Final Report GIA 190908_Final

Private Sector Development Project (PSDP)

Pool of Short-Term-Experts

PN 2007.2031.8, VN 81098513

Yemen

Identification and Benchmarking of Promising Sectors in Yemen

Identification and Benchmarking of Promising Sectors in Yemen Study

Presented to: General Investment Authority (GIA)

Presented by: Samir Mourshed

(Consortium INTEGRATION – DIALOG)

August 2008 (Sana’a / Yemen)

3/103 GIA Ye / GTZ (PSDP) Study on Identification and Benchmarking of Promising Sectors in Yemen

1. Executive summary

The objective of this study is to identify Yemen promising economic sectors and provide competitive benchmarking analysis with other MENA countries (see the Terms of Reference, attached as Annex 1). In order to reach an identification of those promising sectors with a sufficient degree of confidence, the consultant employed the competitive advantage framework based on the concept developed by Michel Porter. This concept looks at the competitive advantage of nations using the diamond of national advantage which identifies four broad attributes that jointly explain a nation’s competitive advantage. These attributes are factor conditions, demand conditions, related and supporting industries and firm strategy, structure and rivalry. Based on this concept, the consultant identified the factors that affect sector competitiveness in Yemen. Those factors include: Factor conditions (human resources, natural resources and infrastructure)

Economic performance (efficiency of production and market size for the sector) Political, legal and regulatory business environment as related to each sector Potential for investment (existing investments and outsourcing)

In addition to in depth interviews and discussions with key business people, sector related experts and Government officials, the consultant used SWOT strategic framework as a participatory approach to assess each economic sector and to summarize its overall position using the above factors. SWOT involved analyzing both internal and external factors that affect each Sector through organizing key data and information about the sector across four categories: strengths, weaknesses, opportunities, and threats. Benchmarking was used to analyze the sector position among competitor MENA countries. The Consultant then identified the promising sectors and formulated the comparative advantages and the unique selling proposition for each selected sector. Economic sectors in Yemen suffer from a number of micro as well as macro-economic weaknesses that affect its competitiveness and ability to attract investments: 1. Macro-economic weaknesses:

Social challenges (poverty) Legal and regulatory challenges to provide an enabling business environment (investment

incentives, taxation, contract enforcement and competition regulations) Infrastructure constraints Security challenges

2. Micro-economic weaknesses at the firm level leading to low productivity. They include:

Strategic positioning of local firms Low input costs are primary competitive advantage Emphasis on labor intensive operations Focus on the local market with a considerable population but low purchasing power Outdated technology, low investment in machinery, equipment, maintenance Low investment on branding Insufficient scientific and technological infrastructure and capacities for R and D which

results in reliance on foreign partners to provide know-how and secure innovations Imitate products and services of local and foreign competitors


Low investment on training

Corporate direction Domination of family businesses that are not sufficiently progressive and innovative Seizing profitable opportunities to start-up a new business. Strategy is driven by Government

3. Weaknesses affecting national competitiveness of Yemen national economy

Low labor productivity due to low qualification and outdated production technologies Weak infrastructure Rules and regulations that increase the cost of doing business and reduce companies’

exposure to open competition Companies operating in isolation and focus on a narrow set of activities Low level of trust throughout the society Centralized decision making Economic relations to neighboring countries are dominated by trade; low level of

investments, technology transfer and joint business development efforts Weak private sector institutions (not structured to support economic development) Weak collaboration between private and public sector (educational/research institutions) as

well as institutions that enable collective action by the private sector, such as business associations.

Existing market positions of Yemen economic sectors are based on factors unrelated to microeconomic competitiveness such as:

Strategic location that allow accessibility to major international markets Natural resource endowments Natural tourist resources

As such, Yemen has huge potential in all sectors analyzed except for the oil and gas sectors. There is low proven oil reserve (2.8 billion barrel) with considerable depletion rate and difficulty to project oil production from both existing fields and new ones. Gas proven reserves are only estimated at 12-15 billion cubic feet. Oil exports are so far concentrated on Asian markets. Gas export projects require huge financial and technological resources. In addition, Yemen faces in this sector heavy competition from regional rich gulf countries with developed infrastructure. Security concerns, on the other hand, limit foreign investments in both sectors resulting in the limitation of the production level. Due to lack of local capacity for survey and exploration, foreign oil companies are dominant in both exploration and production. Promising sectors include:

Infrastructure Education and training Health Land transport infrastructure Electricity Water supply and waste water treatment


Agriculture Biological farming High water conservation farming methods Arabica coffee Honey

Fishery

Mining and quarrying

Mining and quarrying metallic (metal ores) Mining and quarrying non-metallic (natural rock) / building stones Large scale manufacturing of cement

Tourism and eco-tourism

Manufacturing

Fish processing Food processing Intensive semi-skilled labor manufacturing activities (garment, apparel, leather goods,

footwear and sown goods) When comparing the position of each sector in Yemen with that in other MENA countries, it appears that all sectors are comparatively weaker in relation to the conductive factor conditions (e.g. human resources and physical infrastructure), business environment (e.g. structural and technical support, business development services) as well as the regulatory and judiciary environment and government policies specific to each sector. Future challenges for Yemen are meeting the demand of each economic sector with the skilled labor forces, providing efficient infrastructure, enabling the business environment for structural and technical support needed for each sector. The Yemeni Investment Law no. 22 of 2002 is open to all fields of investment that are related to the identified sectors. It offers the most attractive incentives for local and foreign investment (e.g. FDI) in MENA region, including seven-year tax incentive with possible extension to up to fourteen years, establishes equal treatment between foreign and local investors. The foreign investor has the right to buy property for project purposes. The investment cannot be nationalized or seized and funds cannot be blocked, confiscated by other than a court law. In addition to Aden free zone, the Government established three industrial zones for manufacturing. Investment attractiveness in Yemen requires, however additional efforts to meet growing challenges. The Government has a role to play in supporting the competitiveness of the Yemen economy in general and sectoral competitiveness in particular. There are still major efforts needed in the following areas:

Length of procedures and cost related to starting and/or closing a business Length of procedures and cost related to getting licenses for starting a new business Regulatory framework Trade policy reforms


Judiciary system Enforcing contracts Settling disputes Corruption perception

The above factors are to be addressed as a package to be integrated into the Yemen economic policies with the aim to attract and boost private investments; particularly those related to the operations, services and protection of these investments. The major recommendations of the study are: Prioritize the sectors identified and its sub-sectors using competitive criteria and ranking to

assist GIA in focusing its targeting and promotion on investment opportunities that contribute most to Yemen socio-economic development (e.g. sector specific promotion strategy) and targeting donor organization to support and implement necessary interventions (e.g. preparing detailed sectoral / sub-sectoral strategies for upgrading and assisting the priority sectors).

Review the investment law to improve incentive framework related to the priority sectors/sub-sectors.

Adopt an integrated policy approach covering all drivers of competitiveness to enable sustainable prosperity growth and develop competitiveness strategy at national and sectoral levels.

Support updating and/ or reforming laws and regulations that govern the entry and operations of local and foreign investment

Support upgrading the regulatory and legislative reform to overcome regulatory barriers, create healthy business environment and enabling business climate including effective enforcement mechanisms of both the competition law and intellectual property rights law. In addition to strengthening the anti-dumping authority and creation of an effective competition authority preventing anti-competition behavior.

Support the development of clear standard system and accreditation procedures that meets international standards to guarantee access to world market.

Support collaboration between private and public sector (educational/research institutions) as well as institutions that enable collective action by private sector, such as Business Associations.

Enhance sector /sub-sector level data availability and accessibility in order to enable assessing the operational performance at each sub-sector, identify gaps and needs for its development.

Promote investment in infrastructure sectors and sub-sectors through public- private partnerships with the objective to improve the access, use and cost of infrastructure services (e.g. improve service quality) through restructuring the infrastructure sub-sectors by separating political decision making from economic regulations (e.g. creation of independent regulating agencies) and specifying the role of national operators with respect to new actors.

Promote investments and improve incentive framework in identified sectors and sub-sectors


2. Contents

1. Executive summary 2 2. Contents 5 3. List of tables and charts 7 4. Abbreviation and acronyms 8 5. Introduction 10

5.1 Objective of the study 10 5.2 Approach and methodology 10 5.3 Data availability 17 5.4 Structure of the report 18

6. Factors impacting sectoral potential 19 6.1 Human resources 19 6.2 Supporting physical infrastructure 21

7. Economic sectors in Yemen 29 7.1 Introduction 29 7.2 Economic sectors 30

Agriculture 30 Fishery 32 Mining and quarrying 34 Manufacturing 38 Travel and tourism 40

8. Identification of promising economic sectors 42 9. Sector-level competitiveness and benchmarking 54

9.1 Introduction 54 9.2 Competitiveness of MENA business environment 54 9.3 Benchmarking promising economic sectors 58

Agriculture 58 Fishery 63 Mining and quarrying 68 Manufacturing 71 Travel and tourism 76 Benchmarking 78

10. Investment law and its influence on attracting investments in identified sectors 82 10.1 Investment law no. 22 of 2002 82 10.2 Attractiveness of investments in Yemen 85

11. Recommendations 89 12. Annexes 94

Annex (1): Terms of Reference 95 Annex (2): Time schedule of mission 98 Annex (3): References / documents used 99 Annex (4): Persons met during the assignment 101


3. List of tables and charts

List of tables Table (1): World Competitiveness Yearbook breakdown of competitiveness factors Table (2): Framework for the identification criteria of promising sectors

Table (3): SWOT Analysis Framework Table (4): Benchmarking criteria for promising sectors Table (5): Air Transport in MENA Region Table (6): Maritime transport in MENA region Table (7): Telephone line density and cost and internet penetration in MENA countries Table (8): Water supply and sewage systems (2004) Table (9): Gross output, Gross Domestic Product and employment for Economic Sectors in Yemen Table (10): Reserves of non-metallic natural rock Table (11): Competitive performance of MENA countries Table (12) EDB overall ranking for MENA Countries Table (13): Agriculture performance in Yemen and MENA countries Table (14): Benchmarking conductive factors conditions and criteria for the Agriculture sector for MENA

countries Table (15): Benchmarking business environment criteria for the Agriculture sector for MENA countries Table (16): Benchmarking regulatory environment and Government policy for the Agriculture sector for

MENA countries Table (17): Fishery performance in Yemen versus other MENA countries Table (18): Benchmarking regulatory environment factors and criteria for the Fishery sector for MENA

countries Table (19): Benchmarking business environment criteria for the Fishery sector for MENA countries Table (20): Benchmarking regulatory environment criteria for the Fishery sector for MENA countries Table (21): Comparative data – stone sub-sector in Egypt and Turkey Table (22): Structural support and Business environment Table (23): Performance of the manufacturing sector in Yemen and MENA Countries Table (24): Benchmarking conductive factors conditions and criteria for the Manufacturing sector for

MENA countries Table (25): Benchmarking business environment criteria for the Manufacturing sector for MENA countries Table (26): Benchmarking regulatory environment factors and criteria for the Manufacturing sector for

MENA countries Table (27): Selected travel and tourism indicators for Yemen tourism competitors in MENA Table (28): Benchmarking conductive factors conditions and criteria for the tourism sector for MENA

countries Table (29): Benchmarking business environment factors and criteria for the Travel and Tourism sector for

MENA countries Table (30): Benchmarking regulatory environment factors and criteria for the Travel and Tourism sector

for MENA countries List of charts Chart (1): Porter’s diamond framework Chart (2): Diamond factors: sources of location competitive advantage


4. Abbreviations and acronyms

BCI Business Competitiveness Index BLT Build-Lease-Transfer BOO Build-Operate-Transfer BOT Build-Operate-Transfer CSO Central Statistical Organization - Yemen EPI Environmental Performance Index ESCWA Economic social committee of West Asia FAO Food and Agriculture Organization FDI Foreign Direct Investment GAFTA Great Arab Free Trade Zone GCC Gulf Cooperation Council GCI Global Competitiveness Index GDP Gross domestic product GIA General Investment Authority - Yemen GNI Per Capita Gross National Income GNP Per Capita Gross National Product GSMRB Geological Survey and Mineral Resources Board - Yemen GST General Sales Taxation GTZ German Development Cooperation HDI Human Development Index ICT Information and Communication Technology IE Investment Environment ITC International Trade Commission LD Land Development LIST Listing LOA Lease of Assets MC Management Contract MENA Middle East and North Africa MO&M Ministry of Oil and Minerals - Yemen MoT Ministry of Tourism - Yemen PSDP GTZ Private Sector Development Project - Yemen R and D Research and development SOA Sale of Assets SOE Sale of Equity SWOT Strengths, Weaknesses, Opportunities and Threats TEVT Technical Education And Vocational Training TOR Terms of Reference UAE United Arab Emirates UNICTAD United Nations Conference on Trade and Development


USAID U.S. Agency for International Development WB The World Bank WCY World Competitiveness Yearbook WEF World Economic Forum WTO World Trade Organization YCBI The Yemeni Council of Businessmen and Investors


5. Introduction

This study has proven to be very challenging and interesting at the same time. It was not easy to obtain the needed secondary information in a precise and reliable manner and to carry out the field work in an effective and efficient way due to the given conditions and certain difficulties in recruiting the Yemeni team members etc. The study was carried out by Samir Mourshid as the team leader in cooperation with three Yemeni team members in the period from July 21st to August 13th, 2008. The study team worked mainly in Sana’a. Short trips were made to the cities of Aden, Mukalla, Taiz and Houdaida (see work schedule in Annex 2). The team met with many distinguished persons from government institutions and the business community to obtain documents, statistics and other types of information needed for carrying out this demanding task. The study team wishes to express its gratitude and appreciation to all persons who were approached for their valuable assistance which was indispensable for the elaboration of the study. In particular, the consulting team wishes to thank GTZ / PSDP as well as the GIA for this interesting assignment and for the constructive and fruitful cooperation during its implementation.

5.1 Objective of the study

As stated in the Terms of Reference TOR (see Annex 1), the objective of this study1 is to identify promising economic sectors in Yemen and provide competitive benchmarking analysis with other MENA countries. 5.2 Approach and methodology In order to reach an identification of those promising sectors with a sufficient degree of confidence, the consultant employed the analytical tools applicable within the timeframe for the study and the availability of data. An analytical framework was developed in order to integrate these tools towards a logical conclusion. Firstly, through a review of secondary sources, a general analysis of factors affecting the sectoral competitiveness in Yemen was concluded. This literature review resulted in:

The identification of a tentative list of sectors for further assessment. The assessment of key factors affecting sectors competitiveness

Secondly, a framework for the assessment of sectors/ sub-sectors was developed through the identification and analysis of key criteria for sectoral investment potential. Thirdly, identified sectors were analyzed through a framework of assessment. These sectors have been identified through the following mechanisms:

The review of secondary sources including available statistics. Workshops with key actors from government and private sectors as well as SWOT

workshops which were done for agriculture as well as mining and quarrying sectors. In-depth interviews with key business leaders representing all sectors (see Annex 4,

“Persons met”). Observed concentration of existing investments.

1 The objective of the assignment was modified during the preparation for this study.


Finally, a selection of broad potential sectors has been proposed.

The consultant used the competitive advantage analysis to assess each sector based on its potential to create sources of advantage (low cost, resource availability, or differentiation). The following questions were addressed by competitive advantage analysis:

How competitive is the sector? How well is the sector performing relative to competing sectors (based on employment,

exports, government efficiency, GDP and productivity)? How well are the enterprises in the sectors performing compared to the companies in a

competing economy (based on employment, exports, innovation, and productivity)? How does the business environment of the local economy perform relative to that of a

competing economy (based on financial infrastructure, location, nature of local market, physical infrastructure, and size)?

The Consultant therefore used – with adaptation - the competitive advantage analysis framework developed by management theorist Michael Porter, especially his diamond framework of national competitiveness and the related five forces of:

• Firm structure, strategy and rivalry • Demand conditions • Factor conditions • Related supporting institutions

The diamond framework was adapted and modified to the case of Yemen as described below in Chart (1).

Chart (1): Porter’s diamond framework

Definition of sectors

Prior to the development of criteria to assess sectors and the consequent selection of those identified as promising, the International Standard Industry Classification (ISIC) was used to define and classify industries as adopted by the Ministry of planning and International Cooperation (MPIC) as well as the Central Statistical organization (CSO). The ISIC is a classification according to kind of economic activity that is carried out by a unit and the type of production in which it engages. According to these characteristics, enterprises can be grouped to form industries. An


industry is defined as the set of all production units engaged primarily in the same or similar kinds of productive economic activity.2 ISIC is an internationally widely used classification mechanism that identifies 15 sectors, 62 divisions, 161 groups and 298 classes to identify increasingly specific industrial fields. Using the ISIC to define and classify sectors/sub-sectors has its practical reason as it provides the basis for grouping firms in sectors or subsectors for further clustering and sector related development initiatives.

