Urgent need for a viable marketing policy [Archives:2002/09/Business & Economy]
Investors are warning that with backward marketing mechanisms and no stock market in Yemen, agricultural investment in the country is in danger.
The present system, or lack of, means there are no guarantees of profits and the lack of stock market means there are no ways to build reserves for investment.
The financial standing of commercial and trade banks have exceeded YR 202.57 billion. Banks have made a remarkable increase in their holdings.
However, so far these banks and private trade houses have not established a stock market.
The Yemeni Central Bank has also announced that bank reserves have exceeded US $3 billion for this year.
However, the commercial and trade banks’ inability to create a stock market with the Yemeni Central Bank has led to a fragile marketing field, which is considered to be one of the main activities of banks.
These banks have also had a weak role in providing services for customers, and raising their awareness to interact within a productive environment.
In 1995, the government of Yemen, in cooperation with the World Bank and the International Monetary Fund, embarked upon a economic reform program to encourage local and foreign private sectors’ investment.
The objective was to increase the industrial and agricultural production and develop foreign trade through non-oil local exports.
Measures taken by the Yemeni government, however, have faced many obstacles impeding the investment and trade process of banks and capitals, mainly because there is a lacking policy for the marketing process.
Mahfood Shamakh, a well-known Yemeni businessman, said “The current situation of the marketing policy in Yemen is not favorable for the agricultural or industrial investment. It is so because this requires, in the first place, defining specifications for local products, ensuring encasing, wrapping, transporting and storage to compete with foreign products in foreign markets.”
He added,”To enhance the marketing process on local and foreign levels the government has to support the establishment of specialized marketing companies. It also has to provide them with facilities including tax exemptions, support to establish encasing and wrapping stations and cooling stores. Means of transportation also need to be available to help distribute products to all local markets and ports.
The government marketing policy
Despite the weak marketing infrastructure, the Yemeni government has taken some measures within its economic reforms.
It has set up a Marketing Information Department in General Administration Marketing Agricultural, though it is weakly supported. Data on prices, fruits and vegetables consumed, and manufactured products in Sana’a and Taiz is collected. And it has established an information network department for agricultural marketing, including five information-collecting units in Aden, Taiz, Ibb, Hodeidah, Mokala, and Sanaa.
Sources in the General Administration of Agricultural Marketing note also that the administration has published three books with information and analyses on prices, goods and quantities during 1997-1999.
However, the agricultural sector has suffered from the non-availability of marketing information. Consequently this has put the marketing of agricultural products to both local and foreign markets in danger.
Services falling short
Though the government has liberated foreign trade, marketing services of local products still fall short of what is expected, due to the private sector’s restraint in investing in distribution, storage and transportation of goods.
The private sector justifies this due to the lack of legislation regulating and organizing the whole process. The non-availability of resources necessary to provide these services is also another hindranc, investors assert.
Mr. Abdulmalek al-Arashi, Agriculture Ministry deputy assistant, said. “Absence of marketing services increases the level of losses and run-outs products, especially that of fruits and vegetables. Investment in the field of fruits and vegetables is still low though the Fund for Agricultural and Fish Production provides assistance to encourage projects working in the marketing and exportation.
The fund also shoulders 20% of expenses of establishing cooperation wholesale markets and exports centers in governorates.
Among the outstanding projects supported by the fund is the establishment of wholesale markets in Mareb, costing YR 33 million.
The fund has also helped in the establishment of agricultural exporting centers in Hodeidah with a cost of YR 63 million, the Cooperation Al-Arish Center in Aden with YR 72 million and potatoes marketing and storage center in Amran with YR 51 million.
The government of Yemen supports exports through the fund of Agricultural and Fish Production.The objective is to advertise for national products. The fund provided YR 30 million in this context to cover expenses of filling, wrapping and carrying local freights to foreign markets.
Weak marketing impedes exports development
No’man al-Malsi, the Supreme Technical Body of exports Department secretary general, said “The policy of economic reforms has borne fruits in the past three years in terms of increasing national agricultural exports of fruits and vegetables from 6,000 tones in 1996, to 54,000 tones in 1999 to 100,000 tones in 2000. The weak marketing mechanisms made most of the Yemeni exports go toward the Saudi markets which possess better exporting resources.”Mr. al-Malsi attributed the weak marketing policy to the absence of data and information on prices, markets and exporting outlets. It was also attributed to high transportation and case fares, and the limited qualified cadre in techniques and agricultural exports measures.
Due to weak infrastructure and marketing services, the Investment General Authority (IGA) complains that investors are not investing in agricultural fields because there are faster profits to be made elsewhere.
Statistics issued by the IGA show the authority made licenses for 3,267 projects with a cost exceeding YR 522 billion during 1992-2000. The following table highlights more fields of investment.
For their part, investors attribute their reservation to put their money into agriculture and fish to the non-existence of guarantees and credits, in case of trade and non-trade dangers relating to marketing exportation.
Exchange companies are also a factor. The companies do not affect marketing policy, but they can do a great deal of damage to reserves of the Yemeni Central Bank and import merchants.