[{"bbox": [96, 152, 1137, 419], "category": "Text", "text": "The proposed action will contribute to the prevention of further conflicts due to limited economic opportunities. As most parts of Northern Ethiopia undergo a transition from ‘a state of war’ to a ‘state of development’, the proposed action will be instrumental in supporting the efforts for post-conflict economic reconstruction. This contribution towards the recovery of the economy in general, and MSMEs in particular, occurs in a setting of security, political and social transitions in the aftermath of a conflict. This underlines the need to create specific approaches for conflict-affected regions that are urgently in need of the restoration of jobs and economic opportunities, especially for women and girls who are disproportionally affected by the crises, to build back social cohesion, peace and political stability in the shortest time possible. Faced with the probability that post-conflict areas have a higher likelihood of going back to war than others, there is a justified need to devise a rapid response mechanism for supporting key drivers of the economy, MSMEs."}, {"bbox": [96, 428, 1137, 696], "category": "Text", "text": "The action is aligned with the key domestic policies of the country, i.e. the Ten-year Perspective Plan (TYPP, 2020) and the Home-Grown Economic Reform Programme (HERP, 2019). Its strategic priorities include (i) building technological capacity and digital economy, (ii) ensuring sustainable access to development finance, (iii) ensuring leading role of private sector in development, (iv) building a green economy and circular resilient to natural and man-made disasters, (v) ensuring inclusiveness of growth. Due to the downturn of the economy, especially in the north of the country, these priorities are even more pressing and essential. Building the local private sector capacity and supporting homegrown businesses can also curb the risk of aid dependency and boost sustainable economic growth. Therefore, this action would correspond with focal area green growth (which includes support to private sector and access to finance), envisaged for a future MIP for Ethiopia to be established once circumstance permit."}, {"bbox": [96, 706, 1137, 815], "category": "Text", "text": "The action is also aligned with the Country Level Implementation Plan (CLIP Ethiopia) and the EU Gender Action Plan 2021-2025 GAP III and the EU Youth action plan calling for accelerating progress, focusing on the key thematic areas of engagement, including promoting the economic, social and political empowerment of women and girls."}, {"bbox": [115, 839, 370, 872], "category": "Section-header", "text": "## 2.2 Problem Analysis"}, {"bbox": [96, 898, 1137, 1059], "category": "Text", "text": "Before the crises, the private sector in Ethiopia faced several constraints related to access to finance, markets, infrastructure, skills gap, etc. The gender gap in employment remains substantial, especially in the private sector. While 77.2 % of women access the job market compared to 87.8 % of men, and working women are still overrepresented in the informal sector (74 %) compared to men (61 %). Many of these have been aggravated by the aforementioned multiple crises (COVID-19, inflation, food crisis) and worsened by the conflict. Consequently, MSMEs have become less resilient against economic shocks."}, {"bbox": [96, 1070, 1137, 1179], "category": "Text", "text": "According to USAID, negative economic shocks of just 5 percent can increase the risk of a civil war by as much as 50 percent in fragile states⁴. While the depth of the impact of the conflict on MSMEs in the North is yet to be studied, it is apparent that operationally enabling services including electricity and telecom were cut while banks and MFIs were damaged and closed operations."}, {"bbox": [96, 1188, 1137, 1351], "category": "Text", "text": "Moreover, a World Bank empirical study through phone surveys⁵ indicated that the conflict disrupted livelihoods in Tigray, immensely impacting the supply chain mechanism; diminishing purchasing power of households; and disproportionately curtailing non-farm livelihood and economic activities in urban areas as compared to rural areas. This most likely has had a heavy toll on MSMEs' operations in the region. Moreover, the conflict has also increased food insecurity by 38-percentage points⁶ compared to the pre-conflict situation. Accordingly, the food insecure population is estimated to have reached close to 74 % of the total population in the region."}, {"bbox": [85, 1426, 1144, 1501], "category": "Footnote", "text": "⁴ Doing Business In Post-Conflict Zones: Why SMEs Are Key, Gayle Tzemach Lemmon and Ashley E. Harden. See also Memorandum submitted by Professor Robert Picciotto, printed in International Development Committee, Conflict and Development, HC 464-i, 15 March 2005"}, {"bbox": [85, 1500, 1144, 1623], "category": "Footnote", "text": "⁵ The phone interviews were conducted just before the outbreak of the conflict and during the first phase of the conflict, between November 2020 and May 2021. Immediately after the outbreak of the war on 4 November, telecommunication and electricity services were suspended or intermittent in areas under the control of the Tigray region government. These services were later restored, which allowed access to some households by phone. However, in June 2021, all communications were cut off and interviews were no longer possible."}, {"bbox": [85, 1621, 1085, 1647], "category": "Footnote", "text": "⁶ This percentage point increase is a 106% increase from pre-conflict levels, observed for seven months into the conflict."}, {"bbox": [1037, 1680, 1144, 1705], "category": "Page-footer", "text": "Page 5 of 20"}]