Aden industrial zone emen’s economic savior? [Archives:2007/1035/Business & Economy]

March 22 2007

By: Raidan Al-Saqqaf
[email protected]

The Yemeni government currently is accelerating the process of establishing industrial zones in several locations deemed to have the necessary requirements to make them more attractive for investment in order to interest both regional and international investors in Yemen, as well as promote the nation as an investment destination.

Establishing these industrial zones is coupled with reforming investment laws in addition to providing major investors with sizable areas within the industrial zones, as well as tax exemptions, including allowing several imports to be tax-free, such as machinery, equipment and select types of raw materials.

The Yemeni government has decided upon these measures in order to increase such prospective investments' profitability, especially since Yemen's image as an investment destination has yet to be established, an image better known for complicated bureaucracy and high levels of corruption.

However, recent measures to make Yemen's investment environment more attractive to potential investors have been of great importance, especially if the nation's third five-year national strategy for poverty reduction and development is to succeed.

The strategy aims to increase Yemen's industrial exports and transform its economy from an agricultural one dependent upon oil into a modern, diversified economy with several industrial sectors funding the nation's progress and development by manufacturing value-added products that will help integrate the local economy with the international market.

One example of these industrial zones is Aden industrial zone. Economic experts indicate that once the predicted investments begin pouring into the zone and several industries are established, Aden industrial zone has the capacity to increase the manufacturing sector's contribution to the Yemeni economy from its current 10.3 percent to 16.2 percent by 2011, a 12 percent average annual growth rate.

Aside from this, Aden industrial zone would employ at least 1,000 workers during its first phase of operation (2006-2011), while total investments in the zone are expected to exceed $1 billion, according to Ministry of Trade and Industry Assistant Undersecretary Abdul-Elah Shaiban.

In its plan for Aden industrial zone, the Ministry of Trade and Industry, in cooperation with Aden governorate, has allocated a 500-acre area west of Aden and currently is negotiating offers from five international firms to develop the area's infrastructure, budgeted at $1.5 million for the first phase, and will include constructing a road network, sewage, telecommunications and, more importantly, power and electric services.

Minister of Trade and Industry Khalid Rajeh Sheikh stated that the April 22-23 'Invest in Yemen' conference will bring Aden industrial zone to the attention of potential investors with a wide range of investment opportunities ranging from steel, heavy industries and manufacturing to petrochemicals.

He added that more than 100 investment opportunities in Aden have been researched and found to be lucrative for investors. However, local businessmen remain skeptical that Aden industrial zone will achieve the growth and potential illustrated in government reports, adding that the Yemeni government has laid down such investment-friendly strategies and publicized investment in Yemen.

A source at the Sana'a Chamber of Commerce further indicated that the Yemeni government currently is pushing investors and businessmen out of Yemen due to its arbitrary economic decisions and its inability to provide security and guarantee the protection of businessmen and business organizations currently operating in Yemen.

However, the success of the Yemen investment conference relies heavily upon the prospective profitability of investment opportunities as compared to other opportunities in the region, especially considering that Yemen still suffers the image of its unstable past and high levels of corruption.

Therefore, any explanation of optimistic speculations by the government and the Ministry of Trade and Industry regarding Aden industrial zone may indicate that the government has made some fundamental changes to improve Yemen's business environment. However, the truth of this argument will be tested at the upcoming investment conference.