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With support from:

MENA MDTF
THE MIDDLE EAST & NORTH AFRICA MULTI DONOR TRUST FUND
3
1

CONTENTS
CONTENTS 1

ACKNOWLEDGEMENTS 2

EXECUTIVE SUMMARY 4
RECOMMENDED ACTIONS FOR INTERVENTIONS 5

METHODOLGY & REPORT STRUCTURE 10

PART ONE: COUNTRY CONTEXT 14

PART TWO: FINDINGS OF THE 2018 SURVEY 16
SUMMARY OF KEY FINDINGS 16
IMPACT ON FIRM CLOSURE AND RELOCATION 17
IMPACT ON SALES 18
IMPACT ON EMPLOYMENT, WORKING HOURS, AND CUSTOMER LOSS 20
IMPACT ON INPUTS AND COSTS 22
IMPACT ON FINANCING AND CASH MANAGEMENT 25
IMPACT ON INVESTMENTS AND ARREARS 28

PART THREE: COMPARISONS BETWEEN 2012
AND 2018 FINDINGS 30

PART FOUR: RECOMMENDED OPTIONS
FOR INTERVENTIONS: 34
RESILIENCE AND REVITALIZATION OF PRIVATE SECTOR ACTORS 35
PRIVATE SECTOR INVESTMENT IN RESTORING PUBLIC GOODS 37
STRENGTHENING COORDINATION AND COLLABORATION WITH
PRIVATE SECTOR ACTORS 38

REFERENCES 41

ANNEX (1) 42
2

ACKNOWLEDGEMENTS
The Impact of Conflict on Private Enterprises Report is an Advisory Services and Analytics
(ASA) product financed by the Middle East & North Africa (MENA) Multi Donor Trust Fund
(MDTF) and led by Sami Sofan (Private Sector Development Analyst). Core WBG team
members included Abdulhakim Al-Aghbari (Senior Highway Engineer), Amir Althibah
(Research Analyst), Kurt Ambroze Hagemann (Consultant), and Abdulhakim Nasher
(Consultant). The team would like to thank Marina Wes (Country Director, the Arab
Republic of Egypt, the Republic of Yemen, and Djibouti), Poonam Gupta (Country Program
Coordinator, the Arab Republic of Egypt, the Republic of Yemen, and Djibouti), Raja
Bentaouet Kattan (Country Manager, the Republic of Yemen), Najy Benhassine (Director,
Finance Competitiveness and Innovation Global Practice), Jean Pesme (Practice Manager,
Finance Competitiveness and Innovation Global Practice), Nabila Assaf (Practice Manager,
Finance Competitiveness and Innovation Global Practice) for their advice and support.

Finally, generous financial support from the Middle East & North Africa (MENA) Multi
Donor Trust Fund (MDTF) is gratefully acknowledged.
Escalating
3 in March 2015, the conflict spanning across Yemen has resulted in massive
casualties, a wave of internally displaced persons, substantial infrastructure damage, and
hampered service delivery across both the economy and society. The private sector was
among those that were severely impacted by the conflict.

 80%
of firms experienced a
 25% drastic drop in sales
of firms closed as a
result of the conflict
 20%
of firms relocated their
 30% operations, domestically
and abroad
of firms changed from
small to micro
enterprises  20%
of firms lost full-time
 22% employees
of firms had shrunk
from either large to
medium, or medium
to small  27%
of firms lost part-time
employees

 22 Million People
the equivalent of 75 percent of
 the population of the Republic of
Yemen are in need of humanitarian
 protection or assistance
4

EXECUTIVE
SUMMARY
Escalating in March 2015, the conflict effectively or plan ahead for the future.
spanning across Yemen has resulted Prior to the conflict, the private sector
in massive casualties, a wave of constituted 50% of GDP and provided
internally displaced persons, substantial employment for around 69.4% of the
infrastructure damage, and hampered total employed population.2 Currently,
service delivery across both the with the private sector in disarray, the
economy and society. Key infrastructure economic pain is widespread and deeply
including major roads and bridges have felt: the cumulative real contraction of
been destroyed, power lines have been GDP between 2015 and 2018 is estimated
debilitated, and oil and gas production at $49.8 billion3. Twenty five percent of
ground to a complete halt for months, (25.18%) firms surveyed in the 2018 Rapid
only to resume roughly a year after the Assessment Survey closed as a result of
start of the conflict. In total, according to the conflict. The security issues in conflict
the 2018 Humanitarian Needs Overview, zones, economic devastation and financial
approximately 22.2 million people— the recession, and the shelling of firms were
equivalent of 75 percent of the population the main reasons for firm closures.
of the Republic of Yemen—are in need of Additionally, many firms experienced
some manner of humanitarian protection shrinkage: 29.7% of surveyed firms
or assistance.1 changed from small to micro enterprises,
and 22% had shrunk from either large to
The business climate across Yemen
medium, or medium to small.
has dramatically deteriorated as a
result of the conflict, and businesses Interruptions of key service provisions
throughout the country experienced like electricity and loss of a customer
severe disruptions that for many firms base are among the major constraints
constituted a force majeure situation, experienced by surviving firms since
hindering their ability to either operate 2015. Over 80% of firms experienced a

1
United Nations Office for the Coordination of Humanitarian Affairs, 2018 Humanitarian Needs Overview—Yemen
(https://reliefweb.int/report/yemen/yemen-2018-humanitarian-needs-overview-enar).
MoPIC (2018): Yemen Socio-Economic Update. Issue (35), July 2018.
2

MoPIC (2018): Yemen Socio-Economic Update. Issue (39), December 2018.
3
5

drastic drop in sales signaling further the dire financial situation. Taken with
risks of closure if the conflict continues. reduced sales, the reduction in working
Additionally, disruption of domestic and hours is curtailing local employment. In
imported supplies, high supply costs, loan 2018, the firms surveyed experienced a
restrictions, and substantial spending loss of workers reaching an aggregate
on taxes and other regulatory fees have contraction of around 20% of their full-
placed a heavy burden on the shoulders time employees and 27% of their part-time
of the private sector. These factors, employees compared to employment
combined with stark security threats, have levels prior to the 2015 conflict.
pushed almost 20% of firms to relocate
RECOMMENDED OPTIONS FOR
their operations, both domestically
INTERVENTIONS
and abroad. Financially speaking, firms
have diminished access to the banking Addressing these challenges requires
system, relying heavily on cash payments substantial effort by the GoY and the
and on money exchange companies international community to support
for conducting financial transfers and the resilience of the private sector and
business transaction. Over 97% of prevent its further deterioration and
enterprises surveyed pay employees in losses. The loss of private sector wealth
cash, and roughly 68% also pay suppliers and activity of this magnitude is part and
in cash. These trends likely indicate a parcel to the food insecurity, poverty,
lack of trust in the banking sector, the public health issues, and defunct service
decimated capacity of the of the local provision that plagues the war-fatigued
financial system, or a combination of both. population. As such, both in the future post-
conflict setting and at present, engaging
Employment and operations have been
and revitalizing the Yemeni private
drastically curtailed by the conflict. On
sector is a crucial and indispensable step
the operations front, a substantial 32%
towards the successful reconstruction
of the firms experienced nonoperational
and recovery of Yemen, and the long-
days resulting from both the conflict and
term well-being of the population. The
the inability of workers to make it to work,
recommended actions for intervention
with nonoperational days ranging from
include options that support the resilience
less than 10 to over 50 days. In tandem,
and revitalization of private sector actors,
working hours have also plummeted, in
increase its participation in recovery
some cases by more than 50%, seemingly
and restoring services, and strengthen
a reflection of market demand and
6

its coordination and collaboration with confidence and stability need to be
the government and international returned to Yemen’s banking sector,
community. The incorporation of the the backbone of any robust economy or
following recommendations in the design private sector activity. The GoY and the
of new operations or programs tailored international community need to scale-
to supporting the resilience and recovery up existing interventions targeting the
of the Yemeni private sector would resilience of financial intermediaries
contribute immensely to the revival, in the country and such interventions
health, prosperity, and inclusiveness of should be sustained, scaled-up,
the Yemeni economy as a whole. and extended across the board to
struggling financial intermediaries
Support The Resilience & Revitalization of
in the country. After the conflict has
Private Sector Actors
stabilized and reconstruction begins in
¡¡ Establish an Early Recovery Financing full, actions needs to be taken by the
Facility (ERFF) for small and medium GoY and the international community
enterprises (SMEs) (Short-Term). to support the extension of wholesale
Recovery financing will be instrumental facilities to banks and microfinance
in the immediate term to enable institutions in order to inject liquidity
enterprises to recover from both and facilitate the resumption of credit
physical and non-physical losses and and equity finance toward the private
access immediate working capital. An sector.
enterprise recovery financing facility
¡¡ Establish A Challenge Fund and/
would provide recovery financing
or Venture Capital Firm/Start-up
(grants, lines of credit and partial credit
Incubator and revamp Yemen’s
guarantees) to enable local enterprises
information and communication
to restore their economic activities and
technology (ICT) infrastructure
provide essential goods, services, and
(Medium-Term). After the conflict
jobs within their communities.
subsides, establishing a challenge
¡¡ Support Yemen’s banking sector Fund for SMEs in Yemen, or a Venture
recovery (Short-Term). Given the Capital Firm/Start-Up Incubator could
paucity of investment, credit, and help address both the shrinkages
financial intermediation, as well as and closures of SMEs by providing
the over-reliance on cash payments necessary seed and growth capital.
and on money exchange companies, It is also essential to revamp the
7

