Dimensions of World Attention towards Post-Unity Yemen [Archives:2000/41/Business & Economy]

Dr. Abdulaziz
Al-Shawafi,
Prof. of Economics
Since 1990, Yemen has been witnessing important political changes attracting attention of researchers and writers in the world due to their local and regional dimensions and effects. The changes have great role in studying the movement of world changes, beginning from declaring the Yemeni unity on May 22, 1990, the democratic changes, reflections of the 2nd Gulf crisis, parliamentary elections in April 1993 and the political crisis during 1993-94 which culminated in war of 1994. That war lasted for two months from 4 May to 7 July 1994, ending in the defeat of separatism. All those events were important in shaping the new political development in Yemen.
After the unity Yemens importance in the Arab Peninsula increased to the second stature next to the Kingdom of Saudi Arabia. On the other hand, shrewdness of President Saleh in tackling issues such as Hunaish Islands, settling the border dispute with Saudi Arabia in June, 2000, had its impact on the social, economic, geographic, military and political situation in the whole of Yemen.
Social integration has made Yemen, with 17 million in population, be the first in terms of population in the Arab Peninsula. Geographical integration made Yemen, with 600,000 km2, come as the 2nd in terms of its area after Saudi Arabia. After that there were big chances for Yemen to utilize more military, economic and political potentials. It is vital to note that Yemen had obtained the military and economic potentials of two regimes despite the fact that political strife had contributed to hindering those energies and potentials during the transitional period. Moreover, much of these potentials were wasted during war of 1994. However, the fact that Yemen remains united, despite all obstacles facing it, made it the focus of attention for many reasons including its stability and strategic location.

Associated with the unity, a number of oil and gas discoveries were made, specially in Mareb, Hadramout and Shabwah. A number of Western and international companies competed with each other to obtain exploration and excavation concessions for oil and gas.
Despite limited production, compared to other neighboring countries, indications of development seem great, specially in the field of gas which may have great importance in future. This development has to be given due attention to gain the results desired. However, the process of liberal change remained a random one till 1994.
The next very significant stage in Yemens economy is Yemens oil industry. Oil reserves discovered in PDRY and YAR was developed in cooperation with international companies. State oil companies were dependent on foreign experts. Soviet oil companies conducted studies on the coasts and regional waters of PDRY. However, in the late 1970s, talks were conducted with British, French, Italian, Spanish, Kuwaiti, and Brazilian firms. Thirty international oil companies had already excavated for oil in the YAR. In 1984, Yemen Hunt made the first ever discovery outside Mareb near the borders with PDRY. Soon American, European, South Korean and Soviet companies joined and started negotiation for exploration for Yemeni oil.
Techno-Export Soviet Company, for example, made a discovery in 1986 in Shabwah in PDRY near the borders of Mareb. Those discoveries created more opportunities for complementary contracts for construction in YAR such as the American project that set up the small refinery near Mareb. The Lebanese, Italian and German Groups built pipelines that extended from the site of the project in Mareb to the port on the Red Sea at the coasts of Tehamah. Joint venture does not only ensure rights of oil security but has also buoyed up activities at the borders. That has also buoyed up hopes of YAR to make use of the facilities available in Aden including the Port and modern oil refinery. This cooperation enhanced ties and dissolved conflicts. Then, the two national oil companies were merged into one Yemeni company and started investing in oil and mineral wealth. At the end of 1989, the Yemeni Oil Company signed an agreement with an international team of oil companies. This agreement constituted a convergence of two different ideological regimes before 1990. The two regimes became partners in the biggest project in the then two regimes. Soon after the unity agreement was signed.
Therefore influx of capital into Yemen in form of aids or remittances created two regimes with majorly developing projects, one the one hand and immigration and marginal agriculture and commercial sector on the other. Recession of international oil prices and drop in foreign aids in 1983 had very much confused economists and led to take sharp restricting measures in the YAR, and contributed to eruption of factional war in Aden in the beginning of 1986. This hazardous situation was retrieved by virtue of oil discovery in Mareb and Shabwah which created more opportunities for foreign funds and promising investment.
The unity was meant to be a complete integration. While Sanaa will be the seat of government, Aden will be developed to restore its past status as an economic center and free zone competing Hong Kong and Singapore and other free zones in the region.
Before achieving any economic benefits of the unity, the second Gulf war erupted and aids from Kuwait, Saudi Arabia, Iraq, UAE were stopped. Moreover, a great number of the Yemeni emigrants reaching 700,000 came back to the country imposing heavy burdens on the fragile economy due to frittering out of many operative resources in social services fields.
Revenues from oil were not enough to cover servicing foreign debts. They were neither enough to be utilized in infrastructure projects. Furthermore, problems of oil property arose on the borders and attempted to hinder the companies work. Therefore, for the second time politics abroad and changes of international economy had affected the development plans in Yemen through creating obstacles in the way of the flow of foreign funds and investments into Yemen. Despite all that, foreign investments in Yemen had not stopped. A memorandum of understanding was signed in October 1993 with a foreign company by the Yemeni Free Zone General Authority for the establishment of a multi-phase Free Zone in Aden at a cost of $5600 billion over 25 years, including the building of new facilities in the port, enlarging the airport, installation of a turbine power station using gas and building industrial area. Now work is under way in the second phase of the project.
The lawful framework for this project has also been defined according to laws granting exempts from import export duties and a group of taxes levied on income and profits for 15 years. This is to attract companies to the area. Arab and foreign private sector would be allowed to implement investment projects by 100%. There are also guarantees against nationalization in addition to providing assistance concerning pieces of land, water, electricity ..etc. Aden as a free zone enjoys significant advantages. It has a strategic location the region as it is located as being at the meeting point between the Indian Ocean and the Red Sea. It is also considered as a station for refueling and anchorage in an area between the east and the west. Prosperity seems promising, nevertheless all that will depend on the Yemeni government policy.

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