Identifying promising sub-sectors

In order to establish a clear and verifiable basis for the assessment and selection of promising sectors/sub-sectors, a detailed framework of criteria for the assessment of promising sectors/sub-sectors was developed. The development of a framework of criteria followed a two-step process:

Formulation of a concept of what constitutes a promising sub-sector for investment The identification of specific factors impacting on potential of a sector/sub-sector

1. Formulating a concept of promising sub-sectors

This study identifies a sector as promising if it is (potentially) competitive in national and international markets and thus provides attractive opportunities for investments. Competitive sectors are those where investments have created or can create and sustain competitive advantages in the national and international market. Sectors providing opportunities for investments are those where barriers to entry are low and where the value chain can allow outsourcing or clustering.

International competitiveness Conventional economic theory has looked at the question of national competitiveness in terms of what makes some nations succeed in international competition. Answers are usually found in terms of factor conditions (existence of natural and capital resources as well as knowledge,). New insights from management theory hold however that the above question is fundamentally wrong. We should rather ask why firms based in a particular nation (region/sector) are able to create and sustain competitive advantage. Understanding what makes a nation (region/sector) competitive is therefore equal to understanding the conditions that provide the pressures on firms to be competitive. This concept of competitiveness has been developed by Michael Porter, firstly published in 2002 in the Harvard Business Review article. In this article: “The Competitive Advantage of Nations”, Michael Porter developed the Diamond of National Advantage, identifying four broad attributes that jointly explain a nation’s competitive advantage. These attributes are factor conditions,

2 UN DESAS, “International Standard Industry Classification of All Economic Activities”, Revision 3.1, page 11.


demand conditions, related and supporting industries and firm strategy, structure and rivalry as shown in Chart (2) below.

Chart (2): Diamond factors: sources of location competitive advantage

Potential for investment Not all competitive industries hold potential for growth and development of investments. Enterprises in Yemen are characterized by their relative labor-intensive production processes, low capitalization levels and localized marketing. Internationally, investors tend to specialize into a limited segment of the value chain of certain products or services. They produce components or provide a specialized service within the value chain. In Yemen such specialization through outsourcing is not developed, but there can still be differences between sub-sectors based on the availability of its input and resource potentials. 2. Factors impacting sector/sub-sector potential

National competitiveness of the sector/sub-sector On basis of the concept of international competitiveness - as it has been described above - a wide range of researchers and institutions have developed practical methods to measure competitiveness according to specific criteria.


This study will broadly follow the classification developed by the World Competitiveness Yearbook (WCY). The WCY identifies four categories of competitiveness input factors:

Economic performance Government efficiency Business efficiency Infrastructure.

Table (1), below provides a breakdown of competitiveness factors within these categories.

Table (1): World Competitiveness Yearbook breakdown of competitiveness factors

Economic Performance Government Efficiency Business Efficiency Infrastructure

Domestic Economy Public Finance Productivity Basic Infrastructure

International Trade Fiscal Policy Labor Market Technological

Infrastructure

International Investment Institutional Framework Finance Scientific

Infrastructure

Employment Business Legislation Management Practices Health and Environment

Prices Education Impact of Globalization Value System

Source: IMD World Competitiveness Year book, 2006

The consultant also looked at the national sectoral competitiveness with the objective to promote investment. The focus was therefore on the competitiveness of sectors. Certain adjustments were made to the criteria framework to better fit the specific needs of this study. The criteria were organized in different categories depending on the availability of data. The main factors identified for the study are as follows:

Conductive factors conditions Sector economic performance Conductive legal and political environment Potential for investment

Table (2) shows those factors and the framework used for the selection criteria of promising sectors.


Table (2): Framework for the identification criteria of promising sectors

Description Definition Indicator Criteria Source Employment in sector Sector employment Statistics

Availability of Qualified Labor Labor availability not viewed as constrained

Perception of businessmen

Human Resources Existence of relevant education/training services (specific to skills in the sector / sub-sector)

Positive Identification Secondary data

Availability of raw materials Not viewed as a constraint


Natural Resources Availability and accessibility of environmental resources needed for production

Not viewed as a constraint

Secondary data Perception of

businessmen

Conductive factors conditions

Physical infrastructure required for production and distribution including transport, electricity, water and waste water

Availability and adequacy of physical infrastructure for the delivery, production and distribution processes in the sector /sub-sector

Not viewed as a constraint


Secondary sources

Productivity of production in the sector / sub-sector

Productivity Indicators high relative to other sectors

Perception of businessmen Production is relatively

efficient and competitive Value added in the sector

Contribution to National Value added relatively high

Statistics Sector economic performance

Market size is significant and develops positively

Output in the sector / sub-sector

Level of output in the sector is high as percentage of GDP

Statistics

Governmental support programs and policies specific to the sub sector exist

Programs have been identified

Perception of businessmen Conductive

legal and Political environment

Legal framework and government policies specific to the sub sector (taxation, financial security, and contract enforcement and competition regulations) are conducive to growth and investment.

Investors perceive the legal and political environment in their specific sub sector as enabling.

Not viewed as constraint Perception of businessmen

Sector/sub-sector is identified by sector specialists

Sector/sub-sector is positively identified


Awareness of sector/sub-sector potential (business community identifies the sector as promising)

Sector/sub-sector is identified by business community

Sector/sub-sector is positively identified

Perception of businessmen Potential for

investment Existing investment opportunities (sector provides business opportunities for investments)

Level of existing investments % of businesses operating in the sector/sub-sector is higher than average

Statistics

The identification process of the promising sectors was implemented through four parallel analytical tools using a participatory approach.

Identification through brainstorming workshops with key actors from governmental and private sectors and SWOT workshops which were done for agriculture as well as mining and quarrying sectors.

Identification through interviews with key business leaders representing all sectors Identification through secondary sources including available statistics. Identification through observed concentration of existing investments


SWOT analysis Based on the above framework, the consultant used also the SWOT strategic framework as a participatory approach to assess each economic sector and summarize its overall position. It involved analyzing both internal and external factors that affect the Sector through organizing key data and information about the sector across four categories: strengths, weaknesses, opportunities, and threats, as follows in table (3):

Table (3): SWOT analysis framework

Internal (strengths and weaknesses)

• Availability of adequate human resources • Availability of natural and environmental resources needed as

input for production • Availability of physical infrastructure required for the

delivery, production and distribution processes (water, transport, roads, energy and communication infrastructure)

• Sector economic performance Labor and capital productivity Value added in production processes

• Market size Size and growth rate of the sector

• Potential for investment Existing business opportunities and potential for

investment Existence of long term development plans for the sector

External (opportunities and threats)

• Political, legal and regulatory business environment that encourage investments in the sector

• Enabling business environment Taxation Financial security Contract enforcement Competition regulations Security threats Procedures and regulations, bureaucracy

The key issues to be addressed by SWOT Analysis, as perceived by persons interviewed are:

What are the overall strengths, weaknesses, opportunities, and threats faced by the Sector / the Economy?

What are the strengths, weaknesses, opportunities, and threats faced by the Sector / Economy regarding a particular issue (such as employment) or in a particular area of eco-nomic development (such as economic structure)?

Building on the above framework, the identified sectors are identified using the framework of criteria shown in Table (4).


Table (4): Benchmarking criteria for promising sectors

Factors Benchmarking Indicator Source Location Location advantage Human resources Availability of Qualified Labor

Availability of raw materials Natural resources Availability and accessibility of environmental

resources needed for production Conductive factors conditions Physical infrastructure

required for production and distribution including transport, electricity, water and waste water

Availability and adequacy of physical infrastructure for the delivery, production and distribution processes in the sector /sub-sector

Existence of relevant education/training services, specific to skills in the sector / sub-sector (Vocational training and technical education , higher education at universities) Scientific research Certification and testing relevant to the sector Press and publications Technical / commercial catalogues Exhibitions and fairs

Structural support

Business and sector associations Construction of equipments Production of tools and consumables Technical support Technological assistance Availability and quality of industry credit

Business development services

Consultancy services (e.g. providing technical, engineering, architect and sector related knowledge and expertise) Trade union pressure Environmental obligations Administrative burdens Sector related infrastructure Waste disposal Availability of functioning industrial areas

Business environment

Constraints

Workforce turnover Availability of Government support programs and policies specific to the sector Enabling legal and policy rules and regulations Availability environmental regulations Safety and security

Regulatory environment and government policies specific to the sector

Legal framework and related Government policies (taxation, financial security, contract enforcement and competition regulations Health and hygiene

Perception of Yemeni businessmen

Internet sources for benchmarking countries

5.3 Data availability Data availability has been a controlling factor during the preparation of this study. In Yemen, data at sectoral level are not readily available. Most of the accessible data are in a highly aggregated format. This has been a challenge during the preparation of the study. National data used for the purpose of this study was provided by The Ministry of Planning and International Cooperation and the Central Statistical Organization (CSO) unless otherwise indicated. For benchmarking, various internet sources were consulted, including the Arab


Organization for Agriculture Development, the Arab Monetary Fund, and the Arab Economic Report – 2007. In addition to the relevant organizations of United Nations, namely the World Bank, FAO and UNICTAD /ITC. 5.4 Structure of the study Following the executive summary and the study introduction, the main part of the report analyzes the factors impacting sectoral potential in Yemen (chapter 6). It provides an account of human resources and supporting physical infrastructure and concludes with outlining the challenges facing those related factors in Yemen. In the next chapter (7), the position of economic sectors in Yemen will be analyzed, followed by the identification of promising sectors (chapter 8). In this chapter, a detailed analysis of each sector will be presented, including description of its comparative advantage in terms of human resources, natural resources and strategic location, the sector potential and major constrains. To define the competitive advantage and to compare each sector with its competitors, a unique selling proposition is then formulated. The investment promotional measures as well as potential sub-sectors are concluded emphasizing Yemen’s comparative and competitive advantages in terms of natural resources, human resources, the strategic location and accessibility to major international markets to show investment opportunities for each sector. Finally recent trends to improve the sector competitiveness will be elaborated. Sector-level competitiveness is then introduced in chapter (9) by highlighting the competitiveness of MENA business environment. Then, each selected sector is benchmarked against MENA countries using a set of benchmarking factors and criteria related to conductive factors conditions and regulatory environment. In chapter (10), the Yemeni investment law and its influence on attracting investments in the identified sectors is assessed in comparison with the MENA countries. Recommendations and proposed follow-up actions are described in chapter (11).


6. Factors impacting sectoral potential

6.1 Human resources

Yemen is a low-income economy and is one of the least developed in the Arab World. Its per capita GNP was US$936 ($2.6 per day at nominal terms) before Mauritania (US$888) in 2006. The average per capita GNP in the MENA region is US$4142 with a growth rate reaching 14.4%. This is due to Yemen’s limited institutional situation and the qualification of its human resources in addition to certain social and traditional restrictions. These factors result in poor productivity and accordingly poor standard of living. The high population growth and its impact on investment and other aspects of life is a serious challenge that has been realized by the government and found its expression in the development and poverty reduction plans and policies. The continuation of illiteracy, the poor rates of school enrollment and poor coverage of health services are among the most important factors that affect the status of human development in Yemen. Population growth Yemen has a population of about 19.7 million (2004 Census) and estimated at 23 million in 2006. Over the last three decades, Yemen witnessed a rapid population growth, which was reflected in the increase of total population growth by 2.5 times. The population growth rate is between 3–3.5% during the period 1994-2004 and reached 3.6% (by 2005-06). Yemen population growth rate is one of the highest among MENA countries, before Kuwait (6.5%) and Qatar (5.3) and after Lebanon (0.6%) and Morocco (1.9%)3. The Population of Yemen is expected to increase to 43 million in 2025 if the growth continues at current rate. This growth in population would be incompatible with the available economic resources, would limit the potentials for economic growth and present a high risk for the peaceful social development in the country. On top, it creates growing demand for educational and health services as well as for access to drinking water and job opportunities. Yemen’s population is characterized by a young age structure where the age group of 0-15 years old is 48.8% of the total population. This enlarges the base of the population pyramid and leads to a large average family size (7.4 persons) and to raising the economic dependency ratio to 477 for every 10 economically active persons in 2004. Providing such population structure with social services represents a heavy burden on society and increases the pressure on the labor market. The whole population occupies only 2% of the total geographical area of around 45 million hectares and is scattered among 41,800 villages, thus making it difficult to provide basic services to all these small settlements. According to the 1998 Household Budget Survey, 17.6% of the population lives in extreme poverty, while 41.8% is below the upper poverty line. Rural population suffers more from the prevailing economic conditions than the urban population. The Yemeni population is distributed as 76% in rural areas, over an area of approximately 460.000 km2, with a population density of 40 persons per km2. About 50% of the population is concentrated

3 The Arab Monetary Fund: The Arab Economic Report - 2007


in the Governorates of Taiz, Ibb, Sanna and Hudaida. The least populated Governorates are Al-Mahra, Al-Jouf and Marib (3%). Labor market The rapid population growth and the young age-structure of population lead to rapid increase in the labor force by rates exceeding the already high total population growth rate. The number of working-age population (15 years old and over) rose from 7.6 million in 1995 to 9.7 million in 2000 and to 10.9 million in 2006 (by an average of annual growth rate of 4.2% leading to increasing the new entrants to the labor market which is a challenge facing the Yemeni economy and the private sector to provide adequate job opportunities to absorb these active population. The labor force is expected to increase by 3.8% a year during the next five years, thereby requiring annually 170,000 new job opportunities. The challenges facing the labor market as perceived by most interviewees are: under-employment, weak capabilities, low productivity and poor management. Technical education and vocational training With the high population growth, dispersed population in small communities located in diversified topography areas, the Government faces accumulated problems and challenges including widespread of illiteracy (64%, of the population), poor enrolment rate of 75.6% in basic education, especially for girls whose enrolment did not exceed 63% against 87% for boys. This rate however is one of the lowest among the MENA countries (97% in Tunisia and Egypt and 33% in Djibouti) and a dropout rate of more than 15% especially in the lower grades of primary education. The Government, however increased its expenditure on education and training sector to about 14.7% of total spending (28% in Tunis and 2% in Somalia), which led to an increase in the total enrollment at all educational levels from 2.453.000 students in1990 to 3.993.000 students in 2006 with an average growth rate of 5% per annum for all students. Vocational training (after basic education level) and technical education (after secondary school level) absorb only a small portion of the school graduates. In 2006 the share of students in both tracks, from the total number of enrolled students in all levels of education amounted to 4%. Technical education graduates amounted to 1456 male students and only 180 female students or the ratio of one technical graduate for every 17 university graduates, whereas the proportion should be 4 technical graduates for each university graduate. The ratio of vocational training students is less than 2% of the total national labor force. In addition, most of the graduates of the technical education and vocational training institutions do not meet the requirements of the private sector establishments. As a result, some large enterprises have established their own institutes for training mainly their own staff according to their needs. University education University education witnessed an increase in enrollment by 16% during the period of 2000 to 2006 in parallel by an increase in the number of public universities from 2 universities to 7. and the establishment of 8 private universities with 130 colleges. The majority of university graduates however study liberal arts and theoretical social and humanistic subjects. The number of students


enrolled in the faculties of engineering, electronics, and natural sciences and alike is relatively small as compared to the need of the labor market. Also the contents and the level of the university education in these fields as well as its praxis orientation are not sufficiently geared according to the requirements of the market. This situation results in an enormous waste in human capital and its productive capacities. During the next five years, it is estimated that 150.000 students will graduate and compete for approximately 55.000 job opportunities, leaving more than 95000 unemployed graduates4. Health services and health conditions The health system consists of health units, centers and hospitals. Between 1970 and 2005, Health Units have expanded from 912 to 1821; Health Centers increased from 392 to571 and hospitals from 74 to 116 with 1467 inhabitants per bed; for each 100000 inhabitants, the number of physicians increased from to 30, while the number of nurses increased from 55 to 65 respectively. The percentage of Government spending on health is only 6% of total spending, with about 30% of rural population and 80% of urban inhabitants’ benefit from the health services provided by Government. When compared to MENA countries, comparative figures are seven times higher than in Yemen. 6.2 Supporting physical infrastructure Infrastructure includes roads, bridges, water and sewage networks, electricity supply and communications systems. Yemen’s infrastructure does not meet the requirements for the needed economic growth in terms of scope, quality and efficiency. Involving private investments through BOT (Build-Operate-Transfer), BOO (Build-Operate-Own), MC (Management Contract) projects as well as other alternative modes of privatization5, would provide feasible investment opportunities and would establish at the same time important preconditions for the expansion of other productive economic sectors. However, a conducive investment environment for such infrastructure projects by the private sector has to be established and the obstacles preventing potential private investors have to be removed. Road transport With no railways or inland waterways for transport, Yemen relies heavily on the road transport. According to data provided by the Ministry of Public Works and Highways: of the total 26,362.3 km of roads, only 11,394.8 km (43.2%) are paved and 14,967.5 km are gravel roads. There are two important trunk routes. The first links Aden with Sana’a (365 km) and Sana’a with Huddaida (226 km). Despite reasonable conditions of these corridors, travel time tends to be rather long due to the narrow winding and steepness in the mountainous terrain. The second trunk route links Hudaida with the Saudi boarder. This road is better constructed. It services well the Yemeni trade activities with Saudi Arabia. The annual increase of asphalt roads is only 8%. However, Yemen has

