes of main bilateral donors

2.4.1 European Commission

The EC financially supported the services of a consultant who assisted with thepreparation of the Memorandum of the Foreign Trade Regime. The EC startedrecently with a five-year project to assist the MoIT with the WTO accession process.Under this project there will be two international long-term experts stationed in theCommunications and Coordination Office with WTO at MoIT. According to the IFdonor facilitator in Yemen, the EC is interested in IF follow-up activities within theframework of this WTO accession project.

2.4.2 Netherlands

Yemen is one of the 36 countries that is on the new list of partner countries withwhich the Netherlands enjoys long-term bilateral cooperation.3 In such cooperation,the ambition is to cooperate as much as possible through programmes. TheNetherlands has cut its development aid budget for Yemen by more than half, downto a level of € 23 million in mid 2003. This resulted in skipping economic developmentas priority sector, including agriculture, in the bilateral aid relationship with thecountry. The Netherlands selected health, education and water as remaining prioritysectors, reasoning that the respective Ministries in the latter sectors are open topolicy dialogue and relatively more reform-minded.

Dropping economic development as priority sector is motivated by pointing to the grimexternal environment for economic development and the lack of evidence ofimprovements in the investment climate, which could be demonstrated by a firmpolitical will to solve corruption and security issues and improved recourse to the legalsystem. Also, cooperation among donors in the area of economic development ispoor according to the Embassy. Notwithstanding this, it is difficult to understand forthe Yemeni Government (Deputy Minister of Finance) that: ‘if the Netherlands wantsto reduce poverty they at the same time stop a restructuring project of an agriculturalbank’. 3 The list of partner countries is published in DGIS (2003), ‘Aan elkaar verplicht,Ontwikkelingssamenwerking op weg naar 2015’, Annex II, October.

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TRTA projects supported by the Netherlands in the past have had a mixedperformance according to the Embassy. These projects included:

� Support to restructuring of the Ministry of Agriculture;� Support to restructuring the Cooperative Agricultural and Commercial Bank;� Support to the Small and Medium Enterprises Development Fund; and� Support to Al Husainiah fruit & vegetable market.

The Netherlands Embassy has taken up the role of lead donor in the IF process inmid 2002. This implied making comments on the DTIS draft reports and informingdonors with a presence in Yemen about the IF process. By end of 2002 guidelines fora lead facilitator became available. Activities undertaken by the Netherlands Embassyfor the IF process have therefore been more in terms of logistics than being involvedin the content of the process. After the national workshop, the Netherlands Embassyorganised a donor meeting in early August 2003. The Netherlands Embassy isexpected to play a role in preparing and organising the conference of a DonorConsultative Group after the DTIS and Action Matrix have been validated.

The Netherlands Embassy has no delegated funds available for financing IF follow-upTRTA activities.

2.4.3 Germany

The German Embassy is active in four sectors in Yemen: Employment orientedeconomic growth, health, basic education and water. The first sector focuses on thedomestic market and not on international trade; projects that have been implementedin this sector include:

� Vocational training project, which has been locally successful in certain centres;� Project for rural self-help groups; they start to learn from their experiences;� Small Enterprise Promotion Project in Taiz and Aden, which is more successful in

Taiz than in Aden due to backing of the Said family in Taiz.

The German Embassy is not interested in providing financial support for IF follow-upactivities on a bilateral basis; they are not able to provide resources into a TRTAbasket.

2.4.4 United Kingdom

Globally, the UK is supporting the IF but for Yemen the UK has no resourcesavailable for this.

TRTA projects that are supported by DFID include a project on automating systemsfor customs documentation (ASYCUDA). This system has brought more governmentrevenues from trade, whereas the private sector seems pleased with it. DFID alsosupports community-based organisations.

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3 IF SITUATION

3.1 Preparatory phase of DTIS

Following a request by the Yemeni Government, it was decided in November 2001 toundertake a DTIS for Yemen. A preliminary mission was fielded by the proposedDTIS team leader in early February 2002. This proposed team leader worked with theWorld Bank country staff in preparing an Aide Memoir that was discussed with thehead of the WTO Coordination Unit at the MoIT. During this mission initial contactwas made with the PRSP team in the Ministry of Planning. Adaptation of the broadTerms of Reference (ToR) to the situation in Yemen was discussed and a selection ofsector work was suggested. Recruitment of the local consultants was also discussed.

A second draft of the ToR for the DTIS was released on April 9, 2002. TheGovernment appointed a national committee for preparation and negotiation with theWTO; the same committee was later assigned the task of national IF SteeringCommittee.4 The national IF Steering Committee consists of 23 members and isheaded by the Minister of Industry & Trade. Besides 14 Deputy Ministers, theChairmen of Customs and Taxation, the Committee has two representatives of theprivate sector.

The time schedule for the DTIS proposed in the ToR of April 9, 2002 was as follows:

� Main mission 18 May – 12 June 2002;� Draft report 20 August 2002;� Comments from government and agencies 20 September 2002;� Draft for workshop 30 September 2002;� Workshop 22 October 2002;� Final report 20 December 2002.

A IF focal point was established in the MoIT.

3.2 Diagnostic phase of DTIS

The main mission of the international consultants took place from mid May to earlyJune 2002. A team consisting of eleven consultants and ten local experts did thefieldwork for the study under supervision of the World Bank. A first draft of the DTISwas ready in August 2002.

The DTIS team had meetings with the donors before and after the preparatory andmain missions.

The translation of the DTIS into Arabic and incorporating comments from the SteeringCommittee in the first draft was completed by March 2003. There have been fourmeetings with the Steering Committee to discuss the draft versions of the DTISbefore the national workshop.

4 Decree of the Minister of Trade and Industry of May 25, 2002.

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The DTIS was discussed during a national workshop on June 21-23, 2003. Thisworkshop, attended by a cross-ministerial audience, recommended among otherthings to add the industrial sector to the DTIS. Sectoral sessions were held to outlinefurther work plans for agriculture, fisheries, tourism, transportation,telecommunications, and labour. According to observers, the discussion seemed tohave been lively and went about as far as it can go in Yemen.

3.3 Follow-up phase of DTIS

After the national workshop, the lead facilitator organised a donor meeting. Theratification of the DTIS and the action plan by the national steering committee and aministerial committee was planned for the second half of October 2003, and aconsultative donor meeting was scheduled for November 2003 to determine whichdonors would contribute what in the framework of the action plan.

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4 MEASURING IF PERFORMANCE IN YEMEN

This chapter deals with the indicators that have been developed for the input, output,outcome and impact of the TRTA activities that are subject to this IOB evaluation. Thespecific set of indicators selected for the IF programme in Yemen (and Ethiopia) canbe found in the evaluation matrix in Annex 1. The indicators of impact have beenderived from two objectives of the Netherlands in supporting providers of TRTA.

4.1 Input

Amount of financial support allocated to the IF in Yemen

Under Window I the budget approved for the DTIS for Yemen amounted to USD300,000. In addition, the World Bank resident office contributed USD 100,000 to theIF process in Yemen. This amount was needed for expenses for the workshop,logistics and communication costs and time spent by two staff persons. The UNDPprovided a further budget of USD 38,000 for support to the implementation of the IFprocess in Yemen.

Number of preparatory meetings (and working days spent for this purpose) of the sixcore agencies in relation to the IF in Yemen

Staff of the World Bank resident office has supplied most time input.Three persons from that office have been busy full time for more than 2 years nowwith the DTIS work. Two staff are from outside Yemen, one is from Yemen.

Time of the WTO IF Secretariat in Geneva spent on the IF in Yemen:0.5 days per month (Consultant estimate)

Time of the WB IF Task Manager in Geneva spent on the IF in Yemen:0.5 days per month (Consultant estimate)

Number of meetings of national IF Steering Committee in Yemen

� two meetings on Terms of Reference of DTIS;� four meetings before the national workshop;� three meetings after the national workshop.

Time span for preparing and delivering the DTIS in Yemen

The preparation of the DTIS started in February 2002. In November 2003 the DTIShad not yet been validated by the national steering committee.

