Yemeni-American relations Present and future [Archives:2003/696/Business & Economy]

December 22 2003

Mohammed bin Sallam
Mr. Abdulaziz Abdulghani, chairman of Shura Council and honorary member of FAAAY reviewed in his address to the activity on “Yemeni-American Relations Present and Future'', held in Sana'a Wednesday stages witnessed by the two countries relations which first started with trade relations in late of the 18th century when America was one of the main importers of Yemeni coffee, through diplomatic relations in the mid of the forties and then the U.S. recognition of the Yemen revolution in 1962. Mr. Abdulghani indicated that despite of impact of the second Gulf war on those relations the United States adopted a positive stand towards the Yemeni unity during the secessionist war and international variables, indifferent of 9/11 events. He said the Yemeni-American cooperation in fighting terror proceeds basically from the fact that Yemen has suffered much from terror and the cooperation in this area would serve Yemen's need for eliminating that phenomenon that inflicted great damage on the Yemeni economy and affected Yemen's international relations. The symposium that was attended by a group of intellectual, politicians and academic personalities who had studied in the United States had listened to a lecture in the economic field delivered by Dr Ali Abdurrahman al-Bahr, head of the housing bank, the FAAAY executive president, the main of which is to follow and also there had been two working papers, one on cultural and educational issue presented by Dr Mohammed Motaher, vice minister of higher education and scientific research and the second on by Dr Abdurrahman Abdrabou, professor in Sana'a University.
By Dr. Ali Abdulrahman Al-Bahr
Head of Housing Bank

Before turning to the hard task of numbers and figures of Economics let me go back to the early stages of Economic and political contracts between the two countries. It was in 1923 when two American geologists from “Standard Franco American” arrived to Yemen. They run Geological survive in Tehama and the Red Sea. Between 1927-1932, Mr. Karl Twitchell, an American geologist and mineral engineer from, USGS visited Yemen so many times trying to secure an agreement on Oil, Gas and Mineral resources exploration. He also discussed exporting salt from salif and producing electricity generated by waterfalls. It was then said the same person went after that to Saudi Arabia and set the stage for the first Oil agreement between Saudi Arabia and American Oil Companies:
– In 1961 the first oil agreement was signed between Yemen and the American Company “John.W.MECOM” 5 wells were drilled in Tehama under that agreement
– In 1958 USA started the construction of Mokha – Taiz – Sana'a road. This road was one of the first links between Yemen capital and the external world.
– In 1958 USA provided Yemen with the wheat donation to help it getting over drought and economic hardships. USA is a great power, a great country and the world greatest economic & financial powerhouse. USA produces a GDP of 10 Trillion US Dollar per Year. That is about 30% of the world GDP which is 33 Trillion US Dollars in 2002. It hosts the world biggest capital market. US bourses value exceeds 12 Trillion Dollars in shares, Bonds and other assets. That is one third of the wealth of the world.
– The populations are 300 Million that is 5% of the world population.

The American people strongly believe in Democracy, Freedom & Human integrity. Free market economy is probably at the heart of the American Economic might. They embrace their ethnic diversity and believe that to be one of the main sources of American strength. Freedom of religion, freedom of speech and the right to political participation are the common values of the American society. Cooperation between Yemen and United States covers a wide range of activities over a long period of time. The following list may reflect the most important fields of cooperation.

The fields of cooperation:
– Education and technical training
– Health and disease control
– Agriculture, Water and Marine Resources
– Infra structure projects
– USA wheat program
– Oil and Gas industry
– Trade and finance
– Tourism and environment protection

As it appear it is hard to tackle every sector fairly enough within the limited time of this good event. I think it is also as effective and convenient to analyze economic cooperation along three important institutional axis, they are as follows:

1. Bilateral: Or government to government cooperation.
2. Multilateral: i.e.. Cooperation though trans-national financial agencies and organizations of a world scope such as IBRD, IDA, IFC, IMF.
3. Private investment: The task here is done by private multinational companies private Banks and financial groups. Most of heavy duty role under this listing endured and carried out by oil companies.

1. Bilateral Cooperation:
When ever we talk about economic cooperation it comes directly to out minds the issue of loans. What different countries has provided in term of development finance at what conditions in what sectors of Yemen National Economy. How conducive and stimulating to economic growth. What employment and job chances it creates.

Partners in Economic
And Social Development
The total amount of Yemen outstanding foreign loans as on December 31st 2002 stands at 5.477 Billions US Dollars. Out of this total 4.045 Billion US Dollars is disbursed and out standing. 532 Million is undisbursed. Government to government loans stands at 1.766 Billion US Dollars; it represents 32% of the total foreign dept. the creditor countries are as follows:
– Japan comes in the first place with a total of 262 Million US Dollars.
– The United States of America is the second creditor country to Yemen, it provided Yemen with a total of (101 Million US Dollars). The United States agreed to reschedule the amount of (71 Million Dollars) that was due to be paid in 2002. Japan agreed to reschedule the amount of (156 Million Dollars).
– The Arab Countries as a block provided Yemen with loans totaling to (728 Million Dollars).

Arab countries channeled their finance to Yemen through their respective specialized development funds as “Saudi Development fund, Kuwait Development Fund & Abu Dhabi Development Fund”.