information and communication and from the Yemeni diaspora – and
technology (ICT) infrastructure and provide coverage against traditional
introducing broadband access to SMEs political risks (war and civil disturbance,
throughout the country. Adequate ICT expropriation, breach of contract, and
infrastructure supports a wide range of transfer restrictions). It will serve to
business operation as well as facilitate de-risk investments, including any
business transactions and finances. potential IFC investments under the
Private Sector Window (PSW), as
Maximize Finance for Development through
well as risks resulting from business
attracting Private Sector Investments in
transactions in Yemen (such as public
Support of Restoring Public Goods
contracts for infrastructure or the
¡¡ Establish an Investment Guarantee provision of other goods, services
and Financing Facility (IGFF) to help and works). The pipeline for such
mobilize private sector capital for a guarantee facility is expected to
high-risk infrastructure projects emerge as reconstruction activities
(Short- and Medium-Term). begin in earnest and is expected to
Considering that service disruptions be focused in the energy, transport,
remain the largest stumbling block construction, agriculture, and urban
to the successful operation of local construction sectors.
businesses, combined with the
¡¡ Execute a deeper analysis and
unlikelihood of the post-conflict
assessment of the employment
government having the resources
situation in the Yemeni private sector.
necessary to finance the infrastructure
While this survey was able to partially
needs of the country post-conflict,
cover employment and provide
the international community needs
findings, it was only able to scratch
to support the establishment of a
the surface; much more remains
guarantees and financing facility
to be discovered and is necessary
to enable local private sector and
for the successful revitalization of
FDI participation in the immediate
the Yemeni job market. As such, in
restoration of public goods. The IGFF
coordination with the International
would be used to provide protection to
Labor Organization (ILO), a deep-dive
investors and contractors engaged in
should be undertaken to assess the
business in Yemen. It will be designed
true extent of the effects of the conflict
to cover investors – foreign, domestic,
on private sector employment with a
8

focus on multi-causal explanations donors and government agencies. As
for both causes for unemployment an immediate measure, the GoY and
and barriers to restoring job security. the international community should
further support and engage proactively
Strengthening Coordination, and
with the Cluster specifically in helping
Collaboration with Private Sector Actors
secure the buy-in of the private
¡¡ Engage in public-private discussions sector in Yemen’s reconstruction
on regulatory reform in Yemen and recovery efforts. In the medium-
and on increasing private sector and long-term, such engagement
participation in recovery and would also contribute to reforming
reconstruction efforts. The conflict the business environment and
has degraded the general business championing favorable policies that
environment and the business promote exports and attract private
community continues to suffer from sector capital and investment Without
regulatory unpredictability and from a doubt, the recovery and expansion
substantial spending on taxes and of the private sector is critical for
other regulatory fees. Such regulatory economic growth and stability in
challenges are likely to continue post-conflict Yemen. The international
post-conflict if structured discussion community, in partnership with
among public and private sector the Government of Yemen, should
stakeholders does not take place. develop a plan of action considering
Thus, the facilitation of Public-Private the above solutions to ameliorate
Dialogue (PPD) is indispensable. The the challenges faced by local Yemeni
GoY and the international community businesses and pave the way towards
should continue its engagement restoring a dynamic economy that
with the recently-established Yemen delivers for all. The international
Private Sector Cluster. Founded in community and the GoY should take
collaboration with the WBG, the Yemen heed of these recommendations and
Private Sector Cluster gathers private design new projects tailored towards
sector institutions from around the supporting the resilience and recovery
country and advocates for the sector, of the Yemeni private sector that also
supports the emerging needs in the bolsters the health, prosperity, and
country, and acts as a coordination inclusiveness of the Yemeni economy
platform that enables the private as a whole.
sector to collaborate effectively with
9

Table (1): Summary of Constraints and Interventions Measures

Constraints Intervention Measures

Support the Resilience & Revitalization
of Private Sector Actors:
¡¡ Establish an Early Recovery Financing
ed

ion al

Facility (ERFF) for small and medium
iat nci
Lac ment

Decreas

enterprises (SMEs) (Short-Term).
Sales

ed na
f
ko

rm Fi

¡¡ Support Yemen’s banking sector recovery
est

or
te of

Ac (Short-Term).
ct
Inv

In ine

Fi ces e
gs y
na s in bilit ¡¡ Establish A Challenge Fund and/or
cl

nc to k
De

n a Venture Capital Firm/Start-up Incubator
e Ba Inst sh
on ca y
iance
rel emon
(Medium-Term).
SME
Over s and anies
& s closu e n t ¡¡ Revamp Yemen’s information and
hrin re
kag s CONSTRAINTS paym ge comp
n
es excha communication technology (ICT)
infrastructure (Medium-Term).

Maximize Finance for Development
through attracting Private Sector
Lack of Service Lack of
Provision Investment Investments in Support of Restoring
Public Goods
¡¡ Establish an Investment Guarantee
and Financing Facility (IGFF) to help
CONSTRAINTS
mobilize private sector capital for high-
risk infrastructure projects (Short- and
Medium-Term).
Political and ¡¡ Execute a deeper analysis and
Unemployment
Security Risks assessment of the employment situation
in the Yemeni private sector.

Degraded business Strengthening Coordination, and
environment
Collaboration with Private Sector
Actors
¡¡ Engage in public-private discussions
Cumbersome on regulatory reform in Yemen and on
taxes and fees
increasing private sector participation in
Restrictive recovery and reconstruction efforts.
regulations
10

METHODOLGY & REPORT
STRUCTURE
To assess the effects of the 2011
crises and the 2015 conflict on Box 1.1. The 2012 survey was based on a stratified random
sampling that was created from the earlier sample of 500
local enterprise, two surveys
firms utilized for the 2010 Investment Climate Assessment
were undertaken, the Rapid Enterprise Survey conducted by the World Bank. The sample
Assessment Survey of Impact of followed the below stratification, the scope of which was
Conflict in Private Enterprises in maintained in the sample used for the 2018 rapid survey:

Yemen, 2012 and 2018. The 2012 Location: The sample was distributed over six main
assessment surveyed the effects governorates and across; 6 main strata; Sana’a, Hodeidah,
Taiz, Aden, Al-Mukkala and Ibb.
of the 2011 civil strife on business
and serves in many cases as a Size: A sub strata under each main stratum was created;

cogent point of comparison with ¡¡ First sub-strata: small establishments (5-19 employees);

the timely 2018 assessment. The ¡¡ Second sub-strata: medium scale establishments (20-
99 employees)
2012 survey was undertaken with
¡¡ Third sub-strata: large scale establishments (100- over
the objectives of: employees)

i) establishing the impact Sector: The sample represented some of the most important
sectors in the economy, including wholesale and retail trade,
of the conflict(s) on
transport, manufacturing, health construction and hotels.
local private enterprise, As is customary, the sample will not include financial services
with a particular focus firms, farms or utilities due to the different nature of their
on sales, employment production functions.

figures, financing, and
investment;
ii) creating a firm understanding of the expectations of local businesses over
the next two years regarding the aforementioned indicators, and;
iii) gaining an understanding of the kinds of assistance most valued by firms.
The survey covered 200 firms from six major governorates in Yemen: Sana’a,
Aden, Taiz, Ibb, Hodeidah, and Al-Mukkala.
11

Out of the 200 firms, 199 successfully contact information. As such, the survey
completed the survey, indicating a success used replacement firms from the 2012
rate of 99.5% assessment, matching the size, sector,
and location of the main sample.
Following up on the 2012 assessment,
the 2018 Rapid Assessment Survey The 2018 assessment in total reached
utilized a methodology based on the out to 274 firms and conducted 141
2012 survey to conduct further analysis successful surveys over the period of
of the targeted indicators in the 6 years August to September 2018. In comparison
in between surveys. As such, the 2012 to the baseline of the 2012 survey, the
data collection tools were reviewed and 2018 survey found that 69 firms of the
adapted, and the list of the 200 firms total 274 (25.18%) had closed, 40 refused
surveyed in the 2012 assessment were to be surveyed, and 24 refused upon
used as a sample scope for the number screening (Table 1). Of the 141 completed
of businesses required to be surveyed surveys, small firms represent 67.3%,
under the 2018 survey. While the initial medium 21.2%, and large 11.3%, with
data collection plan for the 2018 report manufacturing firms constituting 54%
focused on using phone contact data and service firms making up 46% (Table
due to security concerns, ultimately the 2). Geographically, Amanat Al Asimah
team conducted face-to-face interviews represented 24.1% of firms surveyed,
with selected large businesses to ensure Al-Hodeida 21.2%, Taiz 16.4%, Aden
a higher likelihood of response. The represented 15.6%, Hadramuat 13.4%,
intended scope necessitated a minimum and Ibb 9.2% (Table 3).
of 120 completed questionnaires from
the 200 businesses surveyed in the 2012 Table (1): 2018 Interview Results
assessment, and followed the design of
STATUS NO. OF FIRMS
the 2012 assessment regarding business
sizes (small, medium, and large), sectors Open/ complete interview
141
(active sample)
(wholesale and retail trade, transport,
manufacturing, and hotels), and locations Closed 69

(Sana’a, Hodeida, Taiz, Aden, Al-Mukalla,
Refused 40
and Ibb). However, the minimum
sample failed to be reached due to Screener Refusal 24

many firms being shut down, owners
Total 274
refusing interviews, and/or outdated
12

Table (2): Characteristics of The Sample Per Firm Size

FIRM SIZE FREQUENCY % FIRM ACTIVITY FREQUENCY %

Small 95 67.37% Manufacturing 76 54%

Medium 30 21.27% Services 65 46%

Large 16 11.34%

Total 141 100% 141 100%

Table (3): Distribution of Sample Across The Targeted Locations

LOCATION MANUFACTURING SERVICES TOTAL %

Aden 9 13 22 15.6%

Al-Hodeida 19 11 30 21.2%

Amanat Al-Asimah 15 19 34 24.1%

Ibb 7 6 13 9.2%

Hadramaut 12 7 19 13.4%

Taiz 14 9 23 16.3%

Total 76 65 141 100%

The assessment tool (questionnaire) used the objectives of the 2018 rapid survey.
in 2012 assessment were modified to fit The final version of the questionnaires
13

used for the data collection, included the assessment questions organized into five
sections to determine the impact of the conflict on firms’ sales, employment, investment,
and financing. See Annex(I) for the complete set of questionnaires.

