Private sector could do betterYemen’s investments are growing [Archives:2004/788/Business & Economy]

November 8 2004

Mahyoub Al-Kamaly
Overall investment in Yemen has risen from YR 284.5 billion in 2000 to YR 559.8 billion in 2003 at an average annual growth rate of 25 per cent, which is more than the targeted amount in the second five-year plan.
A government report ascribes the big increase in government investments, investments in public and mixed sectors and those of independent and annexed sectors as well as private funds.
Those investments exceeded what had been expected in the five-year plan, due to the state's goal of improving the level of the economy infrastructure and working toward the plans of the poverty alleviation, improving basic services, and services of social security in a manner contributing to improvement of investment.
The report on the five-year plan, from 2001-2005 also explained that local and foreign investments have risen from YR 168.3 billion in 2000 to YR 220 billion in 2003, at an average annual growth by 9.3 per cent. This is below the annual rate of inflation for the same period, which means that the actual size of private investment has receded by an annual rate of 2.1 per cent. and that is unlike what has been targeted in the plan and expectations of the private and public sectors.
The plan was expecting that the private sector would take the initiative and embark on leading the process of investment and consequently open large-scale growing annual investments by no less than 23.5 per cent. The report has in this regard shown the great gap between what was expected from the private sector role in the development process mentioned in the plan and what has been realized.
The percentage of achieving the goal has not exceeded 39.7 per cent, and thus there is clarification of the reasons behind the low-level in the rate of economic growth during that period.
The report also mentioned that the government sector, and in order to attain goals of the plan and strategy for poverty alleviation, has gone beyond what was targeted in the five-year plan, whether it was in the chapter of final consumption, or particularly regarding the investment side.
Nevertheless, it has indicated that the private sector has failed in reaching the target in the investment side, reflecting itself negatively at the level of final consumer spending of the sector, and implying that there is an obvious change in structure of specifying resources.
Proportion of gross investments rose by about 8.4 per cent by virtue of the great increase in government, public, mixed, independent units and funds sectors investments. The gross of their investments has risen to the gross of investments from 40.8 per cent in the year 2000 to 60.7 per cent in 2003. Against that, investments of the local and foreign private sector recorded a retreat from 59.2 per cent to 39.3 per cent during the same period and also the retreat in the proportion of exports of commodities and services by around 4 per cent, and that had its effect in not achieving the growth rates targeted.
The second five-year plan target has been designed to realize a change in the national economy structure along with course and type of total demand components through the creation of suitable change in spending on gross domestic product for the benefit of gross investment.
According to the report published in the Economic Supplement of Al-Thawra Newspaper, the plan has worked for realizing a big gradual increase in investment in general, from 19.2 per cent of the gross domestic product in 2000 to 28.6 per cent at the end of the plan period.
That increase depends on achievement a high average growth in private sector investment to attain a rate of 23.5 per cent and fewer rates in government and oil investment which are expected to realize an annual growth rate by 18 per cent and 10 per cent consecutively during the period of the plan. Those rates include stability in the individual income and its increase in future by mustering and distribution of investment resources in order to extend the productive base of the national economy and increasing production efficiency as well as limiting squander in economy.
The report also expects a rise in the private sector share in investment reaching at 61.8 per cent in the final year of the plan versus a drop in proportion of government and oil investment at 38.2 per cent. This development reflects a rise in role of the private sector in development, including the transfer of administration and implementation of some productive and public services projects to the private sector via privatization that represents one of the methods of developing the private sector and increase of its role in developing the national economy and diversification of the production base.