Perceptions on price hikes [Archives:2008/1119/Business & Economy]

January 10 2008

By: Yemen Times Staff
Inflation and increasing prices affect large segments of the society in Yemen and in other countries as well, however, the reasons for understanding why inflation happens. The Yemeni consumers are very price sensitive, and therefore are significantly affected by price increases. YemenTimes surveyed a random sample of consumers in different locations, attempting to cover a representation of most consumers.

The audience was divided into to categories, the first directly blames the government and government policies, stating that the wrong policies of the government such as reducing the subsidies on food stuff and other products which are consumed by all levels of the society, as removal of these subsidies will affect the lowest segments far more than the well-to-do segments.

Moreover, government policies which has increased the dependence on the international market was also to blame, reiterating that in the pre-oil era Yemen was dependent on its own agricultural produce to feed its people, in fact, one of the respondents stated that during the beginnings of the 20th century Yemen provided food aid to the United Arab Emerits.

The Second category blamed the businessmen and the retailers for raising the prices, stating that the middle men claim that international prices rise and therefore raise the prices of everything, from foodstuff to clothing and accessories. A respondent claimed that a clothing item which cost 2000 in Eid-Al-Fitr four months ago, cost 3000 in Eid-Al-Adha, three months later, with a 50 percent increase which is absolutely not justifiable.

Additionally, importers of essential items such as foodstuff and wheat form an oligopoly where they “meet and agree on their retail prices” thereby creating an illusion that the price hike is universal across all businessmen, while it is a large-scale scam on the people of the republic.

Other respondents continued along the same lines, indicating that businesses overstate their operating and other costs in order to increase the overhead along with their profit margins, in turn increasing the prices by the day and the month, although the real costs do not change as such.

Another number of respondents blamed both the government and the privet sector for the increasing prices, adding that the real reason for increasing the prices is that there is no government monitoring controlling businesses, which allows them to run “free and wild” and augment the prices as they want. They claim that the government should protect the interests of the people against such businessmen, therefore maintaining the prices relatively stable.

When asked about the future of price changes, all respondents stated that they expect the prices to continue increasing cross all sectors, adding that they have extinguished all their coping mechanisms, and cut back on their expenses to the minimum possible.

Another similar survey undertaken by the public opinion polling center affiliated to the Yemeni center for strategic research attributed the increase in prices to the following factors, as distributed by percentage of respondents:

– 31.2 % – corruption within the government and the privet sector

– 29.2 % – lack of effective government monitoring mechanisms.

– 22.8 % – because government officials are businessmen and serve their personal interests and business gains through price hikes

– 22.8 % – existence of monopolies and oligopolies.