The Stock Market Between Reality & Ambitions [Archives:2001/16/Business & Economy]

April 16 2001

Sultan Al-Jarady
Lawyer & consultant
The past few years brought with them a controversy about the establishment of a stock market in Yemen. In preparation for this move, a law to organize such a market has been passed. So far, we have not heard about this project since the death of YCB consultant, Saif Ahmad Haider, who prepared the project.
As a lawyer, I am more concerned about the economic, financial, and investment aspects of this law. I have always asked whether the present circumstances are fit for a stock market and, if so, what are the factors and conditions to make a stock market a success.
In my opinion, it is illogical to run after other countries in establishing organizations, authorities and stock markets just for the sake of imitation, thinking that this would convince the world that we are indeed developing. Stock market means a market in which securities are sold or offered for dealings for the first time. However, there are no specification about what kind of securities are going to be sold.
Public and private organizations and companies issue shares and bonds for the companies and organizations, although this is forbidden by law, unless companies and organizations are legally allowed to do so. Usually, shares’ period is the same as that of the company while bonds are either long-term or short-term. The government also issues securities in the form of government bonds to be offered in the stock market for the sake of implementing economic and industrial projects.
Offering securities in the stock market, in fact, requires a number of factors and conditions to be fulfilled. The stock market provides good opportunities for companies, organizations, government, individuals, etc., to carry on investment activities by providing them with the finances required. This necessitates availability of productive stock companies and organizations. Otherwise establishing a stock market would be a failure. Stock companies in Yemen are a few. This raises a question about how a stock market can be set up if there are no sufficient securities to be offered. And the securities the government issues will not be enough to back up the situation. The issue also needs full awareness about the importance of saving and investment. Such awareness cannot be there without a prosperous and strong economy. Yemen’s economy suffers from inflation, high prices, low per capita income and lack of liquidity, all making an awareness about development of saving and investment a big hoax. In addition, the government’s privatization program, as indicators show, envisages selling public organizations and companies to the private sector. If this is right, Yemen will face a big problem. The government is supposed to change the public organizations into stock companies that will offer their shares for subscription. This move is bound to encourage the establishment of many stock companies and to create a suitable atmosphere to make the stock market a success.
If the government is serious about the stock market issue, it must change the public organizations into stock companies, encourage the emergence of other stock companies and spread awareness about the importance of saving and investment.