COUNTRY NAME: Republic of Yemen
LAND AREA: 527,968 km2
POPULATION: 23,4 million (2010 est.)
LANGUAGE: Arabic, English
CURRENCY: 1 Yemeni Riyal (YER) = 100 Fils; 1 EUR = 290.80 YER (Nov. 2010)
MAIN CITIES: Sanaa (capital), Aden, Hodeida
NATIONAL DAY: 22 May – Republic Day
TIME ZONE: Standard Time is GMT + 3
Although by no means one of the wealthiest countries in the Middle East, Yemen offers some important opportunities that should not be overlooked by investors. Its resources are limited and it needs to meet the challenges posed by a rising population. The country also faces depletion of its oil reserves and its groundwater, but it is developing its gas industry and taking steps to improve the efficiency of its agriculture and irrigation. Challenges also include a generally underdeveloped infrastructure, but the country has been attracting increased funding from international donors. The country’s main industrial activities are crude oil production and petroleum refining; small-scale production of cotton textiles and leather goods; food processing; handicrafts; small aluminium products; cement and commercial ship repair.
Average GDP growth for 2009-2010 was predicted to reach 5.1% as the country’s first LNG plant comes on stream, marking an important new development for the country’s bid to diversify its sources of income. In 2006 Yemen began a new economic reform programme designed to bolster the non-oil sector, boost diversification and attract foreign investment. As a result, international donors pledged around $5 billion for development projects in the country. The IMF had said that economic reforms had slowed after the 1990s and urgently need to be reinvigorated. Although a number of reform initiatives emerged in recent years—including civil service and public financial management, a major adjustment to fuel subsidies in 2005, a new general sales tax, an anti-corruption drive, and improvements to the social safety net—most of which have been only partially implemented and there have been significant delays. With the country’s oil reserves expected to be depleted in just over a decade, Yemen is preparing to make the transition to a non-oil economy. A decline in oil output and volatility in world oil prices have added a sense of urgency to the economic reform process. Economic activities in the non-oil sectors have increased at a “reasonable rate” according to the IMF, but inflation has been a key concern. Inflation in Yemen has been extremely volatile in the past year, but it is expected to fall. However, Yemen has been relatively insulated from the financial side of the current world economic crisis and its banks have had relatively low exposure to private foreign lending. Portfolio investment is quite limited, given the absence of a domestic stock market or commercial credit market. Yemen’s main foreign asset—the Central Bank’s reserves—are highly liquid and kept predominantly in the form of deposits in international banks. Yemen is seeking closer ties with the region and the world economy. Discussions on accession to the WTO have been taking place since 2004. Bilateral negotiations on goods and services have been concluded with China and are ongoing with Australia, Canada, the European Union, Japan, Korea, and the US. The country also continues to pursue membership in the Gulf Cooperation Council primarily through the Yemeni-Gulf Technical Committee. In mid-2008, GCC members tasked the Secretary General to conduct an integrated study on the prospects for Yemen’s accession into the bloc. Yemen is pursuing efforts to further diversify its economy and promote alternative sources of growth and employment generation. In addition to the gas sector, there has been a focus on strategies to promote the development of the country’s tourism and maritime activities, to capitalise on the coastal location and cultural heritage. Several other areas of the non-oil economy have been identified as potential sources of growth: agriculture (particularly honey), fishing, building stones and leather products. To encourage investment, Yemen has undertaken a number of initiatives to strengthen the investment climate including the establishment of a one-stop shop for investors, a new procurement law, and an active anti-corruption authority; as well as a comprehensive review of company and labour laws. In recognition of such efforts, Yemen’s ranking on the World Bank’s Doing Business report jumped from 113 in 2008 to 98 in 2009. International donor support has been instrumental in helping to sustain reform efforts.
Oil & Gas
Yemen started to export gas through Yemen Liquefied Natural Gas (YLNG) in 2009. It also aims to develop the domestic gas market, in particular gas-to-power. Liquefied natural gas (LNG) export revenue and domestic gas sales are expected to partially offset the decline in crude oil revenue from currently producing fields. This will require developing the country’s gas pipeline infrastructure to facilitate access to the power sector and other customers. There is significant scope for the participation of private sector investors in the gas infrastructure development work that Yemen needs to undertake.
Yemen is seeking private investors to develop new power projects. The Public Electricity Corporation is being assisted by the International Finance Corporation (IFC) as it moves ahead with the development of independent power projects (IPPs). The IFC is engaged in carrying out a feasibility study for a private power project, it was reported.
Opportunities to develop the country’s tourism industry are considerable. Yemen has some of the most attractive locations in the world and could significantly boost visitor numbers given more effective promotion and improvements in the tourism infrastructure. The capital Sana’a has a unique character whose old city with its distinctive buildings is listed among the world heritage sites of UNESCO. Ma’rib is another impressive location where the Great Ma’rib Dam, an example of early Yemenite civilization, can be found. Meanwhile, Shibam has been dubbed the Manhattan of the desert. Situated 250 miles off the coast of Yemen, the island of Socotra is the largest member of an archipelago of the same name, a four-island cluster off the Horn of Africa and Gulf of Aden. Socotra is noted for its lush vegetation and exotic wildlife. Yemen’s potential as a tourism destination has suffered because of negative reporting that has damaged the country’s image abroad. Recently, Yemen’s tourism authorities have been seeking to change foreign attitudes and to this end launched tourism promotional campaigns in European countries.
A new port at Hadramout is to be built on a 12 million square metre site to complement Yemen’s existing port facilities at Aden, Hudeidah and Mukalla. The proposed $240 million new port will serve trade routes between Europe, Africa and Asia, as well as other destinations around the Indian Ocean. As part of plans to increase the capacities of ports and to operate them in more efficiently, Yemen has sought partnership with specialist international companies to establish the port.
Yemen has held talks with the World Bank and the European Union on implementing fisheries projects that donors had agreed to fund in the country’s coastal provinces. The Minister of Fisheries Wealth Mohammed Shamlan discussed the projects with a mission from the organisations in June 2009. He praised the efforts of the Bank and the EU to develop the fisheries sector in the country and affirmed that the Ministry was working to overcome any difficulties that deter the implementation of such projects.
Yemen is seeking to improve the productivity of its agricultural sector with the aim of improving food security. It is focusing on attracting investors to strengthen the infrastructure that supports the sector particularly the development of marketing and the promotion of agricultural exports. The World Bank and international donors are supporting numerous projects in the country’s agricultural sector. The agricultural industry in Yemen suffers from serious natural threats relating to climate and regular hazards such as swarms of locusts. These are a significant threat to farmers in the valleys and central highlands areas and can lead to serious food crises. A large proportion of the population remains entirely dependent on agriculture for their livelihoods.
The World Bank is funding a Technical Education Development Project to the tune of $15mn. The project seeks to improve the performance of vocational training institutions in the country through the implementation of advanced training programmes to meet labour market demands. The Ministry of Education and the World Bank met in July 2009 and stressed the importance of reforming the Vocational Training Fund, developing its capabilities to improve education quality and to meet labour market’s needs at the local and regional levels. The project has three components divided into three phases. The first phase represents planning, monitoring and assessment in the ministry and the project’s management unit; the second phase relates to designing and delivering new advanced technical programmes; and the third phase concerns reforming and developing the Vocation Training Fund by reorganisation and reviewing regulations.
Source: Austro-Arab Trade Directory 2011.
The mentioned data are subject to modification. No responsibility is taken for the correctness of the details provided.
Last modified: 24 January 2011