Economic Reforms of the 90s Background, Objectives and Outcomes [Archives:2000/23/Business & Economy]

June 5 2000

Mahyoob Al-Kamali
World Bank’s Objections:
Though the opposition parties and Yemenis of limited income object to the conclusions of the WB’s technical and advisory expertise, Bank’s envoys to Yemen have made many remarks against the government failure to fully apply certain recommendations by the bank. The most important of these shortcomings are as follows:
1) The slow reaction of the government to create an atmosphere for containing the negative impact on the labor force.
2) Delay in mobilization of the savings and introducing the credit to speed up the productive activities, as well as the slow implementation of projects in rural areas funded by international organizations to increase the per capita income of those under the poverty line.
3) The government’s in conclusive amendments on the egressive investment law. As Mr. Anderson, Middle East Bureau Officer in the WB stated there is no system of rewarding investors.
The government institutions, on the other hand, view that the investment law has created a congenial atmosphere to attract national as well as foreign capital investment in the country, in Mareb and Aden Refineries Administration, Fish Wealth, establishing tourist projects, etc.
The Yemeni government puts accent on attracting the national as well as foreign capital to establish projects enhancing the economy and creating more job opportunities to reduce unemployment rate. However, investors and businessmen continue to grumble about the non-existence of the desirable money market to create a stable financial atmosphere for investment.

The Free Zone Supporting Reforms:
Since 1990, the government of Yemen has been doing its best to make use of the studies and recommendations by the WB to improve Aden Port. It has been rendering special services for containers coming or going back through the Red or Arab Sea or Indian Ocean as to make the port a Free Zone for multi-national companies keen on investing and marketing their goods via Aden Port.
The first stage of developing the port was in 1999 over at the cost of $ 250 million. That included building of a wharf and deepening the berth of the port so that it can receive huge ships. The infrastructure of the Free Zone was also established including water, electricity, refrigerated stores, places to store fish, maintaining fishing ships, making available services like fueling ships, etc.
Aden new containers terminal has become fit to receive 1800 terminals. It has been supplied with big cranes that can deal with the biggest sea carriers in the world. The Free Zone was also designed to cover an area of 1550 hectares. The number of the International Companies that have booked pieces of land so as to invest in the area ran to 100 by the end of 1999. On the other hand, the licenses endorsed to the national and foreign private sectors ran to 600.
The free zone will presumably see an increase in investments, especially after the licensed businesses to be inaugurated during the current year.
The containers terminal received about 80 thousand containers till the end of 1999. By the end of 2000, it is expected that the number will increase to 300 thousand containers. This will help increase Yemen’s exports, beside increasing revenues of the state budget.

Along with opening new navigation routes to the container terminals, that is facing competition from the ports of Dubai, Jeddah and Djibouti, official authorities should encourage and expand investments in the region particularly after Aden has established links with famous international maritime routes such as:
1) American Resident Line (ARL)
2) Maersk Line
3) Bescon Consortium
5) PIL
In its recommendations to establish the Free Zone, the WB collaborated in funding the establishment of a transparent administration for this area to enable the government of Yemen to consolidate its long-run economic gains.
Therefore, the implementation of the first stage of developing the containers terminal project in Aden was an essential initiative to promote the industrial area. Businessmen and investors are of the view that there are lots of bureaucratic bottle necks pertaining to the procedures of allotting lands to investors. The result of this is delay in the implementation of investment projects in Aden.

Reform Program Outcomes:
The measures carried out by the Yemeni government to implement economic, administrative as well as financial reform programs have led to substantial reduction of foreign debts. However, Yemen has been unable to increase its exports other than oil due to the inherit shortcoming in the processes involving industrial and agricultural productivity. This has resulted in decreasing budget deficit through dependence on increased oil prices in the international markets.
Thus, oil revenues continue to constitute 85% of the total budget. If the situation continues to be like this, increasing of main oil products kerosene, gas etc., food supplies and other services won’t help to improve the economy of the state as new burdens will be created affecting the people of low income group.
The view that privatization of public institutions will help the economy of the country needs to be established on the basis of a careful study of the effectiveness of privatization of the institutions that were already sold to solve the budget deficit. This deficit has gone up during the past two years.

However, it is only advisable that the authorities should consider the deplorable economic condition of a large section of the society below the poverty line. Any further wave of price hikes will trigger a dismal situation.
It is also obvious that the number of people who are losing their jobs is increasing in course of time. Besides, the establishment of the industrial Zone in Aden has been delayed for a long time despite steps for improving the conditions container terminals are on full swing.
The WB’s role is manifested clearly by foreign debts exemption while leaving the remaining unpaid debt unable for payment. It also grants Yemen lots of further loans as well as other facilities. The IMF, AMF, Abu Dhabi Bank, and Kuwait Bank have all been following the same policy. Therefore, the donor countries have increased their support to Yemen’s economic reforms.

However, all said of done, what really intrigues and agitates the Yemeni man of the street is how to feed his children and support his family. The fact remains that notwithstanding all economic reform the number of people living below the poverty line is increasing in course of time. Thus, the authorities have to redouble their efforts so as to achieve a comprehensive sustainable development for the country as well as its people.