Has the government forgotten its 1997 plan for the industrial zones? Industrial Sector Still Waiting! [Archives:2001/05/Business & Economy]

Ridwhan Al-Saqqaf
Aden Bureau Chief
Aden
Minister of Industry and Chairman of the General Committee for Investment, Mr. Abdulrahman Mohamed Ali Othman told a local newspaper that the priorities of his ministry during the coming period will be to set up a strategy to encourage foreign and local investment in industry. He added that the ministry will present a plan to provide facilities for investors and will work on increasing productivity levels and the quality of local products and increasing industrial exports.
The minister’s statement came as the government approved a major change in one of the articles of the investment law, aimed at enabling foreign investors to purchase and use land and real estate with ease and with the protection of the state.
The change will apply to the article that restricts the freedom of foreign investors by forcing them to obtain prior permission from the General Committee for Investment before purchasing or disposing of investments. This also comes during the time in which the parliament is expected to discuss and possibly endorse the changes approved by the cabinet a few months ago regarding the investment law. These changes pave the way to minimize the steps needed to get licenses for investment and also to provide exemptions to investors.
It is worth mentioning that the above changes were encouraged by the World Bank in order to provide an appropriate and encouraging atmosphere for investors in the industrial sector. The cabinet had already last year approved a strategy to promote industrial investment with the cabinet’s resolution number 133 for 2000, which was passed after the industrial survey done by the Ministry of Industry together with a number of foreign organizations. Through the survey, the industrial sector’s situation in Yemen was analyzed along with a study of all the obstacles faced by investors in the industrial sector.
This comes as an increasing number of investors complain about the current situation facing industrial investments. Many of the complaints were raised through letters sent to the government, by meeting the leadership, and even in scientific, commercial, and industrial conferences held all over the country. The 4th and 5th Businessmen Conferences in Aden held in 1999 and 2000 consecutively were an occasion on which many Yemeni, Arab, and foreign investors brought this issue to the surface. The obstacles facing the industrial sector in Yemen can be summarized by the following:
– Smuggling. Thousands of products similar to ones locally produced are being smuggled in every day. Even though these products are of lower quality, they are in demand due to their lower price because they are not taxed by the state. This is the main cause that leads to flooding, which is a negative phenomenon that could potentially have a severe effect on the local economy, especially in the industrial sector.
– Customs taxes applied to imported materials used in industrial investments in Yemen are also a major obstacle facing industrial investors, because this leads to higher manufacturing costs, resulting in higher prices for the consumers. This encourages the import of ready-made products, hence discouraging the manufacturing of products locally.
– Multiple taxing (for productivity and sales). Too many taxes result in heavier burdens on the various industrial companies because they cause an increase in prices of manufactured goods, leading to less interest among the public, and more competition with imported ready-made goods serving the same purpose.
In brief, industrial development can only be achieved if industry is providing quality products at reasonable prices. Hence, if the government ever plans to encourage industrial development, it should remove all the bureaucratic obstacles facing investors in the industrial sector, and should reduce taxes paid by this sector, and work on preventing smuggling of foreign products by increasing security and enforcing the law.
Businessmen agree that if the government is sincere in its commitment to encourage the industrial sector, it should start by providing a completely structured industrial zone with a strong infrastructure that includes all the necessary services such as electricity, water, communications, transportation facilities, and sanitation facilities, all at economical prices.
However, it is unfortunate that the government has failed to implement the three industrial zones, in Aden, Hodeidah, and Mukalla, which it decided to establish in 1997, when the Minister of Industry was Mr. Mohamed Ahmed Sofan. The implementation of these projects never started despite the fact that a feasibility study of these industrial zones was made as part of a technical and scientific cooperation agreement with Egypt in the same year. The study’s results showed that there was great potential for a successful industrial zone in the governorate of Aden as part of an industrial triangle between Aden, Lahj, and Abyan governorates, with an initial estimated area of 6 square kilometers which could have been expanded in the future.
Even though it is not an easy task to launch these industrial zones due to their extremely high building costs, the government could have taken some solid steps towards implementation, and should have encouraged donor countries and organizations to help support the project financially. Experts say that the project’s great potential could have easily convinced these countries and organizations to provide assistance to the Republic of Yemen.
Building these zones will create employment opportunities for thousands, and will help decrease poverty. Unlike current industrial complexes, which are near housing complex, the proposed zones will be located away from cities, hence preventing environmental pollution. However, it would still be efficient to build some housing complexes within a reasonable distance of these industrial zones, which would consequently help distribute the population.
It would be smart of the government to proceed immediately with the building of these zones before the private sector, with the BOT system or with one of the systems used successfully in the region and in many Arab states, such as Egypt, which has several industrial zones.
Around 4 years have passed since the government decided on going forward with these zones. When the government made this decision , businessmen and investors were optimistic for the country’s future in regard to industrial development. We are afraid that what was said was no more than propaganda used by the government to get public support for the 1997 elections, not more, not less. We are running out of time, especially as we are witnessing an increasing demand for not only three, but even more industrial zones to meet the demand of the local market, and to be able to produce goods capable of competing with foreign products in Yemen and for exporting to other countries.
The government’s role is not limited to providing the atmosphere needed to attract investors and businessmen to launch their industrial projects and investments. The government’s role includes monitoring the quality of the products of these factories, and making sure they meet the standards it has set up for locally produced goods. It should also verify that the raw material used in producing these goods are within quality limits. All of this should be done in an unbiased manner, regardless of this or that businessman’s contributions to the overall economy of the country, simply because the health of Yemeni citizens should be on top of the government’s priority list.
All of the above should only be carried out after formulating and approving a law that would organize all issues related to the industrial sector . The Yemeni Standards Committee should set clear laws that indicate the standards that must be met by local goods produced by factories in Yemen.
The above laws should not only be used to monitor the quality of goods, but should also be used to make sure that labor rights and health standards are met in these factories. It is funny to notice however, that government run services, such as the municipal cleaning services have the worst of records in terms of the health conditions of their employees. But this should not be a reason to overlook the importance of monitoring working conditions in privately run factories and industries.
The Ministry of Industry should also work in close coordination with the Ministry of Supply and Trade in monitoring the quality and standard of imported goods either to be directly sold in the market Ðespecially those that are similar to locally produced goods- or to be used as raw materials in local factories.
All of the above tasks require a lot of hard work, commitment, organization, skilled workers, and funds. This drives us to the question of whether the Yemeni Standards Committee would be able to issue the required laws, and enforce them. The issue of funds is vital-they are needed to ensure that employees working in this sector will not be bribed or taken advantage of during the process of quality inspection and assurance. On the other hand, will the Ministry of Industry start working on implementing the already available laws in this regard, and give us some answers to our questions about the long forgotten industrial zones’ projects.
Will investors, businessmen, and all the Yemeni people have to wait too long for these projects to start? Let’s hope not!

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