Made in Yemen: Survival or Turnaround? [Archives:2008/1147/Business & Economy]

April 17 2008

By: YemenTimes Staff
Minister of Trade and Industry Dr. Yahya AL-Mutawakel has stated time and again that Yemen needs to push forward its manufacturing industry, emphasizing at this sector of the economy if properly supported will significantly help in reducing unemployment and poverty. Inline with that, last week Al-Mutawakel has announced the formation of a higher council for manufacturers to play a role in the development of several manufacturing industries in Yemen.

Al-Mutawakel emphasized that one of the obstacles to the development of manufacturing industry in Yemen is the lack of government coordination, adding that this council will have representatives from the ministry of trade and industry, customs authority, tax authority, and the general investment authority in order to decrease the administrative burden on manufacturing industries as well as provide facilities to support manufacturing in Yemen.

Industrial zones

In December last year, he Ministry of Trade and Industry has confirmed plans to establish eleven industrial zones throughout the country. The Ministry had indicated that Small and Medium Enterprises (SMEs) are the targeted business organizations which will play a major role in the development of the industrial zones, contrary to other statements that industrial zones will thrive as a result of foreign direct investment and large-scale projects.

The largest proportion of Yemeni SMEs are focused within twelve subsectors, mainly within the service sectors. While there are very limited SMEs in other subsectors particularly within the industrial sector, thereby raising questions if Yemeni SMEs will be interested in venturing into the industrial zones.

The strategy for developing SMEs focused on improving financial services and sources of funds for promising SMEs, while the industrial zones promise tax free business operation, as well as an opportunity to attract large number of SMEs in order to create a viable collective subsectors within the industrial zones. Such models have proven to attract multinational corporations to invest in industrial zones where supplementary industries already exist.

Small and Medium Enterprises are the second-largest employer in Yemen, giving direct employment for around 700,000 workers, and indirect employment to another 200,000. However, there are around 350,000 SMEs working in the country, indicating that SMEs average 2 – 3 employees each.

The Government of Yemen through various agencies aim at stimulating the growth of the SME sector, through providing grants and technical assistance through the Social Fund for Development and its Subsidiary the Small and Micro Enterprises Promotion Service (SMEPS), which has had a notable impact on the growth of SMEs in the country.

Legal reforms

Minister of Trade Al-Mutawakel has stated that his ministry is working on the development of two laws to protect local manufacturing, the first law is the local industrial development strategy, while the second is the protection of local production. The two laws aim at providing the legal framework to help protect and strengthen local manufacturing industries in the light of intensive global competition and the smuggling and dumping of goods into Yemen. The local manufacturing industry in spite of several competitive advantages has been unable to push forward with double digit growth due to the aforementioned reasons, therefore, the manufacturing community is hopeful that these reforms will revive the manufacturing industry in Yemen.