Transparency Initiative & Yemen [Archives:2006/991/Business & Economy]

October 19 2006

By: Raidan Abdulaziz Al-Saqqaf
[email protected]

The ast few decades have witnessed a great acceleration in the accumulation of wealth, due to industrial developments, technological revolutions or the newfound wealth in natural resources such as oil, gas and minerals. The newfound wealth was recently seen with the global increase in oil prices and the fortunes made by oil producing and exporting countries, and here I would like to bring the experience of two oil producing and exporting countries, Norway and Yemen.

Norway is among the rich countries on earth, and is the third largest exporter of oil after Saudi Arabia and Russia, while Yemen is one of the least developed countries and a tiny exporter of oil. Each country received significant income as a result of the increase in oil prices; Norway deposited the funds into a “Future Generations Fund” in order to ensure the well being of future generations, while Yemen sets a bank account at its Central Bank, and spends the additional funds to expand the day-to-day operations of the government instead of investing it or using it to tackle any of the distressing problems of poverty and illiteracy.

Yemen did not anticipate the increase to prices of oil in accordance to its budget and financial information and therefore it did not have a strategic vision (similar to that of Norway) for which it can use the additional funds, and instead used the funds to build more government premises, buy more furniture and vehicles.

Although Yemen is far richer than it was a few years ago, poverty is increasing and quality of life continues to stagnate. What Yemen needs isn't more wealth per se, Yemen needs a concept or a system enabling it to use its wealth and resources in service of Yemen's future and in sustainable development for future generation.

The Extractive Industries Transparency Initiative is one of those concepts ensuring better utilization of resources, it supports improved governance; empirical studies have shown that when governance is good, then the revenues of extractive industries can be channeled to fostering economic growth and reducing poverty.

The primary beneficiaries of transparency initiative are the governments and citizens of countries which have considerable natural resources. Knowing what governments receive, and what oil and extractive companies pay the government, is a critical first step in proper use of those revenues.

Implementing a transparency initiative as part of a program of improved governance will help to ensure oil, gas, and mining revenues contribute to sustainable development and poverty reduction. Having said that, the government is on the right track as the cabinet has ratified a number of transparency and accountability measures last January, but the impact of those measures are yet to be witnessed in Yemen.