Yemeni non-oil exports caught between expectations and obstacles [Archives:2009/1223/Business & Economy]

January 8 2009

By: Ali Saeed
Yemen's economy highly depends on oil resources, with the country's oil exports accounting for around 85 percent of export revenues and 33 percent of the GDP, according to Oct. 2007 statistics.

These figures indicate how heavily Yemen depends on oil, although the depletion threatens the oil reserves which are estimated at 116,800,000 barrels per year and 320,000 barrels per day, on average in 2007.

Yemeni non-oil exports accounted for about 27 percent of export revenues in 2007, with little improvement from 22 percent in 2006. This information came from Yahya Al-Motwakel, Minister of Industry and Trade, who reported it in the latest National Exports Conference which was held in Sana'a between November 24th and 25th, 2008.

The total revenue of the non-oil exports rose from around twelve billion YR in 2000 to YR 123 billion in 2007, according to Noman Al-Mulsi, secretary general of the Yemeni Export Supreme Council.

The conference discussed Yemeni non-oil export challenges and recommendations. Stakeholders in the conference discussed the non-oil sectors that Yemen has and the difficulties that stand against their export development.

The participants in the conference said that Yemen has many heterogeneous non-oil sectors such as agricultural products, fishery wealth, industrial exports, and mining industries.

Agricultural Exports

According to the World Bank, the agriculture sector comprises up to 57 percent of the non-oil exports. However, there are challenges facing the agriculture exports; namely water scarcity and the consumption of the scarce water resources in qat production. Annual use totals around 800 million cubic meters of water, equivalent to 30 percent of the water used for irrigation.

In the National Exports Conference, Farooq Mohammed Qasim, general manager of marketing and agricultural trade, said that there are many obstacles facing agriculture exports. First, the scattered agricultural areas contribute to the shortage of specialized exporting farms. Second, the expansion of agricultural production without planning created outputs that do not meet the needs in the external markets. Third, degradation of the productive capitals such as grapes and coffee. Fourth, the weak infrastructure. Finally, there are no specialized companies in agricultural transportation and marketing.

About the financial side of the agriculture exports, the manager said that until now, there is no bank or any financial foundation that can finance exports. He added that Yemeni agricultural exports are not able to compete in the external markets due to the high cost of air cargo.

Fishery Exports

Dr. Saeed Banaeemoon, head of the investment committee at the commercial and industrial chambers, said that Yemen is in a good location since it is located southwest of the Arabian Peninsula and has outlets to both the Red Sea and the Arabian Sea. The length of the Yemeni coastline is 2250 KM. In addition, the country has more than 150 islands, most of them in the Red Sea.

The Ministry of Fishery wealth reports indicate that Yemen has huge fishery resources. These resources allow fishing harvests around 400,000 tons yearly and up to 400 types of fish. Statistics point that the fish resources that are being severely exploited is around 60 different types of fish, and these types are in high demand both locally and globally. The severely exploited fish form around 17 percent of the total types of fish found in Yemeni seas. Yemen is fourth among Arab countries in fish production.

Food and Agriculture Organization (FAO) Statistics indicate that Yemen was globally the first in producing and exporting squid, and the fourth in Arab countries in producing Rockfish up to 2004.

However, information about the fishery stock is old and needs updating. Previous statistics been compiled randomly, and the Tsunami in the Pacific Ocean caused a decrease in the quantity of fish in the Arabian Sea.

Yemeni fishery exports contribute to non-oil exports by 40 percent, and Yemeni fish is well respected among the Arabian and foreign markets. In 2006, Yemen exported 89.6 thousand tons of fish, with a total value exceeding USD 259 million.

The dominant percent of production is traditional and was estimated to be 97.2 percent of fish production in 2006. Categories of exporters range between individuals, specialized companies, and non-specialized companies; however, the individuals seem to have the largest portion of exports with 50.5 percent. Specialized companies have 33.5 percent, and the non-specialized companies, 16 percent.

Banaeemoon noted that the individual sector exports the biggest quantity and that most of the individuals' exports are raw. He added that the individuals' exports are being sold cheaply because they export only to Saudi Arabia. He commented that this kind of exporting affects national economic revenues. Individuals use traditional means for storing fish to be exported. These methods do not maintain the freshness of the fish, hence leading to quantities of spoiled fish and losing money.