4 Ministry of Planning and International Cooperation 5 Such as: SOE (Sale of Equity), BLT (Build-Lease-Transfer), SOA (Sale of Assets), LD (Land Development), LIST (Listing) & LOA (Lease of Assets)


the least percentage of paved roads (43.2%) when compared Jordan (100%), Egypt (80%), and Algeria (70%). Air transport Yemen has two major airports: Sana’a International Airport and Aden Airport. Both have paved 3,000 meter runways. Yemen has also 44 feeder air transports within Yemen, through 44 airports of which 16 have paved runways. Sana’a International Airport is the Yemen’s busiest airport for both passengers and freight. It is served by several carriers including YEMENIA, Royal Jordanian, Gulf Air, Lufthansa, Egypt Air, Syrian, Qatar Airways, Emirates, Sudan Airways and Saudi Arabian. YEMENIA is the most active carrier. It has 25 international cargo representative offices distributed throughout the Middle East (9), Africa (7), Europe (5), and Asia (4). The second international airport, Aden is only served by YEMENIA, Royal Jordanian, and Djibouti Airlines for its international services. Air craft traffic is, however, the least among MENA countries. Table (5) shows that the number of aircraft arrival and departure (in 2004) amounted to 22,000 which is the least after Sudan (10800) and more than 20 times lower than in Oman (438,600). The number of Passengers carried in Yemen was 1,489,000 which is, also the least among MENA countries after Sudan (657,000 passengers). The number of Passengers carried in the neighboring Oman is 13,131,000 Passengers There are no scheduled domestic/international freighter services operating in Yemen. All air freight is carried in the “belly” of passenger aircrafts. Freight is carried on a capacity availability basis as priority is given to passengers and their luggage. Due to limited exports, air freight amounted to 19 ton/km in 2004; the least after Sudan (7 ton/km). YEMENIA is the dominant carrier, due to its extensive network and local know-how. The two main airports lack the critical mass for minimum air freight service means. Potential exporters have to start from scratch to create air transport arrangements, if they wish to go further than belly freight transport.


Table (8): Air transport in MENA region (2004)

Total aircraft arrivals & departures

(000)

Passengers carried (000) Air freight (Ton/KM)

MENA Country

Total Arrival Departure Transit Total Passenger/trip

Arrival Departure

Yemen 22 747 742 -- 1489 68 10 9

Algeria 47 -- -- -- 3478 -- 21 --

Bahrain 72 2309 2308 527 5144 72 111 72

Egypt 228.4 11792 11752 -- 23544 103 212 --

Iraq 13.6 583 834 -- 1417 104 15 6

Jordan 42.4 1219 1223 -- 2442 58 46 48

Kuwait 40.6 26026 2443 60 3131 126 124 41

Lebanon 39 1599 1601 135 5109 86 37 25

Morocco 106 3690 3759 248 7697 73 54

Oman 437.6 1572 1559 -- 13131 72 39 28

Qatar 99.2 1298 1206 1590 4094 42 102 9

Saudi Arabia

238.6 16180 15985 -- 32165 135 310 184

Sudan 10.8 223 434 -- 657 67 1 6

Syria 33.2 1080 1148 87 2315 70 15 17

Tunisia 92.2 4669 4715 202 9586 104 11 11

UAE 290.8 13704 13388 1851 28943 100 746 702

Total 1372.4 63271 63100 4700 131071 96 1833 1146 Source: The Arab League Transport Statistics Bulletin, Second Issue. 2005. (--) Not available, Countries not shown are not available

Maritime transport With the absence of rivers in Yemen navigation along coastline, stretching to a length of 1,906 km, maritime transport in Yemen is the only existing means of water-borne shipping. Yemen is geographically situated at a junction of principal maritime routes linking Asia, Africa and Europe. With a strategic location on Bab-el-Mandeb, the strait linking the Red Sea and the Gulf of Aden is one of world's most active shipping lanes in which two high-profile ports, the Port of Aden and the Port of Hodeidah are located and endowed with naturally deep permissible drafts. The Port of Aden is the largest seaport in Yemen. It has 5000 hectares of sheltered warehouses area which allows its facilities and services to be expanded. It handles 1,500 to 2,000 calls per year. Aden lies directly on the main shipping route which provides cost reduction advantage for container companies. It functions as the representative seaport of Yemen and also as the trans-


shipment base for the Gulf region, Indian Ocean region and Africa. With modest facilities, it handles containers and bulk and general cargos. It has the potential to become an important hub for regional maritime cargo. Due to its topographical advantages, the port of Aden is capable of multiplying its capacity with a fair amount of investment in equipment. It is already incorporated in the mainstream shipping network playing a role in loading on/off goods from the Asia-Europe trunk route to minor routes in the Middle East and Africa. For example, a world representative mega-carrier of containers, the Maersk Sealand, now uses Aden as a hub for its operations serving East Africa and the Middle East. Hudaida is Yemen’s second largest port after Aden. It assumes the role of the principal exporting port for cargo originating from Yemen. It is the main import entrance port. In 2006, it handled around 650 calls per year. Salif, sheltered by Kamaran island, offers deep water without any dredging. There is a plan for expanding Salif by adding further 600m of quay at a depth of around 16m. Other seaports, such as Mukallah, Nashtoon and Mokha, are considerably smaller in scale, activities and facilities compared with the two major seaports Aden and Hodeidah. The Ports in Yemen are controlled by three ports corporations established in 2007:

• Yemen Gulf of Aden Ports Corporation (Aden) • Yemen Red Sea Ports Corporation (Hodieda, Rudum, Salif, Ras Issa, Mokha • Yemen Arabian Gulf Ports Corporation (Mukalla, Ashshhr, Rudum, Balhalf, Nishtun)

The Omani port of Salalah has almost the prime location, same features and benefits as Aden to shipping lines but Aden still not able to offer facilities with the same capacity, efficiency and reliability as does Salala. The Port of Salala is positioning itself and developing its facilities with the goal of becoming a regional transshipment hub. It stresses Oman’s political stability, high level of security and the strength of the Omani Navy. The port has 4 berths with a total length of 1200 meters and along side depth of 16 meters. Each berth has an area of 50 hectares capable of handling 5 cranes. Aden port has only one berth with the depth of 11.30 meters and length of 180 meters. As table (6) shows Yemeni ports handle 3.4% of ship calls in the MENA region; higher than the Omani ports (1.8%) but far below UAE ports (14.2%). Omani ports, however handle 11.1 of containers while Yemeni ports handle only 2% of the total container cargo.


Table (6): Maritime transport in MENA region (2004)

Ship calls Commodity (000Ton) Container GRT National

commercial feet

MENA Country

No. % Imports Exports Total % No. % No. % Yemen 3860 3.4 7027 154 7181 2.5 521 2.0 8 0.8 Algeria 7546 6.6 21165 2489 23654 8.1 512 2.0 76 7.9 Bahrain 1582 1.4 2863 1071 3934 1.3 192 0.7 11 1.1 Egypt 10313 9 29592 13595 43187 14.8 3645 14.3 159 16.6 Djibouti -- -- 4900 1067 5967 2 148 0.6 1 0.1 Jordan 2694 2.3 11152 8771 19923 6.9 395 1.5 11 1.1 Kuwait 4269 3.7 18560 3797 22357 7.7 610 2.4 50 5.2 Lebanon 2876 2.5 5034 616 5650 1.9 465 1.8 77 8.0 Libya 2852 2.5 5840 869 6709 2.3 -- -- 30 3.1 Mauritania -- -- -- -- -- -- 315 1.2 -- -- Morocco 36210 31.5 24715 15625 40340 13.8 612 2.4 53 5.5 Oman 2117 1.8 2944 2869 5813 2 2830 11.1 7 0.7 Palestine -- -- -- -- -- -- -- -- -- -- Qatar 3034 2.6 1901 168 2069 0.7 218 0.9 21 2.2 Saudi Arabia 10674 9.3 41081 12505 53586 18.4 3732 14.6 83 8.7 Somalia -- -- -- -- -- -- -- -- 5 0.5 Sudan 1589 1.4 4114 934 5048 1.7 240 0.9 6 0.6 Syria 3012 2.6 9432 2473 11905 4.1 451 1.8 184 19.2 Tunisia 5937 5.2 14032 6976 21008 7.2 318 1.2 22 2.3 UAE 16364 14.2 12151 -- 12151 4.2 10355 40.5 103 10.8

Total 114929 100 17938 74057 291995 100 25567 100 958 100 Source: The Arab League Transport Statistics Bulletin, Second Issue, 2005 (-- Not Available, also countries not shown are not available) Telecommunications Telecommunications plays an essential and increasing role in any knowledge-based society. It can replace transport and break down the isolation of remote and rural areas. The telecommunications sector appears to be financially self-sufficient and provides 100% of its capital requirements. However, Yemen has the lowest penetration of telephone and Internet services in the Middle East and minimal rural access to telecommunications services so that there is considerable scope for additional investments in this sector (for each 1000 people, there are 19 telephone lines in Yemen, 57 in Algeria, 86 lines in Egypt and 838 lines in Qatar. The waiting time for having a fixed telephone line installed is, however as high as 3.8 years, the highest is 10 years in Syria and the lowest is zero years (in UAE). In terms of fixed line tariffs, a local phone call costs 0.01 US$/3minutes which is reasonable when compared with the going local call rates in Algeria, Egypt, Iran and Saudi Arabia. A mobile long distance call to USA costs 4.5 $/3 minutes is relatively high when compared to Egypt (3.3 $/3minutes). Because of the relatively high international tariffs, international bypass (call back) seems to be a revenue issue. With the increased access to global satellite systems more private


sector consumers may be expected to bypass the system under the current tariff regime. This should encourage the telecommunications service providers and the Government to rebalance international charges and promote better regulations. The loss of revenue from high volume commercial users could have important adverse development consequences. Local tariffs are, however reasonable by regional standards but there is a high disparity between local and international tariffs. PTC receives an estimated 25% of gross revenues on outgoing calls; 20% of gross incoming revenues and 49% of all profits for its investment in TeleYemen which suggests that there could be scope for some possible tariff rebalancing in favor of reduced international charges which would help Internet growth and encourage export oriented firms. Internet users in Yemen are the lowest among MENA countries. For each 10,000 Yemenis only 8.2 use the internet. In Egypt 70.9 persons out of 10000 people are using the internet. The highest is in UAE (2820 people).

Table (7): Telephone line density and cost and internet penetration in MENA countries (2000)

Telephone mainlines Mobile international Internet Penetration

MENA Country

No. per 1000 people

Waiting list per 1000 people

Waiting time

(Years)

Local call cost

(US$/3Minutes)

No of mobile phone per

1000 people

Outgoing traffic

(Minutes/Subscriber)

Cost of call to USA

($/3Minutes

Users per

10,000 people

Hosts10,000 people

Yemen 19 159.5 3.8 0.01 2 105 4.5 8.2 0.04 Algeria 57 646 5.4 0.01 3 86 4.7 16.19 0.01 Egypt 86 1300 1.9 0.01 21 34 3.3 70.9 0.83 Iran 149 1203.5 1.2 0.01 15 24 7.7 -- 0.00 Iraq 29 -- -- -- 0 29 0 -- 0.00 Jordan 93 29.7 0.3 0.02 58 275 -- 190.8 1.80 Kuwait 244 0.0 0.0 0.00 249 340 5.4 783.5 16.60 Lebanon 195 -- -- 0.07 212 124 4.5 858 18.12 Libya 108 80 1.2 0.00 7 78 -- 17.80 0.11 Morocco 50 5 0.1 0.07 83 172 4.5 70.50 0.21 Oman 89 -- 0.5 0.07 65 518 -- 354.60 2.4 Palestine -- -- 0.7 0.04 -- -- -- -- -- Qatar 838 73 -- -- 44 -- -- 501.2 0.00 Saudi Arabia 137 927 2.6 0.01 64 324 5.2 92.6 4.11 Syria 103 3026 10 0.02 2 101 20.1 18.5 0.00 Tunisia 90 83.7 0.9 0.02 6 165 -- 104.3 0.11 Turkey 629 -- -- ‐‐ 109 -- -- 728.4 -- UAE 391 0.3 0.0 0.0 548 1102 3.5 2820.5 132 Source: Compiled from various sources: World Bank, Global ICT Dept., and International Telecommunication Union and European Communication Group. -- Not available


Water resources, water supply and sewage6 Yemen suffers from the imbalance between availability of and need for water. The annual average of total rainfall is 6.7 billion m3. The surface water flow in Wadis (valleys) is estimated to be 3.5 billion m3. Rain water is used to irrigate 47% of the cultivated area, while 11% of the cultivated land is spate irrigated. Surface water is either lost by evaporation or by flowing out into the deserts or out to the sea leaving a small amount seeps down, during irrigation to feed lower shallow water sediment in the short term and ground water in the long term. The recoverable water is around 2.5 billion m3 of which surface water is 1.5 billion m3 and the ground water about 1.5 billion m3. The total uses of water, however have risen to 3.4 billion m3 distributed for agriculture (3.1 billion m3 of which Qat consumes 59 million m3) or 89 %. This exceeds the average share of agriculture in MENA by 2% and the world by 22%. Domestic uses reach 238 million m3 (4%), leaving 4% for the use by industry (68 million m3). This explains the depletion of water resource in most water zones and basins resulting in to the fall of the ground water level by an average of one meter per year7 in Taiz, Saada and Abyan as well as in Sanna. The rapid increase in using ground water for irrigation over the last 20 years has led to the fact that, major cities suffer from sever water shortages. The people in the industrial city of Taiz, for example, get water on a few days in the month. The depletion of ground water has led to the deterioration of water quality and rise of its salinity which make the water non-potable or evenly fit for agriculture use. Industrial growth, the expansion of hotels, tourism and other public and private services require the provision of additional water which will make the water shortage one of the most severe and urgent problems facing the development process in Yemen, unless the Government takes urgent measures to preserve the water basins, deal with over cultivation of Qat and introduce efficient methods for irrigation. According to 2004 census, water coverage is 38.7% of the households, of which only 19.9% is provided by public water supply networks. In rural areas the drinking water coverage is 27.9% and 73.7% in urban areas. Frequent cut-off of water is common in major cities. Water supply and sanitation networks are old and damaged leading to a loss of 36% in 2006. Produced water reached 133 million cubic meter of which 67.3% is consumed (89 million cubic meter). Per capita consumption reaches 125 cubic meter/year. Yemen, as such is considered the poorest country in the world in terms of water consumption. The average consumption in the MENA region is 1250 cubic meter/year. According to the Social Statistical Bulletin of the Arab League (table 8), potable water reached about 34% of the rural population and 62% of the population urban cities compared to 27% and 32% in Somalia, respectively and 100% in both rural and urban areas in the United Arab Emirates, Qatar, Lebanon, and Kuwait. Sanitation services are mainly confined to the major urban centers in which 38% of the population is provided with sanitation services, compared to only 19% in rural areas. Yemen is the least country in MENA region to provide sanitation services in rural areas with the exception of Somalia (14%).

