A fresh group of economic reform and serious consequences [Archives:2003/654/Business & Economy]

July 28 2003

The Yemeni government intends to inaugurate a new package of economic, financial and administrative reforms concentrated on reconsidering some financial and investment laws for realization of genuine growth rates in gross domestic product and working for activating the wheel of investments in vital areas especially in the free zone in Aden.
For this purpose the cabinet has established a ministerial committee, it described as the elite, to examine and check the financial law, he laws of customs and taxes in addition to the laws of contracts, biddings and investment. The government has given the committee three months to effect amendments on those laws according to the program of comprehensive reform and Yemen's orientation towards restructuring of establishments and installations and the implementation of privatization program. The financial reforms stipulate taking a series of banking measures and arrangements and control of prices of the currency and preserving of its stability, as well as cubing monetary inflation and completion of banking reforms for attaining the stage of building a stock and money exchange market.
The financial reforms also aim at dominating the general budget deficit, development of financial revenues and reducing public spending. The Yemeni government designs during the coming period to reform customs and taxes administrations by combating corruption and putting an end to tax evasion, prevent manipulation of customs revenues and to limit smuggling that deprives the customs authorities of around YR 80 billion each year.
Including its coming measures of reform it is expected that the government would implement the general tax law on sales that ha been arousing controversy among industrial circles and the private sector and the concerned bodies. That law implementation has been suspended at the end of last year so that it would not affect popularity of the ruling party in the parliamentary elections held on 27 April 2003.
Official institutions intend to fight corruption resulting from contracts law that is causing problems to the government and delaying execution of investment projects under various justifications.
As for the law of investment that has been subjected to many amendments, the government has included it s part of the duties of the committee set up for carrying out law amendments. It still suffers from shortcomings and failure by the sides responsible for issuing investment permits and determining who the investor is and the privileges granted to him according to the law.
Therefore the coming stage of economic and financial reforms in Yemen seems to be at a large-scale level and interested in the financial aspects and the increase of tax and customs revenues in an attempt to develop the national income by depending on safe sources. The general budget deficit for this year has exceeded YR 64 billion. However the consequences of these reforms could be serious because of their dependence on increasing general taxes.