Time span for realising follow-up TRTA after delivering the DTIS

No follow-up TRTA has yet been realised. After the first draft of the DTIS becameavailable in August 2002, the Lead Facilitator made a first round among the donors

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present in Yemen. During this round the willingness of donors to take up additionalprojects under the IF framework was investigated, which apart from the World Bankand USAID proved disappointing.

In November 2003 it was planned to have the national steering committee to decideon which projects to submit for Window II financing.

4.2 Output

Number of national workshops

One national workshop was held on June 23-24, 2003.

Overview/inventory and analysis of existing TRTA programmes

There is no overview and analysis of existing TRTA programmes.

The number and type of prioritised TRTA/CB projects

The list of prioritised TRTA/CB projects was to be finalised in a planned meeting ofthe National IF Steering Committee in November 2003.

DTIS draft completed for National Workshop in March 2003

The DTIS of Yemen has been compared with the required six components as set outin the generic and broad ToR that have been developed for these integration studies:

I. Review and analysis of the country’s economic and export performanceThis is covered in the first three chapters of the DTIS – Component studies;

II. Description and assessment of the macroeconomic environment and thecountry’s investment climateThis is covered in the first two chapters of the DTIS – Component studies.

III. Assessment of the international policy environment and specific constraintsthat exports from the country face in international marketsThe international policy environment is dealt with under Regional initiatives,Market access abroad and Yemen’s WTO accession in Chapter 3 of the DTIS– Component studies. Obstacles to Yemeni exports are discussed in Chapter5 of the DTIS – Component studies.

IV. Assessment of a small number of key sectors believed to have significantpotential for expansion in output and trade in benefit of the poorThe sectors selected for further study in the DTIS include two sectors,fisheries and tourism, besides a situation analysis of the transport sector andof Yemeni migrant workers. The DTIS could have done more in investigatingwhich products can be promoted for exports that in particular will benefit thesmaller enterprises. For that purpose, use could have been made of the WorldBank financed Baseline Survey among micro and small enterprises in Yemenin 2000.

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According to the SFD, the poor trade mainly agricultural products, such asvegetables, fruits, meat and cheese, on weekly markets in their own region.Some small farmers load their agricultural produce (tomatoes, fruits) on trucksand drive to the NW border of Saudi Arabia. Because no proper sorting andpacking is done, there is thus far little export success.

According to the Small Enterprise Development Fund there is a great need fornon-financial business services in small enterprises. Export possibilities forthese enterprises were reported for food, beverages, and animal skins toAfrican countries, -including Sudan, Ethiopia, Djibouti and Kenya.

The representative of the private sector in the national IF Steering Committeeremarked that the DTIS places too much emphasis on the opening up ofYemen’s market and becoming a WTO member. On the other hand, the DTISpays less attention to the fact that Yemen has nothing to export. According tothis representative, the DTIS needs to show how to prepare unskilled labour inYemen for involvement in export activities, other than training them ascleaners and sending them abroad.

The Table 6.5 in the DTIS – Component studies shows that the poor areslightly over-represented in Agriculture/Forestry/Fishery. But there is littleanalysis of trade policy for the agricultural sector in the DTIS. The povertyanalysis in the study is interesting but does not make many linkages with tradeactivities and does not recommend concrete pro-poor trade policies. Thequestion remains what the implications are for trade policy of the differentscenarios for which the poverty impact is simulated.

V. Assessment of national capacity (public and private) to formulate andimplement trade policyWTO-related technical training and broader training and capacity building ineconomic policy making is discussed in the section at the end of Chapter 3 ofthe DTIS – Component studies.

VI. A pro-poor trade integration strategyThe DTIS – Component studies mentions in Chapter 3 that the tariffs may falldisproportionately on the poor, since the highest tariffs apply to fish and fishproducts, while processed food products, clothing and footwear generallyhave tariffs well above the average for manufacturing and the overall average.In the opinion of the evaluators, the DTIS had to investigate this finding furtherand had to come up with recommendations for more pro-poor trade policyoptions. Some poverty impact analysis of trade measures are recommendedfor further review, such as import prohibition of motor cars older than fiveyears and second hand goods (see Non-tariff measures in Chapter 3 of theDTIS – Component studies). The DTIS could have piloted such a review forone or two examples.

In short, the DTIS is of good quality, though a large part is based on existingmaterial from earlier World Bank reports. Since there is no WTO Trade PolicyReview report for Yemen the treatment of the first three components requiredby the broad ToR are well covered in the DTIS – Component studies. On theother hand, the links between trade and the poor (components four and six ofthe broad ToR) could have been given more explicit attention in the study.

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According to the latest World Bank Country Assistance Strategy the labourforce will increase on average by 240,000 workers (per annum) for which newjobs should be created. What can non-oil trade expansion do in creatingemployment for those entrants to the labour market as well as for the pool ofunemployed and unskilled workers in Yemen?

Another shortcoming of the DTIS is the vague presentation of the technicalassistance matrix in the DTIS version of March 2003. More time should havebeen allocated by the DTIS team to the formulation of profiles for follow-upTRTA.

4.3 Outcome

Number and type of follow-up actions undertaken by officials of Yemen on DTISrecommendationsThere are no follow-up actions yet on DTIS recommendations by officials since theDTIS still needs to be ratified.

Number and type of follow-up actions on impact analysis of trade policy on the poor,on important production chains, on employment opportunities for the poorThere are not yet sector working groups established or follow-up actions by sector.

Active monitoring by all national stakeholders of recommended follow-up to DTIS

Monitoring of recommended follow-up to DTIS is not yet done and a monitoringsystem not yet installed. There is a planning schedule that should lead to the donorprogramming exercise by end of 2003.

Coordination of the TRTA of the six core agencies by officials of Yemen

Coordination on the ground is limited since only the World Bank and UNDP have aresident office (See also section 5.4 on agency coordination). Coordination isassumed to take place in Geneva between the agencies.

4.4 Impact

Trade and economic sectors brought into PRSP or national development plansTrade has not yet been integrated into the PRSP process. Some poverty analysisdone in the DTIS will be taken up, possibly when there will be a mid-term review ofthe current PRSP.

In the SFYP for the period of 2001-2005, some attention is devoted to developing theexport capabilities of the private sector in agriculture, fisheries, tourism, free zonesand low wage industries. This attention to developing export capabilities in the SFYPcannot be attributed to the DTIS.

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Country ownership of DTIS and the IF-process at large

Country ownership is not demonstrated by active participation, initiatives andleadership of national stakeholders. Across Ministries there is not much awareness ofthe IF/DTIS. Reinforcement workshops would be needed to get the private sector tounderstand the IF concept better.

For the preparation of the PRSP there has been a much broader consultativeapproach and participating structure than has been applied by the DTIS team. Theapproach of the DTIS team basically consisted of a number of missions during whichstakeholders were interviewed in Sana’a.

The fact that at the national workshop the sector selection was a point of discussion,with the result that the DTIS team had to add the manufacturing sector at that stage,indicates that the consultation in the preparatory phase has had an insufficientoutreach outside the MoIT.

Mainstreaming trade into the PRSP cannot be done with the limited consultative andparticipatory set-up of the DTIS for Yemen. For the DTIS team, apart from the twopreparatory missions by the Team Leader and the main mission, there was no time towork with the PRSP team. For these there needs to be more time for the DTISconsultants.

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5 ASSESSING IF PERFORMANCE IN YEMEN

This chapter presents the scores on the IF performance in Yemen. The scores on theefficiency, effectiveness and relevance follow from a uniform scoring methodologydeveloped for all TRTA activities that are subject of this IOB evaluation. For theranking, a five-point scale is applied: Poor (P), Weak (W), Fair (F), Good (G), andExcellent (E). An explanation of the rating methodology can be found in Annex 2.

5.1 Efficiency

Relation input and output (Score: W)

Basically, a rather traditional trade policy report is produced for USD 440,000. This isexcluding the time costs of the staff of the Agencies. The National Workshop resultedin suggested work plans for the sectors selected by the DTIS that are of poor quality.

Table 5.1 shows the efficiency score of the input-output relationship of the IF processin Yemen.

