World Bank gives warnings regarding Yemen economyHigh public spending, heavy taxes, weak private sector [Archives:2003/645/Business & Economy]

June 26 2003

Mahyoub Al-Kamaly
The World Bank most recently published report on the economic growth in Yemen has admitted that levels of public and private investment expected in the 2003-2005 second economic plan and what remains of it are very high and not keeping pace with what is expected of improvement of in the basis of human resources and increase of productivity resulting from effecting structural reforms. The report has also affirmed that private sector installations perform in an unstable environment and presence of big administrative hindrances, inconvenient taxes and uncompetitive practices. Meanwhile the report mentions that majority of private sector installations are small and practice their activity at limited capacity markets where very few opportunities for effecting easy expansions are there.
The Bank, which supervises price reforms in Yemen, has expected that high government spending would threaten the economic stability achieved in the latter half of the '90s of the past century. The Bank's report has also indicated that planning for increasing investments of private sector by 21% till 2005, is most probably would not be attained unless there were noticeable improvements in governance environments and businesses and investment. The Bank says the rapid economic development generating job opportunities would not be realized unless certain sectors are given priority. These sectors are agriculture, fish wealth, and tourism and conversion industries. The late is presently suffering difficulties blocking expansion in production. Some of these difficulties are attrition of subterranean waters, domination of traditional technologies, weakness of judiciary and legal systems and difficulty of possessing pieces of land. On the other hand the report mentions that Yemen's oil reserve is estimated at 2.8 billion barrels and some of the presently producing wells are expected to get dry. As for Yemen's reserve of liquefied gas it is estimated at an amount ranging between 12 to 15 billion cubic feet. Nowadays only the local consumption of gas is covered out of this reserve while its exporting project will continue floundering till the year 2005.
The report remarked that the project for liquefied exporting was facing many impediments. There are no guaranteed external markets, no financial resources necessary for completing the necessary infrastructure in addition to existing strong competition from other countries in the region. As for minerals the report says Yemen possesses large deposits of gold, platinum, titanium, gypsum and others.
For tourism, Yemen has huge tourist potentials such as religious and historical sites, islands, deserts and mountains but needs about $135 million investment in this area. In its report the World Bank proposed priority to be given to transport sector and to introduce reform in this field, mainly liberating and lessening organizational measures, especially in air and land transport. There must be an encouragement extended to the private sector by offering services and liberating prices of shipping and passengers. Hence the Bank suggests adoption of a new price dose on tickets.
The WB has on the other hand urged the work for consolidating local security situation and removing strict regulations that weaken the infrastructure. It suggests introduction of reforms to judiciary regime and modernization of civil service.