6 Data provided by the Ministry of Planning. 7 Ministry of Agriculture


Table (8): Water supply and sewage systems (2004)

Safe water supply (%) Sewage (%) MENA Country Urban

population Rural

population Total Urban

population Rural

population Total

Yemen 62 34 57 38 19 35 Algeria 88 80 85 99 82 92 Bahrain 100 -- -- 100 -- -- Djibouti 100 64 96 85 50 82 Egypt 100 99 98 88 52 73 Iraq 97 50 81 97 61 89 Jordan 99 91 97 94 87 93 Kuwait 100 -- 100 100 -- 100 Lebanon 100 100 100 100 87 98 Libya 72 68 72 97 86 -- Morocco 99 56 81 49 8 34 Oman 76 65 73 97 61 89 Palestine 96 85 93 99 96 99 Qatar 100 100 100 100 100 100 Saudi Arabia 78 64 70 100 -- 99 Syria 98 87 93 99 81 90 Tunisia 100 92 97 80 65 85 UAE 100 100 100 100 95 98 Source: Compiled from various sources: The Arab League: Social Statistics Bulletin(2006) , UNICEF database (2007), The World Bank: International Development Indicators -- Not available

Electricity In 2006, the capacity of the Public Electricity Corporation (PEC) produced 4838 megawatt. Demand on the national grid was 6518 megawatt and 92 megawatt on the independent systems, giving a deficit of 1600 megawatt in the national grid and a surplus of 136 megawatt in the independent systems8. The number of subscribers reached 1203000 in 2006 (27% of total population). Transmission and distribution losses were estimated at 25.1% in 2006, which is the highest among MENA countries (in Egypt for example the loss reaches 18%, Algeria (16%) and Jordan (9%). Electricity shortages and disruptions are identified by interviewees as a major obstacle to the expansion of business. Investors are forced to build and operate their own power stations independently which add additional burden to their production costs. The institutional, technical and financial system of the electricity sector must be a priority for reform, liberalization of tariff, reduction of energy losses, and inviting private investment in power generation.

8 Ministry of Electricity and Ministry of Planning - annual economic report 2006.


7. Economic sectors in Yemen

7.1 Introduction The main economic sectors in Yemen include agriculture, fishing, mining and quarrying, manufacturing and tourism. Based on the statistics of the national accounts (2006) that is shown in table (9) below, Crude oil is the highest contributor to GDP. It contributed 35.07% despite a negative growth rate of 8.26%, followed by agriculture (without Qat) which contributed 6.45% and grew at a positive rate of 6.48% between 2004-06 despite employing 29.8% of national labor force. Qat, however contributed 2.55% and grew at 1%. Manufacturing sector (excluding oil refinery) contributed to GDP by 2.9% and grew at 5.18%, followed by the travel and tourism sector which contributed to GDP by 1.27 at a growth rate of 1.81. Fishing contributed to GDP by 1.15%; recording a negative growth rate of -5.47%. Electricity and water was the least contributor to GDP (0.73%) but recorded the highest growth rate (6.5%) among all sectors. Table (9): Gross output, Gross Domestic Product and employment for economic sectors in Yemen (2006)

Gross output

GDP

Employment

Value(At current prices,

mil. riyals)

Contribution to Gross Output

(%)

Value (at current

prices, mil Riyals)

Contribution to GDP (%)

Growth rate

(2004-06) (%)

No % of

national employment

Agriculture (without Qat) 464468 7.11 242630 6.45 6.48

Agriculture

Qat 199390 3.05 95829 2.55 1

1,060,000 29.8

Fishing Fishing 52268 0.80 43069 1.15 -5.47 430,000 12

Crude oil and natural gas extraction

1665399 25.51 1318672 35.07 -8.26

Mining and quarrying

Mining and quarrying (excluding oil)

4470 0.07 3353 0.09 6.73

18,000 0.5

Manufacturing (excluding oil refining)

756876 11.59 274249 2.29 5.18 Manufacturing

oil refining 585089 8.96 17462 0.46 1.81

210,000 5.9

Tourism Restaurant and hotels 89384 1.37 47900 1.27 2.6 80,000 2.3

Electricity and water 88745 1.36 0.73 6.5 17,000 0.5

Source: The Central Statistical Organization (2006)


7.2 Economic sectors Agriculture Yemen enjoys topographical variations that give rise to a wide range climatic condition in the fertile high land plateau and the desert in the eastern part with a range of Wadies. Yemen has, therefore, ideal conditions for growing a variety of both tropical and temperate zone crops in the different climate zones (hot and humid on the coastal strip, moderate in the high lands and hot and dry in the desert region) and different soil characteristics. Thus, in Yemen a wide range of products with staggered peak seasons in different production regions can be produced. Yemen is divided into four agro-ecological zones: the Highlands (44% of cultivated area and 61% of the farms), the Eastern Plateau (26% of the area, 19% of the farms), the Tihama (26% of the area, 10% of the farmers) and the Coastal Area (Gulf of Aden, with 4% of the area, 10% of the farms). About two thirds of cultivable land is currently under cultivation. Again, slightly less than two-thirds of cultivated land is cropped by cereals, 15% by fruits and vegetables, 10% by livestock grass and 9% by the Qat trees. About 53% of cultivated area is rain-fed, 30% is irrigated by ground water and streams and spate irrigation irrigate the rest. Between 2003–06, agriculture production (without Qat) grew by -2.5% due to the replacement of cash crops by Qat which grew by 3.9%. The livestock sector represents about a quarter of agriculture value-added and grew by an average rate of 20% during the same period. In 2006, Qat contributed 3% of GDP, 28.7% of total agricultural value-added, and absorbed about a quarter of agricultural work-force and created a tenth of household income. It is exclusively cultivated in the Highlands (73% of total Qat cultivations and 75% of cash crop area in the zone) and in the Eastern Plateau. Although Qat covers 9% of total cultivated area, its plantation is increasing rapidly (36% rise over cultivated area in 2005), particularly in Sana'a, Ibb, Hajjah and Dhamar governorates. It is more likely that Qat cultivation will continue to increase because it is more profitable in comparison with other crops under the same conditions and given the rise in the demand for Qat consumption. This will in turn exert more pressure on limited ground-water resources and increase rates of displacement of other crops such as grapes, coffee and cereals. Limited water resources are the major constraint for expansion in agricultural production in Yemen. Between 1970 and 2006, irrigated agriculture had tripled from 210,000 hectare to 630,000 hectare. Located within a dry and semi-arid area, Yemen is among the world poorest countries in water resources. Per capita share of recoverable water resources amounts to 137 m3 in comparison with 1,250 m3 for the MENA region, 7,500 m3 world wide, while the water poverty line is estimated at 1,000 m3. Average annual rainfall ranges from 500-800 mm in the highlands, 50-100 mm in the coastal areas and less than 50 mm in eastern governorates. Water sustainability started to worsen in the 1970s with the digging of deep tube wells (about 50,000 wells) for both drinking and agricultural use, subsidization of diesel prices and water and electricity tariffs. These resulted in depletion of groundwater, particularly in basins of western governorates (e.g., Sana'a, Sa'ada and Taiz basins).


Strengths Employs 45.4 % of labor force in Yemen Topographical variations and different climatic zones that allow for producing a wide range

of products with staggered peak seasons in different production areas. Fertile high land plateau and the desert in the eastern part with its range of Wadies. Investment opportunities for nurseries and protected agriculture.

Weaknesses

Fragmented, small and scattered land tenure (73% of tenures is less than one acre and 57% of land owners have more than three plots.

High cost of cultivating an agriculture land (50% of land earnings are absorbed by rent, irrigation and Zakat)

Water scarcity due to depletion of ground water especially in the Western governorates. Half of cultivated area is rain fed and vulnerable to rainfall conditions

Inefficient traditional irrigation system (dominance of traditional flooding despite depletion of existing water in almost all water basins)

Dominant traditional agriculture techniques, using low-quality and low-productivity seeds, limited access to improved suitable varieties.

Substantial yield gap (up to 60% for some crops) Low productivity (due to fragmentation of land holdings, inappropriate inputs and water

scarcity) leading to low labor wages. decline in traditional rain-fed agriculture and livestock systems as a result of rapid growth

of the irrigated sector Weak agriculture credit (availability of agriculture credit falls to $30/hectare) High post harvest losses due to poor harvesting techniques (rough handling, poor packaging

and poor transport networks. High packaging, transportation and freight cost for exporting agriculture produce Lack of quality control undermines competitiveness of export products. Increasing plantation of Qat: Qat production (44% of the total value of agriculture

production) replaces cash crops, especially coffee, that have high value added for industrial processing and export. Qat production heavily consumes water. Farmers resort to illegal digging of wells; contributing to the depletion of water.

Despite reputed Yemeni honey and coffee, the quality does not meet world standards. Inefficient soil management and production techniques Low product price and high cultivation cost Shortages of extension services No Pest control No organized marketing and Lack of coordination between production and marketing Lack of business information on domestic and foreign markets Low investment Inefficient air transport of perishable food products Weak farmer organizations No diversified marketing and export destinations (95% of agriculture exports go to Saudi

Arabia). Need to target other regional and international markets high prices on niche markets and lack of quality controls which hamper competitiveness of

agricultural exports


deterioration of the upper catchments which have been neglected by past infrastructure projects leading to degradation of age-old systems of terracing and water harvesting

High population growth and rapid urbanization Opportunities

Yemen has a name recognition as a coffee and honey producer Government policy to protect local production

Threats

Urbanization and building on agriculture land Weak institutional implementation of existing policies and regulations supporting the

production of high value cash crops No production strategy or targets even for Yemen strategic products (coffee, honey, dates,

mango and other fruits). No incentives to facilitate high value products for processing and exporting Competition from foreign imports

Fishery Yemen is endowed with rich fish resources including surface and deep-water fish. The most valuable fish stock is rock lobster, cuttlefish, shrimp and bottom-dwelling species. Due to the use of intensive labor in typical fishing activities, the availability of warm waters throughout the year, and the nutrient rich upwelling systems, fisheries are considered among the most promising sectors for job creation, income generation and export potentials. The long coastal strip -extending over 2,000 km- the widespread islands and territorial waters in the Red and Arabian seas and the Gulf of Aden, provide significant fisheries resources and various forms of marine life that will enable the sector to contribute effectively to the implementation of the food security strategy of Yemen The status of fisheries resources is unknown because of the absence of proper scientific research and lack of reliable statistics, especially for the stocks facing over-exploitation. Since 1991, no dependable fish landing statistics have been collected (especially for the small-scale fleet) and no reliable resource surveys, stock assessment and catch statistics are available. The current system of licensing is not based on reliable knowledge of standing stocks and, therefore, it may be dangerously contributing to the over-exploitation of the fish stocks. Although there is little disagreement between local and foreign scientists about the heavy exploitation of fish stocks, disagreement exists about the impact of current fishing levels on resources and the level of risk of stock collapses. Similarly, views differ about the desirability of the current licensing regime and its objectives. It is difficult to assess the political benefits of the existing bilateral agreements against their potential negative impact on small-scale fisheries. However, the concerns expressed by local and foreign scientists and fishery specialists about the state of the stocks should be taken very seriously. Fish resources are heavily over-exploited by foreign licensed and unlicensed industrial fleets operating from the industrial fishing port in Aden, with limited control over its operations. There is a need to undertake stock evaluation study in order to reassess the feasibility of current licensing schemes in light of the study.


Strengths

Employs 12% of the national labor force. 2000 km of costal line, Varied and huge fish resources with exceptional good quality World wide the demand for food, including fish, is increasing, while the supply potential is

declining. The price of fish on the international market id increasing. Relative to other sectors, it might be easier to attract foreign investors in the fishery

business. There are adequate locations and good potential for aquaculture / fish farming.

Weaknesses

Poor fish resource management Weak institutional and physical infrastructure Lack of effective quality control Limited fishermen education and training, nor fishery related extension activities Poor performance of the related institutions Inappropriate technology (using gillnets instead of lobster traps in catching lobsters,

gillnets instead of long-lines for shark fishery) Inadequate methods of handling catches at sea (small fishing boats not equipped with

coolers / preservation units and no cooling facilities) and during landing and transportation. Poor processing methods and facilities (i.e., modern techniques reducing post-harvest losses

and enhance the marketability of fishery products are not being used) Inappropriate fish landing infrastructure and weak basic services and bad practices in most

parts of the handling, auctioning, transportation and processing chain (fish landing sites, auction areas, cold chains, transport and feeder roads)

Lack of basic services (e.g. water, wastewater, hygiene conditions and electricity) Weak transportation networks and lack of direct transport links No cooling and storage facilities at the respective airports Lack of reliable sectoral data and research capacity Dominant position of large-scale commercial fishing (biased market negotiation High cost of electricity compared with power self-generation Inefficient coast guards service Poorly organized fishermen associations as service and self-help organizations to improve

the performance of the members regarding operations, financing and marketing. Lack of basic data, statistics and resources in the fishery sector Current licensing is not based on reliable statistics of standing stocks

Opportunities

Increasing on-shore facilities by fishermen associations Government plans to build new fishing ports Government plans to establish a maritime planning Institute

Threats

Lack of national fishery resource management planning. Weak regulation enforcement of encourages unsustainable fishing practices of over fishing


Lack of code of practice and instructions on handling fishery products Local governments are not able to monitor and enforce quality control Degradation of coastal environment Foreign fishing in regional waters mostly operating for the industrial fishing port of Aden,

with limited control over its operations Modest local fish processing capacity Limited financing mechanisms for fishermen Lack of onshore security No national marketing strategy for fish products Ineffective fisheries surveillance, monitoring and control (SMC) capacity and a strategy for

its implementation Mining and quarrying Yemen is endowed with rich and diversified geological resources. Yemen’s unique geological setting provides oil resources, varieties of minerals and industrial stones. . The high Yemen Plateau with volcanic rock and the eastern desert where rock is mostly sedimentary and affected by pressure from the Arabian Plate movement provide a good mixture of various types of rock for use as building stone, in addition to rich metallic ores such as gold, silver, iron ore, zinc, nickel, lead, copper, tantalum. This mineral potential has not yet been exploited effectively. No major mining operations are actively exploring nor exploiting such opportunities. Despite abundant resources of rock that can be utilized as building material, there have been limited exploitation of Yemeni stone that is rich in color and texture. Such building stones however have been traditionally used for the construction of houses and buildings. Exporting, however, has been a limited activity. Overall, the natural resources are unexploited due to limited small scale investments. Crude petroleum and natural gas Yemen is a small player in the oil market with small proven reserves and production levels. In 1970s, serious exploration work started. About 18 agreements were signed with oil companies for exploration and production. Actual oil production started in the mid-1980s. Currently .there are six producing blocks in Yemen (Shabwah, Marib, Masila, Jannah, Ayad and Hawarim). By the end of 2000, Yemen's remaining recoverable reserves stood at 2.8 billion barrels. Since 2002, oil production has been declining by 12.5% annually, reaching 415000 barrel/day in 2006 but losing about a quarter of its output over the last six years because some oil fields started to dry up. Meanwhile, exports of crude oil witnessed an even sharper drop of about 17% since 2004 due to the increased diversion of crude for domestic refinery needs. The gas sector in Yemen is estimated to have reserves of about 12-15 trillion cubic feet. Currently, about 95% of the produced gas is re-injected into the ground because of the delay in the Natural Gas Export project. The inability to find external markets is one of the most significant problems facing the development and improvement of the gas sector, especially in light of strong competition from affluent countries in the Gulf and the scarce financing resources available for Yemen's gas export projects. However, gas production for domestic use is expected to increase, particularly for the Marib power station. Currently, domestic consumption is met with about 30,000 b/d equivalent of liquefied natural gas (LNG) from the Marib block. In addition to the importance of gas as a clean


source of energy, it can also be an important source of foreign currencies if Yemen manages to export it. Gas can also be an essential input for a number of petrochemical applications and industries. Strengths

Exploration companies and areas for exploration are increasing The world wide demand for energy, especially from the emerging economies in China and

India is increasing. The prices on the international markets are increasing Multinational companies are searching for any opportunity to expand their businesses.

Weaknesses

So far, concentration of oil exports to Asian markets Small proven oil reserves and production levels as well as considerable depletion rate. The infrastructure for the production and export of gas requires huge financial resources. Difficulties in securing markets for the sale of gas Yemeni capacities (personnel, know-how and capital) for exploration and production of oil

and gas are still rather weak. Opportunities

Mining law is undergoing revision to follow international best practices. Stable and predictable taxation and royalty structure for oil and gas sub-sector

Threats

Competition from regional rich gulf countries with developed infrastructure Lack of local capacity for survey and exploration Dominance of foreign oil companies in exploration and production Security concerns affect negatively foreign investments and production level Media reports on the security situation in Yemen lead to a negative image of Yemen as a

location for foreign investments. Mining of metallic (metal ores) Recent surveying, exploring and excavating for minerals have led to the discovery of promising reserves such as gold in Hajjah, platinum in Amran, titanium in Abyan, Strengths

The Geological Survey and Mineral Resources Board (GSMRB) has highly qualified staff who are able to improve its services and openness to foreign investors

Large reserve of zinc, lead and silver Large reserve of heavy metals Primary exploration data of GSMRB shows the high potential of mineral deposits,

particularly gold, lead, copper, silver and Zinc The first mining exploitation company will start production of Zinc by end of 2009 which is

expected to attract other investments


Weaknesses Lack of skilled manpower for mining operations Lack of knowledge and application of efficient technology in the mining sector Lack of organizational and institutional support to GSMRB required to efficiently facilitate

services and promotion of investment. Opportunities

Availability of metallic resources that have increasing demand on the world market No intervention by the state in operations

Threats

Unorganized sector that lacks active functional association and lobbying Limited security for mining operations due to disputes in property rights, unclear land

ownership, ambiguity of laws and regulations. Non-metal (natural rock) / building stone mining and quarrying Yemen also has important reserves such as limestone, gypsum, marble, rock salt, granite stone and basalt as shown in the following table (10).

