The economic importance of attracting investment (Part 1 of 2) [Archives:2006/935/Business & Economy]
By: Dr. Ahmed Ismael Al-Bawab
By all scientific and practical standards, Yemen is exerting efforts to enact investment laws and legislation providing stable facilities, guarantees and climates. Yemeni government efforts are focused on realizing benefits for local, Arab and foreign investors. Such efforts have been ongoing since achieving Yemeni unification.
Nevertheless, it's not enough to say that we are preparing the investment climate, passing laws or removing restrictions. The important thing is to draw up an investment map with clear characteristics and distributions portraying investable opportunities.
The question is not merely attracting capital because if such capital doesn't find feasible and ready projects, they'll have to wait. If forced to wait long, they will tend to back down and shift toward speculation and other parasitic economic activities. Ultimately, such capital will be forced to depart, consequently giving a negative impression about the investment climate's inconvenience or that it is not ready. It then would be difficult to bring back that capital once more to the same specific region.
Many good opportunities exist in Arab economies in general and in Yemen's economy in particular. There are investment opportunities in electric energy, airports, seaports, roads and communications that have burdened the state in building them. Such areas have become necessary and useful and it is certainly important they be undertaken by the private sector to sell their products at their economic prices.
Unwise subsidy simultaneously benefiting both the needy and the able also should be canceled. The problem of the needy should be treated within a wider social framework wherein alms tax legislation is rendered to the state to undertake spending on those deserving of it.
In Yemen and other Arab countries, there are very important investment opportunities in rehabilitating floundering projects and installations, removing their struggles and restoring them to the economic cycle, thus rescuing huge amounts of money spent to build them. This type of investment needs support, encouragement and motivation at a level similar to new investments.
Hence, we must not forget the great role played by Yemen's financial and banking sector as the essential and effective actuator of the investment climate. It is imperative to develop it and put modern technology in its possession, as well as enable it to keep pace with national economies requirements and effectively respond to modernization requisites.
The sector also must undertake an effective role in encouraging saving, supporting money markets and financing direct investment processes. Therefore, it's necessary to establish large Yemeni-Arab banks possessing modern diversified financial instruments. This is what Yemen is endeavoring to do as a first step in this direction, by virtue of support and encouragement from its political leadership.
The Yemeni government recently decided to merge some banks owned by it, with part of their shares possessed by contributors. In cooperation with the World Bank and the International Monetary Fund, it formed specialized committees, whose goal is to face challenges and difficulties and form a strong economic and financial block.
Nevertheless, the role of Arab banks and financial establishments in recycling available capital in international financial markets in favor of Arab markets has remained nonexistent due to weakness in mechanisms allowing this type of activity. This is also because of intense world competition to attract such capital, as well as the role of major economic blocks.
The coming years offer a real challenge to Yemeni banks and financial establishments and Arab world nations which must restructure themselves and determine their directions in compatibility with existing challenges and difficulties. They must depart from the narrow mediation process and not suffice themselves with lending and borrowing.
There must be comprehensive renewal and modernization in structures and patterns, as well as in the field of technology and communication. They also must exert efforts to establish financial instruments to gather savings and attract significant capital from international markets, as well as support and develop financial markets in Yemen and other Arab nations.
We live in an age of economic conglomeration and banking and financial groupings, which must be activated in favor of Yemen, sisterly countries and other parties.
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