2. Multilateral Lending Activities:
Whenever we study economic cooperation with USA, we have to touch on international financing banks and agencies. The most important are:-

1- The World Bank
– International Development Agency “IDA”
– International finance corporation “IFC”
2- International Monotony fund “IMF”
Discuss the role of the World Bank and international monotony fund in the context of Yemen USA development cooperation is not with out reason. The reason is very simple the USA is the biggest share holder of both the Bank and the fund, it owns about (36%) of their capital hence the decisive voting power in the boards of both institutions, it can lead and direct lending policies, loan allocation to countries and regions of the world, including ranking priorities of different countries and projects. USA was very helpful in introducing Yemen to both the Bank and the fund when Yemen was trying to join the group as a full member country in the beginning of the Seventies of the last century, (1973). The effect of IDA was felt in every sector of Yemen Economy Education, Health, Agriculture, Water, Infrastructure and institution building, it provides Yemen with quite substantial amount of loans at concession rates with long grace periods and soft conditions. The total amount of committed loans of IDA stands at (1.78 Billions US Dollars). Most of this money have been used except about (392 Million Dollars) still unutilized. IDA role was to strength the physical production capacities of Yemen Economy and to improve education and the quality of labor force through education and training. Yemen adopted and implemented the first second Economic Development plans under the close support of the World Bank and IDA in particular. They financed so many projects in that plan, such as: Tehama Valley Authority, Zabied dam and irrigation system, Sorded Valley, Wadi-Mor dam and irrigation, Electricity Generation, Transmission and distribution system. A large number of education projects including a lot of schools, Buildings, Technical Teams, Collages and Training centers.

IFC: International Finance Corporation is the private business affiliate of the World Bank. It deals with private businesses and companies in member countries. Their role is to provide finance and know how, they participated in three important private companies in Yemen through share holdings and money lending. Those are: milk and diary products in Hodiedah, Ghee & Soap Company in Taiz.

IMF: International monetary fund is the twin sister of the World Bank, both where created by britenwood agreement after the second world war to rebuild the world monetary and trade system, over and above reconstruction of Europe. The fund played an important role in building the ministry of finance by providing a general financial reform the monetary system. Technical assistance and on job training to Yemeni personal in the finance ministry and its subsidiaries such as, Tax authority, customs authority, they help training the central Bank staff, help drafting rules and monetary policies and exchange regulations. They help supervising Commercial Bank operating in Yemen and bringing the whole monetary and banking system in line with international rules and regulations as set by the fund and major international trading nations. The fund also provide Yemen with short term loans to help it finance foreign trade and imports. The fund loans stands at (384 million Dollars).

Trade: the USA comes in the third place, next to Saudi Arabia and United Arab Emirates in exporting to Yemen. Total American Exports to Yemen reached (17.5 billion Yemeni Rials) in 2000 that is about (4.5%) of Yemen total imports. In return Yemen Export to USA recorded (40 Billion Rials) in year 2000, it represented (6.5%) of Yemen total exports in the same year. In 2001 Yemen export declined to (23 Billion Rials) imports from USA declined also to (20.6 Billion Rials). This is the balance of trade which represents the exchange of goods, mainly grains, Oil and Oil products. There are other components in the balance of payment reflecting economic cooperation between the two countries; it is normally reflected in the current account of the balance of payment. Those figures reflects income of Yemeni capital invested in the USA stock exchange and money market, the total declared income from Yemeni assets reached (110 Million US Dollars) in 2001 about (70-80 Million Dollars) came from Yemen Central Bank investment which amount to (4.29 Billion US Dollars). Our own estimation of Yemen private capital “Including Yemen Commercial Banks & private capital” invested in the American capital market range between (4-5 Billion US Dollars). There are also income from tourism and Yemenis working in USA. The number of American tourist who visited Yemen in the year 2000 reach 12,000 out of 65,000 tourists visited the country that year, this numbers gave USA 20% of the tourism industry of Yemen. The Yemeni society in the United State, i.e.. Yemen Americans exceeds 80,000 people in number. This brings us the strongest step closer to the American people and American society. 5% of the American people are Moslems, they are totally free “under American constitution” to worship ALLAH. They are equally recognized like their American fellow citizens, they have the rights to go to school, to get a job, to join the US army, to vote in elections and to be candidates for the white house as presidents of the United States of America. Yemen have a big students society in the USA some of them are financed out of their own family resources, this presents a clear evidence of how proud and trust people are of education in the United States of America. This is alive whiteness of Yemeni and Moslems old wisdom “go for education even at the remotest part of the globe”. The USA is afar distance but it is very close to our hearts and minds, we owe these young men & women the highest respect, they deserve not less than a full cooperation in providing them with information, education advises, education support and at the least the moral support. Those are all within FAAAY mandate and duties. Yemen and FAAAY will reciprocate the same way towards any American friend or scholar who may be interested in studying or coming to Yemen.

3. Private investment:
This is probably the most effective, enduring and fast in bearing its fruits. USA is the largest home of private business, capital market and private initiative. Oil and Gas industry comes under this platform. The Oil & Gas cooperation started by signing production sharing agreement between Yemen and Hunt Oil Company in March 1982. Oil & Gas was produced in commercial quantities in July, 1984. The first well “Alef One” tested and was able to produce 10,000 barrel of oil per day, by that date Yemen put most of its economic and prosperous economic future. Oil discovery was a real break through and cutting edge victory for Yemen in its relentless quest for viable and better human way of life, based on higher income better education better health and better chances to get a job. It was a great achievement for Hunt Oil Company and a corner stone in Yemen American cooperation. Hunt Oil Company celebrated its 20th anniversary and granted an extension period of 5 more years. There is also Canadian Oxidental Oil Company working and producing Oil & Gas from more than one concession area. Canadian Oxie is the Canadian sister Company of the USA based Oil Company “Oxedenatal”. Oil & Gas production and Export changed the economic structure of Yemen beyond recognition. It changed Yemen agricultural traditional economy into a new structure where Oil & Gas production contributes more than 50% of Yemen gross domestic products. It provides the country with more than 80% of foreign exchange to finance imports and 80% of government budget.