Table (10): Reserves of non-metallic natural rock ( 2006) Raw material Reserves No of locations

Lime Stone and Dolomite 3.5 milliard m3 50 Gypsum 391 million ton 15 Marble 1 billion m3 16

Bio-mass 34.5 million rn3 6 Volcanic Glass Berlet 35 million m3 6

Granite 1.6 million m3 50 Tuff 350 million m3 50 Building stones Basalt 121 million m3 16

Rock 365 million ton 9 Silica 13 million m3 35 Source: GSMRB (2007)

In 2006, Yemen production reached 8.5 mil tons, higher than Egypt (3.2 mill Tons) and Turkey (3.5 mill tons). Between 2003 and 2006, the mining and quarry sector witnessed an average yearly growth rate of 6.2 % per year, leading to the increase in its contribution in GDP from 6.5% in 2003 to 7.3% in 2006. Strengths

Large deposits of industrial rocks that are located in closer locations to sea ports. Availability of required material for cement industry (quality limestone) in close locations

allow for lower cost of processing. Weaknesses

Lack of quarrying and operations skills


Limited investments in the sector Poor transportation network to link productive areas to sea ports and other outlets High cost of transportation (roads are not technically constructed according to the needs

of heavy load trucks which increases the travel time and cost (in European conditions, travel time of a truck is calculated by 1.5-2 times when compared with a normal car. In Yemen 5-8 times according to drivers)

Lack of infrastructure (railways to reduce transportation cost, Jetties (Lessan Bahry) for exporting products)

Lack of technical support and training for producers Inefficient production due to outdated technology and equipments leading to increased

waste of production (80 – 90 %) and high capital investment cost for modern and efficient equipment.

Lack of information on the availability, location, quality etc. of the resources and about the sector in general.

Private businesses’ inability to access export markets. Opportunities

High potential for export and job creation Unexploited metal and non-metal resources Available industrial rocks dimension and ornamental stones with unique colors, technical

property, chemical structure and physical specifications that meet international standards and provide opportunities for international marketing.

Available building stones have high value added potential Investment opportunities in lightweight concrete and brick industry (exploiting scoria

deposits), ceramic industry (feldspar), glass industry (pure sand) gypsum and gypsum plate (gypsum deposits), magnesium carbonate industry (magnesium deposits) and salt refineries (salt rock deposits)

A new updated mining and quarry law that meets international standards has been formulated awaiting approval and enforcement by next year

Threats

Ambiguity of laws and regulations with regard to land ownership and utilization of natural resources

Unfavorable taxation International dumping due to lack of protection measures The sector not targeted and supported by national institutions as well as international aid

organizations despite its high potential for export and job creation (Stone industrial sector is compared with the metallic mining).

Limited security for mining operations due to disputes in property rights due to tribal conflicts over land resources

Ambiguity of land ownership leading to serious security concerns in areas when accessing deposits leading to high security cost in developing quarries


Manufacturing Manufacturing sector activities and investments are self-financed by family and private ownership. Its value added to input is very low (40%). It contributed only one-third of industrial valued-added (9% of GDP) and 9.9% of Yemen’s real GDP in 2006. The growth prospects of the sector in Yemen are limited by lack of finance and by dependence on imported goods for 99% of its inputs. According to the establishment survey (2004), the sector includes 41544 establishments in the following sub-sectors:

Food processing Textiles, clothing and leather Wooden and furniture Miscellaneous metal products Non-metallic (construction) Paper and printing Machinery and equipment Chemicals and plastic Oil refinery

Of these establishments, 85.45% are classified as micro enterprises (1-4 workers), 9% small (5-9 workers, 2.03% medium-scale (10-24 workers or more) and 0.66% of large firms (25 workers or more) in addition to 2.86% of not specified firms. Ownership is concentrated in private hands, with the Government having full ownership of 100 large enterprises (36.6%). Other large firms are owned by conglomerates of established families. The sector is characterized also by high degree of industrial and geographical concentration. Manufacturing activities are concentrated in a few governorates. 19% of all manufacturing establishments are located in Sana'a, followed by Taiz (14%), Ibb (11%), Hadramout (8%), Dammar (7%), and Hodieda (7%). These six governorates and hosted more than 66% of total manufacturing establishments in Yemen. In terms of industrial output, more than half of all manufacturing establishments are involved in food processing producing food products (mainly flour and cooking oil) and beverages. This was followed by textiles, clothing and leather (13%), woodwork and furniture (12%), nonmetallic construction manufacturing (10%) and metal products. With regard to ownership of establishments, 99% of all manufacturing (and 67% of large) establishments were owned by private Yemeni citizens, 0.4% by the public sector (19% of large establishments), 0.3% by cooperatives, 0.4% were joint ventures and only 0.1% were owned by foreigners. Strengths

Lower wage rates than the rest of the region. and comparable to that of South East Asian countries

Natural resource intensive With the availability of sand and clinker as the two essential ingredients in cement

industry, Yemen has the opportunity in large scale manufacturing of cement Yemen has evidence of granite and marble which justify large scale manufacturing and

supply potential With lower wage rates, shorter training period to develop a skilled worker (about 3

months), location, port advantage, deep trading experience and significant shipment


activities, the labor-intensive garment, apparel, leather goods, footwear and sown goods can be poised for rapid growth using domestic cottons, raw skin and imported fabrics, yarns and processed leather

Weaknesses

Small family firms rarely develop into large businesses Limited supplier base (dependence on imports for most raw materials) Limited industrial base (small scale sized establishments) Poor management and weak governance Low productivity due to lack of technical and professional staff Unskilled labor and high cost of foreign workers Confined to production of consumer goods and construction materials. No diversified

products Inability to identify markets Insecurity and un-forceability of contracts High production cost due to poor infrastructure (e.g., electricity supply, water and sewage) High transportation cost due to weak networks, poor roads and monopolies in the

transportation sub-sector Low perception of Yemeni products by the Yemeni people as compared to the imported

products. Ineffective private sector institutions and weak coordination with government

Opportunities

Opportunity for natural-resource intensive product processing (of fruits and vegetables, coffee, fish and cement) that can benefit from locating in a port-based industrial enclave (such as Hudeida) as well as meeting growing local demand

Improved transport links, the Saudi border agreement, opportunities exist for strategic alliances in food processing.

Threats

Lack of business support and advisory services Tightening legal, regulatory and infrastructure constraints Red-tape in operating and set-up a business High tax rates Corrupt payments increase production cost Burdensome levies (cumulative value added) Continued unfair competition, smuggling and dumping Growing informal sector with inability to modernize Limited investment finance, insufficient access to credit and high interest charges High uncertainty


Travel and tourism Yemen is known as “the jewel of Arabia”. Its unexploited extensive resources and attractive natural characteristics support various tourism products that meet a growing world demand. Yemen's potential in cultural, historical, environmental aestivation, coastal and island tourism in addition to mountain climbing and desert scouting is significant. In fact, tourism sector is one of the leading and promising sectors for its ability to provide job opportunities, to contribute to poverty reduction and earning foreign currencies. Tapping the identified potentials in the sector requires however concerted efforts by the authorities to address a number of constraints that faces tourism, and international vacation tourism in particular including:

Poor and expensive transportation Difficult operating environment for tourism, Lack of promotion activities Insecurity The challenges of preserving cultural heritage.

Air accessibility to Yemen is, in addition, limited and international and domestic airfares are high compared to other tourism destinations. Although Yemen's international vacation tourism clientele may be less price sensitive, because it comprises mainly relatively rich cultural and adventure tourists rather than mass tourists, its expansion requires a reassessment of present air policies. According to the annual economic report published by Ministry of Planning and International Cooperation (2006), the contribution of tourism to GDP in Yemen has been insignificant (1.8%). The actual contribution of tourism may have been slightly underestimated in the national accounts because the impact of the sector is measured by the contribution of hotels and restaurants only. Following the drop in the value-added of the sub-sector in 1994 by 12%, value added of hotels and restaurants increased by an average of 9% annually during 1995-2006. Nonetheless, the contribution of the sub-sector into GDP growth remained negligible. Estimated GDP contribution of travel and tourism is 1.7% with hotels and restaurants contribution to GDP by only 0.7%. The potential for Travel and Tourism in Yemen should be recognized. It attracts foreign currency while providing employment opportunities and lowering unemployment. It contributes also to diversifying and growing the national economy. Thus, tourism-friendly strategies aiming at improving border facilities, airport and surface transport infrastructure, human resources development coupled with destination marketing and promotion campaigns targeting new world untapped markets in Asia and parts of Europe in parallel with the promotion of private and public investments in tourism-related infrastructure including accommodation, transportation, theme parks, and resorts as well as air transport infrastructure are essential for enhancing the competitiveness in Yemen against competitor countries in the region. Strengths

Second employer of labor force after agriculture (12.4%) Name recognition for Yemen history, its extensive resources and attractive natural

characteristics supporting various tourism products that meet growing world demand.


Generate labor intensive source of employment Growing summer vacationers of Yemeni origin and visitors from Gulf countries Growing opportunities for investment

Weaknesses

Limited training and education facilities in tourism Low quality of existing accommodation and tourist facilities Few international standard hotels Limited hotel room capacity Limited recreation facilities Limited resort complexes at beach locations Limited air accessibility to Yemen Very limited hygiene dining facilities (restaurants and cafés) Poor transport facilities and infrastructure (land, air and marine) Weak tourist facilities at most tourist attractions Still low investments in tourism Very weak promotion and marketing efforts

Opportunities

High potential for growth Yemen is positioned to combine cultural and eco-tourism with beach tourism Yemen is positioned to be part of regional circuits combing its cultural and eco-tourism

product with recreational or beach tourism in UAE, Oman and Djibouti Increasing tourism movement worldwide

Threats

Hostile investment environment (investors can not invest unless they associate with local partners who often have no financial capacity

Limited government support Security threats (kidnapping) High level tourism projects require the recruitment of foreigners. Considering the high

unemployment rate among the Yemenis might force the government to force the investors to employ Yemenis, resulting in low quality services and declining of tourism.


8. Identification of promising economic sectors

The existing market positions of Yemen rely on factors unrelated to microeconomic competitiveness. Those factors include: a strategic location that allow accessibility to major international markets, low cost of labor, natural resource endowments and natural tourist resources. As such, Yemen has huge potential in all sectors analyzed above except for the oil and gas sectors. As mentioned above, there is low proven oil reserve (2.8 billion barrels) with considerable depletion rate and difficulty to project oil production from both existing fields and new ones. Gas proven reserve is only estimated at 12-15 billion cubic feet9. Oil exports are concentrated in limited markets (Asian markets). Exporting of gas requires huge capital investments and faces heavy competition from regional rich gulf countries with developed infrastructure. Security concerns, on the other hand impact production level and limit foreign investments in both sectors. Due to lack of local capacity for survey and exploration, foreign oil companies are dominant in both exploration and production. Promising sectors include:

Infrastructure Education and training Health Land transport infrastructure Electricity Water and waste water

Agriculture Biological farming High water conservation farming methods Arabica coffee Honey

Fishery Mining and quarrying

Mining and quarrying metallic (metal ores) Mining and quarrying non-metallic (natural rock) / building stones Large scale manufacturing of cement

Tourism and eco-tourism Manufacturing

Fish processing Food processing Intensive semi-skilled labor manufacturing activities (garment, apparel, leather goods,

footwear and sown goods) Yemen comparative advantage in terms of human resources, natural resources and strategic location are described below. For each sector, the sector potential and major constrains are outlined followed by its comparative advantage. To define the competitive advantage and differentiate each sector from competitors, a unique selling proposition is formulated. The investment promotional measures as well as potential sub-sectors are included emphasizing Yemen’s comparative and

9 Ministry of Oil and Mineral Resources


competitive advantages in terms of natural resources, human resources, the strategic location and accessibility to major international markets to show investment opportunities for each sector / sub-sector. Finally recent trends to improve the sector competitiveness are clarified. Human resources and physical infrastructure Potential: Driver to all economic sectors

Strategic location in the international shipping networks with a new container port (Aden) and work underway in other seaports

International airports (6) and additional 8 operating There is a scope to increase and improve asphalt roads There is a scope for improving and increasing communication services

Major constraints:

Education Poor quality of basic and secondary education (inadequate school buildings, low qualification of teachers, shortage of teaching and learning materials and weak community involvement)

Limited and unevenly distributed number of technical institutes and vocational training centers and poor linkages with the labor market and private sector.

Higher education does not match the labor market needs and has a limited role to serve the community (dominance of theoretical fields and humanities over applied science, technical specialization and research)

Health Low health service coverage and poor quality due to insufficient human and financial resources

Road transport Weak inadequate roads network (e.g. inconsistent technical specifications and standards, enforcement offload limits)

Lack of regular maintenance Monopoly of transport offices (ferza) Unsustainable trucking industry Poorly qualified transport intermediary service

Air transport Air freight availability is limited to one airline (YEMENIA) Inefficient air transport f perishable food products High cost of air freight Weak infrastructure cooling and storage facilities for exports

Maritime transport Limited number of regular and direct maritime services to and from Yemen Shipping lines provide long transit times with numerous port calls High cost of handling container trans-shipment in sea ports due to limited number of regular shipping lines

Weak infrastructure cooling and storage facilities for exports Telecommunication High cost of communication services (e.g. internet, mobile phone)


Concentration of communication in urban areas Low penetration

Water and sanitation Imbalance between high population growth and the scarce water resources (due to over-exploitation of ground water) leading to growing annual water deficit exceeding one billion m3.

Inadequate access to safe water due to low coverage of water supply and sanitation services, especially in rural areas

Electricity Growing electricity deficit and energy losses leading to growing electricity shortages and disruptions to the manufacturing sector and other private sector institutions

Weak institutional, technical nd management capacity

Comparative disadvantages:

Yemen lacks the key drivers for economic sectoral development and social progress which affects the proper exploitation of Yemen natural resources and achieving economic growth. Increasing production and productivity faces the challenges of globalization, competition and keeping pace with qualitative transformation in science, research and technology. Education and training, health conditions of the labor force and efficient physical infrastructure are linked to all economic sectors.

Unique selling proposition:

Building social capital and infrastructure sustains Yemen economic growth

Investment promotion measures:

Promote public/private partnerships (e.g. infrastructure services provision by schemes such as BOT, BOO etc.)

Promote privatization of public enterprises (transport and communication sectors)

Promising sub-sectors: Education

Private training and education institutions with updated curriculum to motivate students to join applied research and technical specialization)

Health Health care facilities operating to provide quality primary and advanced health care services, provide pre-service staff training in all governorates and districts

Road transport Pubic private partnership in road transport related projects (Completion and maintenance of existing mountain roads and construction of a new mountain road)

Air Transport and air cargo Air cargo handling infrastructure Open operation of the airport to new competitors to encourage competition to provide better services and reduce airport-related fees

Maritime Transport


Shipping services (e.g. cargo handling and forwarding agencies) Ship maintenance and repairs

Telecommunication Promote private provision of telecommunication infrastructure and related services

Water and sanitation Private investments and pubic private partnership in water resource related projects adopting appropriate technologies and protecting the water resource and its quality

Electricity Electricity generation and distribution infrastructure related private sector projects

Agriculture Potential: Proximity to the Gulf markets

Topographical variation and varied weather conditions allowing wide range of products with staggered peak seasons in different production regions.

Unutilized land resource (one third) and two third under cultivated Potential for increasing productivity when using appropriate farm management techniques

Name recognition / famous varieties of crops (Arabica coffee and honey)

Major constraints:

Fragmented, small and scattered land tenure (73% of tenures is less than one acre and 57% of land owners have more than three plots.