Table 5.1 Input-output relationship of the IF process in YemenInput Output EfficiencyFinancial support USD 440,000 1 National workshop on June 2003 W3 FTEs of WB resident officefacilitate the work

No overview and analysis of existing TRTA W

Draft DTIS of good quality but with insufficientlinks between trade and the poor and puzzlingTA matrix

W9 Meetings of the national steeringcommittee

No overview of prioritised TRTA/CB projects P

Time span for delivering DTIS (Score: P)

According to Solleveld (2003) the preparation of a DTIS takes between six and twelvemonths. Following the National Workshop, a donors’ programme meeting may takeplace a few months later. The starting date of individual projects depends on thecapacity of donors to include these activities in their programme cycle and theavailability of Window II funding.

The preparation of the DTIS started in February 2002 and the first draft was availablein August 2002. Due to the difficulty of translating the various drafts into Arabic andtime needed for discussing several sensitive issues, it took about one year and a halfto get the DTIS to the stage of being ratified by the national steering committee.

The tight working schedule of the international consultants in the DTIS team mayeventually have led to these delays. With more time invested in consultingstakeholders on sensitive issues like corruption, lack of security and sectors selectedfor further diagnostic work in the DTIS, goodwill and a broader consensus would havebeen obtained from the beginning.

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In short the DTIS has not been delivered on time; the DTIS was still to be approvedby the Government of Yemen by November 2003.

The National Workshop could have been held by the end of 2002 but was delayed tillJune 2003, about six months later. A donors’ programme meeting did not take placebecause the list of projects in the technical assistance matrix of the DTIS had still notbeen validated by November 2003.

Overall score on efficiency: Poor (P)

5.2 Effectiveness

The output of the IF may have increased the knowledge of the members of theSteering Committee. Outside this circle of mainly Deputy Ministers, no capacitybuilding has taken place among individual public officers.

The indicators of output and outcome are presented in Table 5.2. The effectivenessscores of the outcome are either P, or W. The DTIS report discussed during theNational Workshop has not yet led to follow-up actions of officials on therecommendations of the report. Given the lack of capacity in the MoIT, follow-upactions are expected to take a long time.

The overview in the technical assistance matrix in the draft DTIS prepared for theNational Workshop does not make a distinction between existing and new TRTAactivities. Also the activities presented in that matrix are not costed. The same appliesto the work plans suggested for the sectors selected, which were formulated by theworkshop participants. No sector working groups have been established to work outemployment opportunities for the poor. Other shortcomings of the technicalassistance matrix are: there is no connection between the type of actions and themain body of the DTIS report; there is no analysis of the experience with the existingtype of actions.

There is no monitoring system on follow-up actions installed in which all nationalstakeholders will be involved.

Coordination between core agencies has been modest and in some cases poor withthe World Bank office too dominant in suggesting the study subjects of the DTIS. TheUNDP resident office is not happy with the content of the DTIS, which is found to benot comprehensive enough. Not only external trade, but also internal trade issuesshould have been brought in. UNDP therefore plans to produce an additional study,using the Ministry of Planning as an entry point. A project proposal has been draftedwith the title ‘Policy Support Options to Accelerate Economic Growth, EmploymentGeneration and Reduce Poverty.’ This project aims to assist the Government ofYemen with pro-poor policies and practical recommendations.

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Table 5.2 Output-outcome relationship of the IF process in YemenOutput Outcome EffectivenessNational workshop of June2003

Not yet follow-up actions undertaken by officialson DTIS recommendations

W

Overview of existing and newTRTA projects

No follow-up actions on impact analysis of tradepolicy on the poor, important production chains,and employment opportunities for the poor

P

No monitoring system for all national stakeholdersof recommended follow-up

WDraft DTIS

Coordination of TRTA of the six core agencies byofficials

P

Overall score on effectiveness : Poor/Weak (P/W)

5.3 Relevance

For the relevance of the IF-programme in Yemen, an assessment has been made ofthe contribution of the activities under this programme to the achievement of Dutchpolicy objectives. In the design for the evaluation, two questions were identified forthis assessment (see Annex 1):

I. To what extent has the outcome of IF-Yemen contributed to the formulation of anational policy by the developing country at the interface of trade anddevelopment?

II. To what extent has the outcome of IF-Yemen contributed to the capacity of thedeveloping country to negotiate and implement multilateral trade agreements?

Table 5.3 indicates whether or not these Dutch policy objectives are within thedomain of the TRTA programme, i.e. in the domain of IF-programme in Yemen.

Contribution of IF/DTIS to national policy formulation at the interface of trade anddevelopment in Yemen (Score: P/W)

With the DTIS work, a start has been made to think about the effects that trade policycan have on development. At the start of the DTIS, there was a discussion betweenthe MoIT / DTIS team and the Ministry of Planning on the question of whether tradeshould be mainstreamed into the PRSP or, vice versa, the poor be included intotrade. For the Ministry of Planning, the small and medium sized industries are a toolfor poverty reduction but there was no response on this discussion point from theDTIS team. Consequently, no strong links developed between the PRSP unit and theDTIS team.

Contribution of IF/DTIS to the capacity to negotiate and implement multilateral tradeagreements (Score: F)

The work of the DTIS has helped in the understanding of some of the issues relevantfor the Yemeni WTO Accession team. Some of the DTIS work was used for theMemorandum on the Foreign Trade Regime, a memo required by WTO accessionprocedures. In addition, the IF Focal Point reported to have learned to think aboutinternational competitiveness of sectors as a result of the sector study on tourism.This type of studies was cited as being useful for preparing offers on opening sectorsto foreign competition.

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Table 5.3 Relevance IF-YemenIndicator Indicator within the scope of the

TRTA programmeScore

Contribution to national policy at theinterface of trade and development

Yes P/W

Increased capacity to negotiate andimplement multilateral trade agreements

No F

Overall score on relevance: Weak (W)

5.4 Specific issues

5.4.1 Country ownership

There is little ownership of the IF process. The MoIT may have absorbed the study,although the diagnostic work was contracted outside the Ministry. There are no signsof clear ownership of the DTIS among other government agencies, including theMinistries of Planning, Social Affairs and Labour, and Finance, which was verifiedduring interviews by the evaluator.

The private sector is not aware of the IF/DTIS study and does not understand theemphasis on mainstreaming trade. According to private sector organisations,employment is what counts and the government does not provide the right climate tocreate jobs. Civil society has not been engaged in the IF/DTIS process.

TRTA activities will hopefully be prioritised by the end of 2003, in order to obtainWindow II financing. From the bilateral donors there is, however, little interest infunding TRTA activities from the Action Matrix. Nearly all the financial support ofdonors with a presence in Yemen is earmarked for their own programmes. Only theWorld Bank and USA seem to be willing to provide additional funds under the IF.

5.4.2 Differential effects

One can safely assume that the number of enterprises ready to be supported forexport is much higher in middle-income countries. In Yemen, there are a handful oflarge companies, some 80,000 companies with 5-50 workers and some 405,000small and micro-enterprises with up to 4 workers. One could better re-orientate the IFin Yemen towards stimulating in first instance domestic trade by giving businesssupport services to the medium and smaller enterprises. These firms will need moretechnical assistance to be able to provide tradable on the domestic market after whichthey can graduate towards actually exporting.

With the current low export orientation of enterprises in Yemen, a discussion onmainstreaming and integrating trade into the PRSP and economic development plansbecomes abstract and very sophisticated for both government and private sectorrepresentatives. The whole IF concept seems not understood in Yemen.

The view taken by the DTIS team with respect to the sector selection in Yemen(Fisheries and Free Zones in the coastal area) assumes that one wants to createtrading areas with employment and wants to attract poor people to come to those

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areas. The risk of this approach is to encourage considerable regional disparities inwelfare, with rich enclaves on the one hand and the rest of the country getting poorerand poorer on the other. This risk can be addressed by creating a broader economicbasis, starting from the potential of small entrepreneurs to compete in the homemarket and who are gradually able to compete on not too sophisticated regionalmarkets.

