People afraid of the new price hikesGovernment: Stopping price reforms could result in catastrophe [Archives:2004/777/Front Page]

September 30 2004

The government failed last week to pass its proposed new price rise by lifting subsidies on oil products, which would have meant that the price of diesel increases by 100%, and petrol by 50%, in addition to price rises for other products.
Some 250 members of the Parliament and the Al-Shura Council absolutely rejected lifting subsidies on oil products because the government has not showed its seriousness or credibility in executing financial and administrative reform, fighting corruption, decreasing governmental expenses, or limiting extravagant spending on official ceremonies and luxirious buildings.
In a statement to Yemen Times, Sultan Al-Atawani, MP, harshly slashed at the government's new proposal.
He said: “The government has proposed a view on reform. It asked the Parliament to approve lifting subsidies on oil products in return for lowering custom fees on new cars and agricultural machinery. They are not necessary for citizens and do not affect the lives of the majority of people.”
Al-Atawani added: “The government complains of a decrease in investment activity, a frailty of the investment infrastructure, and the retreat of the private sector's contribution to the five-year plan from 95%-39%. But it never tries to find solutions to the rampant corruption. It also does not prevent smuggling oil outside the country by the elite of society whose oil tankers pass across sea and land borders.”
He believes that the government should, before lifting subsidies, reform the administrative apparatus, reconsider the system of wages, and improve revenues from sources other than taxation like agriculture and fishery wealth.
The Prime Minister, Abdul-Qadir Ba Jammal, had proposed a draft to the Parliament and Al-Shura Council reporting several challenges before his government including slow economic growth, less job opportunities, low investment volume, frail infrastructure, and a health and education gap between males and females and in cities and rural areas.
Consequently, he claimed that to face these challenges, the price of oil derivatives should be raised. He also asked for a change in new vehicles custom fees from 25% to 5%, and exempting raw gold, books, newspapers, and magazines from custom fees.
Members of the Parliament and Al-Shura Council considered Ba Jamal's report contradictory. Whereas the PM's report says that subsidies mount to YR 150 billion, the minister of planning and international cooperation had said it is YR 80 billion.
An official source had earlier informed media that the government's move is motivated by the donors, the World Bank, and the International Monetary Fund. Aid is conditional to implementation of the proposal, which is actually approved by the political authority.