Water scarcity due to depletion of ground water especially in the Western governorates. Half of cultivated area is rain fed and vulnerable to rainfall conditions

Inefficient traditional irrigation system (dominance of traditional flooding despite depletion of existing water in almost all water basins)

Dominant traditional agriculture techniques using inappropriate-quality seeds with limited access to improved suitable varieties.

Substantial yield gap (up to 60% for some crops) Low productivity (due to fragmentation of land holdings, inappropriate inputs and water scarcity) leading to low labor wages.

Weak agriculture credit (availability of agriculture credit falls to $30/hectare)

High post harvest losses due to poor harvesting techniques (rough handling, poor packaging and poor transport networks.

High packaging, transportation and freight cost for exporting agriculture produce

Lack of quality control undermines competitiveness of export products.


Increasing plantation of Qat Qat farming threatens coffee production as farmers shift from coffee to the more profitable Qat production.

Despite reputed Yemeni honey and coffee, the quality does not meet the requirements of world standards.

No organized marketing and Lack of coordination between production and marketing

Lack of business information on domestic and foreign markets Inefficient air transport of perishable food products High population growth and rapid urbanization No production strategy or targets even for Yemen strategic products (coffee, honey, dates, mango and olives)

No incentives to facilitate high value products for processing and exporting

Comparative advantage:

With the topographical variation, varied climate (hot and humid on the coastal strip, moderate in the high lands and hot and dry in the desert region )in the fertile high land plateau and the desert in the eastern part and long production season, Yemen is an ideal location for growing a variety of both tropical and temperate zone crops with staggered peak seasons in different production regions. With limited water resources that require high water conservation farming methods and raising productivity to conserve water, there still a chance to focus on high value organic farming using more modern and efficient irrigation methods in order to exploit the variety of both the tropical and temperate zone.


Unique topographical variation, varied climatic conditions, varied products with staggered peak seasons.


Promotion of non-farm activities and rain-fed crops Promoting the adoption of terrace rehabilitation and watershed and range management

Promotion of commercialized agriculture, veterinary extension services and seed producing plantations

Promote introducing efficient post harvest techniques and facilities

Promising sub-sectors:

Traditional coffee sub-sector with improved modern farm systems. Traditional honey sub-sector with efficient extension and support services

Olives and cereal sub-sectors (rain-fed/drought resistant cultivations competitive to Qat)

Fruits and vegetables sub-sector introducing (e.g. mango and date palm) with provision of improved irrigation management and extension services.

Livestock production with improved husbandry, cross breeding and improved range management.


Rural road rehabilitation and management Private agriculture and veterinary extension services Seed producing plantations

Fishery Potential: Estimated high fish reserves with rich fish resources including surface

and deep-water fish. High value marketable fish stocks

Demurral species (grouper, emperor, snapper and sea bream) Large and small Pelagic species (yellow fin tuna, skipjack tuna, kingfish, Sardines, anchovies

Cuttlefish Shrimp and spiny rock lobster

Warm waters throughout the year Promising fish production from aquaculture and Mari culture

Major constraints:

Limited fishermen education and training, nor fishery related extension activities

Inappropriate technology (using gillnets instead of lobster traps in catching lobsters, gillnets instead of long-lines for shark fishery)

Inefficiency and onshore methods of handling catches at sea (small fishing boats not equipped with coolers / preservation units and no cooling facilities)

Poor processing infrastructure (i.e., modern techniques reducing post-harvest losses and enhance the marketability of fishery products)

Inappropriate fish landing infrastructure and basic services in most areas(fish landing sites, auction areas, cold chains, transport and feeder roads)

Lack of basic services (e.g. water, wastewater, hygiene conditions and electricity)

Weak transportation networks and lack of direct transport links Unreliable and inadequate utility supply (electricity current which oscillates intensely causing extensive damage to any connected equipments)

Dominant position of large-scale commercial fishing (biased market negotiation

High cost of electricity compared with power self-generation) Inefficient coast guards service Poorly organized fishermen associations as service organizations aims to improve quality of members produce and marketing

Poor fish marketing and transportation difficulties (inadequate cooling and storage facilities)

Lack of support and aquaculture development.


Lack of reliable sectoral data and research capacity (basic data, statistics and resources in the fishery sector)

Current licensing is not based on reliable statistics of standing stocks No stock updated stock assessment in order to review the feasibility of current licensing schemes in light of the study


Yemen’s natural and location advantage is high. Yemen’s coastal line is extending 2500 kilometer from the Yemeni-Omani border in the Arabian Sea to the Yemeni-Saudi border in the Red Sea with the Gulf of Aden. Yemen also has the coastlines of many islands scattered in its territorial waters. With the southwest monsoon winds during summer, Yemen’s territorial waters are rich with large commercially valuable fish resources of an exceptional quality in a relatively clean environment away from pollution.


Varied strategic coastal locations, valuable fish resources


Support providing assistance to small scale fisheries to improve fishery resource management

Support the commercialization of basic services and removing the constraints to private sector provision.

Support reviewing and revising the legislation, procedures and regulations related to traditional and commercial fishing.


Fish processing sub-sector producing high value added products with improved quality to access world exporting markets (e.g. EU and Gulf markets)

Coastal infrastructure supporting fishery (e.g. core fishing ports, fish landing areas, feeder roads and airport related facilities.

Basic services and facilities (cold storage, transportation and marine control and inspection)

Business development services (e.g. quality control laboratories, and auction services)

Mining and quarrying Potential: Promising reserves of gold, platinum, titanium

Promising non-metallic / natural rock reserves of (industrial rocks, dimension and ornamental stones with unique colors, technical property, chemical structure and physical specifications that meet international standards and provides opportunities for international marketing


Major constraints:

Lack of quarrying and operations skills Poor transportation network to link productive areas to sea ports and other outlets

High cost of transportation (roads are not technically constructed according to the needs of heavy load trucks which increases the travel time and cost (in European conditions, travel time of a truck is calculated by 1.5-2 times when compared with a normal car. In Yemen 5-8 times according to drivers)

Lack of infrastructure (railways to reduce transportation cost, Jetties (Lessan Bahry) for exporting products)

Lack of industrial zones (with electricity and other facilities) Lack of technical support and training for producers Inefficient production due to outdated technology and equipments leading to increased waste of production (80 – 90 %) and high capital investment cost

Lack of information and studies profiling small industries in the sector and exploration studies

private businesses’ inability to access export markets and deposit information;

Ambiguity of laws and regulations with regard to land ownership and utilization of natural resources

Unfavorable taxation International dumping due to lack of protection measures The sector not targeted and supported by national institutions as well as international aid organizations despite its high potential for export and job creation (Stone industrial sector is compared with the metallic mining).

The regulatory Authority (GSMRB) needs institutional support. Weak promotion of the industry. Limited security for mining operations due to disputes in property rights due to tribal conflicts over land resources

Ambiguity of land ownership leading to serious security concerns in areas when accessing deposits leading to high security cost in developing quarries


Under exploited rich and diverse variety of building and ornamental stone with physical and mechanical characteristics and quality (in terms of physical function and ornamental features comparable to other stone internationally distributed in the world market.

Low labor cost


Diverse stones with unique colors, physical function and ornamental features. Competitive wage rates



Promote investment opportunities in the building stone sub-sector (particularly FDI) in industrial rocks, dimension and ornamental stones.

Implement an intensive promotional program on investment opportunities in the mining sector.

Promote establishing rail networks (e.g. linking mineral reserves with sea ports.

Promote infrastructure projects aiming to improve extraction, exploitation, exploitation and transport in areas of promising reserves of mineral resources

Support reviewing and upgrading the legislative and institutional framework for regulating the exploration and exploitation of mining resources.

Support reforming the legal and judicial systems and strengthening enforcement of their rules.


Promote investment in industrial rocks, dimension and ornamental stones, particularly FDI

Cement industry Manufacturing Potential: Strategic transit location between South East Asia, the Gulf, Africa

and Europe port advantage and significant shipment activities Larger population and wider local market than Gulf countries Availability of abundance of raw materials (agricultural crops and fruits, fish and minerals

Availability of labor and lower wage rates Long trading experience Establishment of Aden free zone Underutilization of export potential

Major constraints:

Small family firms rarely develop into large businesses Limited supplier base (dependence on imports for most raw materials) Limited industrial base (small scale sized establishments) Low productivity due to lack of technical and professional staff Unskilled labor and high cost of foreign workers Confined to production of consumer goods and construction materials. No diversified products

Inability to identify markets Insecurity and un-forceability of contracts High production cost due to poor infrastructure (e.g., electricity supply, water and sewage)


High transportation cost due to weak networks, poor roads and monopolies in the transportation sub-sector

Low perception of Yemeni products as compared to the Saudi and Europeans

Ineffective private sector institutions and weak coordination with government

Inadequate infrastructure, especially electricity services and roads (even in industrial areas in Sana’a and Huddieda)

Lack of business support and advisory services Tightening legal, regulatory and infrastructure constraints Red-tape in operating and set-up a business High tax rates Corrupt payments increase production cost Burdensome levies (cumulative value added) Continued unfair competition, smuggling and dumping Growing informal sector with inability to modernize Limited investment finance, insufficient access to credit and high interest charges


Despite being a natural resource rich country, Yemen has limited comparative advantage in manufacturing. It has nascent (**??**) industrial base. Wage rates are competitive by regional standards but availability of skilled labor is low. Weak Industrial infrastructure (shortage of electricity and water) is serious drawback, even in important industrial cities such as Sana’a and Taiz . Yemen is a port-based location and has a port advantage (e.g. Aden as a trans-shipment port) and natural advantage as a costal location that gives the natural resource-based industries / sub-sector the opportunity for growth, particularly in stone manufacturing, fish processing and garment industry


Strategic coastal location, growing resource-based industries, competitive wage rates


Support industrial zones and improve facilities in existing ones Provide higher incentives to labor-intensive industries Attract FDI and promote strategic alliances and joint investment opportunities to enhance technology transfer and ease credit constraints

Promote project finance, leasing and venture capital activities


labor-intensive investments requiring shorter training duration (e.g., garment, apparel, leather goods, footwear and sown goods using domestic cottons, raw skin and imported fabrics, yarns and processed leather

High value added food processing


Tourism Potential: unexploited extensive resources and attractive natural characteristics

support various tourism products including unique UNESCO cultural heritage (historical cities: Sana’a, shibam and zabid)

Diversified landscapes with unique natural environment (Socotra Island)

Mountains in the north, stone village, old sculpted slopes into spectacular terraces

Canyons in the south with its green stretches of farm land surrounded by colored rocky walls and separated by deserted highlands

Mountain villages facing dense of palm grows and inhabited by traditional population

Major constraints

Poor services due to lack of technical and professional hotel management

Lack of necessary infrastructure to attract tourists (accommodation and tourist facilities

Poor transport facilities and infrastructure (land, air and marine) Very limited hygiene dining facilities (restaurants and cafés) Low quality of existing accommodation and tourist facilities Hostile investment environment (investors can not invest unless they associate with local partners who often have no financial capacity due to lack of legal protection and bureaucratic actions (e.g. dealing with authorities)

Security concerns (kidnapping, proliferation of arms)


Yemen is endowed with extensive resources and attractive natural characteristics that support Yemen as the most unique destination in MENA region, combining its millennia-old history with traditional Arab culture and a favorable climate considers Yemen among the best in the region. Yemen retains much of it’s authentic culture and has much to offer in terms of history (the great kingdom of Sheba , the 3,000 years old Mareb Dam and the architectural splendor unrivalled old souk in Sana’a with a history that dates over 12,000 years). Yemen has an extensive underdeveloped coastline, stretching over 2,500 km. The island Socatra with over 300 days or more of sunshine, and a climate that ranges from cool in the highlands to warm in the coast all at one is a world-famous destination for bird watching and reef diving. Yemen’s attractive resources and natural characteristics support, in addition a wide range of tourism activities that meet the demand of the mature market open to cultural and historic products, eco-tourism and specialist market (e.g., beach holidays , game fishing, scuba diving, whale and dolphin watching,


archeology, folk and culture, desert trekking, rock climbing) as well as themed attractions, outdoor activities (e.g. hot air ballooning, hang gliding).


Unique natural characteristics, favorable climate, old history, traditional culture


Promote cultural and eco-tourism Support public/private partnership as a determined effort for the government to work together hand-in-hand with the private sector to be able to fully leverage the Travel and Tourism sector’s potential to stimulate economic efficiency and growth.

Promote supporting infrastructure and related services. Support reviewing / assessing air transport policies related to facilitating access by foreign airlines to reduce air travel costs (e.g. landing fees), allow charter flights & open more airports to international traffic.

Collaborate with Ministry of Tourism in exhibitions of Yemen’s cultural heritage and archeological treasures combined with targeted promotion campaigns

Support environmental protection and cultural heritage preservation policies and laws


Promote resort areas, attractions and tourism related facilities in sites of cultural, scenic and ecological interests to extend the length of stay

Promote eco-tourism facilities

9. Sector-level competitiveness and benchmarking

9.1 Introduction The objective of this section is to outline the key factors that influence each sector identified above and show, also how such factors are influenced by the sector business environment in the Middle East and North Africa (MENA) countries. These factors are: location, human resources, and natural resources, physical infrastructure, structural support, technical support, business development services and regulatory environment and government policies specific to the sector as seen by business people interviewed. The performance of each sector in Yemen will be assessed against MENA countries using the set of indicators outlined in table (4) in page 16. Defining the MENA region is the first obstacle a researcher faces. It is often unclear and there is no single definition that fully captures the different key historical, cultural and other contemporary issues such as Islam, oil, colonialism etc. The World Bank for example defines the MENA region as Algeria, Bahrain, Djibouti, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Saudi Arabia, Syria, Tunisia, United Arab Emirates (UAE), West bank and Gaza and Yemen. Many other international institutions define MENA as extending from Morocco to


Turkey along the southern and eastern shores of the Mediterranean and as far east as Iran and south to the Sudan, Saudi Arabia and Yemen. Whenever possible and depending on data availability, the Consultant will adopt the second definition that includes Sudan to MENA countries in order to capture the full picture in the region. 9.2 Competitiveness of MENA business environment The performance of the MENA countries against each other using different international indicators and measurements available, including population levels (POP) and performance (world ranking) relating to the most widely accepted indexes such as Human Development Index (HDI), Digital Opportunity Index (DOI), Environmental Performance Index (EPI) and Global Competitiveness Index (GCI), Business competitiveness Index (BCI) and Ease of doing business (EDB) shows the following – table (11):

Despite the global significance of MENA’s oil and workers’ remittance, most MENA countries score lower on the HDI world ranking index (171 countries). Yemen is one of the lowest (ranked 150), following Mauritania (153). The first ranked country is Israel (23) followed by Kuwait.

When measuring the digital divide and performance of information and communication technology (ICT), DOI shows a related large variability between MENA countries in terms of the current status with respect to ICT; in terms as ICT existing equipment base, availability of trained personnel and the current usage of ICT. In the international comparison, Yemen is at position 128. In the MENA region, Sudan (136) and Mauritania (154) are ranked lower than Yemen.

Environmental issues such as health, air quality, water resources, biodiversity and habitat, productive natural resources and sustainable energy are included in EPI. It reveals that all MENA countries, at all levels of economic development face serious environmental challenges. Sudan, Yemen and Mauritania have lower EPI as they are relatively unpolluted, but they are only partly meeting the challenge of providing environmental infrastructure (drinking water and waste water treatment) for their people and the systems for pollution control and ecosystem protection in these countries are still relatively weak. Lebanon, UAE, Turkey, Iran and Saudi Arabia are notably higher on the EPI which suggests that these countries face significant long-term sustainability challenges but are managing their present circumstances relatively well. Egypt and Syria depend largely on water resources originating from other countries and are therefore vulnerable to the water policies of their neighbors. The sustainability of the human and economic development of the region will thus depend on long-distance water transfers and massive desalination projects.

The Global Competitiveness Index GCI is the main competitiveness indicator used by the World Economic Forum (WEF) in which Competitiveness is defined as a set of factors, policies and institutions that determines the level of productivity in a country and productivity describes how efficiently available resources are used and therefore the growth performance of an economy. GCI rankings are drawn from a combination of publicly available hard data and the results of the Executive Opinion Survey, a comprehensive annual survey conducted by the WEF, together with its network of Partner Institutes (leading research institutes and business organizations) in the region. The report covers only 13 countries from the MENA region (Algeria, Bahrain, Egypt, Jordan, Kuwait, Libya, Mauritania, Morocco, Oman, Qatar,


Syria, Tunisia, UAE). Yemen is not included in this ranking. According to the recent GCI rankings published in the Arab World Competitiveness Report 2007, UAE is the most competitive economy in the Arab world followed by Qatar and Kuwait, but Mauritania is the least.