The findings of both surveys were used as a basis for the given analysis. While
incorporating some analysis from the 2012 assessment for comparison, the majority
of analysis on this report is based off of the 2018 survey due to its timeliness and
expanded scope.
PART ONE

COUNTRY CONTEXT
In 2011, protracted conflicts in Yemen devastated the already struggling economy
and caused large numbers of causalities, widespread poverty, and one of the largest
humanitarian crises in the world. The 2011 crisis represented the culmination of
simultaneous political, social, and economic challenges that resulted in a contraction
of 12 percent of GDP that year. The severe fuel shortages resulting from the crisis,
along with the repeated attacks targeting power transmission lines and the overall
deteriorated security situation, seriously disrupted the operations of many economic
sectors.

Difficult as they may have been prior to 2015, those economic challenges do not
compare to the current dire situation that has occurred as a direct consequence
of the conflict that began on March 2015. The 2015 conflict has resulted in massive
casualties, a wave of internally displaced persons, substantial infrastructure damage,
and hampered service delivery across Yemen. Key infrastructure including major roads
and bridges have been destroyed, power lines have been debilitated, and oil and gas
production came to a complete halt for months, only to resume slightly a year after
the start of the conflict. In total, according to the 2018 Humanitarian Needs Overview,
approximately 22.2 million people— the equivalent of 75 percent of the population
15

of the Republic of Yemen—are in need of some manner of humanitarian protection
or assistance4.

The business climate across Yemen has dramatically deteriorated, and businesses
throughout the country have suffered extensively. The private sector constituted 50%
to GDP and provided employment for around 69.4% of the total employed population.5
Currently, with the private sector in disarray, the economic pain is widespread and deeply
felt: the cumulative real contraction of GDP between 2015 and 2018 is estimated at
$49.8 billion6. At present, the 2015 conflict has collapsed the main productive sectors of
the Yemeni economy. Among the major factors stifling businesses include: (i) currency
devaluation; (ii) fuel and power cuts; (iii) road blockages; (iv) security unrest; (v) lack of
foreign skilled workforce; (vi) political instability; (vii) scarcity; (viii) improbability and
volatility of the availability raw materials, and; (ix) unbearable logistical and tariff costs.

This devastation has resulted in an amalgam of constraints and challenges, which
include public finance and liquidity crises, physical damages, economic losses, and
the large-scale restriction of internal and external transactions.

4
United Nations Office for the Coordination of Humanitarian Affairs, 2018 Humanitarian Needs Overview—Yemen
(https://reliefweb.int/report/yemen/yemen-2018-humanitarian-needs-overview-enar).
MoPIC (2018): Yemen Socio-Economic Update. Issue (35), July 2018.
5

MoPIC (2018): Yemen Socio-Economic Update. Issue (39), December 2018.
6
PART TWO

FINDINGS OF THE
2018 SURVEY
SUMMARY OF KEY FINDINGS
Findings from the 2018 survey indicate that the business community in Yemen
experienced constraints that for many businesses constituted a force majeure,
hindering their ability to either operate effectively or plan ahead for the future. The
top constraints to doing business were service disruptions (31.2%), loss of customers
and supplies (25.5%), financial problems (16.3%), and business services problems
(9.2%). Moreover, 69 (25.18%) of the total 274 firms had closed, citing security issues
in conflict zones, economic devastation and financial recession, and the shelling of
firms as the main reasons for closure. These and other forces have also forced 17%
of surviving firms to relocate within Yemen.

Sales have plummeted, and business operations have taken a steep hit. Over
80% of firms reported a decrease in sales averaging around 54.4%. Of the firms that
export, 78.5% stated a decrease in sales averaging 79.17%, and 85.8% of firms noted
17

a conflict-related jump in prices. Business operations have also slowed, with 31.9% of
firms experiencing non-operational time, 44.7% reporting a decrease in working hours,
and 53.9% noting a change in the number of permanent workers. In addition, the
lion’s share of firms (76.6%) lost important customers and contracts from the conflict.
Supply chains have been disrupted, with 60.3% of participants facing the interruption
of domestic supplies, and 53.9% noting disruptions in imported supplies. Most firms
(75.2%) report a spike in the cost of supplies.

Businesses are finding it hard to finance themselves, and financial intermediation
is in decline. Restrictions to both accessing any source of credit (61.7%) or foreign
exchange (65.9%) under the crisis was reported by the surveyed firms. Most firms (71.6%)
do not have credit, half of firms have observed an increased cost of financing, and
53.9% of firms bemoan an average 45.05% increase in the share of late and nonpaying
customers, all of which taken together put heavy financial pressure on local businesses.
Financial intermediation has been undermined, with 47.5% of firms relying on money
exchange companies and only 13.5% utilizing the banking system. The conflict has
also increased the overreliance on cash; 97.2% of firms pay employees in cash, and
suppliers, also, are overwhelmingly paid in cash (68.1%). Lastly, investment has taken
a hit, with only 13.5% of firms making investments since the conflict began in 2015.

IMPACT ON FIRM CLOSURE AND RELOCATION

Figure (4): Biggest Constraints to Doing Business (By Percentage)

Service Interruptions 31.2%

Physical Damage & Insecurity 7.8%

Transport Problems 3.5%

Loss of Customers & Suppliers 25.5%

Loss of Staff 0.7%

Financial Problem 16.3%

Business Services Problems 9.2%

Others 2.8%

0 5 10 15 20 25 30 35
18

Under the pressures of the conflict, many firms have closed their doors. Sixty-nine
(25.18%) of the total 274 firms have closed. Among the main reasons for these closures
are: i) lack of security; ii) economic recession, and; iii) the shelling of firms (Table 5).
Security (40.6%) and economic issues (33.3%) were responsible for the largest percentage
of closures. Medium size firms (46%) experienced the most closures, followed by large
(33%) and then small (27.94%). Geographically, the regions most affected by closures
were Taizz (48.89%), Al Hudaydah (43.40%), and Amanat Al Asimah (28.26%).

Figure (5): Reasons for Firm Closure
Economic recession/
Financial problems 36

Other 18

Lack of raw materials 8

Security/conflict zone 38

In addition to closures, many firms have been forced to relocate to survive. Of the
firms interviewed, while 78% did not change their location, 17% changed or were in
the process of relocating within Yemen, and 2.8% had plans to relocate outside of the
country. Moreover, of the 17% who have moved or are moving within Yemen, 41.7%
chose Sana’a and 20.8% Ibb. Only a handful, four firms, moved outside the country
to Oman, India, and Dubai.

IMPACT ON SALES
The conflict has caused a sizeable distortion in local sales, stifling business.
Approximately 80.9% of 2018 respondents reported a decrease in sales. Small firms
experienced the largest decrease in sales (85.7%), followed by medium-sized (74.1%)
and then large-sized (62.5%). The average rate of reduction for sales was 54.48%. On
exports, of the 9.9% of firms under the study who export, 7.14% noted a decline in sales
ranging from 20-29%, with 78.5% stating a decrease in upwards of 50%. However, some
firms constituting 14% of exporting firms noted a price increase of 10-19% since 2015.
19

Figure (6): Domestic Sales (Increased/ Decreased)

120 114
100
80.9%
80

60

40
22
16 11.4% 15.6%
20
7 5%
0
Increased No Change Decreased Increased & %
is not Known

Freq %

Prices have spiked, while imports have fallen. Of the firms surveyed, the 12 firms
who expressed a concrete decrease in the percentage of exports, the average decrease
in exports was 79.17%. Regarding the cause of price changes, 85.8% of firms noted
a price increase due to the conflict, while 8.5% observed no change and 5% actually
observed a decrease. Of the 54% who adjusted prices upwards, the rate of increase
exceeded 50%, while 15% noted an increase of 20-29%, and 13% stipulated an increase
from 40-49%.

Figure (7): Price Adjustments Goods/Services (Increased/ Decreased)

140
121
120

100
85.8%
80

60

40
22
20 12 8.5% 7 15.6%
5%
0
Increased No Change Decreased Increased & %
is not Known

Freq %
20

IMPACT ON EMPLOYMENT, WORKING HOURS, & CUSTOMER LOSS
Employment has been degraded as a result of the war. The 2018 study demonstrates
that 22% of the surveyed employ temporary workers. Of those, over the two-month
period before being surveyed, 67% utilized less than 10 temporary laborers a day,
16.1% used 21-30 a day, and 9.6% used 10-20 daily. More strikingly, 53.9% noted
a change in the number of permanent workers, demonstrating that the volume of
permanent workers dropped 4,900 in 2014 and 3,938 in 2018, a change of -20%. On
average, large firms lost 13.67 full-time workers, medium firms 12.72, and small firms
5.93. Notably, on average, tourism lost 39.1 employees, metal products 11.83 workers,
non-metallic mineral products 11.8, wholesale 10 employees, and garments 7.28.
Regarding part-time employees, the number decreased by 1,830 in 2017 and 1,322
in 2018, indicating a change rate of -27%.

