Economic Structure and Conflict Determine Investment Transformations in Yemen

Sawt Al-Amal (Voice of Hope) – Hebah Mohammed

The Republic of Yemen exhibits many investment elements that have made it a magnet for local, Arab and foreign investments, including its strategic location. It also has a coastline that extends over 2,500 km and other advantages.

Despite this, the Yemeni investment environment is still in the process of growth, and within it are many transformations that it faced during multiple periods. “Sawt Al-Amal” here focused on the reality of investment in Yemen and the most prominent transformations taking place.

The Reality of Investment in Yemen 2010-2022

 In a report by the General Investment Authority, the latter declined in Yemen, as it recorded 97 investment projects in 2011, compared to 164 projects in 2010, with a difference of 67 projects.  The World Bank’s 2010 Business Performance report ranked Yemen 99^th in investment attraction and 132nd in investor protection out of 184 countries.

Economists identified to “Sawt Al-Amal” that the legal obstacles to the Yemeni investor lie in the problems of proving ownership of land and real estate.  Because of the expansion of it by influential people and the conflicts between the concerned parties over the purchase of land and real estate. This is considered for the investor a risk of self and money.

 They unanimously agree that the high cost of infrastructure, the imposition of exorbitant taxes, fees, customs and other demands exhaust the investor inside Yemen.

Fayyad Mohammed is a young Yemeni man who completed his university education abroad, and decided to open his investment project after returning to the country. He made a complete strategic plan for the project, and then went to the government offices to initiate the initial procedures for establishing his project.

“I wasted time, effort, and money inside the government offices specialized in investment projects, as I could not obtain a permit to establish my project. Even though it conforms to the required criteria. Because of the corruption that occurred within the government offices, they demanded exorbitant fees from me that exceed the capital I have. So I decided to return to exile, settle there, and open my own project because my country does not encourage the investor, on the contrary, the investor exhausts himself and wastes his money inside government offices,” Fayyad told “Sawt Al-Amal”.

The economic statistics of the Central Agency for the year 2010 show that, “the annual growth rate of real gross domestic product (GDP) records a slight increase and may be non-existent in some years. In the most stable years, it is noted that the growth rate of real GDP recorded a slight increase of 7.82%, in 2010 compared to the previous year 2009, which was 4.3%, but this increase began to decline to lower levels in subsequent years.”

The economic system was subjected to strong shocks due to the deterioration in the political and security scene, which greatly affected economic development indicators. According to the report, the GDP growth decreased by about 12.9% during the year 2014, as a result, public investment spending decreased by 26.3%. And thus the confidence in domestic and foreign investment declined. Despite the existence of a system of legislative laws encouraging investment, the spread of the phenomenon of administrative and financial corruption caused the spread of major economic problems.

 In 2016, the annual statistical report of the General Investment Authority indicated that 55 investment projects were registered with a capital of 16.3 billion riyals, and fixed assets of 10.7 billion riyals. They were distributed over 10 governorates.

In March 2017, the World Bank Estimates indicate that the gross domestic product of Yemen has shrunk by 40% since 2015. Moreover, 17 million Yemenis suffer from food insecurity, representing 60% of the total population, in addition to 7 million others suffering from famine. While malnutrition rates have increased by 57% since 2015.

 During that period, these projects provided 1,450 job opportunities. It included 38 projects in the industrial sector, constituting 62.6% of the total projects.

During the first half of 2017, the number of registered investment projects increased by 72% compared to the corresponding period of the previous year. As the number of new projects reached 43 projects and the investment capital increased by 46% for the same period.

 Judge Mohammed Al-Ghurbani, Director of the Chamber of Commerce in Ibb Governorate, told “Sawt Al-Amal” that the most important obstacles facing a number of investors is the lack of lands designated for investors with large areas because the majority of expatriates in Canada and America buy large-sized lands, the urban construction is haphazard, in addition to the high prices of land, as the price of one brick reaches 150 million Yemeni riyals. Al-Ghurbani confirms that the Chamber of Commerce office is assistant agents for investors and provides them with all facilities.

 Al-Ghurbani added that as a result of the ongoing conflicts within the country, many businessmen across the country decided to move their capital out of Yemen, and some of those who decided to stay had to sacrifice large proportions of the workforce.  He stressed that international indicators regarding Yemen show that the country is facing difficulties in attracting foreign investments, as well as difficulties in returning national capital and foreign companies that fled outside the country to search for a safer work environment than Yemen.

He also pointed out that the obstacles that discourage investment must be addressed to create an attractive environment for investment and capital flow, as well as to ensure a comprehensive achievement of advancing economic development.

In the annual report of the Ministry of Industry and Trade for the current year 2021, Abdulwahab Al-Durra, the Minister of Industry and Trade, said that, in January 2022, the Ministry signed contracts to allocate dozens of sites for the purpose of establishing investment projects on them in various fields. Where 5 sites were handed over from the land of the industrial zone in Hodeidah Governorate according to a lease contract and a record of land delivery to establish five diversified investment projects.

He explained that the Yemeni Company for Renewable Energy was established, with the participation of the public and private sectors. As part of the implementation of plans and strategies for the national vision of building the modern Yemeni State, a proportion of citizens’ initial public offering (IPO) has been allocated, which has focused on developing the commercial and industrial sectors. Additionally, encouraging small and medium-sized industries and entrepreneurs, supporting and protecting the local product.

 Minister Abdulwahab Al-Durra confirms that the Ministry has launched the unified electronic window that will work to complete transactions electronically. However, the Ministry will shift to working with the digital electronic system to be the nucleus of the e-government project to keep pace with the digital transformations of the global economy.

 The annual report of the Ministry of Industry and Trade for 2021 states that among the obstacles to investment in Yemen is the lack of qualified, specialized, technical and technical staff required at the level of the ministry and its affiliated institutions. Additionally, the absence of investment projects aimed at achieving tangible horizons in industrial development, as well as the lack of specialized research and investment development centers.

According to the report, the ministry developed solutions and proposals to address some difficulties, including: adopting a project to develop and build capacities within the activities (National Vision 2022), issuing a regulation governing land management for investment projects in industrial zones, as well as developing laws and legislation related to investment in general and all industrial investments in particular.