The performance of business environment in the MENA region is measured by both BCI and EDB indices. BCI ranks MENA countries by their microeconomic competitiveness, identifies competitive strengths and weaknesses in terms of countries’ business environment conditions and company operations and strategies, and provides an assessment of the sustainability of countries’ current levels of prosperity. According to the recent Arab World Competitiveness Report 2007, GCI and BCI results point to weaknesses in market efficiency, in particular with respect to competition for goods and services. For example it takes 63 days to set up a new business in UAE. However a recent in-depth study by the World Bank entitled Doing Business 2007 ranks MENA countries on their EDB with first place being the best. EDB averages the country’s rankings on 10 topics, made up of a variety of indicators, giving equal weight to each topic. These indicators include:

1. Starting a business (STA) 2. Dealing with licenses (LIC) 3. Employing workers (EMP) 4. Registering property (REG) 5. Getting credit (CRE) 6. Protecting investors (PRO) 7. Paying taxes (TAX) 8. Trading across borders (TAB) 9. Enforcing contracts (CON) 10. Closing a business (CLO).


Table (11): Competitive performance of MENA countries (2007)

Countries Population (million people)

Human Development

Index (171

countries)

Digital opportunity

Index (181

countries)

Environmental Performance

Index (133

countries

Global Competitiveness

Index (125 countries)

Business competitiveness

Index

Ease of doing business

Algeria 33.4 102 83 63 76 85 116 Bahrain 0.7 39 35 -- 49 51 -- Djibouti 0.7 148 132 -- -- -- 161 Egypt 72.1 111 91 85 63 76 165 Jordan 5.6 86 79 64 52 52 78 Iran 69.7 96 105 53 -- -- 119 Israel 6.8 23 14 45 15 19 26 Kuwait 3.0 33 60 -- 44 44 46 Lebanon 3.7 78 93 36 … -- 86 Libya 5.9 64 109 -- -- -- -- Mauritania 2.8 153 154 131 114 101 148 Morocco 30.4 123 68 68 70 66 115 Oman 2.5 56 81 60 -- -- 55 Saudi Arabia 23.6 76 75 59 -- -- 38

Syria 19.1 107 104 97 -- -- 130 Sudan 36.2 141 136 124 -- -- 154 Tunisia 10.2 87 87 82 30 26 80 Turkey 72.5 92 52 49 59 46 91 Qatar 0.8 46 38 -- 38 34 -- UAE 5.0 49 37 47 32 31 77 Yemen 26.9 150 128 122 -- -- 98 Source: Adopted from WISR (2006, 2007); ITU World Telecommunication Indicators Database; Yale Centre for Environmental Law and Policy (2006); UNDP (2006); World Economic Outlook Database (2007) and the World Economic Forum (2006) (Arab World Competitiveness Report 2007 and Global Competitiveness Report 2006–2007) and the World Bank (2007) Doing Busness. : How to reform. -- Not available

Table (12) shows the overall MENA rankings in terms of the 10 indicators of EDB in the different MENA countries. A high ranking means the regulatory environment in the country is conducive to the operation of business. Starting a business indicator for example examines the procedures, time, and cost involved in launching a commercial or industrial firm with up to 50 employees and start-up capital of 10 times the economy’s per-capita Gross National Income (GNI). Productivity and quality are, however two major keys to competitive advantage and therefore managers must recognize that productivity and quality improvement efforts require major changes in company philosophy, culture and operating systems.


Table (12) EDB overall ranking for MENA Countries (2007)

MENA EDB STA LIC EMP REG CRE PRO TAX TAB CON CLO Israel 1 1 8 8 16 1 1 11 2 10 2 Saudi Arabia 2 14 2 2 1 3 6 3 3 7 10

Kuwait 3 6 11 1 7 6 2 5 5 6 6 Oman 4 5 14 5 3 14 3 1 14 9 4 UAE 5 13 4 7 2 9 9 1 1 11 15 Jordan 6 10 3 3 11 6 9 4 8 5 9 Tunisia 7 3 12 10 8 8 15 15 4 3 1 Lebanon 8 7 7 4 10 2 5 8 9 14 12 Yemen 9 16 1 6 5 9 9 12 12 2 8 Morocco 10 2 15 17 6 14 9 14 7 12 5 Algeria 11 8 13 11 17 9 3 17 13 4 3 Iran 12 4 16 15 15 3 16 13 11 1 11 West Bank and Gaza 13 17 10 12 12 3 6 9 6 8 16

Syria 14 11 5 9 9 9 9 10 15 15 7 Iraq 15 12 6 13 4 14 6 6 17 13 16 Djibouti 16 15 9 14 13 9 17 7 16 17 14 Egypt 17 9 17 16 14 17 9 16 10 16 13 Source: Adopted from the World Bank (2006): Doing Business 2007, How to reform and World Economic Outlook Database (2007).


9.3 Benchmarking promising economic sectors in Yemen Agriculture As table (13) shows, agriculture activities including farming, livestock and Qat farming employ 45.4% of total labor force in Yemen, the highest after Mauritania (51.7%). The average in MENA is as low as 28.17%. Between 1995 and 2006, the annual increase in rural population was the highest in MENA region. It was estimated by 1.5%. There was no increase in rural population in Egypt while was decreased in Morocco by 0.5%. Total employment in agriculture in Yemen is also higher (45.4%) when compared to the limited agriculture resource countries; such as Jordan (9.8%) and Libya (4.3%) but less than Mauritania (51.7%). Yemen agriculture exports increased mainly to Saudi Arabia by 15.3%, but still, Yemen is a net importer of agriculture produce (the highest among countries with limited agriculture resources and even higher when compared to Egypt (- 0.3%) and Morocco (3.2%). Due to replacement of coffee plantations by Qat farming, agriculture exports are, also, less than Jordan which uses irrigation efficient methods in farming. The main features of agriculture in Yemen are the low economic efficiency (0.23) when compared to Egypt (0.37) and Morocco (0.46)10 . It is, however close to the MENA average agriculture economic efficiency (0.22%). For many crops the current yields are well below technical potential and actual farmers yield in comparable countries. Furthermore, post harvest losses are estimated to be quite high (20% for cereals, 45% for tomato, 60% for papaya, and 38% for banana). The main causes are harvesting techniques, rough handling and poor packaging and weaknesses in transport networks. The contribution of Yemen agriculture to GDP reaches 12%. It is double the average in MENA (6%), closer to Egypt (13%) and Morocco (12%). However, agriculture productivity in Yemen is the lowest (592 US$) when compared to the MENA average (2143 US$) and to the highest (43,572 US$) in Lebanon. Qualitatively, the situation in Yemen in comparison with MENA countries such as Egypt, Lebanon and Morocco - table (14-16) - is burdened with some major obstacles: lack of skilled labor, high cost and lack of access to agriculture inputs, accessibility and high cost of land and inadequate infrastructure (e.g. road transport), poor accessibility and high cost of finance, Those obstacles reflect a relatively weak position of agriculture in terms of conductive factor conditions and the legal framework related to government policy. Future challenges for Yemen are providing technical and service support to agriculture sector including research, extension and training and efficient infrastructure. In addition to skilled labor force, introduction of innovate farm management techniques, seed varieties, irrigation and fertilization techniques and post harvest techniques.

10 Economic Efficiency=%of agriculture production of GDP/%agriculture labor of total labor force


Table (13): Agriculture performance in Yemen and MENA countries (2005)

Rural

population (000)

Rural population as % of MENA

Farmers (000)

Farmers as % of MENA

Agric labor force (000)

Agric labor as % of total labor force

Production (Million $)

Production as % of MENA

Value added/Worker

(US$)

Agric Economic Efficiency

(%) 1


Net imports

(Million $)

Yemen 15851 12.15 9753 11.14 3069 45.44 2536 03.20 592 00.23 12.00 1119 Algeria 12990 09.96 7448 08.51 2873 23.00 8804 11.11 2750 00.33 07.80 4775 Bahrain 71 00.05 7 00.01 3 00.80 53 00.07 17908 00.47 00.30 5366 Djibouti 113 00.09 555 00.63 275 76.50 23 00.03 79 00.04 03.10 99 Egypt 40922 31.38 24946 28.49 8657 30.20 7067 08.91 1446 00.46 13.20 1083 Iraq 7778 05.96 2108 00.65 602 07.90 3911 04.93 4907 01.12 09.30 1713 Jordan 1087 00.83 568 00.65 198 09.82 341 00.43 1590 00.25 08.70 1101 Kuwait 103 00.08 29 00.08 34 01.80 256 00.32 7440 00.16 00.30 1207 Lebanon 426 00.33 98 00.11 40 02.70 1818 02.29 43572 02.88 07.80 1297 Libya 750 00.58 252 00.29 90 04.33 1294 01.63 13201 00.17 02.40 774 Mauritania 1106 00.85 1585 01.81 706 51.68 189 00.24 607 00.17 07.80 -163 Morocco 13053 10.01 10357 11.43 4308 32.40 7907 09.97 1641 0.37 12.00 1059 Oman 659 00.51 988 01.13 -- 32.60 447 00.56 1205 00.04 -- 447 Qatar 49 00.04 5 00.01 -- 01.20 64 00.08 14835 00.12 00.10 259 Saudi Arabia 2970 02.28 1771 02.02 605 07.10 10499 13.24 16866 00.46 03.00 7524 Sudan 19885 15.25 19870 22.69 8037 56.60 13567 17.11 1336 00.57 30.90 -141 Syria 8276 06.35 4808 05.49 1674 25.70 6564 08.28 3752 00.87 32.60 265 Tunisia 3608 02.77 2288 02.61 983 22.80 3454 04.36 3303 00.49 11.00 -266 UAE 722 00.55 119 00.14 110 04.50 3333 04.20 592 00.50 02.00 2114 MENA 130420 100 87555 100 32631 28.17 79274 100 2143 00.22 06.20 24601 Source: various internet sources, including The Arab Organization for Agriculture Development, FAO and UNICTAD /ITC, 2005

1. Agricultural Economic Efficiency Gross Agriculture Produc As % of GDP / % of Agricultura Labor Force to National Labor Force -- Not available ‐‐


Table (14): Benchmarking conductive factors conditions and criteria for the Agriculture sector for MENA countries (2007)

Factors Benchmarking Indicator

Yemen Algeria Bahrain Egypt Iran Iraq Israel Jordan Kuwait Lebanon Libya Morocco Oman Palestine Qatar Saudi Arabia Sudan Syria Tunisia UAE

Location Location advantage G S M G G G G M G G S G G M M G G G M

Human resources

Availability of Qualified Labor

S M S S S S S S M S M S S S S S M M S

Availability of inputs M S M M M M M M S M S M M M M M S S M

Natural resources

Availability and accessibility of environmental resources needed for production

S M M S S S S M M S M M S M M M M M M

Physical infrastructure (transport, electricity, water and waste water)

Availability and adequacy of physical infrastructure for the delivery, production and distribution processes in the sector

M S G M M M M G S M G M G G M S S G

Source: Compiled during interviews and various internet sources N: None, M: Minimal, S: Sufficient, G: Good


Table (15): Benchmarking business environment criteria for the Agriculture sector for MENA countries (2007)

Factors Benchmarking Indicator Yemen Algeria Bahrain Egypt Iran Iraq Israel Jordan Kuwait Lebanon Libya Morocco Oman Palestine Qatar Saudi Arabia Sudan Syria Tunisia UAE

Existence of relevant education/training services, specific to skills in the sector / sub-sector (university instructions and professional schools)

S S M S S S M M S S M S M M S S M

Scientific research M M N S S S N N S S N S N N S S N Certification and testing relevant to the sector N S N S S S N N S S N S N N S S N

Press and publications N S N S S S N N S S N S N N S S N Techn. / comm.. catalogues N S N S S S N N S S N S N N S S N Exhibition and fairs N S N S S S N N S S N S N N S S N

Structural support

Business and sector associations M S M S S S M M S S M S M M S S M

Construction of equipments N S N S S S N N S S N S N N S S N Production of tools and consumables N S N S S S N N S S N S N N S S N Technical

support

Technology assistance N M N M M M N N M M N M N N M M N Quality of credit M S S S S S S S S S


Consultancy services (e.g. providing technical, engineering, architect and sector related knowledge and expertise)

N M N M M M N N M M N M N N M M N

Trade union pressure M S S S S S S S S S S S S S S S S Environmental obligations N S S S S S S S S S S S S S S S S Administrative burdens M S M M M M M M S M M Sector related infrastructure M S G S S S G G S S G S G G S S G

Water resource M S M S S S M M S S M S M M S S M Availability of functioning areas G S S S S S S S S S S S S S S S S

Constraints

Extension M S M S S S M M S S M S M M S S M Source: Compiled during interviews and various internet sources N: None, M: Minimal, S: Sufficient, G: Good

‐‐


Table (16): Benchmarking regulatory environment and Government policy for the Agriculture sector for MENA countries (2007)

Factors Benchmarking Indicator Yemen Algeria Bahrain Egypt Iran Iraq Israel Jordan Kuwait Lebanon Libya Morocco Oman Palestine Qatar Saudi Arabia

Sudan Syria Tunisia UAE

Availability of Government support programs and policies specific to the sector

M S S S S S S S S S S S S S S S S S

Enabling legal and policy rules and regulations ((taxation, financial security, contract enforcement and competition regulations)


Availability environmental regulations


Safety and security M S S S S S S S S S S M S S S S S S

Legal framework and related Government policies

Drainage M S S S S S S S S S S S S S S S S S



Fishery According to the Central Statistical Authority, the contribution of fisheries to total Yemeni GDP was 1.4% in 2005. Fisheries value added growth rate is decreasing from 30.3% in 2003 to -10.1 in 2006. Yemen fish production decreased by 2.9% between 1995–2006. It constitutes 0.67% of MENA fish production. Oman, however increased its production by 0.4% during the same period; producing 4.13% of MENA production. Fishery sector export is 2.3% of total national exports which is lower than Oman (4%) and higher than Egypt (0.5%). As percentage of MENA exports, Yemen (12.78%) is one of the highest, after Morocco (54.97%) and Oman (13.94%); table (17).