The value of IF in Yemen could be more on supporting domestic trade and on givinga vision on export potentials, which could give directions for development ofvocational skills and the export support infrastructure. Hence, the relevance of IF tothe Dutch policy objective of helping LDCs like Yemen to integrate into the worldeconomy is potentially there. But the efficiency and effectiveness of IF will mostprobably be higher in middle-income countries than in Yemen, where the programmeappears to be a bridge too far.

5.4.3 Coordination

Agency coordination

The World Bank has been the leading agency in Yemen and has done most of thediagnostic work. The World Bank and the DTIS Team did the work on their own. Theyled the IF/DTIS process. There was little interagency coordination on the groundsince only the World Bank and the UNDP are locally represented.

There has been a difference between the World Bank and the UNDP in engagingtheir local staff in the IF/DTIS work. In addition, the agencies have not identified TRTAprojects and worked them out in a coordinated way in their respective fields ofcompetence.

Donor coordination

Coordination among donors in Yemen is poor. There is no harmonisation of donorprocedures under the IF and no interest in taking up TRTA projects as a follow-up ofthe DTIS. Donors continue to earmark their funds and there is no willingness to workother than on a project basis.

Dialogue between The Hague and Royal Netherlands Embassy (RNE)

The lack of progress made by the IF in Yemen could have been put sharper from theRNE towards The Hague. The gap between the realities and experience on theground and the expectations on the IF in The Hague is too large and should havebeen brought into perspective earlier.

The Development Section of the RNE feels that Yemen does not have the institutionalstructure to deal with the IF and that the current set up of the DTIS process shouldhave taken this more into account. The view of the IF is that the Government andprivate sector of Yemen should drive the DTIS process with the six agenciesintending to assist them in this process.

On the other hand, The Hague seems not to pick up the negative signals e-mailed bythe RNE on the lack of participation and ownership of the Yemenis.

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5.4.4 Coherence

Coherence of Dutch bilateral business cooperation programmes with the IF

Yemen is (eligible?) for activities under the Programme Economic CooperationProjects (PESP) and the Netherlands Management Cooperation Programme (PUM).On the other hand, both the Centre for the Promotion of Imports (CBI) and theNetherlands Development Finance Company (FMO) are not undertaking activities inYemen.

The RNE is a lead donor facilitator on TRTA and at the same time the Netherlandshas an exit strategy for projects in the economic sector. Skipping the economicdevelopment sector in the bilateral relationship with Yemen is not coherent with thejob of lead donor in the IF. The job of lead facilitator should be giving strong supportto the focal point in the MoIT, notably in the period after the DTIS. In addition, the leadfacilitator may help to restore the IF working relationship between the resident officesof the World Bank and UNDP. Support is needed to obtain a list of prioritised andcosted TRTA projects and to raise donor interest for the funding of these projects.Without the concrete involvement of the Netherlands in an economic or tradedevelopment project in Yemen, this promotional job will be difficult to do. Althoughthere is still a budget line available for providing financial support to viable IFpriorities,5 the RNE is positioned in quite an implausible role. With the work for IFfacilitation regarded as a sideline, staff capacity at the RNE for the job is also minimal.

5.4.5 Follow-up of earlier IF evaluation

Recommendations with respect to linking IF to the priorities of the countrydevelopment strategy and concerning coordination and funding have not or only inpart been realised in Yemen.

In the opinion of the present evaluator, the final evaluation report of Capra (2003)gives a too positive status report of Yemen (pp. 85-87), especially where it says thatYemen will complete the DTIS stage of its integrated IF programme later that year.Capra (2003) provides incorrect information where it mentions that:

� All government officials and donor representatives, as well as seniorrepresentatives of the private sector, are aware of the IF and supportive of itsobjectives;

� The recent workshop seems to have been effective in raising awareness of theIF across all stakeholders;

� Importantly, the Ministry of Planning and International Cooperation is fullycognisant and supportive of IF objectives.

Monitoring and evaluation of the work done by the agencies in Yemen are thereforeinadequate.

Donors pay the WTO, UNCTAD and ITC for their work in the DTIS and possiblefollow-up projects. Conflicts of interest can arise when these agencies have directinvolvement in evaluations.

5 According to DDE, the RNE has for 2004 an approved budget of Euro 200,000 for IF follow-up.

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5.4.6 Future performance

There is not much evidence that the current performance of IF in Yemen will changedrastically. The overall implementation of the reforms that are important for theinvestment climate remains slow. The introduction of the investment law waspostponed in view of the elections in April 2003. The new government has also notshown that it is serious in improving the transparency of procedures and speeding upthe pace of reform.

The MoIT has little capacity to do the necessary follow-up after the nationalworkshop. The final version of the DTIS, including the manufacturing sector and animproved action matrix, still had to be approved in November 2003. Only after thisvalidation, a donor-programming meeting can take place.

Based on the experiences in the pilot IF countries, the Focal Point –as well asmembers of the Steering Committee- were not optimistic in their expectations that IFwould result in concrete TRTA projects.

5.5 Conclusion and policy issues

No mainstreaming of trade has taken place in Yemen under the IF activities.Coordination between the core agencies has not developed as it should have.The two central objectives of the IF; i) to mainstream trade into the nationaldevelopment plan and the PRSP and ii) to coordinate, sequence and synchronise theTRTA of the IF agencies, will most likely not be reached in Yemen.

The overall scores on efficiency and effectiveness are, respectively, Poor andPoor/Weak. These low scores are confirmed by a comparison of the IF programmeduring the DTIS phase of Yemen with the three IF-pilot countries in Annex 3. Theoverall score on relevance is weak.

There was little local participation in the preparation and organisation of the DTISneither from inside nor outside the government in Yemen

Based on the performance of IF in Yemen, it can be concluded that a more criticalreview of selection criteria for admission of new IF countries is needed to guaranteethat there will be a broad consultative and participatory approach during the DTIS andthat there is a reasonable business climate for export activities. If the latter conditioncannot be guaranteed then IF should re-orientate its focus away from trade towards amore broader private sector development approach. Also, the willingness of donorson the ground to financially support TRTA projects should have been tested morethoroughly in advance.

The agencies should concentrate and focus now on the formulation, appraisal andstart of TRTA projects that will have concrete and rapid results in Yemen.

Communication on IF in Yemen between Post and DDE has not been regular orsubstantive.

Coherence of Dutch OS policy can be improved by giving CBI and FMO moredevelopment tasks in Yemen, where the IF tries to mainstream trade and the

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Netherlands has taken up the role as lead facilitator, although that latter role has lostcredibility.

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REFERENCES

Capra –TFOC Consortium (2003), Evaluation of the revamped IF for TRTA to theleast developed countries, final report, September

IMF (2002), Yemen, Staff Report for the 2002 Article IV Consultation and StaffMonitored Program of July 17, 2002

Someya (2001), Yemen External Competitiveness, Background paper prepared forWorld Bank Office in Sana’a

World Bank (2002), Economic Growth in the Republic of Yemen, Sources,Constraints, and Potentials, a World Bank Country Study

World Bank (2003) “Trade, Investment and Development in the Middle East andNorth Africa: Engaging with the World”

PC-TAS, Trade analysis system on personal computer, Harmonized System Rev.0,1997-2001, ITC/UN statistics division

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PERSONS INTERVIEWED

Name Organisation Position

Brussels

Heuvel, P. van der European Commission DG TradeMout, J.P. European Commission DG TradeNicolai, A. European Commission DG Trade

Geneva

Ambassador andEconomic Attache

Permanent Mission of Yemen in Geneva

Blank, A. WTO-Development Division Head LDC UnitChauffour, J.P. IMF Representative to WTOEsayas Gotta Seifu Permanent Mission of Ethiopia First SecretaryFuller, E. Permanent Mission of the United Kingdom First SecretaryGeoffroy, F. ITCGrainger-Jones, E. World Bank Office GenevaHeuchan, A. Permanent Mission of Canada Counsellor, Trade and

DevelopmentHeuvel, P. van den European Commission, DG-Trade Principal AdministratorNamfua, M. UNCTAD UNCTAD Representative in

