Economic highlights of the new cabinet’s two-year plan (part 3)
In last Thursday’s issue of the Yemen Times, we presented the first two installments on the economic highlights of the new National Unity Government’s two-year plan. The third part of the economic plan aims to revive Yemen’s economy, which came to a standstill – if not a collapse – after the 11-month, nationwide uprising and demand for the fall of Saleh’s 33-year regime. The new cabinet was formed on December 7 as part of an interim government which includes both Saleh’s party and the traditional opposition Joint Meeting Parties (JMP).
The following is the third installment on the economic plan.
In November 2006, donor countries pledged to grant Yemen $5.7 billion to be disbursed towards development projects and poverty reduction programs over the four-year period of 2007-2010.
However, no more than $1 billion was actually received by Yemen’s government due to mismanagement, Ali Al-Wafi, a Yemeni economist, told the Yemen Times.
“Because there were no economic feasibility studies for the projects, at times the Yemen’s government did not pay its financial share for a project or, in some cases, construction companies for the project are not qualified enough to receive the grant and start up the project,” said Al-Wafi.
In the end, around $4.7 billion of the pledged aid was not granted to Yemen.
To allow this money channel to development projects and poverty reduction programs in Yemen, the National Unity Government said in its two-year economic plan that it will work at revising Yemen’s capacity for external loans and grants pledged to Yemen during the past period to utilize the aid.
It will also enhance the capacity to accommodate and carry out externally-funded projects, this in accordance with the two-year economic plan.
Ease of doing business
In the Ease of Doing Business World Index 2012, Yemen ranked 99 out of 183 economies.
The index sheds light on how easy or difficult it is for a local entrepreneur to open and run a small to medium-size business when complying with relevant regulations.
It measures and tracks changes in regulations affecting ten areas in the life cycle of a business: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency.
In addition to obstructive regulations for doing business in Yemen, the political unrest of the past two years has created a negative environment not only for new investors, but also for established businesses.
In March 2011, the joint-funded Yemeni-Qatari Al-Rayyan Hills, the largest residential construction project in Sana’a, was suspended due to the political crisis.
And in December 2011, the Canadian oil company Nexen, the largest such company which has also operated in Yemen since the 1980s, had to leave the country due to the deteriorated security situation.
The government said that it will encourage investment and increase its contribution to the national gross domestic product (GDP). This will require the cabinet to ensure an attractive investment environment to stimulate entrepreneurs to start new businesses.
In this regard, the government also said it will utilize Aden’s strategic geographic position to play a role in the coming economic transition.
To achieve this, there will be a specific economic plan for Aden which includes increasing arrivals to Aden Airport, expanding the city’s harbor, the building of a new harbor for unregistered goods and modernizing services at Aden’s port.
Adel Al-Ashtal, former director of the General Investment Authority office in Aden, told the Yemen Times that, “This plan for investment is good, but security and political stability at the moment are the first priorities for both foreign and local investors.”
“If good investments laws are enacted without political stability, they will mean nothing to investors,” Al-Ashtal said.
He explained that “the positive result if the peaceful revolution succeeds will be the control of corruption and the enforcement of transparency.”
Agriculture is one of the main sectors of Yemen’s economy, since it represents a main source of income for 70 percent of the population and accommodates 54 percent of Yemen’s workforce.
It contributes between five to 10 percent of the GDP, according to Yemen’s National Information Center.
The government said in its two-year economic plan that agriculture somewhat reduces internal migration from rural to urban areas.
Further, the government promised to boost agricultural production to attain a higher level of food security by way of an increased reliance on domestic agricultural production.
The Ministry of Agriculture will be responsible of providing veterinarian services for livestock, which would include national campaigns to combat animal epidemics and promote the treatment of diseases in animals.
The cabinet said that it will activate the agricultural fund, which is intended to provide farmers with finances with which to carry out farming projects to enhance their production, such as with modern irrigation networks.
Since July 2011, Yemen’s farms have experienced severe damage caused at least in part by deliberate diesel and fuel shortages. Huge quantities of potatoes, tomatoes, bananas and other food crops were lost after farmers couldn’t find diesel at gas stations with which to operate their water pumps.
“I have to struggle for two months to get 200 liters of diesel just to keep my farm running; otherwise, the farm will be damaged,” Hassan Jailan, a farmer in Hodeida, told the Yemen Times.
“Because there’s no diesel for fair prices at gas stations, I had to stop farming several food crops, including tomatoes, lady fingers and eggplants,” the farmer said.