An interview with Mustapha RouisNew World Bank manager arrives [Archives:2004/793/Business & Economy]

November 25 2004

Peter Willems
Yemen Times Staff

This week Mustapha Rouis arrived in Sana'a to take over the position of Country Manager at The World Bank in Yemen. Rouis has been working with The World Bank for over 25 years. He has been the Lead Economist and Country Manager at different times throughout his career and has experience in East Asia, Sub-Saharan Africa, Europe, Central Asia and Latin America.
The World Bank has been working closely with the Yemeni government since the mid-90s in a number of areas for development, such as health, education and economic reform. Rouis is replacing the previous Country Manager, Robert Hindle, who finished his three-year stint in Yemen at the end of September.
Rouis talked to Yemen Times reporter Peter Willems about his view of working on the development in Yemen and possible results in the future.

Q: What is your first impression of Yemen now that you will be working to assist the development in a number of areas?
A: First of all, let me say that I am delighted to have the opportunity to work on Yemen. I have heard a lot about the kindness of the Yemeni people and their huge cultural wealth. Second, the World Bank and Yemen have a very close relationship and partnership aimed at improving the welfare of the people, with particular focus on reducing poverty. Though I am not yet familiar with Yemen, my first impression is that Yemen is faced with a lot of challenges.
Many of them are related to the areas of human development, including education, health, population and gender. If you look at the human development indicators and compare Yemen to other countries, it doesn't take you very long to realize that the challenges facing Yemen are daunting.
The second challenge facing the country is with respect to the resources of growth. The main source of growth in this country has been the oil sector, a non-renewable resource. Sooner or later it will pose a challenge for the country, both in terms of government revenue and foreign exchange earnings. Unless the country starts to diversify away from the energy sector, the challenge will be magnified. In focusing on the non-energy sectors, the emphasis should be placed on having an investment climate conducive to private sector development.
The third challenge facing Yemen is weak institutional capacity at all levels, be it in the government or the private sector, and it is very much linked to the first factor which is human development. Institutional capacity usually covers the ability to formulate policies and development programs; implement them; monitor them; and evaluate them.

Q: Could you give more details on how to help increase investments in the country, particularly private investment?
A: One of the key ingredients for growth and development is having a good investment climate. The investment climate covers the legal and regulatory environment, the governance, the infrastructure and the macroeconomic framework. For investment to take place, be it foreign direct investment or domestic investment, the enabling environment has to be conducive to investment.
One of the prerequisites for growth is a stable macroeconomic framework which is characterized by low inflation and a market-determined interest rate and foreign exchange rate. Controlling inflation comes from a combination of factors, including maintaining a prudent fiscal and monetary policy.
Although Yemen has maintained until quite recently a stable macroeconomic framework, I understand that this framework is now under stress. The budget deficit is widening and inflation has increased dramatically, so these indicators need to be reversed.
The second factor influencing positively the investment climate is good governance which encompasses transparency, accountability and rule of law, to mention a few. I think that Yemen has made some progress in these areas, but a lot remains to be done.
The third area is infrastructure. It includes energy, telecommunication, roads, ports and the like, all of which are in need of improvement.
The fourth one is the legal and regulatory framework. I think from what I know so far, the country is doing pretty well on that. But the question is the enforcement of laws.
In addition to the three broad areas I have just mentioned, it is critical, as stated in the 2000 World Development Report on poverty, to empower the people to have a voice in the economic development of the country.
Once you work at the community and grassroots levels, there are a number of advantages. One is that you are responding to the needs of those communities, so you are not way off from their priorities. It also helps ensure better use of resources, through better transparency and accountability.
Lastly, even if you do all these things, you focus on the economic fundamentals and on the empowerment of the beneficiaries, sometimes it is not enough to eradicate poverty. There may still be a need for direct intervention through the implementation of social safety nets. That's where social investment funds or similar arrangements like that are important.

Q: The World Bank has mentioned that the Yemeni government needs to pick up the pace of economic reform. Do you expect the Yemeni government to implement reform at a faster pace in the future?
A: The World Bank has had an excellent relationship with the government. My job is to continue on that road. I think I have the benefit in my particular case of being an economist. I can devote more time to economic issues, which are looming high on the agenda. I hope I will be of help to make a difference.
But at the end of the day, the help that comes from the outside is not as important as the commitment from the country. One thing is for sure: Retarding the implementation of critical reforms can only exacerbate the problems down the road, a situation which neither the government of Yemen nor its development partners would like to be in.

Q: The World Bank has mentioned that lending to Yemen may change if it does not see different results in the future. Would you like to comment on that?
A: Money is not the issue really. The contribution of The World Bank is not just lending. It is carrying out analytical work, transferring knowledge and best practice, providing policy advice, providing technical assistance and then the transfer of resources. Usually there is a tendency in some countries of seeing The World Bank as purely a lending agency, when, in fact, the other aspects are equally, if not more, critical in promoting development.
Getting back to lending, the level depends on a number of factors, including the performance of the portfolio and the speed of implementation of policy reforms. The World Bank will soon embark on the preparation, in a consultative manner, of the next Country Assistance Strategy for Yemen in which all these questions will be addressed.

Q: Do you believe there will be positive results coming from economic reform down the road?
A: It has been well established both in the literature and in empirical analysis of the strong link between reform and growth. It is also well known that successful countries are those that spend say 10% or so on figuring out what to do and 90% on implementation. Those that do the opposite end up with a less successful outcome. We are looking forward to Yemen to turn things around.
It is my job to listen carefully. I don't come with specific answers. I will share experience of what has worked well in other countries and less so in others. In a context where capacity is very limited, one has to focus on policies that will be capacity savings which are easy to implement while at the same time building capacity to deal with tougher issues.
There are always certain things that can make a huge difference which you can easily implement. They are neither politically costly nor economically costly, and yet we overlook those things.
One example which was highlighted in a recent World Development Report was the case of Uganda. Uganda was trying to transfer resources to local schools. In the beginning, only 20-30% of the money was reaching the schools. All the government needed to do to reverse the situation was to advertise in the newspapers the allocations to the schools.
Overnight the process became transparent and everyone knew what to expect. As a result, the situation reversed with most of the money reaching the schools. This was not at all costly and no institutions were involved. So, one has to look for things that could be implemented with very little cost, political or economical.

Q: What sectors in Yemen have the best potential in economic growth?
A: Yemen is a country endowed with good resources: a fantastic location, famous cultural heritage, a well located port, gas and mineral resources, and cheap labor. All these resources present opportunities for development by the private sector in areas such as services – including tourism and transport – and manufacturing.
But unless the investment climate improves, and the role of the state is well defined, the prospects for growth and development will be limited. In this regard, encouraging non-energy exports will have the merit of ensuring the country to be competitive. Also encouraging foreign direct investment to take place is essential, as it has the benefit of bringing in resources but also of bringing in knowledge and a new market.