Future of Investment in Yemen [Archives:2001/18/Business & Economy]
Yemen’s most attractive investment opportunities are in the Aden Free Zone. The Zone’s development plan includes several infrastructure projects such as harbor, airport, roads, electricity, water and sewage. In addition, there are projects in the fields of industry, tourism, and storage. The plan spans over 25 years and projects are to be achieved in stages with a total estimated cost of six billion dollars.
The First Five-Year Plan (1996-2001) foresees total investment of YR817.8 billion to be distributed among private and government investment, foreign loans, and direct foreign investment. The plan mentions major projects in the field of industrial zones, cement, electricity, tourism, agriculture, fisheries, and services.
As for policies and government measures to encourage investment, Investment Law no. 22 of 1991 grants investors complete freedom as well as equal rights for local and foreign investors, together with a set of incentives and tax holidays according to the type of project. Also, Free Zones Law no. 4 of 1993 grants further privileges and guarantees to investors. Moreover, while the Government’s program has increased capital spending, the Government has also committed itself to review laws and regulations that would provide a more conducive environments for private investment. The Government has started by undertaking the responsibility to amend the Investment Law, unify the exchange rate, liberalize interest rates, issue treasury bills, amend customs tariff and consumption and excise taxes, eliminate import licensing, establish commercial courts, privatize some public enterprises, and reorganize the Free Zones Public Authority.
The public sector in Yemen has been introduced through one of the following:
– Projects nationalized or confiscated by the state.
– Public investments provided by the government to establish new projects ,in whole or in part, or earmarked to project expansion, replacement or renovation.
There are no accurate estimates as to the value of assets pertaining to the public sector, nor for those subjected to nationalization in the southern part of the homeland during the totalitarian regime, or even at the sectoral level in both parts of Yemen.
Similarly, there are no precise figures on investments undertaken to add to or replace public sector’s capital during the last period.
The privatization policy is one of the various economic policies based on market mechanism and on a major role for the private sector in the economy. The policy has been developed and adopted as a direct consequence to the failure of the public ownership model in achieving the desired progress. Implementing privatization has also been triggered by the inefficiency associated with public enterprise activities.
Based on the above, the privatization program should incorporate the following elements:
– Determine the overall policies for privatization.
– Specify enterprises and projects to be privatized, starting with designing pilot programs.
– Consider a black list for enterprises that should not be privatized because of their strategic importance.
– Encourage wider ownership for privatized projects through public issue.
Moreover, the privatization program should consider the following regulations and objectives:
– Establishing a financial market.
– Preventing monopoly or control of shareholding and limited liability companies by certain groups.
– Eliciting support from all participants to the program.
– Organizing and preparing special guidelines for foreign participants.
– Legislating anti-trust laws
– Preparing regulations for national, financial institutions to enable them to undertake neutral assessment to evaluation.
– Providing regulations that protect labor rights, since failure to do so would undoubtedly lead to resisting the program by this vital group.