The Dark Side of Privatization in Yemen [Archives:2000/12/Business & Economy]

March 20 2000

By: Mahyoub Al-Kamali

Privatization policy in Yemen is usually fraught with many challenges adding to the burdens on a big portion of employees in the public sector. Despite the fact that government is slowly going ahead with plans for privatization of certain projects however, the non-existence of alternatives for social security and scarcity of job opportunities reduce the chances of investing the revenues, gained from selling or leasing those projects to private sector.
Privatization measures do create fears and suspicion among employees working for the projects to be privatized. The reason is that the process is being carried out in a country having very few infrastructure represented by productive projects whose industrial and agricultural output constitutes a small proportion of exports to external markets, let alone it meets only 10% of local markets consumption needs.
State farms have already been privatized and three state agricultural institutions are to be liquidated through privatization. As for the industrial sector, 16 establishments have been privatized so far, and 9 tourist hotels have been given back to their former owners in Aden and Hadhramout. Seventeen tourist enterprises have also been rented to local and foreign investors.
In transportation sector, loading and unloading activities in the National Navigation Company and some shares in Aden Petroleum Refinery have been privatized.
Certain measures have been taken for selling shares from the National Bank of Yemen and study has been made on privatizing specialized state banks: The Agricultural Bank, The Industrial Bank and The Housing Bank. Other projects are on their way to be privatized.
Privatization is not a good solution to the economic and industrial problems in a country like ours, especially from the economic and financial standpoints. It creates additional numbers of unemployed. The government could reach better solutions if it allocates part of its revenue to revive those unsuccessful projects. Investors are even worse because they are essentially materialistic people, always after their own interests.
Employees of the public sector institutions are concerned about being incapable of purchasing any stocks of the privatized companies or possessing reasonable proportions of shares in such unsuccessful projects because they are from the section of limited income employees. Therefore, giving employees the right to own shares does not agree with their real status.
The government has established a social fund to support victims of privatization, offering temporary financial assistance to those employees who had been laid off, but that can be a social time-bomb for thousands of poor people who have become at their wits’ end.
It could have been better if donors, such as the World Bank and the International Fund provided technical advice to help revive the government’s unsuccessful establishments and projects.
If we were to agree with some economists’ points of view that some projects or establishments form a burden on the government’s general budget without searching or looking into the reasons behind their failure, we will be wronging thousands of people. In addition we will be using unscientific solutions.
There still can be some alternatives to privatization. Increasing production of the Cement Factory and exporting part of it abroad will certainly help the government gain hard currency to improve the state’s balance of trade. This is better than selling such factories and preventing the country from investing its wealth.
We need to reform our establishments’ administrations and encourage them to increase production to cover the local market and reach the stage at which we become an industrial as well as agricultural producing society, instead of importing what we need.