IF-GenevaPostma, J.M. Permanent Mission of the Netherlands in

GenevaRoelofsen, H. ITCSmeets, S. Permanent Mission of the Netherlands First Secretary

Ethiopia

Abi W. Meskel Ethiopian Investment Agency PresidentAkerboom, H. Royal Netherlands Embassy in Ethiopia First Secretary Trade &

DevelopmentAndualem Tegegne Ethiopia Chamber of Commerce Secretary GeneralBarratt, S. Oxfam Regional Media and

Advocacy CoordinatorChekol CIDA Economic Advisor

Fredette, M.A. Canadian Aid Programme DirectorGashaw Debebe Ministry of Trade & Industry Head Foreign Trade

DepartmentGermew Ayalew Ministry of Trade & Industry Team Leader Foreign Trade

RelationsGetachew Adem Ministry of Economic Development &

CooperationHead Economic PolicyDepartment

Gosses, A. Royal Netherlands Embassy in Ethiopia Head of DevelopmentCooperation

Hussein Shibeshi Addis Ababa Chamber of Commerce Secretary GeneralKyei, A.Y. Institutional Monetary Fund Resident RepresentativeMcMan, J. USAID, Addis Ababa Agriculture, PSD, Safety net

Programme

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Name Organisation Position

Melkias Consultant, assistant to IFfocal point

Membere Taye Tesfa World Bank Country Office Addis Ababa EconomistMinuti, A. Italian Embassy in Ethiopia First Secretary DevelopmentMohammed Seyed Ethiopian Investment Commission Director Research & Planning

DepartmentRaadschilders, H. Royal Netherlands Embassy in Ethiopia First Secretary Rural

DevelopmentTeshome Kebede Ethiopian Manufacturing Industries

AssociationPresident

Tsegaye Abebe Ethiopian Horticulture Producers &Exporters Association

Chairman

Vens, T. Delegation of the European Commissionto Ethiopia

Economic Advisor, SecondSecretary

Worku, Kibre Economic Policy Institute Economist, DTIS ConsultantZampini, D. UNDP-Addis Ababa Economist

Yemen

Government authorities

Abdulkarim Al-Arhabi Ministry of Social Affairs and Labour MinisterKhalid Alkhalidi Small Enterprise Development Fund ChairmanYahya Y. Al-Mutawakel Ministry of Planning & International

CooperationHead Poverty ReductionStrategy

Kais Ali Aliriani Social Fund for Development Head Small & MicroEnterprise Development Unit,

Iqbal Bahader, Deputy Ministry of Trade Minister

Ahmed Ghaleb Ministry of Finance Deputy Minister

Nagib Hamim IF Focal PointEng. Khaled T. Mustafa Industrial Sector, Sana’a Chamber of

Commerce and IndustryVice Chairman

Mahfoodh SalemShammakh

Chamber of Commerce of Sana’a andDirector of Shammakh & Co

Vice Chairman

Abdulwahab Thabet Director of one of the largest companiesin Yemen

Representatives of bilateraland multilateral agencies

M. de la Bey Netherlands Embassy Head DevelopmentCooperation, Netherlands

H. Grosskreutz GTZ, German Development CooperationF. Guy British Embassy British Ambassador in YemenGudrun Isphording German Embassy Deputy Head of MissionS. Janssen Netherlands Embassy Lead facilitator,Nadir Mohammed World Bank Office Sana’aAbdo Seif UNDP Programme officer poverty

alleviation team

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ANNEX 1

DESIGN OF THE EVALUATION RESEARCH FOR THE INTEGRATEDFRAMEWORK FOR TRADE-RELATED TECHNICAL ASSISTANCE (IF)

A.1.1 Profile

Mission and objectives

At its start in 1997 the IF sought ‘to increase the benefits that least-developedcountries derive from the trade-related technical assistance available to them from thesix Agencies involved in designing this Framework, as well as from other multilateral,regional and bilateral sources, with a view to assisting them to enhance their tradeopportunities, to respond to market demands and to integrate into the multilateraltrading system.’ The six participating Agencies were (and still are): InternationalTrade Center (ITC), International Monetary Fund (IMF), United Nations Conferenceon Trade and Development (UNCTAD), United Nations Development Programme(UNDP), World Bank and the World Trade Organisation (WTO). The objectives of theIF, after its first review, are: to mainstream trade into the national development plansand PRSPs of LDCs; and to coordinate, sequence and synchronise the TRTAactivities of the above six agencies.

Activities and country coverage

IF was endorsed in October 1997 as the institutional mechanism for the delivery ofTRTA to Least-Developed Countries. The locus of the activities is normally atindividual country level.

In 1998 and 1999 IF started with country needs assessments prepared by individualLDCs, integrated responses by the six Agencies, preparation of multi-year countryprogrammes and Round Table meetings.

After a review by end of 1999/early 2000, an IF Pilot Scheme was adopted for theundertaking of three diagnostic studies for mainstreaming trade integration into thedevelopment plans and poverty reduction strategies of three LDCs. In addition, an IFTrust Fund was established.

Budget of the organisation/programme

The IF Trust Fund finances the mainstreaming work. Several bilateral donors as wellas the World Bank and UNDP contributed to the IF Trust Fund. In March 2003 thecontribution to the IF Trust Fund amounted USD 12 mln.

Financial relationship with the Netherlands

The Netherlands supported the three pilot diagnostic trade integration studies inMadagascar, Mauritania, and Cambodia to the amount of USD 330,000. TheNetherlands also has sponsored a two-day workshop in April 2003 on IF to discussthe role of donors and the relevance to poverty reduction of trade-related capacity

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building. As part of the revitalisation of the IF, the Netherlands becomes the lead-agency for Yemen, one of its partner-countries. Though not being an official leadagency for Ethiopia, the Netherlands very much wants the IF-process and economicsector development of this partner-country to be linked to each other.

Earlier evaluations

IF was reviewed by end 1999. This review mentioned the need for mainstreaming oftrade into LDC’s development plans. It also pointed to shortages of ownership andproblems with funding, governance and management. An evaluation of the revitalisedIF was scheduled to deliver its findings before the Cancun Ministerial Meeting.

A.1.2 Design of evaluation research for IF

Selection and focus

The evaluation research will deal with the performance of the IF in five selectedcountries: Mauritania, Madagascar, Cambodia, Yemen and Ethiopia. The first threehave been selected because they together are the pilot group of IF-countries after the1999 review. The Netherlands has been one of the bilateral donors providing financialsupport to the diagnostic trade integration studies in these countries. The last twocountries have been selected because they are partner-countries of the Netherlands.Also, the Netherlands plays a special role with regard to the IF-process in Yemen asa lead agency and wants to stimulate Ethiopia to link the IF-process to its own sectorplan on economic development.

The focus in this evaluation will be on Yemen and Ethiopia, amongst others by meansof field visits to both countries. The evaluation design presented below applies to theevaluation in Yemen and Ethiopia. For the three pilot countries the same design willbe used, however this evaluation will be based solely on information collected fromthe six agencies and the delegations of the countries in Geneva.

Main questions (to be addressed at the IF country level)

I. Efficiency:a. Were output delivered according to plan, budget and schedule?b. What has been the relationship between the input and the output?

II. Effectiveness:a. Did the output of the IF contribute to knowledge and capacities of individual publicofficers of the developing country in the field of trade and development?

III. Relevance:a. To what extent has the outcome of the IF contributed to the formulation of anational policy by the developing country at the interface of trade and development?b. To what extent has the outcome of the IF contributed to the capacity of thedeveloping country to negotiate and implement multilateral trade agreements?

