Three Obstacles to International Investment and Economic Development in Yemen [Archives:1999/24/Business & Economy]

By: 
Thomas H. Nelson & Associates
Portland, USA
A year ago, I visited Yemen for the first time. I am an American lawyer with some prior experience in the Middle East; as a Peace Corps Volunteer in the 1960’s I served as a teacher and community development worker for over three years in rural Iran, and since then have traveled extensively, including visits to North Africa and, most recently, to Saudi Arabia, where I made an Umrah. When I left Yemen last year it was with great admiration for Yemen’s history and a strong belief in its potential, and I now hope to involve myself deeply in Yemeni activities in the months and years ahead. It is in the spirit of brotherly concern that I offer the following comments.
My visit to Yemen was in part to determine whether increased investment, trade, and commerce by and with various sectors of the American economy are feasible at this time. Yemen’s General Investment Authority is certainly a step in the right direction, for on paper it appears that the necessary decisions have been made to stimulate increased trade and ultimate development. In addition, there are a number of very attractive Yemeni investment possibilities involving utility infrastructure such as water, electricity, telephone, and other essential services. These investments are normally very attractive in developing countries, for because they involve commodities that everyone needs or want, they are much less risky than less necessary goods and services. There are, however, a number of factors that are direct barriers to foreign investment in Yemen and consequent development.
I believe that the three most prominent ones are official corruption, diminished worker productivity, and the failure to develop the economic participation to a major segment of the population Ð Yemen’s women.
No one appears to deny that official corruption is rampant in Yemen, and it seems that virtually everyone who remarks on such corruption notes that it is wrong. As an outsider, perhaps I have a slightly different perspective: I see corruption not only as un-Islamic and wrong but also as a deterrent to international investment and development. This is because all investment requires the undertaking of risk. For example, an investor faces the loss of his money and effort if natural calamities occur, if technological change makes his product obsolete, or if labor or material shortages make production or distribution impossible. These types of risk are attached to all investments, regardless of location. Corruption also creates risks Ð that a loss will occur because an official has been bribed to deny a needed permit or to decide a court case against the investor. Most economic risks are somewhat uniform internationally. Official corruption, however, stops at the corrupt country’s borders. Thus if an investor is faced with investing in corrupt Country A and non- (or less)-corrupt Country B, all other risks being equal, the investor will choose the non- or less-corrupt country. In addition, the additional risk created by the corrupt country will be reflected by a premium that will have to be paid to the investor in order to entice him to place his investment in the corrupt country; that ultimately means that, if they are able to entice the investment at all, the citizens of the corrupt country ultimately will have to pay the foreign investor(s) more than the citizens in their non- or less-corrupt counterparts. And thus official corruption causes development to stagnate.
Addressing worker productivity, my visit to Yemen makes me believe that Yemeni workers generally are considerably less productive than workers in other countries. I believe that the major cause is simple: qat. Again from the perspective of an investor, if the labor force is tardy, absent, or not motivated, this worker attitude and behavior increases risk and thus ultimately diminishes development. During my visit to Yemen I noted that the workday is shortened significantly by qat, and that the productivity during the work period Ð mornings Ð seems diminished, perhaps in expectation of obtaining and chewing qat in the afternoon. I realize that there are powerful social and cultural forces involved in chewing qat, and thus I offer this only as an observation. I personally believe that qat causes many of the types of social problems that alcohol causes, and for the same reason it should be addressed as an item of national concern.
The final barrier is under-utilization of the existing work force. Women can make enormous contributions to the economic development of Yemen; indeed, I believe that they reflect the greatest short-term potential increase in productivity available to the country. There are some obstacles to overcome in realizing this potential, however; the primary one seems to be education. Both secondary and college education should be more available to Yemeni females. In addition, there are cultural attitudes regarding the place and role of women in society that have to be considered and discussed. By these comments I am not suggesting that women’s role in Yemen should be modeled on any other culture or society; as a Muslim, however, I believe that all individuals, specifically including women, should be free to pursue honorable participation in social activities, including work outside of the home. From an economic perspective, I believe that women are a vast and untapped source of economic expansion and growth.
My strongest hope is that Yemen rapidly achieves significant development. However, until the problems associated with official corruption, qat, and the role and status of women are resolved, it seems to me that there is little likelihood of significant economic advancement. Moreover, solving these three problems will doubtless cause unanticipated secondary social disruptions, and solutions will take some time to accomplish. I expect that some will oppose these suggestions. The response to those who resist such solutions is to direct their attention to countries outside of Yemen that have eliminated official corruption, social addictions, and barriers to female economic participation, and then to ask them whether Yemenis cannot or should not live lives better than they are now.
Finally, I hope that these thoughts do not come across as just some more “How to . . .” instructions from some know-it-all Yankee. I personally recognize that my own country is facing enormous problems of its own. America’s top leader has been morally and ethically compromised, its citizens are increasingly cynical, its educational system is collapsing, racism is still prevalent, and drug and alcohol abuse has reached epidemic proportions. Yemen has, with God’s grace, escaped most of these problems, and my country thus could learn much from Yemen.

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