Figure (8): Percentage Change in Permanent Workers

90

80
79
70

60 53.9%
50
48
40 34%
30

20 13 9.2%
10 4 2.8%
0
Yes (%) No Change Don’t Did Want
Change Know to Answer

Freq %

With employment, the everyday operations of firms have also declined. In the 2018
study, 31.9% of firms experienced non-operational time due to civil conflict and mobility
issues for employees, with non-operational periods varying significantly: 35.5% of
firms experienced less than 10 non-operational days, 22.2% of firms had 21-30, and
20% of firms were closed for over 50 days.
21

Compared to 2015, 47.5% of respondents said that working hours remained
unchanged, and 44.7% noted a decrease in working hours, with 6.4% observing an
increase. Notably, Taiz (73.9%), Al Hudaydah (56.7%), and Ibb (53.85%) observed a
decrease in operational hours, while Aden (13.64%) and Amanat Al Asimah (12.12%)
noted an increase in hours. Firms in Taizz expressed a 47.67% decrease, in Amanat
Al Asimah a 37.25% decrease, and in Ibb a 36% decrease. Large (50%), medium
(25.9%), and small (49%) firms experienced a decrease, though 12.5% of large, 7.4%
of medium, and 5.1% of small experienced an increase. Small firms were impacted
most (40.26%), followed by large firms (29.38%) and then medium firms (28.13%).
Across the various sectors, food processing (57.9%), non-metallic mineral products
(53.8%), and garments (52.6%) noted the most widespread decrease in working hours,
while other manufacturing (20%), wholesale (18.2%), and garments (10.5%) saw an
increase. Metal products (50%), garments (45%) tourism (44.17%), and non-metallic
mineral products (35.83%) were hit the hardest. Working hours reduced by more than
50% were observed by 45.6%, and 21% believe working hours decreased by 30-39%.

Figure (9): Firms Who Lost Key Customers & Contracts

110
108
100

90

80 76.6%
70

60

50

40
29
30
20.6%
20

10 3 2.1% 1 0.7%
0
Yes No Don’t Did Not Want
Know to Answer

Freq %
22

The lion’s share of firms experienced losses in customers and contracts. Most of
the sample – 76.6% – lost important customers and contracts from the conflict. Large
(75%), medium (74.07%), and small-sized firms (76.6%) were all significantly affected.
The same applies to firms by sector, with metal products (84.21%), wholesale (81.82%),
and retail (78.39%) the most impacted. Geographically, while all firms were heavily
affected, firms in Taiz (91.30%), Amanat Al Asimah (81.82%), and Al Hudaydah (80%)
were hit the hardest.

Figured (10): Firms Who Lost Customers & Contracts, By Size

80 75% 74.7% 76 76.6%

70

60

50

40

30
20
20
12
10

0
Large Medium Small

No of firms % of firms in category

IMPACT ON INPUTS AND COSTS
Delays abound and disruptions to imports and supply chains are commonplace.
The conflict has resulted in widespread disruptions to local supply chains, with 60.3%
of participants facing the interruption of domestic supplies. Roughly 49% of firms note
a delay of less than 10 days, 32% a delay from 10-20 days, and 10% a delay exceeding
50 days. Regarding imported supplies, 53.9% noted disruptions, with 38.1% of that
population estimating additional days for the arrival of goods over 50 days and 22.3%
from 10-20 days. Regarding sector-level import disruptions, fabricated metal products
23

(68.42%), garments (63.16%), and wholesale (63.64%) were the three most-affected
sectors. Indeed, as a result of the conflict, imports fell from an all-time high of US$ 15.98
billion in 2013 to US$ 7.18 billion in 20177. More recently, clashes at the crucial port
of Hodeidah have drastically impeded imports due to flare-ups in the fighting. Since
2015, imports have been restricted from entry into Yemen and also their distribution
both delayed and obfuscated by the warring parties8.

Figure (11): Disruptions to Imported Supplies in Days
ADDITIONAL DAYS TO RECEIVE NO. OF FIRMS SUFFERS DISRUPTIONS
%
IMPORTED SUPPLIES IN IMPORTED SUPPLIES

Lower than 10 9 11.8%

10 -20 day 17 22.3%

21-30 day 10 13.1%

31- 40 day 1 1.3%

Higher than 50 29 38.1%

Don’t know/ did not answer 10 12.1%

Total 76 100%

Fiscal pressure on businesses has accumulated in the form of costs for supplies,
security, and other fees. Since 2015, 75.2% of firms have reported that the cost of
supplies have increased. Of those who marked an increase, 71% of the population
noted an increase upwards of 50%, while 6.4% was unable to determine the rate of
change, and 7.1% had indicated conversely a fall in prices. Geographically speaking,
firms in Al Hudaydah (93.33%), Taizz (87.33%), Ibb (78.95%) Amant Al Asimah (72.73%)
noted an increase in the cost of supplies, while an 80% and 73.38% increase were noted
in Al Hudaydah, and Amanat Al Asimah, respectively. In addition to supplies, other
costs have also increased: 26.2% of the sample observed an increase in the costs of
security, of which 56.7% noted an increase of over 50%. What’s more, 20.6% of firms
suffered additional losses from theft and vandalism, and taxes and other payments
to state agencies increased from 2015 according to 56.7% of the reviewed.

Uhttps://tradingeconomics.com/yemen/imports
7

Mhttps://www.amnesty.org/en/documents/mde31/8505/2018/en/
8
24

Figure (12): Disruptions in Imported Supplies As A Result Of The Conflict

80 76
70

60 53.9%
50
42
40
29.8%
30
22
20 15.6%
10
1 0.7%
0
Yes No No Don’t
imports Know

Freq %

Figure (13): Disruptions in Domestic Supplies As A Result Of The Conflict

90 85
80

70
60.3%
60 54
50
38.3%
40

30

20

10
2 1.4 %
0
Yes No Don’t
Know

Freq %
25

Figure (14): Cost of Supplies Figure (15): Spending on Taxation or
(Increased/Decreased) Other Payments to The State
Compare With 2015 or Local Authorities
Increased
Increased
56.7%
75.2%
No Change
No Change
9.9% 24.1%

Decreased Decreased

10.6% 2.8%

IMPACT ON FINANCING AND CASH MANAGEMENT
Access to finance has been greatly restricted. Further restrictions to financing and
cash management have arisen since 2015: 61.7% of participants noted some manner
of restrictions, mild or significant, in access to any source of credit under the current
crisis. In addition, a total 65.9% of firms note some form of restrictions, significant or
moderate, in accessing foreign exchange (FX).

Figure (16): Obtaining Credit Compared to 2015

Significant restrictions 48.9%

Mild restrictions 12.8%

Easier 2.1%

Don’t know 29.1%

Did not want to answer 1.4%

As usual 5.7%

0 5 10 15 20 25 30 35 40 45 50
26

Figure (17): Ease of Obtaining Foreign Currency As Compared to Before 2015

Don’t know Did not want to answer

29.83% 1.40%
As usual

2.80%

Mid restrictions

18.42% Significant restrictions

47.55%

Credit is both hard to come by and increasingly sourced by informal means, while
nonpayment abounds. In 2018, 71.6% of firms did not have credit. In spite of this,
50.4% of firms were not dependent on any form of loans, while 19.9% relied on bank
loans, 15.6% relied on loans from suppliers or advance payment from customers,
and 2.9% counted on personal loans or microfinance. Family and friends, at 14.2%,
were also a large source of support to firms. What’s more, 50% of firms claim that the
27

cost of financing has increased and 62.5% observed that the volume of cash payment
obligations to suppliers has increased. Regarding nonpayment, 53.9% of firms bemoan
the increase in the share of late and non paying customers, 19.9% expressed a decline
in arrears, and 14.2% noted no change in comparison with 2015. On average, the share
of late and nonpaying customers increased by 45.05%.

The conflict has caused both the non-usage and apparent skepticism in the formal
banking sector. This is reflected in the fact that 47.5% of the surveyed rely on money
exchange companies for money transfers. Roughly 32% do not approach banks,
only 13.5% utilize the banking system, and even fewer – less than 1% – use ATMs.
Half of large firms have access to a functioning bank branch, while 18.5% of medium
firms and 6.1% of small firms had the same access. For small firms, 51% indicated a
reliance on money exchange companies, and 38.78% indicated having no access to
any branch. Moreover, financial transactions in Yemen overwhelmingly depend on
cash payments over banking transactions: 97.2% of firms pay employees in cash, with
just 2.1% operating through the banking system. Suppliers, also, are overwhelmingly
paid in cash (68.1%), or through cash transfer through money exchange companies
(20.6%). Only 7.6% of suppliers are paid through the formal banking system.