Evaluation-matrix:

Types of Indicators Sources of data Research methodsOf input:1. Amount of financial support allocated to the IF in the two selected countries2. Number of preparatory meetings (and working days spent for this purpose) of the six coreagencies in relation to the IF in the two selected countries (roundtable meetings)3. Number of preparatory meetings (and working days spent for this purpose) of the nationalIF Steering Committee in the two countries4. Time span for preparing and delivering the DTIS in the two selected countries5. Time span for realising follow-up TRTA after delivering of the DTIS in the two selectedcountries

For 1-5:� Files of Netherlands MFA (DDE and PV Geneva)� Files of fund managers of IF at WTO and WB representative in Geneva� Earlier monitoring and evaluation reports� Publications by international NGOs

For 1-5:Dossier study and

Interviews with administrators andpolicy officers

Of output:1. Number of national workshops2. Overview/inventory and analysis of existing TRTA programmes3. Number and type of prioritised TRTA/CB projects4. Draft or Completed Diagnostic Trade Integration Study

For 1-4:� IF focal point, RNE, lead facilitator, rep offices of six agencies in the field work countries� Minutes of meetings held� Donor mappings� Draft or completed DTIS

For 1-4:Desk study and interviews withofficials and stakeholders involved inthe IF in The Hague, Geneva, Sanaaand Addis Ababa

Of outcome:1. Number and type of follow-up actions undertaken by officials of the IF-country on DTISrecommendations2. Number and type of follow-up actions on impact analysis of trade policy on the poor, onimportant production chains, on employment opportunities for the poor (like sector workinggroups established by officials of the IF-country for sectors identified with potential for trade,which are supposed to benefit the poor)3. Active monitoring by all national stakeholders of recommended follow-up to DTIS4. Coordination of the TRTA of the six core agencies by officials of the IF-country

For 1-4:� Team-leader DTIS� National IF Steering Committee / IF Focal

Point� Rep offices of the six agencies

For 1-4:Interviews and desk study

Of impact:1. Trade and economic sectors brought into PRSPs or national development plans2. Country ownership of DTIS and the IF-process at large (demonstrated by activeparticipation, initiatives and leadership of national stakeholders from the very start of the IF)

For 1-2:� PRSPs of Ethiopia and Yemen (World Bank PRSP document library)� Donor facilitator and IF focal pointFor 2:� Delegates of government, business sector and civil society participating in the

national IF steering committees� Minutes of IF steering committees

Desk study and Interviews

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Specific questions

Ownership:

I. Genuine ownership of the IF process is of crucial importance. Such ownershipcan only evolve through a participatory approach in the undertaking of themainstreaming work. What was the process of preparing and undertaking thetrade integration studies in the LDCs? What was the participation from the partof the various ministries and the involvement of the private sector and othercivil society actors? Were the same people involved as in the PRSP process?Who participated in the national IF team? What factors in this participatoryprocess have caused delays and/or have negatively influenced the level ofresults?

II. Have sector plans been developed in which the TRTA proposed in the ActionMatrices do fit? Have the countries been able to obtain funding for identifiedpriorities. How long does it take to obtain funding once TRTA activities havebeen prioritised? To what extent is the financial support earmarked?

Differential effects of TRTA:

III. Are there any indications that the IF is more efficient, effective and relevant incountries that are in a more advanced stage of economic development andtrade?

Coordination:

IV. What has been the role of each of the six agencies in the IF process? Do thesix TRTA agencies each provide an own unique added value within the IF?Does the IF make use of the comparative advantage that each individualorganisation claims to have? To what extent do these six agenciescoordinate?

V. What experiences do 'lead agencies' (bilateral donors and the EU) have infacilitating the IF process? As a result, has donor coordination improved? Arethere economies of scale? What harmonisation has taken place in regard toadministrative differences in procedures among donors and what can bereported on earmarking of funds? What views do the developing countrieshave on this?

VI. What is the dialogue between The Hague and the Royal NetherlandsEmbassies at country level on the progress made in the IF process? Whatactivities are undertaken within the Netherlands Ministry of Foreign Affairs inThe Hague to ensure a coherent Dutch policy reaction, complementary to themultilateral IF interventions?

Follow-up of earlier evaluation:

VII. After the disappointing first review the question is whether the IF has improvedits effectiveness in mainstreaming trade and whether it has improved as amechanism for providing TRTA in terms of efficiency. In this respect it wouldbe interesting to know whether the recommendations made by the reviewhave been followed up? These included: restricting IF to technical assistancefor trade-related development, linking IF to priorities of country developmentstrategies, requiring LDCs to prioritise their TRTA needs, strengthening

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governance, administration, coordination and funding. Also interesting is tolearn from the latest evaluation what the remaining gaps and shortages are inthe IF process.

VIII. Have monitoring procedures of TRTA activities under IF been thought out inadvance? Is there a similar monitoring of PRSP implementation?

Future performance:

IX. What indications do exist that the performance of IF in Yemen and Ethiopia interms of efficiency, effectiveness and relevance will drastically change in thecoming 2-4 years?

X. To what extent do the future plans of IF for Yemen and Ethiopia in the field ofTRTA concur with the Dutch policy objectives for financial support to TRTA?

XI. What is the probability that the future outcome of IF interventions in Yemen andEthiopia will contribute to the Dutch policy objectives in the field of TRTA?

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87

ANNEX 2

RATING METHODOLOGY

The performance of the TRTA activities subject to this IOB evaluation is assessed onthe basis of a uniform scoring methodology. A five-point scale - Poor (P), Weak (W),Fair (F), Good (G), and Excellent (E) - is used for the scores on the efficiency,effectiveness and relevance of the six selected programmes/organisations.

This explanatory note illustrates how the scores on the above three performanceindicators were made.

Generic performance indicators

Generic performance indicators for all six programmes were defined as follows:

I. Efficiency is the relationship between output and input taking into account thedelivery of output according to plan, budget and schedule.

II. Effectiveness is the relationship between outcome and output with emphasison the contribution of the programmes to increased knowledge and capacitiesof individual public officers of developing countries in the field of trade anddevelopment.

III. Relevance is the relationship between impact and outcome with emphasis onthe contribution of the programmes to: a) the formulation of a national policy ofthe developing country at the interface of trade and development; and b) thecapacity of the developing country to negotiate and implement multilateraltrade agreements.

Under relevance the emphasis on trade policy formulation and trade negotiationcapacity reflects two of the objectives that the Netherlands has for support to TRTA.In the relevance tables a separate column – with the heading ‘Indicator within thescope of the TRTA programme’ - shows whether a programme/organisation does ordoes not have among its own objectives the contribution to these Netherlandsobjectives. This allows taking into account a difference between the objectives of theNetherlands and those of a programme/organisation when reading the scores onrelevance.

Programme specific indicators

Specific evaluation matrices were designed for the individual six programmes, whichcan be found in a separate annex in each evaluation report. The more detailedperformance indicators therein aim to reflect the specific features of each programme.The breakdown of the indicators into sub-indicators and sub-sub-indicators in each ofthe specific evaluation matrices are to avoid subjective assessments of results.

Below three examples are given of how the overall scores on efficiency (for IF-Yemen), effectiveness (for JITAP-Tanzania) and relevance (for QUNO) have beendetermined.

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Efficiency IF-Yemen

For efficiency of IF there are two sub-indicators: 1) The input-output relationship ofthe IF process; and 2) The time span for delivering the DTIS.For the first sub-indicator the evaluator looked at the input side at the sub-subindicators: the amount of financial support allocated to the IF, the time input of agencystaff involved in the DTIS, and the number of meetings of the national IF steeringcommittee. As for the output the evaluator looked at the following sub-sub indicators:the national workshop, overview and analysis of existing TRTA, the draft orcompleted diagnostic trade integration study, and an overview of prioritised TRTA/CBprojects.

The sub-sub indicators at the input side were looked at in relation to the quantity ofthe output produced. In addition, the quality of the sub-sub indicators at the outputside were assessed and scored accordingly:

� Was the national workshop a one-off event only? Was there a broad participationfrom the private sector and civil society? The national workshop in Yemen did nothave a broad participation; there had not been much follow-up realised betweenthe time of the national workshop in June 2003 and the evaluation mission inNovember 2003. Hence, a score of Weak on this sub-sub indicator.

� Has the DTIS produced an overview and analysis of existing TRTA? The technicalassistance matrix in the DTIS for Yemen has the following shortcomings: i) it isunclear which type of action is implemented and which ones are proposed; ii)there is no analysis of the experience with the existing type of actions; iii) there isno connection between the type of actions and the main body of the DTIS report.Hence, a score of Weak on this sub-sub indicator.

