Public sector privatization [Archives:2004/775/Business & Economy]

September 23 2004

Mahyoub Al-Kamaly
Economic sources claim that privatization of public sector institutions in Yemen is progressing very slowly for various reasons. The main cause is the lack of capital necessary for buying unstable establishments. Nevertheless, the process is progressing in an organized manner since the launching of the Yemeni reforms in 1995.
The program seeks to improve the state's finances by removing the financial burden of subsidizing the public sector from the general budget, and to allow the state to concentrate on supporting free economy by the mobilization and distribution of the country's economic resources.
Since the beginning of the reforms, the public sector was constituted of around 140 companies, employing around 76 thousand persons, among which figured 37 agricultural companies, 26 industrial companies, 12 companies for trade activity and 11 public services companies. The remaining companies deal with construction, transport, communication, electricity, water, oil and fish.
The Yemeni government took a decision in 1995, to regulate the rules required for implementation of total or partial privatization operations of the establishments and companies owned by the state, or those in which it has shares. The decision decreed that the financial revenues of a privatized company sold to the private sector, would be used for development of the sector to which that company belongs.
The government has so far succeeded in the privatization of state farms, some establishments selling meat, vegetables, fruit, poultry, agricultural machines rental companies and mills. It has also succeeded in the privatization of companies such as dairy factories, banks, other trading establishments and seaports.
The government laid down some general rules for privatization. Among which forbade the changing of the main function of the company concerned, and sought to ensure the safety of its staff. Thus the process has been split up into the following stages:
1- The stage of evaluation of the company,
2- The stage defining the value of the company,
3- The stage of taking the decision, and assessment of the implementation of the results.
Nevertheless, the program has still difficulties with providing the convenient climate for investment. This and the weakness of the private sector and its incapability to buy out the public sector or run it, hinder the process of privatization in the country.