Figure (18): Regular Access to Banks

No access to any braanch 32.6%

Hawala (exchangers) 47.5%

Access to functioning bank 13.5%

Access to ATM 0.7%

Don’t know 3.5%

Did want to answer 2.1%

0 5 10 15 20 25 30 35 40 45 50
28

Figure (19): Mode of Payment (Suppliers & Employees)

    
68.10 % 7.80 % 20.60 % 2.80 % 0.70 %

In cash Through banking Hawala system Don’t know Did not want to
system answer

PAYMENTS TO SUPPLIERS %

PAYMENTS TO EMPLOYEES %

  
97.2 % 2.10 % 0.70 %

In cash Through banking Hawala system
system

IMPACT ON INVESTMENTS AND ARREARS
Widespread uncertainty has both caused investment to plummet and arrears to balloon.
The conflict has taken toll on the investment climate and business confidence. Only
13.5% of firms have made investments since the outbreak in 2015, compared to the
84.5% who have abstained from investing. Most notably, geographically speaking 40.9%
of firms in Aden and 26.3% of firms in Hadramaut boosted investment. By firm size,
56.3% of large firms, 14.8% of medium, and 6.1% of small firms made investments. The
sectors that made investments most consistently were food processing (31.6%), tourism
(30%) and other manufacturing (20%). A sizeable 61.7% of those surveyed canceled
their plans to invest, while 36.9% upheld their plans (Figure 20). Fortunately, only 17%
of the sample had non-paid government debt, and 77.3% did not have government
arrears. However, for those affected by arrears, 8.3% were affected severely, 29.1%
moderately, and 25% substantially.
29

Figure (20): Investments Made Since 2015 Vs. Investment Plans Cancelation

Yes

Yes 61.70%
84.40% No

36.90%
Don’t Know
No 13.50% Don’t Know
2.10% 1.40%

Investment Made Planned Investment Is
Canceled
PART THREE

COMPARISONS
BETWEEN 2012 AND
2018 FINDINGS
A myriad of obstacles have persisted between 2012 and 2018, resulting first and
foremost in shrinkages. As such, results from the 2018 survey indicated a significant
change in the size of businesses compared to the 2012 data: 51% of the sample has
experienced a change in size, with 29.7% shrinking from small to micro (<5 employees),
and 22% shrinking from large to medium, or medium to small. Among the main
reasons for firm shrinkage due to the conflict are: i) financial recession and substantial
depreciation of the Yemeni Rial (YER) to the U.S. Dollar; ii) a spike in the price of raw
materials; iii) electricity shortages and the high price of petroleum necessary for
powering generators, and; iv) diminished market demand. For those few firms that
increased in size during this time frame, however, this can be likely be attributed to
conflict-related population shifts. The city of Ibb, for instance, as a non-conflict zone
31

experienced a large influx of people fleeing the conflict, bolstering supply and demand
as a development factor for the city.
Table (21): Size Change (Small to Micro)

ADEN AL-HODEIDA SANA’A HADRAMAUT TAIZ IBB TOTAL

No. Of Firms 4 14 9 2 10 3 42
(29.7% of the sample)

Percentage 9.52% 33.3% 21.43% 4.8% 23.8% 7.14% 100%

Table (22): Size Change While some parity exists between assessment
Among the Sample periods, on balance, the current civil conflict in
Yemen appears to have had a more detrimental
FROM TO NO. OF FIRMS
impact on local businesses than the civil strife in
Medium Small 21 2011. The status of exporters and credit-holders
Large Medium 1 remained relatively consistent, as in the 2012
Small Medium 4 analysis in which 89% of firms indicated that they
Medium Large 4 did not export, roughly 10% of 2018 firms export,
Small Large 1 and in 2018, 71.6% of firms did not have credit,
Total 31 compared to 73% in 2012. Regarding sales, the
(22% of the sample)

current period has proved more detrimental; 71%
of participants in 2012 identifying a sizeable decrease in sales, while 80.9% of the
2018 respondents noted a similar drop. In addition, the investment climate as of 2018
appears to be in a worse state than 2012, as in 2012 investments decreased from
only 30% of firms between 2010 and 2012, while a meager 13.5% of firms have made
investments between 2015 and 2018.

The recent conflict also more strikingly affected employment and operations. In
particular, 53.9% of firms in 2018 noted a change in the number of permanent workers,
demonstrating that the volume of permanent workers dropped 4,900 in 2014 and 3,938
in 2018, a change of -20%. Regarding part-time employees, the number decreased
by 1,830 in 2017 and 1,322 in 2018, indicating a change rate of -27%. Comparatively,
according to the 2012 study, 38% of firms noted a decrease in employment, while
14% noted an increase. Of the 199 firms surveyed in 2012, jobs were permanently
eliminated for 1,133 full-time employees and 209 part-time employees since 2010. In
the 2018 study, 31.9% of firms experienced non-operational time due to civil conflict
32

and mobility issues for employees, with non-operational periods varying significantly:
35.5% experienced less than 10 non-operational days, 22.2% had 21-30, and 20%
of firms were closed for over 50 days. Meanwhile, 41% of 2012 firms experienced
a decrease in the number of hours, in total amongst the 199 firms surveyed 10,633
days of production/operations were lost due to infrastructure interruptions, 2,967
due to civil disorder, and 207 to labor strikes. The sectors who lost the most days of
production/operations were non-metallic mineral products (3,551 days), other services
(3,038 days), and retail (1,946 days). By size, small firms lost the most days (6,588),
followed closely by medium firms (6,173), and then large firms (1,046).
RECOMMENDED OPTIONS
33

FOR INTERVENTIONS
SUPPORT THE RESILIENCE
AND REVITALIZATION OF
PRIVATE SECTOR ACTORS

 1

2 
PRIVATE SECTOR
INVESTMENT IN RESTORING
PUBLIC GOODS

 3

STRENGTHENING COORDINATION
AND COLLABORATION WITH
PRIVATE SECTOR ACTORS
PART FOUR

RECOMMENDED
OPTIONS FOR
INTERVENTIONS
Undoubtedly, the conflict in Yemen has devastated the Yemeni business environment,
problematizing both the effective operations and future planning for the success and
health of businesses. Businesses face tremendous challenges and constraints. The
prolonging of conflict, coupled with inaction to address the aforementioned constrains,
not only undermine private sector activities in the country and drastically decrease
the chances of their survival, but also threaten the health of the Yemeni economy.

As such, the findings of this report indicate the need for a sound and integrated
program design aimed at addressing the top constraints facing the private sector,
and ultimately enabling its recovery. Grouped into three categories, the recommended
options for intervention presented below revolve around addressing the market failures
35

arising from conflict that severely impact private sector operations. Interventions
have been identified that: i) encourage the resilience and revitalization of private
sector actors; ii) encourage investment in restoring public goods, and; iii) strengthen
coordination and collaboration with private sector actors. The below interventions will
enable early private sector recovery and contribute to the overall recovery of Yemen’s
economy and restoration of livelihoods.

Notably, the proposed interventions aim to “prime the pump” for private sector
investment and activity in Yemen. These measures will help de-risk doing business
in Yemen for both Yemeni and foreign businesses alike, and provide financial and
technical support to maximize the benefit of the momentum generated by reconstruction
and recovery for the Yemeni private sector to promote an inclusive and sustainable
recovery. The interventions will support the resilience of local enterprises still operating
in the country, aid in the recovery and revitalization of the struggling firms, and attract
private sector capital from local investors, the Yemeni diaspora, regional businesses,
and beyond. By reducing risks to lenders on guaranteed transactions, these efforts will
also contribute to revitalizing the financial sector which is essential to overall private
sector recovery and growth.

SUPPORT THE RESILIENCE AND REVITALIZATION OF PRIVATE SECTOR
ACTORS
Addressing the following private sector constraints: SME closures and shrinkages; access to finance; lack
of investment; decreased sales; decline of financial intermediation; banking sector instability; overreliance
on cash payments and money exchange companies.

The following interventions are recommended to encourage the resilience and
revitalization of private sector actors:

Establish an SME Early Recovery Financing Facility (Short-Term).

By many metrics, the conflict has had the most devastating impacts on small businesses:
small businesses demonstrated the least investment and access to credit and were
hit hardest by diving sales numbers. Medium-sized firms, meanwhile, experienced
the most closures. Recovery financing will be instrumental in the immediate term
to enable enterprises to recover from physical and non-physical losses and access
immediate working capital. An enterprise recovery financing facility would provide
recovery financing (grants, lines of credit and partial credit guarantees) to enable local
36

enterprises to restore their economic activities and provide essential goods, services
and jobs within their communities. The governance structure and implementation
arrangements of the facility should build on the implementation mechanisms already
established under the various WB/UN emergency projects with an emphasis on choosing
competent local institutional partners to lead the implementation of the facility. The
financing instruments will be determined on the basis of the market failures targeted
by the intervention (i.e., physical damages, increase in risks, etc.) and financing needs
of financial institutions (i.e., liquidity, risk mitigation instruments, etc.). There may
also be a case for expanding this form of recovery grants to MSMEs that have already
been forced to close and wish to re-open or even to entrepreneurs who wish to start
a business.

Support Yemen’s banking sector recovery (Short-Term).

Given the paucity of investment, credit, and financial intermediation, as well as the
over-reliance on cash payments and on money exchange companies, confidence and
stability need to be returned to Yemen’s banking sector, the backbone of any robust
economy or private sector activity. The GoY and the international community need
to scale-up existing interventions targeting the resilience of financial intermediaries
in the country, and these interventions should be sustained, and extended across
the board to struggling financial intermediaries in the country. Since 2015, the World
Bank has been extending support to Yemeni financial intermediaries and microfinance
institutions in the country to support their resilience and enable them to continue to
provide financial services to their estimated 92,000 active clients in urban and rural
areas. Additionally, the World Bank and other development partners supported the
establishment of a Loan Guarantee Program, the first ever in the country, to support
the extension of guarantees to SME clients and to reduce the collateral requirement
of commercial and Microfinance Banks in Yemen.

