The National Consensus Government, which was formed in December 2011 following months of popular unrest in Yemen, is facing unprecedented humanitarian and economic challenges. These include an estimated GDP growth of -10.5% in 2011, reduced public services (including in the security, judiciary, and local authority services), a worsening public budget deficit, a deep decrease in foreign currency reserves combined with a rising unemployment rate (currently estimated at over 50%), increasing poverty (currently affecting an estimated 54.4% of Yemenis), 465,000 Internally Displaced Persons, and a food insecurity problem affecting approximately 44.5% of the population, according to a 2011 World Food Program report (World Food Program, 2012).

Facing these daunting statistics, the Yemeni government has prepared the Transitional Program for Stabilization and Development (TPSD) 2012-2014. The program lists the top priorities and urgent actions necessary to transform the country. It also presents an estimate for the resources required to address these top priorities, and proposes a medium-term economic recovery program that would follow the transitional period. The main priorities in the TPSD are divided into two major pillars that include 5 focus areas as follows:

1-Political & Security Stability, and State Building

1. Focus Area 1: GCC Agreement and Implementation Mechanism
2. Focus Area 2: Good Governance

2- Socio-economic Recovery

1. Focus Area 3: Humanitarian, Reconstruction, and Emergency Needs
2. Focus Area 4: Economic Recovery, Stabilization, and Growth Foundations
3. Focus Area 5: Human Development and Emergency MDG

In addition to the government, other entities have also worked to identify Yemen’s top priorities during the transitional period. The private sector, in partnership with civil society organizations, organized the “Yemen Development Priorities Conference….A Private Sector Perspective” (Yemen Businessmen Club, 2012). The conference adopted an economic vision for Yemen built on three main focus areas: relief and emergency interventions, youth and employment, and democracy and governance.

A team of Yemeni economic experts also developed a “Roadmap for Yemen’s Economic Recovery” (Yemen Times, 2012). The roadmap defines urgent, mid-term, and long-term priorities for Yemen. It focuses on the urgent priorities, which include: poverty reduction, humanitarian relief and Internally Displaced Persons, unemployment particularly for new graduates, basic socio-economic services, monetary and fiscal policies, governance, private sector involvement, and partnership with the Friends of Yemen group.

There are many similarities among these plans, as well as between them and previous government initiatives, including the country’s First, Second, and Third five-year development plans (running from 1996 to 2010). While Yemen has never lacked well-designed plans, it has been unable to implement these proposals. The current plans proposed by government and non-government actors ignore this elephant in the room, namely, the state’s ineffectiveness and inability to implement any of these plans. This paper will propose one approach to addressing this challenge.

Yemen’s Civil Service

The Yemeni government’s effectiveness is one of the weakest in the world. The World Bank’s assessment of government effectiveness puts the country at the bottom 14th percentile (The World Bank Group, 2010). Yemen’s civil service is characterized by a large, poorly paid work force and inadequate salary differentials between high and low skilled jobs, which negatively impact its ability to attract and retain qualified workers. A 2008 USAID analysis report (USAID, 2008) on government effectiveness in Yemen reports that, at the Ministry of Agriculture, senior officials admitted that 30% of the staff was illiterate. In the Ministry of Health, only 18% had a university education. In the Ministry of Finance, a senior official said he could only rely on 10% of his staff to assist him.

These examples reflect broader trends across the Yemeni government. At the 2006 London Donors Conference, Yemen received pledges of over five billion dollars. Since then, less than 10% of the pledged amount has been dispersed. Lack of government capacity is the major reason given for this extremely low dispersal rate.

As it struggles through additional post-conflict challenges, Yemen is currently in a much worse situation than in 2006. The country is in dire need of substantial funds from international donors to get through the two-year transitional period and the years that follow. With no indicators of improved government capacity, donors will, however, continue hesitating to channel funds through the Yemeni government.

Traditionally, donors have bypassed the government by channeling funds through local Civil Society Organizations (CSOs), international NGOs, or UN agencies. Taking this approach, however, poses three serious challenges:

-        Lack of coordination of activities: In the absence of central planning, channeling funds through CSOs or NGOs results in dispersed, un-coordinated pockets of projects in separate areas with no systematic approach for nation-wide or sector-wide resource allocation.

-        Loss of confidence in the government: In a post-conflict situation, like the one currently facing Yemen, it is crucial that citizens regain confidence in their government’s ability to provide basic services. When citizens see basic services being provided by CSOs and/or NGOs without a government presence, their confidence in the government diminishes, undermining its popular legitimacy.

-        No real Monitoring & Evaluation (M&E): Generally speaking, donors lack the monitoring capacity to hold CSOs or NGOs accountable. This is especially true in the current security environment in Yemen, where donors are prevented from maintaining enough personnel on the ground to provide adequate M&E for funded projects.

Given Yemen’s acute need for basic service provisions, and the importance of rapidly meeting the people’s economic and social needs, this paper proposes a third alternative for providing social services based on the Independent Service Authorities modality introduced by professor Paul Collier, Professor of Economics and Director of the Center for the Study of African Economies at the University of Oxford (Collier, 2010).

Independent Service Authorities[1]

The Yemeni government’s current role in basic service delivery has been modeled on the 1950s European state. Under this model, the government performs three functions:

-        Formulating policy

-        Allocating resources to primary delivery units

-        On-the-ground service delivery

In order to function properly, this model has two pre-requisites: access to timely and accurate information (for proper central planning), and a strong sense of nationhood and public service among public-sector workers. Yemen is far from realizing either of these conditions. Information on social needs is scarce and out-dated, and most public workers are not motivated to serve the public interest. The system lacks the means to foster such self-motivation, and, within the civil service, the range of financial rewards and penalties to financially incentivize workers is extremely limited.

There is no doubt that a new administrative architecture is necessary to rapidly improve service provision in Yemen. Civil service reform is a long-term process and has not been successful in the country so far. The Independent Service Authorities (ISA) modality meets these challenges by decoupling the three functions currently performed by the government.

Policy formulation is a core function of government ministries and must remain within these institutions. However, on-the-ground service provision could be done by many different types of organizations, including private sector entities, CSOs, and local communities. The ISA would create a bridge between the ministries and the service providers. It would monitor the performance of and allocate public funds to these providers to achieve objectives set by the ministries.

An ISA is a public agency, implementing government policies but existing independently of the state’s civil service. Though an agency of the government, the ISA’s board of directors could include a minority of non-government appointees. This should include the main donor agencies and key components of civil society. The primary purpose of such representation is to make the ISA structurally transparent and provide equal and unrestricted access to information on the decisions and performance of the ISA for the government, donors and civil society.

The ISA enters into contracts with primary service agencies but does not itself provide direct services. This avoids conflict of interest issues and focuses the ISA exclusively on negotiating and monitoring the performance of primary providers. Evidence on comparative performance is regularly provided to the ISA’s board, which uses this information to reallocate resources from less efficient to more efficient providers.

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