OPINIONDisinvestment versus investment in Yemen [Archives:2006/1007/Business & Economy]

December 14 2006

Raidan Abdulaziz Al-Saqqaf
[email protected]

In spite of record-breaking investments in the region exceeding US $34 billion so far in 2006, foreign direct investment in Yemen amounted for US $266, which means a considerable portion of investors who came to Yemen in previous years decided to disinvestment due to “political uncertainties.”

These uncertainties are the reason behind Yemen's failure to attract any of the investments coming to the region, and even failure in maintaining its own stocks of foreign investments, dropping from US $1,249 million in 2004 to US $983 million in 2005, with a drop rate exceeding 22 percent in national investments stock.

These findings come contrary to political speeches and the “pink news” laid down by government officials on the status of investment and the excellent work in promoting investments in Yemen, apart from the hundreds of new licenses being issues to new businesses announced through official media to the public.

However, to compensate for the decrease in foreign investments and sustain an acceptable level of economic growth, the government of Yemen has embarked on a public investment program, with a total cost estimated at US $16.8 billion during the period 2007 to 2010.

Although the US $16.8 billion includes a financing gap of US $6.8 billion, the forecasted impact of this program would boost growth in non-oil sectors to an annual 10 percent on average. However, with the government administering the programs focused on infrastructure development, energy, and other sectors, it is expected the high level of government inefficacy may not lure many more investment in Yemen.

Conducting business in Yemen continues to be difficult compared to other countries in the region according to the World Bank's annual “Doing Business” assessment. The reason isn't because the Yemeni government isn't reforming the business environment in order to facilitate the venturing of new investments in the country, but it is that the government is unable to match the speed of these reforms compared to other countries which attract far more investments and deal with geopolitical uncertainties.

There is no magical potion that will suddenly lure regional investors and funds to invest in Yemen, it is a gradual process of building investor confidence through serious reforms in the business environment, including policy, systems, monitoring and facilitation mechanisms, and adopting a true sense of an open and transparent economy in order to attract some of the investments coming into the region.