After the conflict has stabilized and reconstruction begins in full, actions needs to
be taken by the GoY and the international community to support the extension of
wholesale facilities to banks and microfinance institutions in order to inject liquidity
and facilitate the resumption of credit and equity finance toward the private sector.

Establish a Challenge Fund and/or Venture Capital Firm/Start-up Incubator and revamp
the information and communication technology (ICT) infrastructure (Medium-Term).
37

After the conflict subsides, establishing a Challenge Fund for SMEs in Yemen, or a Venture
Capital Firm/Start-Up Incubator could help address both the shrinkages and closures
of SMEs by providing necessary seed and growth capital. It is also essential to revamp
the information and communication technology (ICT) infrastructure and introduce
broadband access to SMEs throughout the country. Adequate ICT infrastructure
supports a wide range of business operation as well as facilitates business transactions
and finances.

PRIVATE SECTOR INVESTMENT IN RESTORING PUBLIC GOODS
Addressing the following private sector constraints: lack of service provision; political and security risks;
lack of investment; unemployment

The following interventions are recommendations to encourage private sector investment
in restoring public goods:

Establish an Investment Guarantee and Financing Facility (IGFF) to help mobilize private
sector capital for high-risk infrastructure projects (Short- and Medium-Term).

Considering that service disruptions remain the largest stumbling block to the successful
operation of local businesses, combined with the unlikelihood of the post-conflict
government having the resources necessary to finance the infrastructure needs of the
country post-conflict, the international community needs to support the establishment
of a guarantee and financing facility to enable local private sector and FDI participation in
the immediate restoration of public goods. The IGFF would be used to provide protection
to investors and contractors engaged in business in Yemen. It will be designed to cover
investors – foreign, domestic, and from the Yemeni diaspora – and provide coverage
against traditional political risks (war and civil disturbance, expropriation, breach of
contract, and transfer restrictions). It will serve to de-risk investments, including any
potential IFC investments under the Private Sector Window (PSW), as well as risks
from business transactions in Yemen (such as public contracts for infrastructure or
the provision of other goods, services and works). The pipeline for such a guarantee
facility is expected to emerge as reconstruction activities begin in earnest and is
expected to be focused in the energy, transport, construction, agriculture, and urban
construction sectors.

The guarantee and financing facility could be administered by the Multilateral Investment
Guarantee Agency (MIGA), as in the Afghanistan Investment Guarantee Facility, by a
38

commercial bank or agent, or by a Gulf Cooperation Council (GCC)-based entity, such as
the Islamic Development Bank’s Islamic Corporation for Insurance of Investments and
Export Credits (ICIEC) or the Arab Investment and Export Credit Guarantee Corporation
(Dhaman). The design of this facility would benefit from lessons learned on similar
International Development Association-financed guarantee facilities in crisis settings
such as Afghanistan, Bosnia & Herzegovina, Palestine, and Albania. The facility could
follow a similar model to the Conflict-Affected and Fragile Economies Facility (CAFEF)
in West Bank and Gaza but with greater funds, availability solely to Yemen, and with
lower rates such that local and diaspora investors would also have access. The GCC
countries are one potential source of financing for such a facility.

Execute a deeper analysis and assessment of the employment situation in the Yemeni
private sector.

While this survey was able to partially cover employment and provide findings, it was
only able to scratch the surface; much more remains to be discovered and is necessary
for the successful revitalization of the Yemeni job market. As such, in coordination
with the International Labor Organization (ILO), a deep-dive should be undertaken to
assess the full extent of the effects of the conflict on private sector employment with
a focus on multi-causal explanations for both causes for unemployment and barriers
to restoring job security.

STRENGTHENING COORDINATION AND COLLABORATION WITH
PRIVATE SECTOR ACTORS
Addressing the following private sector constraints: degraded business environment; restrictive regulations;
cumbersome taxes and fees

The following interventions are recommendations aimed at strengthening coordination
and collaboration with private sector actors:

Engage in public-private discussions on regulatory reform in Yemen & on increasing
private sector participation in R&R efforts.

In addition to the conflict degrading the general business environment, the business
community continues to suffer from regulatory unpredictability and from substantial
spending on taxes and other regulatory fees. Such regulatory challenges are likely
to continue post-conflict if structured discussion among public and private sector
39

stakeholders does not take place. Thus, the facilitation of Public-Private Dialogue
(PPD) is indispensable.

This approach has been demonstrated to be effective in other post-conflict contexts.
For example, a post-completion evaluation of the Nepal Business Forum Phase I
(NBF) undertaken by the Independent Evaluation Group (IEG) further confirmed the
usefulness of a PPD in a conflict-affected state. The IEG found the objective to promote
PPD around private sector reforms in the context of a country’s struggle to establish
democracy appropriate. Under this project, the PPD objectives have been broadly
met. In addition, by August 2012, during the second phase of this project, over 41
recommendations of 120 coming from the PPD had been implemented. Two of these
reforms have delivered US$5.67 million in private sector cost savings, notably in an
environment of significant political turmoil and previously little public-private or even
private-private dialogue. Such an approach would be beneficial applied in the Yemeni
context.

As such, the GoY and the International community should continue its engagement
with the recently established Yemen Private Sector Cluster. Founded in collaboration
with the WBG, the Yemen Private Sector Cluster gathers private sector institutions from
around the country and advocates for the sector, supports the emerging needs in the
country, and acts as a coordination platform enabling the private sector to collaborate
effectively with donors and government agencies. As an immediate measure, the GoY
and the International Community should further support and engage proactively with
the Cluster specifically in helping secure the buy-in of the private sector in Yemen’s
reconstruction and recovery efforts. In the medium- and long- term, such engagement
would also contribute to reforming the business environment and championing
favorable policies that promote exports and attract private sector capital & investment.

Without a doubt, the recovery and expansion of the private sector is critical for
economic growth and stability in post-conflict Yemen. The international community, in
partnership with the Government of Yemen, should develop a plan of action considering
the above solutions to ameliorate the challenges faced by local Yemeni businesses
and pave the way towards restoring a dynamic economy that delivers for all. The
international community and the GoY should take heed of these recommendations
and design new projects tailored towards supporting the resilience and recovery of
the Yemeni private sector that also bolsters the health, prosperity, and inclusiveness
of the Yemeni economy as a whole.
40

Table (1): Summary of Constraints and Interventions Measures

Constraints Intervention Measures

Support the Resilience & Revitalization
of Private Sector Actors:
¡¡ Establish an Early Recovery Financing
ed

ion al Facility (ERFF) for small and medium
iat nci
Lac ment

Decreas

enterprises (SMEs) (Short-Term).
Sales

ed na
f
ko

rm Fi

¡¡ Support Yemen’s banking sector recovery
est

or
te of

Ac (Short-Term).
ct
Inv

In ine

Fi ces e
gs y
na s in bilit ¡¡ Establish A Challenge Fund and/or
cl

nc to k
De

n a Venture Capital Firm/Start-up Incubator
e Ba Inst sh
on ca y
iance
rel emon
(Medium-Term).
SME
Over s and anies
& s closu e n t ¡¡ Revamp Yemen’s information and
hrin re
kag s CONSTRAINTS paym ge comp
n
es excha communication technology (ICT)
infrastructure (Medium-Term).

Maximize Finance for Development
through attracting Private Sector
Lack of Service Lack of
Provision Investment Investments in Support of Restoring
Public Goods
¡¡ Establish an Investment Guarantee
and Financing Facility (IGFF) to help
CONSTRAINTS
mobilize private sector capital for high-
risk infrastructure projects (Short- and
Medium-Term).
Political and ¡¡ Execute a deeper analysis and
Unemployment
Security Risks assessment of the employment situation
in the Yemeni private sector.

Degraded business Strengthening Coordination, and
environment
Collaboration with Private Sector
Actors
¡¡ Engage in public-private discussions
Cumbersome on regulatory reform in Yemen and on
taxes and fees
increasing private sector participation in
Restrictive recovery and reconstruction efforts.
regulations
41

REFERENCES
United Nations Office for the Coordination of Humanitarian Affairs. 2018. 2018
Humanitarian Needs Overview—Yemen. December 2017. https://reliefweb.int/report/
yemen/yemen-2018-humanitarian-needs-overview-enar.

Yemen, Ministry of Partnership and International Cooperation (MoPIC). 2018.
Yemen Socio-Economic Update. Issue (35). July 2018. Yemen.

Yemen, Ministry of Partnership and International Cooperation (MoPIC). 2018.
Yemen Socio-Economic Update. Issue (39). December 2018. Yemen.

Trading Economics. 2019. Yemen Imports.
https://tradingeconomics.com/yemen/imports

World Bank Policy Notes Series. 2017. Economic, Fiscal and Social Challenges in the
Early Phase of a Post Conflict Yemen. Washington, DC: World Bank.

World Bank Policy Notes Series. 2017. Private Sector Readiness to Contribute to
Reconstruction & Recovery in Yemen. Washington, DC: World Bank.

Small and Micro Enterprise Promotion Service (SMEPS). 2015. Rapid Business Survey,
Impact of the Yemen Crisis on Private Sector Activity (2015). Yemen.

