Nearly 78 percent of investment projects in Aden have stalled, says a recent study [Archives:2008/1218/Reportage]

December 22 2008

Ayman Baggash Al-Sayah
A recent study conducted by the government revealed that 1132 investment projects in the Aden governorate have stalled or are no longer active, accounting for 78 percent of the total projects registered by the General Investment Authority.

The study was undertaken by a team from the branch of the investment authority in Aden and was headed by Mohammed Hilbub, professor of investment and supply in Aden University. The report also received support from the Germen Organization for Technical Cooperation (GTZ). According to the study, between 1992 and 2008, 601 projects have stalled and 531 remain registered by the authority but have failed to proceed as investors were unable to find land and supplies for the projects.

The study indicated that the number of stalled projects registered between the 1992 and 2004 decreased, whereas the same number increased from 2005 t0 2007. It attributed the change to the high demand on registering investment projects during the period following the establishment of the investment authority, which intended to appropriate the land after registering the projects.

According to officials, the registration process was also open without regulations or pre-conditions comparable to the minimum investment cost of YR 50 million agreed upon in 2002. Further, the process included all economic activities later exempted by the 2002 law.

According to the report, investment projects of general joint-stock companies have been the most successful, representing only 11 percent of stalled projects. Failure among projects that controlled by joint companies amounted 67 percent, and 73 percent among companies which are under establishment. Additionally, the rate of blockage among individual investment projects totaled 83 percent.

The highest rate of blockage among investment was in the agricultural and livestock sector, exceeding 95 percent, followed by 92 percent in the services sector, 89 percent in the residential sector, and 81 percent in the industry sector. The lowest rate of blockage was registered in the education sector with a rate of 41 percent, followed by 45 percent in the fishery sector, 50 percent in the transportation sector, and 53 percent in the health sector. Obstruction among tourism projects also amounted to 62 percent.

The study further indicated that the industry sector accounted for the largest number of failed or failing projects, totaling nearly 51 percent, followed by 23 percent in the service sector, and 13 percent in the tourism sector. It pointed out that slowed investment projects remain focused on three economic sectors: industry, service, and tourism.

Foreign led projects totaled 83 percent, whereas obstruction among projects controlled by Yemeni investors is estimated at 78 percent. Stalled projects run by Arab investors amounted to 74 percent. Obstruction among joint projects controlled by foreign, Yemeni and Arab investors was estimated at 43 percent, which represents the lowest rate, according to the study.

The report also confirmed that the slowed progress of these projects resulted in the loss of 62.31 thousand job opportunities between 1992 and 2007. The study concludes that these projects would have satisfied the work demands of the Aden governorate's nearly 16 thousand graduates, as well as another 10 thousand job opportunities. It indicated that those lost jobs included projects that failed to progress, noting that there would have been more opportunities had these projects succeeded.

According to a questionnaire distributed among investors in Aden, 50 percent of respondents stated that lack of land was the primary reason for obstruction, while absence of coordination between the government bodies accounted for 49 percent, intimidation by groups or individuals totaled 47 percent, delay of issuing verdicts by the court, 33 percent, intervention of other bodies in the cases under prosecution, 29 percent, contradiction of laws, 28 percent, transferring cases to unspecialized bodies, 22 percent, continuous law amendments, 17 percent, inflation, 12 percent, and bribes, 12 percent.

The study emphasized the importance of mechanisms and procedures that provide accountability on all authorities – the executive, legislative, and judiciary – and civil service employees on the local and national levels. It also recommended supporting the role of the Central Organization for Control and Auditing( COCA) in overseeing all bodies concerned with investment, in order to ensure transparency and accountability in the investment process.

The findings also concluded that senior civil and military nominations should only be approved by the Shura Council in order to guarantee that public jobs and finance are not misused. All project locations and investors must be monitored and recorded, and land must only be allocated to active investors . It further recommended that land appropriated during the 1994 war must be returned to its original owner, according to article No. 13 of the 2002 investment law No. 22.