Prof. Dr. Al-Tarb to the Yemen Times:”The Central Bank of Yemen measures unsuccessful, extempore & impetuous” [Archives:2005/907/Business & Economy]
Interviewed by: Mohammed Khidr
At the monetary and banking level in Yemen, this month has witnessed dramatic events and changes. At the end of the first week of this month, economic and banking circles were surprised with the shocking news of the Yemeni Watani Bank for Trade and Investment declaring its bankruptcy and the immediate action taken by the Central Bank of Yemen in taking control of the bank. The Yemen Times has not spared time to monitor the event and thus it has published front-page news and reports on the event in addition to later reports in its effort to follow up developments of the event. As part of our effort in this regard, the newspaper managed to interview the economic expert and international adviser in administrative development Prof. Dr. Abdulaziz Al-Tarb. Through its questions particularly on the Watani Bank event, the newspaper discussed with him about this, and other economic problems, sounding out his opinion about them. Following is text of the interview.
YT: Let's start with the most recent event the GPC conference. What could be concluded from the closing communique of the General People's Congress 7th conference?
Al-Tarb: the GPC has emphasized its adherence to democratic values, respect for the constructive role of opposition, involvement of civil society organizations in drawing up policies and fulfillment of developmental plans. Therefore the lessons derived from the results of the Egyptian elections might be reflected on a number of Arab capitals unless the ruling parties there comprehend the necessity of modernization and change in favor of their societies. Converting words into actions is the actual wager in reforms, fighting corruption and enhancement of wise administration to create the state of law and order. That also would create job opportunities, alleviation of poverty and limit dependence on oil.
YT: How do you explain the Central Bank of Yemen's (CBY) decision of taking control of the Watani Bank?
Al-Tarb: Yemen is not the only or first country to face a problem with one of its banks. There are other countries that experienced more dangerous problems in this respect, as what happened years ago for a number of Japanese banks and in Malaysia, Indonesia and Thailand classified under the term of Asian Tigers countries. Egypt had also faced such a problem as some banks were incapable of providing liquidity for their clients. Nevertheless, those countries considered the problem a national one rather than just banking. They treated the subject in a professional way and studied responsibility in order not to create confusion and non-confidence in banks. The central bank had provides liquidity and funds.
I believe what happened with the Watani Bank is something regrettable but the CBY's handling of it was not successful, but rather extempore and rash. It could have supplied a 30% amount withdrawn from banks' securities when opening credits or accepting deposits. In addition it is required to give an official statement assuring for the clients and depositors mentioning that the national banks are performing their banking activity actively and good reputation and that customers' deposited funds are preserved and stable.
The finance market is living a state of anxiety and banks and correspondents demand for full coverage, as what happened after blasting the French oil tanker Limburg. Therefore the least of what the CBY could do to correct its wrongly taken measure is to issue a statement to assure depositors and banks, as well as the monetary market. Leaving the matter to speculations and rumors issued by irresponsible sides would harm the economy and the country that attempts to attract regional and international investments.
YT: How do you assess the economic condition of Yemen today?
Al-Tarb: To be frank, the economic condition of Yemen is very weak. It needs a revolution and new blood have to be pumped to participate in the process of reform and modernization. This is similarly applicable to political life.
We need more channels to be made available for the private sector, as the Yemeni economy needs to break up stagnation, which, coupled with inflation has been keeping a firm grip on us in the recent past. Mismanagement, corruption, sheer negligence and carelessness have left a negative impact on our development. Corruption and breaking of the law have playing their negative role on our economy.
YT: What can be done to help solve or rather improve the situation?
Al-Tarb: Implementation of administrative decentralization will lead to major benefits in all government institutions and governorates. Timely good planning and proper monitoring are integral and are basic components of the management process. We do not have any of these elements, although we are now in the 21st century. Economic development also depends on security and stability. Investors should feel that their assets are safe and that they are free in their dealings. Unless the rule of law prevails, very little can be done to encourage investment. There is another important factor with negative impact on investment. Under pretext of control, many persons play the role of intruders in economic activities, simply because they want to share the pie without exerting efforts to earn it. We need to free business from bureaucratic meddling and cumbersome paperwork. Finally, we must push ahead with the privatization process. However, this is to be done with complete transparency and according to the book. I suspect that much of corruption and favoritism could be part of the picture.
YT: Aden free zone, why is it not flourishing?
Al-Tarb: The Dubai Company is taking over the management of Aden port and the free zone though there is a number of remarks and views about that decision.
The other key factor in investment is embodied in trust, and confidence in decision. Investors have trouble trusting our rules and whether we are serious in applying them. They mistrust the decency and character of the persons in charge. I am not trying to put the blame on anyone. I am just stating the facts as I see and hear them and weighing things in my capacity as President of European Marketing and Promotion Authority (EMPA) in the Arab world an the chairman of the Arab Group for Investment (AGID).
The gap between what our officials say and what they do is so enormous. The relationship between what they say and the rules they enact have become almost irrelevant. We have to work on the credibility of the system. The investment law has many advantages on paper but requires credibility.
Moreover, there are practical problems such as multiple responsibilities and authorities in charge of the free zone.
It appears that we do not know what we want; we are really not ready for that. I believe the liberation of the Aden harbor is the first step we have to take in the right direction. Even this we have been unable to accomplish. In other words we have done nothing to market or prepare a promotional campaign for that.
YT: Any further comments?
Al-Tarb: I think Yemen can secure a good development prospect provided we can streamline the bureaucracy. I cannot overemphasize this matter but it is a must and urgent question ahead of the elections of 2006.
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