Amnesty International. 2018. Yemen: Stranglehold: Coalition and Huthi Obstacles
Compound Yemen’s Humanitarian Crisis. 22 June 2018.
42

ANNEX (1)
FCV Rapid Assessment Survey Questionnaire

READ THE FOLLOWING TO RESPONDENT BEFORE PROCEEDING.

This survey is intended to understand the impact of the recent conflict on the private sector. It is a follow up
to the survey you participated in back in 2012 which was also completed by Prodigy Systems. The information
collected is confidential and responses will be grouped in the analysis. The names of participating firms and
respondents will not be used in any document based on the survey. Your answers should reflect only your
experience of doing business in your country.

Please note we are interested in the experience of your business(es) inside Yemen.

A) BASIC INFORMATION (2012 DATA TO BE COMPLETED BEFORE
INTERVIEW, 2018 TO BE UPDATED FROM INTERVIEW)

2012 DATA 2018 DATA

Country:
Questionnaire ID:

2012 DATA 2018 DATA

Company / Establishment Name Q 0.1 Q 0.2
Street Address Q 0.3 Q 0.4
City Q 0.5 Q 0.6
Phone Q 0.7 Q 0.8
Email Q 0.9 Q 0.10
43

NAME OF PERSON
POSITION MOBILE NUMBER EMAIL ADDRESS
SURVEYED
Q 1.1 Q 1.2 Q 1.3 Q 1.4

Q2) Are you the owner of the company or one of the owner’s?

 
 
Don’t know Did not want to
Yes No
(spontaneous) answer (spontaneous)
1 2
9 10
Q3) Are you the manager of the company?

 
 
Don’t know Did not want to
Yes No
(spontaneous) answer (spontaneous)
1 2
9 10
Q4) Would you be willing to speak with us again to discuss these issues in more detail?

 
 
Don’t know Did not want to
Yes No
(spontaneous) answer (spontaneous)
1 2
9 10
IF NO, END SURVEY

LOCATION/ GOVERNORATE GOVERNORATE 2012 GOVERNORATE 2018(Q5.2)

Sana’a 1 1
Aden 2 2
Taiz 3 3
Hodeidah 4 4
Mukalla 5 5
Ibb 6 6

CITY / TOWN

6.1 6.2

2012: 2018:
(_________________________________________________) (_________________________________________________)

(_________________________________________________) (_________________________________________________)

(_________________________________________________) (_________________________________________________)
44

INDUSTRY TYPE SECTOR 2012 (Q7.1) SECTOR 20128 (Q7.2)

Food processing
Textiles
Garments
Chemicals
Plastics & rubber
Manufacturing Non metallic mineral products
Basic metals
Fabricate metal products
Machinery and equipment
Electronics (31 & 32)
Other manufacturing
Wholesale
Retail
Services IT
Hotels & restaurants
Other services
Construction

Transportation

Q8. SIZE (NO. OF EMPLOYEES) SAMPLE SIZE

Small (>=5 and <=19) 1
Medium (=20 and <=99) 2
Large (>=100) 3

B) IMPACTS OF THE CONFLICT

Q9) Is your business currently operational in Yemen? I.e. opening its doors or producing actively?

 
 
Don’t know Did not want to
Yes No
(spontaneous) answer (spontaneous)
1 2
9 10
45

Q10) Business closure reasons?

Q10.1 Business closure due to security reasons

_______________________________________________________________________________________________________

Q10.2 Business closure due to finance problems

_______________________________________________________________________________________________________

Q10.3 Business closure due to the ahortage/lack of raw material availability

_______________________________________________________________________________________________________

Q10.4 other reasons

_______________________________________________________________________________________________________

Q10.4 specify other reasons

_______________________________________________________________________________________________________

To what extent have you experienced the following problems in your business in the last two months from 1
to 5, from 1 being “not at all”, 2 being “very little”, 3 being “to a moderate extent”, 4 being “to a large extent”.
and 5 being “severely”?

    
Not at all Very little To a moderate extent To a large extent Severely
1 2 3 4 5

Water & Waste
Q11.1 1 2 3 4 5
Water
Service Interruptions

Q11.2 Electricity 1 2 3 4 5
Q11.3 Natural Gas 1 2 3 4 5
Fuel supply (diesel/
Q11.4 1 2 3 4 5
gasoline)
Q11.5 Phone, Internet, Post 1 2 3 4 5
Garbage collection/
Q11.6 1 2 3 4 5
disposal
46

    
Not at all Very little To a moderate extent To a large extent Severely
1 2 3 4 5

Damaged or looted
Q11.7 building, equipment, 1 2 3 4 5
Physical damage & insecurity

computers, etc.
Loss of documents/
Q11.8 1 2 3 4 5
records/ data
Losses in inventory
or stock due to
Q11.9 1 2 3 4 5
damage, theft, or
vandalism

Physical insecurity at
Q11.10 1 2 3 4 5
or around premises

Transport insecurity-
Q11.11 inter-city roads, air, 1 2 3 4 5
Transport problems

etc.

Transport damage-
Q11.12 inter-city roads, 1 2 3 4 5
airports,etc.
City street closures,
Q11.13 checkpoints or loss 1 2 3 4 5
of public access

Q11.14 Loss of customers 1 2 3 4 5
Loss of customers
and suppliers

Q11.15 Loss of suppliers 1 2 3 4 5

Negative publicity/
Q11.16 image of your 1 2 3 4 5
country or your area

Loss of staff:
Q11.17 1 2 3 4 5
managers
Loss of staff

Loss of staff: skilled
Q11.18 1 2 3 4 5
workers/technicians
Loss of staff:
Q11.19 1 2 3 4 5
unskilled workers
47

    
Not at all Very little To a moderate extent To a large extent Severely
1 2 3 4 5

Problems accessing
Q11.20 1 2 3 4 5
Finance problems

credit
Problems accessing
Q11.21 other banking 1 2 3 4 5
services
Increase in accounts
Q11.22 1 2 3 4 5
receivable

Q11.23 Customs delays 1 2 3 4 5
Business services
problems

Problems with
Q11.24 business licensing 1 2 3 4 5
and permits

Q11.25 Corruption 1 2 3 4 5

Q11.26 Other (specify) 1 2 3 4 5

Q12) write any extra notes

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________

_______________________________________________________________________________________________________
48

Q13 Of the categories of issues in the previous questions please specify the single biggest constraint to your
ability to do business [Surveyor: read the options to the respondent below]:

Service interruptions 1______________________________________________________________
Physical damage and insecurity 2______________________________________________________________
Transport problems 3______________________________________________________________
Loss of customers and suppliers 4______________________________________________________________
Loss of staff 5______________________________________________________________
Finance problems 6______________________________________________________________
Business services problems 7______________________________________________________________
Other (please specify) 8______________________________________________________________
Don’t know (spontaneous) 9______________________________________________________________
Did not want to answer (spontaneous) 10_____________________________________________________________

Q14) Has your company moved, or is it in the process of moving any operations to a different location as
a result of the conflict?

   
Yes No Don’t know Did not want to
1 2 (spontaneous) answer (spontaneous)
9 10

Q15) IF yes the company moved to different location specify(write) the location?

_______________________________________________________________________________________________________

Q16) Compared to before the conflict in 2015 have your domestic sales:

   
Increased Did not provide % Remained the Decreased
1 (spontaneous) same 3
4 2
  
Did not provide % Don’t know Did not want to answer any part
(spontaneous) (spontaneous) of the questions(spontaneous)
5 9 10

Q17) If domestic sales Increased /decreased provide the estimated Percentage

__________________________________________________________________________ 
49

Q18) Compared to before the conflict in 2015 have your exports abroad:

   
Increased Did not provide % Remained the I did not expect either
1 (spontaneous) same in 2015 or today
4 2 3
  
Did not provide % Don’t know Did not want to answer any part
(spontaneous) (spontaneous) of the questions(spontaneous)
5 9 10

Q19) If exports abroad Increased/decreased provide the estimated percentage

__________________________________________________________________________ 
Q20) Compared to before the conflict in 2015 have you adjusted your price of goods /services sold as a
result of the conflict?

   
Increased Did not provide % Remained the Decreased
1 (spontaneous) same 3
4 2
  
Did not provide % Don’t know Did not want to answer any part
(spontaneous) (spontaneous) of the questions(spontaneous)
5 9 10

Q21) If goods-services prices Increased/decreased provide the estimated Percentage

__________________________________________________________________________ 
Q22) Compared to before the conflict in 2015 has the typical amount of time your business is open and
operational on a regular basis:

   
Increased Did not provide % Remained the Decreased
1 (spontaneous) same 3
4 2
  
Did not provide % Don’t know Did not want to answer any part
(spontaneous) (spontaneous) of the questions(spontaneous)
5 9 10
50

Q23) If business operational time Increased/decreased provide the estimated Percentage

__________________________________________________________________________ 
Q24) Compared to before the conflict in 2015, have you lost key customers or contracts as a result of the
conflict?

   
Yes No Don’t know Did not want to
1 2 (spontaneous) answer (spontaneous)
9 10

Q25) Did your firm suffer any extra losses from looting, theft or vandalism crimes since the beginning of
the conflict in 2015?

   
Yes No Don’t know Did not want to
1 2 (spontaneous) answer (spontaneous)
9 10

IF NO, DON’T KMOW, OR DID NOT WANT TO ANSWER GO TO D1

Q26) If yes, what was the approximate value of these losses as a percentage of your annual sales in 2016?

