Lutfi Abdulhameed Noman: “The government must work hand in hand with the business community.” [Archives:1999/52/Business & Economy]

The influx of foreign products into the country, particularly through smuggling, has strongly hit the national economy. This is more visible in Taiz and Hodeidah, two cities which started to develop some industrial infrastructure. Yemeni businessmen all over the country are furious as they watch lifelong investments go down.
To discuss this issue, Mohammed Hatem Al-Qadhi, Yemen Times, Taiz Office Editor, met Mr. Lutfi Abdulhameed Noman, General Manager of Yemen Company for Paints and Derivatives Ltd (YCPD), one of the pioneers and pillars of the national industry in this field.
Excerpts of the interview.
Q: What is the reason behind the difficulties of some national industries nowadays?
A: There are of course some internal as well as external reasons. Internally, we have to re-structure ourselves in order to improve efficiency and cost-effectiveness.
The most important external reason has been very detrimental to the national economy and has resulted in bankrupting some factories. The reasons are:
1- Unfair recent customs and taxation policies which give price advantages to imported goods at the expense of the ones produced locally.
2- Opening the Yemeni market, without any checks which led to flooding the Yemeni market with foreign products without checks of any kind on quality control.
3- Smuggling of goods across the wide-open land and sea borders as the state is unable or unwilling to stop this.
4- The bad monetary policy of the Central Bank of Yemen which raised the interest rates on loans and other credit facilities which increased the cost of producing goods locally and consequently making us unable to compete the foreign goods.
4- Lack of accurate data and statistics that can be used when preparing feasibility studies for new projects.
Q: What should the government do to help the situation?
A: There is no doubt that the government is trying to encourage investors and entrepreneurs. As this will spearhead the development process. But what I would ask it to do is to push for more coordination between government authorities and the business community. This is particularly important when preparing laws concerning commerce and industry. The government also has to fully understand the need to protect the national business activities and industry.
Q: Some people say the real reason is that the national producers do not produce quality goods. What is your answer?
A: Of course, people can say what they want, but that is not the truth. There are many national industries working under license of some internationally recognized companies. For example, our company is doing business under the license and direction of AKZO Nobel Coating (CROWN Berger Ltd). So, this company would not accept that we produce sub-standard goods under their brand name. The national producers are obliged to abide by the same standards of production and quality.
I am not saying that all goods produced in Yemen are up to international standard, but I am saying that most of the products are world quality, and you know that many Yemeni industries have received international prizes and awards for quality.
Q: How can we stop the on-going bleeding of our industries?
A: Simply by:
1- Government should control its borders by stopping smuggling and punish smugglers harshly.
2- Laws of quality standards should be applied regarding goods produced locally as well as those imported.
3- Coordination between the government and industrial investors when passing laws and when formulating policies concerning trade and industry.
4- Government should provide local products with all means of encouragement as done by all neighboring countries.
Q: Is there a marketing for locally produced goods? I mean are consumers in Yemen fully aware of our products?
A: We are doing some marketing on our own. But the local media has no patriotism or any sense of support for Yemeni products. This is especially true of the official media, especially the television. If anything, they actually take a negative stand and perpetuate negative rumors.
Marketing is an inevitable part of our success. We want to work together on this.
Q: How is the paint business, and how able are you to compete with imports?
A: We, as a company producing paint and derivatives, find that the customs charge on the raw material (input) for manufacturing paint is 10%. On the other hand, customs tax levied on imported paint is only 5%. You see that imported goods are given a price differential which does not allow us to compete favorably. This applies to many other products.
Actually, government policy should be exactly the opposite.
Thus imported paint today takes up to 50% of the local market. This situation has made it very difficult for the local products to compete.
Q: Is there any dumping practice from which you suffer?
A: Without any doubt, we have been subjected to a dangerous dumping practice which has disastrous results for the national economy. It affects the national economy by:
– Flooding the Yemeni market with low-quality goods due to lack of supervision.
– Government loss of tax and customs incomes.
– Dumping leads to bankruptcy of many national industries, leading to lower national income and tax revenue for the state.
– Bankrupt companies discharge their employees leading to more unemployment.
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