With Its Current Investment Law, How Can Yemen Accelerate Foreign Investment? [Archives:2000/19/Business & Economy]
By: Mahyoub Al-Kamali
Attracting investments into Yemen has been relatively promising in the first quarter of this year, especially after holding the Yemeni expatriates conference in Sana’a. Volume of contracted investments increased by 20%.
Generally, boom in foreign investments can be attributed to a number of factors, the most important of which are stability of Yemeni currency “Riyal”, national economy growth, state of stability, enhancing Yemeni exports, joining World Trade Organization and existence of a money market.
According to recent statistics by Public Investment Authority and Free Zone state Authority in Aden, Yemen has sanctioned encouraging of some projects funded by Yemeni emigrants’ capitals. Statistics reveal that investment in these projects amounted to YR 3-5 billion in the first quarter of this year with a 22.75% and 27.05% increase compared to the same period last year. The five-year plan, which will be over this year, reveals that national and foreign investments that the government started implementing in 1996 have amounted to YR 8.50 billion.
Although Yemen has undergone a depression in foreign investment due to war of 1994, the Asian financial crisis in 1998 and decrease in oil crude prices in 1999, the trends of increase of investment witnessed in the first quarter of this year is expected to continue throughout the next three months.
The Investment Climate:
Experts observe that improvement in Yemeni-Gulf relations, drop in kidnapping cases, possibility of Yemen’s joining the World Trade Organization, the strategy of developing the Free Zone in Aden, have all led to strengthening of confidence of Yemeni expatriates to invest an estimated $30 billion in Yemen.
Yemen does its best to attract investment from some Asian countries, particularly Malaysia, Indonesia and Gulf countries where there are many Yemeni emigrants. It also tries to attract the emigrants in USA for the same end. To achieve this, Yemen is doing its best to create an atmosphere of stability and security, the main factors of promoting investment in the country.
Experts remark that since the second half of last year, Yemen has started adoption of a positive financial policy that ensures stable development of national economy. This, in fact, increases the prospects of attraction of foreign investment into Aden Free Zone. They also confirm that Yemen has started adopting an extensive openness policy to the world in all fields including communications, banks, stocks, airmail, insurance, local and foreign trade and tourism.
World Bank Support for the Infrastructure Development:
The world Bank calls upon Yemen to improve its infrastructure facilities and its economic climate to attract more foreign investments to Yemen. Yemen has all the potentials to attract foreign investments to pour into the country on condition that its economic atmosphere is improved. Therefore, if the authority wants to implement this in reality, it has to limit its control over capitals and minimize its bureaucratic measures. It has to stop its erratic interference in implementing projects with foreign or Yemeni emigrants’ capitals.
Foreign Investments in Yemen:
The Yemeni authorities have recently passed a law known as “The Investment Law” that organizes and facilitates all procedures involving investment in the country. The authority has also passed some legislative measures including taxes and customs exemption aimed at encouraging investors to invest in the country. The most important means of investment are as follows:
1) The Agricultural field:
Investment sources say that Yemen intends to take some measures and favored policies to encourage foreign and Yemeni emigrants investments in agriculture so as to achieve sustainable development in this sector. Investments in this sector will undoubtedly enhance the reform of rural economic system. In addition, they will build the infrastructure, update the agricultural techniques and employ key administrative personnel.
Experts also confirm that Yemen is in need of building wide-range of express ways networks to ensure growth of the national economy. Although there are many factors to ensure Yemen’s development, what should be emphasized is the sincerity and commitment to pull together all resources and work for the betterment of the society.
2) The Industrial Field:
The authorities intend to strengthen the current industrial policy through various projects either by national or foreign capitals. The Free Zone has created many opportunities for establishing such projects.
3) The Tourism Sector:
The strategic location of Yemen in linking countries in the East with those in the West, makes it possible to attract foreign investments. Besides, Yemen has all the facilities to enhance tourism industry. The magnificent beauty of nature and the historic landmarks of its great civilization go back to thousands of years, and constitute a great tourism potential. There are also plans of building hotels, chalets and tourist islands to attract tourists from far and near to Yemen.
Reports show that the number of foreign tourist investment contracts has increased recently by 7% compared to the previous year.
4) The Fishing Industry:
Investing in fishing industry sector may provide Yemen with huge revenue and attract local as well as foreign capitals. A survey conducted by a Chinese company has made it clear that the Yemeni shores are rich with fish and that 1,600 million tons can be annually hauled from the sea, which will contribute revenue of at least $380 million per year.
There are also some other possibilities to establish local markets for locally marketing fish and exporting the rest. The Ministry of Fish Wealth on its part has signed a number of contracts with Yemeni as well as foreign investors to invest in the marine field. The number of these companies has reached 17.
5) Oil, Gas and Mineral Investment:
Yemen is about to start operating a huge investment project to export natural gas in 2004 after five years of its due period. The annual gas productivity of this project will be 5,3 million tons. The overall cost of this project is $ 2,7 billion.
According to the investment agreement in the gas project, a number of companies are participating in gas investment: France’s Total company has 36%, Yemeni Gas Company has 21%, U.S. firm Hunt Company has 15.1%, US Exxon Company has 14.5% while South Korea’s SK Corp. and Hyundai hold 8.4% and 5% respectively. Yemen’s natural gas reserves are estimated at about 420 billion cubic meters.
Regarding oil investment, reports show that efforts are exerted to increase foreign oil investment in the country. Proven oil reserve is estimated at about 4.6% billion barrels while Yemen produces about 430 thousand barrels of crude oil per day.
Canadian companies are investing in minerals. Geological surveys show that there are chances of attracting more investment in minerals.
To sum up, it is within the authority’s hand to increase both the emigrants and foreign investment in Yemen. However, what it essentially needed is an atmosphere characterized by security, easing all obstacles and difficulties faced by investors and limiting long administrative bottlenecks.