  
Yes % is known Don’t know Did not want to
1 (spontaneous) answer (spontaneous)
9 10

Q27) IF YES provide annual sales in 2016 estimated Percentage

__________________________________________________________________________ 
D) INPUTS AND COSTS

Q28) Do you currently suffer any disruptions in domestic supplies as a result of the conflict?

   
Yes No Don’t know Did not want to
1 2 (spontaneous) answer (spontaneous)
9 10
51

IF NO, DON’T KNOW, OR DID NOT WANT TO ANSWER GO TO D3

Q29) If yes, how much longer (how many more additional days) does it typically take to receive domestic
supplies compared to 2015, before the conflict?

  
Yes & no of Don’t know Did not want to
days is known (spontaneous) answer (spontaneous)
1 9 10

Q30) If yes no’ is known Specify the additional days to get domestic supplies

__________________________________________________________________________ Days
Q31) Do you currently you suffer any disruptions in imported supplies as a result of the conflict?

    
Yes No No imports Don’t know Did not want to
1 2 3 (spontaneous) answer (spontaneous)
9 10

IF NO, NO IMPORTS, DON’T KNOW, OR DID NOT WANT TO ANSWER GO TO D5

Q32) If yes, how much longer (how many more additional days) does it typically take to receive imported
supplies compared to 2015, before the conflict?

  
Yes & no of Don’t know Did not want to
days is known (spontaneous) answer (spontaneous)
1 9 10

Q33) If yes Specify the additional days to receive imported supplies

__________________________________________________________________________ Days
Q34) Compared to before the conflict in 2015 have the cost of your supplies:

   
Increased Did not provide % Remained the Decreased
1 (spontaneous) same 3
4 2
52

  
Did not provide % Don’t know Did not want to answer any part
(spontaneous) (spontaneous) of the questions(spontaneous)
5 9 10

Q35) If cost of your supplies Increased/decreased provide the estimated Percentage

__________________________________________________________________________ 
Q36) Compared to before the conflict in 2015 has your spending on security for your business:

   
Increased Did not provide % Remained the Decreased
1 (spontaneous) same 3
4 2
 
Don’t know Did not want to answer any part
(spontaneous) of the questions(spontaneous)
9 10

Q37) If spending on security Increased/decreased provide the estimated Percentage

__________________________________________________________________________ 
Q38) Compared to before the conflict in 2015 has your spending, either officially or unofficially on
taxation or other payments to the State or local authorities

   
Increased Did not provide % Remained the Decreased
1 (spontaneous) same 3
4 2
  
Did not provide % Don’t know Did not want to answer any part
(spontaneous) (spontaneous) of the questions(spontaneous)
5 9 10

Q39) If officially or unofficially on taxation or other payments Increased/decreased provide the estimated
Percentage

__________________________________________________________________________ 
53

E) FINANCING AND CASH MANAGEMENT

Q40) What is your assessment of the ease of obtaining credit from any source as compared to 2015
before the conflict?

     
Easier than As Mild Significant Don’t know Did not want to answer
before usual restrictions restrictions (spontaneous) (spontaneous)
1 2 3 4 9 10

Q41) What is your assessment of the ease of obtaining foreign currency as compared to before the
conflict in 2015?

     
Easier than As Mild Significant Don’t know Did not want to answer
before usual restrictions restrictions (spontaneous) (spontaneous)
1 2 3 4 9 10

Q42) In 2015 before the conflict, what was your primary source of credit for this establishment?

    
Credit from suppliers or An informal Banks Micro-finance Friends
advances from customers lender 3 institution or family
1 2 4 5
   
Do not Other Q42 Don’t know Did not want to
have credit (please specify) (spontaneous) answer (spontaneous)
6 7 9 10

Q43) At this time, what is your primary source of credit for this establishment?

    
Credit from suppliers or An informal Banks Micro-finance Friends
advances from customers lender 3 institution or family
1 2 4 5
   
Do not Other Q42 Don’t know Did not want to
have credit (please specify) (spontaneous) answer (spontaneous)
6 7 9 10

IF “DO NOT HAVE CREDIT” GO TO E7

Q44) Do you currently use credit to provide working capital or for investments?

    
Working Investment Both Don’t know Did not want to
capital 2 3 (spontaneous) answer (spontaneous)
1 9 10
54

Q45) Has your cost of financing changed due to recent events related to the conflict?

   
Increased Did not provide % Remained the Decreased
1 (spontaneous) same 3
4 2
  
Did not provide % Don’t know Did not want to answer any part
(spontaneous) (spontaneous) of the questions(spontaneous)
5 9 10

Q46) If cost of financing Increased/decreased provide the estimated Percentage

__________________________________________________________________________ 
Q47) Since the start of the conflict in 2015, have your outstanding cash payment obligations (i.e. accounts
payable) to suppliers:

   
Increased Did not provide % Remained the Decreased
1 (spontaneous) same 3
4 2
  
Did not provide % Don’t know Did not want to answer any part
(spontaneous) (spontaneous) of the questions(spontaneous)
5 9 10

Q48) If outstanding cash payment obligations Increased/decreased provide the estimated Percentage

__________________________________________________________________________ 
Q49) How has the share of late or nonpaying customers changed as a result of the conflict?

   
Increased Did not provide % Remained the Decreased
1 (spontaneous) same 3
4 2
  
Did not provide % Don’t know Did not want to answer any part
(spontaneous) (spontaneous) of the questions(spontaneous)
5 9 10

Q50) If nonpaying customers Increased/decreased provide the estimated Percentage

__________________________________________________________________________ 
55

Q51) What kind of physical bank branch do you have regular access to?

    
No access to Access to a Access to a functioning Don’t know Did not want to
any branch functioning ATM only bank branch (spontaneous) answer (spontaneous)
1 2 3 9 10

Q52) How do you pay suppliers?

     
In cash Through the formal Through the Other Q52 Don’t know Did not want to
directly banking system hawala system (please specify) (spontaneous) answer (spontaneous)
1 2 3 4 9 10

Q53) Has your company made any investment in building, plant or equipment since the beginning of the
conflict in 2015?

   
Yes No Don’t know Did not want to
1 2 (spontaneous) answer (spontaneous)
9 10

Q54) Did your company cancel any planned investment in building, plant or equipment due to the
conflict?

   
Yes No Don’t know Did not want to
1 2 (spontaneous) answer (spontaneous)
9 10

Q55) Does your company have nonpaid government arrears?

   
Yes No Don’t know Did not want to
1 2 (spontaneous) answer (spontaneous)
9 10

Q56) To what extent have the nonpaid government arrears impacted your company?

   
Severely To a large To a moderate Very
1 extent extent little
2 3 4
  
Not at all Don’t know Did not want to answer
5 (spontaneous) spontaneous)
9 10
56

F) EMPLOYMENT

Q57 How do you pay your employees?

     
In cash Through the formal Through the Other Q57 Don’t know Did not want to
directly banking system hawala system (please specify) (spontaneous) answer (spontaneous)
1 2 3 4 9 10

Q58) Has your business had any days in which it was fully or significantly non-operational in the last 6
months due to employees being unable to come to work?

   
Yes Did not provide No Did not want to answer any part
1 days (spontaneous) 2 of the questions(spontaneous)
3 10

Q59) If YES, Specify the days in which it was fully or significantly non-operational

__________________________________________________________________________ Days
Q60) Have you increased the use of temporary, non-permanent workers since the beginning of the
conflict in 2015?

   Did not want to answer any part
Yes Did not provide No of the questions(spontaneous)
1 number 2 10
3

Q61) Estimated number of temporary workers employed daily during last one to two months

__________________________________________________________________________ Days
The following question refers only to permanent workers (including management) of your establishment.
Permanent workers are defined as all paid workers that are employed for a term of one or more years
and/or have a guaranteed renewal of their employment contract and work full day

Q62) Equal number of employees in 2014 and 2018

 
Equal no’ in Unequal no’ in
both years both years
1 2
57

Q63) Since the start of the conflict in 2015, has the number of people employed at your establishment

    
Increased Remained the Decreased Don’t know Did not want to
1 same 3 (spontaneous) answer (spontaneous)
2 9 10

Q64) What was the average number of permanent workers in:

  
Yes the number Don’t know Did not want to
is known (spontaneous) answer (spontaneous)
1 9 10

Q65) If yes the average number of permanent workers in known

TOTAL

Q 65.1 2014
Q 65.2 2015

Q66) What has been the percentage change in permanent workers at your establishment between the
start of the conflict in 2015 and now?
Enumerator: please record percentage change and whether increase or decrease

   
Yes the percentage Remained the Don’t know Did not want to
of change is % same (spontaneous) answer (spontaneous)
1 2 9 10

Q67) IF YES, the percentage of change is known

__________________________________________________________________________ 
Q68) What was the average number of part time permanent workers in:

  
Yes part time workers Don’t know Did not want to
can be provided (spontaneous) answer (spontaneous)
1 9 10

Q69) If yes the average number of part time workers is known

TOTAL

Q 69.1 2014
Q 69.2 2015
58

H) QUESTIONS FOR THE ENUMERATOR

Q70) What degree of confidence do you have in their replies?

  
Low Medium High
1 2 3

Q71) How many calls did it take to complete the interview?

  
One Two More than 2
1 2 3

Q72) How long did the interview take in minutes?

_________________________________________________________________________ Minutes

The survey ends here
Thank you for your cooperation
59

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