Banaeemoon spoke about the challenges that face the exportation of fish, numbering off the obstacles. First, there is the declining of traditional fish production in the past years. Second, there is the obstruction of companies that work in fish preparation to fish using modern facilities. Third, the high price of fish that is due to the decrease in production, which leads to the high price of fish while simultaneously weakening the competitive ability of Yemeni fish exports in the external markets. Fourth, the taxes and fees in the secondhand market result in the high cost of purchasing fish. Fifth, there are complications involving the exporting procedures, and there are no unified procedures in the different areas of exportation.

Sixth, paperwork of fish exporters to Saudi Arabia is conducted without proper exporting licenses from the Ministry of Fishery Wealth, unlike the companies. Seventh, the high cost of the air shipment of fish impacts poor fishermen, which is roughly $2 for 1 kilogram. Eighth, there is a quality of exported fish, because the land shipment from Hadramout to Sana'a creates problems in transporting fish safely. Ninth, problems of air shipment with the Yemenia Air line occur due to the inability of Yemenia to ship from Al-Mukalla to Europe. Lastly, the long distance between exporting windows and the producing areas creates problems with fish quality, especially in the eastern Area.

Mining Exports

About the mining industries exports, Nabeel Ahmed Al-Razihi, engineer at the General Authority Survey of Yemen, said that mining industry activities in Yemen are concentrated on gypsum, rock salt, building bricks, and ornamental stones.

He added that Yemen has privileged geology and geographical features, including a number of old rock formations that date back to 300 billion years.

He revealed that mining projects in Yemen are still new and that Yemen has huge mineral reserves and rocks. In 2005, Yemen exported 42,842 tons of minerals and industrial rocks with a return of YR 352,680, and in 2007 with a total value of YR 225,187.

Al-Razihi pointed out that the mining industry sector faces obstacles such as no financial allocations, a weak artificial structure, lack of awareness of natural resources, and insufficient infrastructure.

Future Vision

The government represented by the Yemeni Export Supreme Council is working in the field of non-oil exports development. The Secretary General of the Yemeni Export Supreme Council said that the future vision of the non-oil experts is to enhance and increase the competitiveness of this sector and increase it by more than ten percent. The third five-year strategy aims to increase it to 19 percent. The strategies that the council adopted them to achieve that is as follows:

First: Developing the exporting institutions' structure by the following:

a) Developing bodies that work in the field of exports.

b) Activating the work of commercial representation and embassies abroad in order to serve Yemeni non-oil exports.

c) Creating exporters associations for competitive and distinguished products, such as the association of the fishery wealth exporters, association of building stones exporters, association of the coffee exporters, association of the vegetables exporters, and association of the fruit exporters.

All these will work on developing the non-oil exports and serving the exporters rights.

d) Benefiting from international companies that specialize in marketing and transforming the technology to the exporting block by encouraging the foreign direct investment (FDI).

Second: Facing and removing all the obstacles standing against the exporting sectors, whether through taxes or financing by the following:

a) Facilitating the procedures of the paid customs restoring the raw materials.

b) Entering the temporary permitting system for the products' inputs and discharging the exporting produces machines from the taxes, as stated in investment law no. 22 for 2002.

Third: Creating remittance and financing mechanisms that are considered to be one of the motivations in directed investment in exporting through the following:

a) Activating the renting financial law that recently was approved by the parliament.

b) Creating special bank for exports finance

Fourth: Solving the difficulties that are relevant to air shipment, marine, and ground cargo by:

a) Establishing cargo companies that will transport and export from the production area to the targeted countries.

b) Decreasing the cost of air, marine, and ground shipment and the ports tariff that will contribute in reducing the production cost.

c) Establishing an air shipment company or providing sufficient spaces in the Yemenia Air Lines.

d) Supporting agricultural and fishery shipments through an agricultural and fishery supporting fund that will contribute in reducing the production costs.

Fifth: Activating promotional activities through the following:

a) Participating in international fairs and developing export branches through the matching grant system (program funded by the World Bank) that involves both the public and private sector. In this system, the exporter pays 50 percent and the matching grant pays the rest.

b) Promoting Yemeni exportable products that will contribute in the movement of the non-oil exports.

Finally, activating the developing activities that concern foreign market studies as well as raising the skills of the exporters and companies that work in this field through workshops and training courses that concern quality. Also, the plan includes strengthening the information center that belongs to the Yemen Export Supreme council to provide useful data concerning exportation to foreign markets and the chances there.