� Does the draft DTIS comply with the broad terms of reference for integrationstudies? Are the pro-poor aspects covered in the trade integration study?Linkages between poverty and trade were insufficiently paid attention to in theDTIS for Yemen; According the World Bank Sana’a Office the study was for about70 percent based on input of the World Bank, making use of data and materialfrom earlier World Bank reports. Hence, a score of Weak on this sub-subindicator.

� Is there an overview of TRTA/CB priorities for submission to Window II? Fourmonths after the national workshop there was not yet a list finalised with TRTA/CBprojects ready to submit to Window II. Hence, a score of Poor on this sub-subindicator.

The unweighted average for the above sub-sub indicators gives a score of Weak -(2+2+2+1)/4= 1.750 for the first sub-indicator.

For the second sub-indicator the evaluator looked at the time between the firstpreparatory mission and the approval of the DTIS by the authorities of the country, forwhich a benchmark of one year was taken. In the case of Yemen this time span wasin November 2003 already more than 22 months, hence a score of Poor on this sub-indicator.

The unweighted average score for the two sub-indicators gives the overall score ofPoor for the efficiency of IF in Yemen: (1.75+1)/2= 1.375.

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Effectiveness of JITAP-Tanzania

For the output-outcome relationship of JITAP-Tanzania nine sub-indicators weredistinguished:

I. Were the Inter-Institutional Committees (IIC) functioning demonstrated byregular meetings? Only two out of five subcommittees have functioned in thisway. Hence, a score of Weak on this sub-indicator.

II. Have the workshops organised for Customs Officials increased the knowledgeof the participants? The Customs Department in Tanzania was not satisfied withthe results of the two ad hoc workshops. This Department expressed the needfor more activities on technical and legal customs matters, which the JITAPworkshops had not provided. Hence, a score of Poor on this sub-indicator.

III. Number and type of completed Multilateral Trade System impact studies. Underthe first phase of JITAP-Tanzania external consultants delivered two MTSstudies. While Tanzania is lacking in terms of complying with WTOcommitments, for instance on notifications, the responsible officials did notachieve any results with the impact studies regarding conformity checks andlegal adjustments. Hence, a score of Poor on this sub-indicator.

IV. Are the reference centres, containing WTO and multilateral tradedocumentation, used by individuals? Two out of three reference centres werenot functioning as such. Hence, a score of Poor on this sub-indicator.

V. Have the training courses increased the knowledge and capacities of theparticipants? The participants of the training courses saw them as too short andnot comprehensive enough. Little dissemination activities were found. Hence, ascore of Weak on this sub-indicator.

VI. Network of trainers and MTS experts maintained? The degree of networkingamong trainers and MTS experts is minimal. An Institute of Multilateral TradeSystems was formed but is not operational. The utilisation of theCommunication Discussion Facility is low and this facility has not contributed tostrengthening the national network of trainers. Hence, a score of Poor on thissub-indicator.

VII. Are the Trade Secrets Guide and Export Financing Book found useful? TheTrade Secrets Guide had not been brought out by JITAP. The Export FinancingBook was given away for free by the BET. Hence, a score of Poor on this sub-indicator.

VIII. Number and types of strategies developed for priority sectors/products. Twoexport development strategies for textiles & clothing and spices were developedwith assistance of JITAP. The Board of External Trade prepared independentlysimilar strategy reports for horticulture & mushrooms and fishery. Hence, ascore of Good on this sub-indicator.

IX. Is the national enquiry point on standards functioning? The Bureau of Standardsoften has difficulties with their Internet connections. The photocopying machinesupplied by JITAP to the Bureau of Standards was not operational as therewere no funds for maintenance and toners. Hence, a score of Weak on this sub-indicator.

The unweighted average for the above sub-indicators gives a score of Weak for theeffectiveness of JITAP in Tanzania: (2+1+1+1+2+1+1+4+2)/9= 1.667.

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Relevance of QUNO

For the relevance of QUNO, two sub-indicators were used: 1) the capacity of thedeveloping country to negotiate and implement multilateral trade agreements; 2) theformulation of a national trade policy at the interface of trade and development.

For the first sub-indicator, the evaluator looked at the following sub-sub indicators:

I. Has the increased knowledge of the beneficiaries led to an active participationin the TRIPS negotiations, in the form of participation in discussions in theTRIPS Council and of putting forward proposals? The beneficiaries of QUNOhave been very active, both in the discussions and in putting forwardproposals. Hence, a score of Good. (A score of Excellent was not givenbecause QUNO’s beneficiaries are mainly from developing countries thatalready have always been quite active in the negotiations.)

II. Has the increased knowledge of beneficiaries and the joint meetings ofdeveloping countries at the QUNO office led to strategies and alliancesbetween developing countries? It is difficult to analyse the strategies ofdeveloping countries because a strategy is not always visible, but it is veryclear that the developing countries have adopted a common co-ordinatedapproach, especially by submitting joint proposals and making jointstatements. Only on the par. 6 issue, there has been some differences inapproach, but not on substance. Hence, a score of Good/Excellent.

III. Has the increased knowledge of the beneficiaries (through the two indicatorsabove) led to positive negotiation results for developing countries? The DohaDeclaration has been very important for developing countries, because itcontained a number of important achievements for developing countries, e.g.that countries have the right to protect public health, not only in cases ofhealth crises. The Decision on Implementation of paragraph 6 of the DohaDeclaration on the TRIPS Agreement and public health is far from perfect, butthe developing countries have been defending their rights actively, withouttheir active participation, the agreement would definitely have been worse. Onthe other hand, external factors have also influenced the outcome of thenegotiations, e.g. pressure from public opinion, and therefore the result cannotonly be attributed to developing countries negotiators. Hence, a score ofGood.

IV. Has the increased knowledge of QUNO’s beneficiaries led to an increasedcapacity of developing countries to implement multilateral agreements?QUNO does not focus on the implementation of agreements. The capacity ofcountries to implement trade agreements will therefore not be increased as aresult of QUNO’s activities. Hence, a score of Weak. (A score of Poor was notgiven because the outcome of the negotiations may help developing countriesto implement trade agreements: there is now much more information availableregarding the flexibilities the TRIPS Agreement provides regarding health andthere is less uncertainty.)

The unweighted average for the first sub-indicator on the basis of these four sub-subindicators is (4+4.5+4+2)/4= 3.625.

For the second sub-indicator, we looked at the following sub-sub-indicators:

I. To which extent has QUNO focused on stakeholders in the national tradepolicy process. QUNO has had a number of activities in developing countries

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(regional seminars), where different stakeholders were brought together, anddifferent stakeholders have sometimes also been invited to Geneva. Alsopublications are sent to a wide audience in developing countries. This onlyleads to more awareness in developing countries about the issues at stake,but leaves the effects on national trade policy uncertain. Hence, the score isWeak.

II. To which extent does QUNO look at the relation between trade anddevelopment in national policy. QUNO has analysed what options developingcountries have in the negotiations, and how these options relate to theirdevelopment. This information has also been used for national policy, at leastfor determining a national position in the negotiations. Hence, a score of Fair.

The unweighted average for the second sub-indicator on the basis of these two sub-sub indicators is (2+3)/2= 2.500.

The unweighted average score for the two sub-indicators gives the overall score ofFair for the relevance of QUNO: (3.625+2.5)/2= 3.063.

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ANNEX 3

RESULTS OF THE IF PERFORMANCE DURING THE DTIS PHASE IN YEMEN VIS-À-VIS THE THREE IF PILOT COUNTRIES

A.3.1 IF pilot countries

This annex compares the input and results (output, outcome) of the IF programme, asfound for Yemen, with those of the three IF pilot countries (Cambodia, Madagascar,and Mauritius). The comparison is based on a desk study of publicly availableinformation on the DTIS process in the three pilot countries, as well as on aquestionnaire sent to the permanent missions of the pilot countries in Geneva; thesources of information are mentioned at the end of this annex. The below tablescontain a selected set of IF evaluation indicators that over time has been limited toreflect the IF performance during the DTIS phase up to the moment that the report isapproved by the authorities.

The tables presented thus allow a comparison of the IF performance during the IFDTIS phase in the five countries. The performance of Yemen has been based on theinformation collected during the fieldwork at the end of 2003, whereas theperformance of the three pilot countries has been mainly based on publicly availableinformation. Since the IF programme and the DTIS phase started earlier in the threepilot countries, these countries have obviously come further in the IF process thanYemen; but again, the selected set of evaluation indicators in this annex is restrictedto the DTIS phase only. Another introductory remark is that generally pilot countriesreceive more attention (financially, politically, etc.) from both donors and beneficiarygovernments; this may have had a positive influence on the IF performance of thethree pilot countries as well.

In Table 1, three input indicators are compared for Yemen, Cambodia, Madagascarand Mauritania: Financial support, the number of consultants involved in the DTISteam and the time-span covering the various key moments during the DTIS process.It appeared that the financial support could not be determined from the publiclyavailable source of information on the IF programme in the three pilot countries.

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Table A.3.1 Input IndicatorsCountry/Indicators

Financial support; Number ofconsultants

Time-Span

Yemen Financial support USD438,000;Consultants

Pre-mission (February –April 2002) -> Mission (May2002) -> 1st draft DTIS (August 2002) ->2nd draftDTIS (March 2003) -> National workshop (June2003) -> Revised DTIS/TA Matrix (October 2003) ->Donor meeting (November 2003?) -> DTIS notvalidated

Cambodia Financial support*; Consultants Pre-mission (May 2001) -> Mission (August 2001) ->Draft DTIS (October 2001) -> 1st National Workshopand agreement on implementation plan (November2001) -> Follow-up Workshop (December 2001) ->DTIS/TA Matrix adopted and submitted for financing(January 2002) ->First project funded resulting fromthe DTIS (February 2002)

Madagascar Financial support*; Consultants Mission (July 2001) -> 1st draft DTIS (November2001)-> Activities suspended in 2002 -> Activitiescontinue October 2002 ->Revised DTIS (February2003)-> National Workshop (July 2003)-> Nationalvalidation workshop and DTIS approved (September2003)->Implementation plan agreed and donorimplementation meeting organised ->2nd NationalWorkshop (January 2004)

Mauritania Financial support*; Consultants Mission (July 2001) -> DTIS (October 2001) ->National Workshop (November 2001) -> ValidatedDTIS (November 2001)->IFWG decision to fundproject from Window II (October 2002)

Comments Table 1

In terms of input, Yemen has had a larger number of consultants compared to the threepilot countries. The time-span for delivering the DTIS has been relatively long for Yemen.After 22 months Yemen has still not validated the DTIS. Follow-up activities for Yemen aretherefore absent, and no TRTA activities have been realised so far. In contrast, all threepilot countries have realised TRTA activities within a shorter time-span, which was onaverage 13 months after the main DTIS mission. For reaching the key-moments during theDTIS process the time-span for Yemen has been longer than the average time-span (seeBox 1 below). Based on the above two input indicators (number of consultants and time-span), efficiency for Yemen has thus far been less than for the three pilot countries.

Box A.3.1 Average Time-Span6 and Time-Span for YemenPeriod Average /Time-SpanPre-Mission-Mission 4 months/ Yemen 4Mission-1st DTIS draft 4 months/ Yemen 4Mission-Preparing DTIS for the national workshop 7 months/ Yemen 14Mission-validated DTIS 10 months/ Yemen >22National workshop -validated DTIS 2 months/ Yemen > 9Mission-TRTA funded projects 13 months; Yemen U

In Table 2, two output indicators are compared for Yemen, Cambodia, andMadagascar. The first output indicator is overview/inventory and analysis ofexisting TRTA programmes made during the DTIS process; the second outputindicator measures whether any follow-up TRTA/CB projects have been prioritisedand funded as a direct output of the DTIS process. 6 Average time-span is based on the three pilot countries. * Data on financial support for the three pilotcountries are not publicly available. U = Unknown

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Table A.3.2 Output IndicatorsCountry/Indicators

Overview/inventory and analysis of existingTRTA programmes in the country

Prioritised and funded follow-upTRTA/CB projects

Yemen NO->No overview and analysis of existingTRTA programmes exist. Only a planningschedule is made that should lead to a donorprogramming exercise (end of 2003).

NO-> List of prioritised TRTA/CBprojects was to be finalised in aNational Steering Committee Meeting(November 2003). Little interest frombilateral donors in funding TRTAactivities.

Cambodia YES-> IF focal point has presented a list ofTRTA/CB undertaken or proposed by the sixcore agencies, associated agencies andbilateral donors.

YES-> The 30th IAWG meetingapproved the first IF project resultingfrom the Cambodian DTIS (February2002). Total of 60-65 TRTA/TRCBprojects have been initiated or funded.

Madagascar YES->Government is currently busy withidentification of TRTA activities and projects.

YES->Priority Projects in TA Matrixhave been submitted for funding.

In Table 3, two outcome indicators are compared for Yemen, Cambodia, andMadagascar: i) Follow-up actions, such as impact analysis of trade policy onproduction chains and employment opportunities made during the DTIS process; andii) Co-ordination of TRTA made by the six core agencies during the DTIS process.

Table A.3.3 Outcome IndicatorsCountry/Indicators

Follow-up actions: Impact analysis of tradepolicy on production chains and employmentopportunities

Co-ordination of the TRTA by the sixcore agencies

Yemen No-> No follow-up actions undertaken. Nosector working groups established, or anyfollow-up actions by sectors have been made

NO-> Limited co-ordination on theground. Only WB and UNDP have aresident office on location.

Cambodia Yes-> A number of activities have beeninitiated covering various sectors -> Financialsector development plan; RegionalDevelopment Plan.

Evaluator could not draw anyconclusions on donor co-ordination fromstudying the available officialdocuments in this desk study

Madagascar NO-> Have not been able to follow-upbecause government still in the process ofsearching for funding

NO-> Co-ordination has not been easyand not enough/good communicationbetween the 6 agencies has beenestablished

Comments Table 2 and 3

Output indicators are weak for Yemen in comparison with the two pilot countries. So farno overview or analysis of TRTA activities has been made. Regarding prioritised andfunded projects, modest progress has been made in Yemen. In general, little interesthas been shown from donors to fund TRTA activities in Yemen. In terms of outcomeindicators, the results are weak too for Yemen. Follow-up actions have been limited,and realisation of activities cannot be expected until 2004. In general, progress madeon impact analysis of trade policy on production chains, and employment opportunitiesfor the poor has been weak for Yemen. Co-ordination among core agencies has beenweak for Yemen. The WB and UNDP have been present on location in Yemen; theother four agencies only had a limited presence and involvement in the DTIS in Yemen.Compared with the pilot country, Cambodia, the effectiveness for Yemen is weaker.

In conclusion, looking at the time-span of different phases in the DTIS process andthe relationship between selected input and output of the DTIS it appears that theabove efficiency indicators for Yemen in comparison with those of the three pilotcountries are worse; the same conclusion applies to the indicators of effectivenesstaken up in this annex.

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Sources

Evaluation of the Integrated Framework, Country Report Yemen, January 2004

DTIS (Cambodia, Mauritania and Madagascar),http://www.integratedframework.org/documents.htm

Information on Follow-up-Progress to date (Yemen, Cambodia, Mauritania,Madagascar), http://www.integratedframework.org/ifcountries.htm

“Implementing the IF in Cambodia”, WT/IFSC/W/13, August 2002,http://www.integratedframework.org/doccountry/cambodia.htm

“Implementing the IF in Cambodia”, Update of the list of Trade Related CapacityBuilding undertaken or proposed by the 6 core agencies, associated agencies, andbilateral donors, April 2003,http://www.integratedframework.org/doccountry/cambodia.htm

Report on the 8th meeting of the Integrated Framework Steering Committee (IFSC),March 2003, Geneva, http://www.integratedframework.org/files/docs/IFSC-M7.pdf

Questions on IF for delegations of Cambodia, Madagascar and Mauritania in Geneva,Response from the Madagascar ministry.

O S D R 0 5 3 0 / E

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Policy and Operations Evaluation Department

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