Table (17): Fishery performance in Yemen and MENA countries (2005)

Production (Tones in life weight)

Production as % of MENA

Exports (Tones in life weight)

Exports as % of MENA

Imports (Tones in life

weight)

Yemen 25,000 0.67 77,484 12.78 299

Algeria 136,959 3.67 24,221 4.00 16,507

Bahrain 12,026 0.32 6,877 1.13 4,747

Djibouti 350 0.01 44 0.01 445

Egypt 970,924 26.02 2,665 0.44 95,409

Iran 415,138 11.12 13,550 2.24 15,694

Iraq 32,100 0.86 28 0.00 848

Jordan 1,077 0.03 935 0.15 2,275

Kuwait 6,677 0.18 346 0.06 15,912

Lebanon 4,473 0.12 178 0.03 25,055

Libya 33,557 0.90 2,007 0.33 23,652

Morocco 965,224 25.86 333,164 54.97 19,254

Oman 154,078 4.13 84,484 13.94 3,187

Palestine 196 0.01 - - -

Qatar 8,829 0.24 2,250 0.37 4,850

Saudi Arabia 61,404 1.65 6,809 1.12 110,440

Sudan 59,400 1.59 1,024 0.17 488

Syria 15,155 0.41 29 0.00 20,786

Tunisia 97,160 2.60 16,337 2.70 26,055

Turkey 603,513 16.17 29,935 4.94 75,571

UAE 102,528 2.75 2,935 0.48 75,571

MENA 3,731,927 100.00 606,105 100.00 648,383

Source: FAO: Fishery Statistics, Commodities (2005)


In comparison with the main competitors in MENA, Oman and Morocco face a number of future challenges such as providing related infrastructure, appropriate technical; assistance, research and extension, development of human resources and providing technical and service support to the fishery sector tables (18-20). Yemen, in particular has to face overcome the following challenges in order to enhance the competitive position of the fishery sector: The availability of qualified labor through fishermen education and training as well as

enhanced fishery related extension activities Quality of physical infrastructure for fish landing, distribution and processing (fish landing

sites, auction areas, cold chains, transport and feeder roads) Providing appropriate technology assistance: using gillnets instead of lobster traps in

catching lobsters, gillnets instead of long-lines for shark fishery, methods of handling catches at sea (small fishing boats not equipped with coolers / preservation units and no cooling facilities)

The availability of business development services The legal frame work related to government policy (environment regulations, health &

hygiene, security) and licensing organized fishermen associations as service organizations aims to improve quality of

members produce and marketing Lack of reliable sectoral data and research capacity (basic data, statistics and resources in

the fishery sector) Research and business support services (updated stock assessment in order to review the

feasibility of current licensing schemes)


Table (18): Benchmarking regulatory environment factors and criteria for the Fishery sector for MENA countries (2006)


Yemen Algeria Bahrain Egypt Iran Iraq Israel Jordan Kuwait Lebanon Libya Morocco Oman Palestine Qatar Saudi Arabia


Location Location advantage G G G G G G G G G G G G G G G G G G G G

Human resources


M S M S S S S S S M S M S S S S S M M

Availability of raw materials G M S M M M M M M S M S M M M M M S S

Natural resources


G S M M S S S S M M S M M S M M M M M



M M S G M M M M G S M G M G G M S S


‐‐


Table (19): Benchmarking business environment criteria for the Fishery sector for MENA countries (2006)




S S M S S S M M S S M S M M S S M

Scientific research M M N S S S N N S S N S N N S S N Certification and testing relevant to the sector N S N S S S N N S S N S N N S S N

Press and publications M S N S S S N N S S N S N N S S N Technical / commercial catalogues M S N S S S N N S S N S N N S S N

Exhibition and fairs M S N S S S N N S S N S N N S S N

Structural support

Business and sector associations M S M S S S M M S S M S M M S S M

Construction of equipments M S N S S S N N S S N S N N S S N Production of tools and consumables N S N S S S N N S S N S N N S S N Technical

support

Technology assistance N M N M M M N N M M N M N N M M N Quality of industry credit M S S S S S S S S S



N M N M M M N N M M N M N N M M N

Trade union pressure M S S S S S S S S S S S S S S S S Environmental obligations N S S S S S S S S S S S S S S S S Administrative burdens G S M M M M M M S M M Sector related infrastructure M S G S S S G G S S G S G G S S G

Waste disposal M S M S S S M M S S M S M M S S M

Constraints

Availability of functioning industrial areas G S S S S S S S S S S S S S S S S


‐‐ ‐‐


Table (20): Benchmarking regulatory environment criteria for the Fishery sector for MENA countries (2006)




M S G S G S G G M G G S G G M G G


M S G S G S G G M G G S G S M S G



Safety and security M S G S G S G G M G G S G S M S G


Health and hygiene M S G S G S G G M G G S G S M S G



Mining and quarrying During the time of preparing this study, the Consultant was unable to have Yemen sub-sector specific figures. Data for the competitor / benchmark countries in MENA (Egypt and Turkey) were readily available through internet sources (Mining Ministry for Turkey and the Egyptian Ministry of Trade). As table (21) shows, it can be noted that each benchmark country produce 4.3 of world production. Available raw material in turkey amounts to 3.7% of world availability, with 3.6% available in Egypt. Turkish parameters are similar both in production and in domestic uses, but higher in export. The success of Turkey seems to be based on foundation in the capacity to attain a winning trade-off between products price and quality, leveraging on the abundance of stone reserves and on relatively competitive production factors coupled with the utilization of state-of-the-art technology. In Turkey, domestic consumption of finished products absorbs around 37% and 50% in Egypt of the available quantity (net production + import). Comparing per capita consumption of processed dimension stones, unit demand in Egypt is higher than that in Turkey which shows that Egypt’s internal market seems reasonably developed. Also, considering that its value is not very different from Turkey even if the per capita GNP in Egypt is 3 times smaller than in Turkey. Both countries, however, export similar amounts. Productivity however is much higher in Turkey (101.5%) than in Egypt (67.5%). The principle exporting countries in MENA11 are Turkey, UAE, Egypt and Iran; exporting (in million US$) 143.6, 47.4, 58.4 and 39.9 respectively. Principle importers are Kuwait and UAE (in million US$) 129.3 and 49.5 respectively. All MENA countries’ exports amount to 1063.2 million US$ and imports amount to 345.8 million US$ (2004). In comparison between Egypt and Turkey, as rising industries future challenges for Yemen require the following structural, technical and business support areas; Table (22) :

Development of human resources specific to the sector needs Collaboration between private and public sector (e.g. education and research institutions), as

well as institutions that enable collective actions by private sector such as business associations).

Availability and adequacy of related physical infrastructure Availability of functional industrial areas Accessibility and cost of credit and the weak. Appropriate technology and investments in equipment, Providing technical and service support to the stone industry sub-sector Enforcing the law, security and contract enforcement

11 UN International Trade Statistics Yearbook (2005)


Table (21): Comparative data – stone sub-sector in Egypt and Turkey (2006) Factor Unit Egypt Turkey

000 Ton 3200 3250 Sector production World % 4.3% 4.3% 000 Ton 3 68 Raw import World % 0.0% 0.5% 000 Ton 3203 3318 Raw availability World % 3.6% 3.7% 000 Ton 900 1266

Raw material

Raw export World % 6.6% 9.3 000 Ton 1036 841 Finished production World % 3.3% 2.7% 000 Ton 1267 1211 Finished import World % 2.9% 2.7% 000 Ton 1270 1272 Finished export World % 2.1% 2.1 000 Ton 600 796 Domestic use World % 3.7% 5%

Domestic use equivalent 000 m2 670 476

Finished product

Domestic use per capita m2 x 1000 nh. 182 123

Quantity of processed products 000Ton 1267 1211

Quantity of processed products millions m2

equivalent (th.2)

23.43 22.4

Directly employed workers Unit 37000 32000 Ton/person 67.5 101.5 M2/person 633.3 699.9

Productivity

Total productivity M2/person/day 1.74 1.92

Sources: Internet sources: Ministry of Trade - Egypt and Mining Ministry – Turkey --


Table (22): Structural support and business environment (2006)

Factor Yemen Egypt Turkey

University instruction N M G Professional schools N M G Web diffusion M M S Certification and testing labs N N S Scientific research N N S Press and publication N N S Technical/commercial catalogue M M G Exhibition and fairs M M S

Structural support

Sector and business associations M M S Construction of equipment N M S Production of tools and consumables N N G

Technical support

Technology assistance N N G Quality of industry credit N M M Engineering studies N M S Architecture studies M M S Geological studies M M S

Other related Support

Technical cartography N M S Trade union advocacy N N M Environmental obligations N N N Administrative burdens M M N Quarrying infrastructure M S M Waste disposal N N N Availability of industrial areas None None None

Constraints

Workforce turnover None None None Source: Compiled from internet sources Ministry of Trade - Egypt and Mining Ministry - Turkey N: None, M: Minimal, S: Sufficient, G: Good


Manufacturing Table (23) shows that the manufacturing sector contribution to Yemeni GDP is 9.90%; less than that in UAE (12.1%) and Oman (10.4%) but slightly higher than the average contribution of the sector in the MENA region (9.5%). Manufacturing Sector’s exports are minimal (3% of total national exports) and the least among competitors’ countries members of the Gulf Cooperation council (GCC). in Oman, for example manufacturing exports reach 12% of its total exports but are higher than that of Saudi Arabia (3%) and far less than the MENA average (11.10%).

Table (23): Performance of the manufacturing sector in Yemen and MENA Countries (2006)

Value added

(Million $)

Value added /

worker ($ per worker)


Exports (Million

$)

Exports of

total exports

(%)

Yemen 1,388.2 16,000.0 9.90 124.5 3.00 Algeria 4,779.1 26,854.0 4.10 6,719.9 69.00 Bahrain 1,951.3 69,899.0 12.30 -- -- Djibouti -- 780.0 2.30 -- -- Egypt 17,155.0 5,336.0 16.00 2,381.4 31.00 Iran Iraq 823.9 21,559.0 2.00 -- -- Israel Jordan 25,147.7 19,005.0 17.90 2,798.6 72.00 Kuwait 6,800.1 207,177.0 6.70 -- -- Lebanon 2,115.7 4,868.0 9.10 1,188.0 68.00

Libya 114.7 95,347.0 2.20 -- -- Mauritania 89.2 14,936.0 3.30 -- -- Morocco 10,401.9 4,364.0 15.80 6,719.9 69.00 Oman 3,697.5 233,797.0 10.40 1,604.0 12.00 Palestine -- -- -- -- -- Qatar 3,873.1 207,177.0 7.30 -- --

Saudi Arabia 33,043.0 302,599.0 9.40 124.5 3.00

Syria 3,476.6 7,410.0 10.20 542.3 11.00

Tunisia 5,305.4 26,854.0 16.90 7,554.3 78.00

UAE 19,995.4 302,490.0 12.10 -- -- MENA 121,852.6 32,341.0 9.50 38,779.2 11.10 Source: various internet sources, including The Arab Organization for Agriculture Development, FAO and UNICTAD /ITC.


Qualitatively, the situation in Yemen in comparison with benchmarking countries, as shown in tables (24-26) is weak. Yemen faces the following constraints:

Availability of semi-skilled labor and lack of technical and professional staff Limited supplier base (dependence on imports for most raw materials) Inadequate infrastructure, especially electricity services and roads (even in industrial areas

in Sana’a and Huddieda). Minimal relevant education and training institutions providing specific skills for the sector Lack of business support and advisory services Ineffective private sector institutions and weak coordination with government Weak relevant business support services including consultancy services High competition from informal firms Limited Government support programs and policies Limited investment finance, insufficient access to credit and high interest charges Red-tape in operating and set-up a business High tax rates Corrupt payments increase production cost Burdensome levies (cumulative value added)

Those constraints reflect the weak conductive factor conditions, unavailability of business development services and the inadequate legal framework related to government policies. As shown in tables (24-26), most MENA countries; particularly the rich Gulf States compete aggressively. All have appropriate physical infrastructure but are facing shortage in human resource. Future challenges for Yemen are providing structural business support, development of human resources and providing technical and service support to the manufacturing sector.


Table (24): Benchmarking conductive factors conditions and criteria for the Manufacturing sector for MENA countries (2006)




Location Location advantage G G G G G G G G G G G G G G G G G G G

Human resources


S M M S S M S M S M S M M M M M S S M

Availability of raw materials M S M S S M S M S M S M M M M S S S M

Natural resources


S S M S S M S M S M S M M M M S S S M



M S G S S G S G S G S G G G G M S S G



Table (25): Benchmarking business environment criteria for the Manufacturing sector for MENA countries (2006)

Factors Benchmarking Indicator Yemen Algeri

a Bahrain

Egypt

Iran

Iraq

Israel

Jordan

Kuwait

Lebanon

Libya

Morocco

Oman

Palestine

Qatar

Saudi Arabia

Sudan

Syria

Tunisia

UAE


M S M S M S M S M S M S M M M M S M

Scientific research N S N S N S N S N S N S N N N N S N Certification and testing relevant to the sector N S S S N S S S N S S S S S N N S S

Press and publications M S G S M S G S M S G S G G M M S G Technical / commercial catalogues M S G S M S G S M S G S G G M M S G

Exhibition and fairs M S S S M S S S M S S S S S M M S S

Structural support

Business and sector associations M S S S M S S S M S S S S S M M S S

Construction of equipments N S N S N S N S N S N S N N N N S N Production of tools and consumables N S N S N S N S N S N S N N N N S N

Technical support

Technology assistance N S N S N S N S N S N S N N N N S N Quality of industry credit: availability and cost of finance

M S S S M S S S M S S S S S M M S S



N S N S N S N S N S N S N N N N S N

Trade union Advocacy N S S S N S S S N S S S S S N N S S Environmental obligations N S S S N S S S N S S S S S N N S S Administrative burdens S S S S S S S S S S S S S S S S S S Sector related infrastructure M S G S M S G S M S G S G G M M S G Waste disposal M M G M M M G M M M G M G G M M M G Availability of functioning industrial areas M M S M M M S M M M S M S S M M M S

Constraints

Competition from informal firms G S M S G S M S G S M S M M G G M



Table (26): Benchmarking regulatory environment factors and criteria for the Manufacturing sector for MENA countries (2006)




M S G S G S G G M G G S G G M G G





Safety and security M S G S G S G G M G G S G S M S G


Health and hygiene M S G S G S G G M G G S G S M S G



Travel and tourism12 Travel and tourism has been an important driver of growth and employment in the world over the past few decades. Many countries in the MENA region have the natural competitive advantage in travel and tourism. Its strategic location between Asia and Europe provides a natural stopover for both international travelers and transport vessels, the historical and cultural heritage sites, as well as the natural beauty and warm climate make MENA an attractive destination for international tourists. According to the Word Tourism Organization (UNWTO), travel and tourist arrivals in the MENA region have an average annual increase of 9.5% between 2000–2005 despite regional conflicts and security concerns, comparable with world wide growth during the same period. Table (27) provides a historical perspective of the growth in travel and tourism in the MENA over the past decade (1995-2005). It shows that arrivals were tripling in Algeria, Egypt, Libya and Saudi Arabia and UAE. Rising from a very low level of 85000 arrivals in Yemen (as well as in Oman and Syria), the increase was more impressive. Omani revenue increased during the period by 70% while doubled in Egypt. International tourist’s arrivals totaled 336000 (35% from the Middle East, 34% from Europe, 11% from Asia, 11% from the Americas, and 8% from Africa). With an estimated contribution of 1.7% to the GDP (hotels and restaurants contribute only 0.7% to GDP), tourism in Yemen represents a marginal economic sector. Gross revenues generated by international tourism are estimated at about 262 million US$ in 2005 (about 56% of the total revenue). The travel and tourism sector is an important employer in Bahrain (11%), Egypt (6.7%) and Oman (3.8%). It is however, the least employer in Yemen (1.5% of total employment). Due to lack of skilled labor force needed for the travel and tourism sector, foreign labor is employed mostly by the 4-star and 5-star hotels. Thus, the promotion of joint venture investments in the development of human resources for the tourism sector are economically feasible and they are urgently needed to facilitate the further development and expansion of the tourism sector to create job opportunities for national labor force, reduce unemployment and to avoid social problems that might arise from increasing the number of foreign workers in Yemen. The sector contribution to employment creation is expected to increase in the coming years, particularly in the countries that have low tourism base (UAE, Oman, Bahrain and Saudi Arabia) as well as Yemen with its rich resources. The forecasted rate of employment creation in all countries lies above the overall rate of employment growth in MENA which averaged 4% between 2000 and 2006. Travel and tourism sector, on the other hand contribute high to GDP in Bahrain (8.3%) and Egypt (7.9%) and least in UAE (1.1%) and Yemen (1.8%). WTTC forecast however shows increasing contribution to GDP in all countries.

12 UNWTO (World Tourism Organization), 2007, Historical Perspective of World Tourism, UNWTO, Tourism Market Trends, 2005 and Tourism Barometer 4(3). Madrid, 2005


Table (27): Selected travel and tourism indicators for Yemen tourism competitors in MENA (2006) International tourist arrivals

(000) International tourism receipts (US million) Employment (2006) GDP

1995 2005 1995 2005 (000)

% of total employment

Estimated annual employment growth

(%) 2007-2016 forecast

(000) % of total

GDP

Estimated annual GDP growth (%) 20072016 forecast

Yemen 85 1.5 50 262 85 1.5 4.9 306 1.8 5.6 Algeria 852 1443 247 920 121 1.4 5.2 1581 1.5 7 Bahrain 1396 3914 247 920 38 11 3.8 1137 8.3 5.8 Egypt 1313 6.7 2684 6851 1313 6.7 1.8 8374 7.9 5 Jordan 1075 2987 660 1441 147 8.7 2.6 1250 9.2 4.2 Kuwait 72 91 121 164 22 1.9 7 923 1.3 5.9 Lebanon 450 1140 n/a n/a 52 3.1 5.5 690 3 6.7 Libya 56 149 2 218 50 3.5 4.1 1092 2.5 7.4 Morocco 2602 5843 1296 4617 1038 8.8 303 5601 10.1 4.6 Oman 28 3.6 144 481 28 3.8 4.3 723 2.6 5.1 Qatar 309 732 n/a 760 7 2 2.8 524 1.4 5.2 Saudi Arabia 90 208 n/a 6111 90 2.8 3.9 8805 2 4.1 Syria 815 3368 1258 2175 417 7.3 5.1 1556 6.4 3.9 Tunisia 4120 6378 1530 2063 271 9 2.2 2760 9.2 4.7 UAE 2315 5871 632 220 40 1.6 5.3 1483 1.1 8.7 Source: Jennifer Blanke and Irene Mia: World Competitiveness: assessing Travel and Tourism Competitiveness in the Arab World, chapter 22andUNWTO and WTTC – World Travel and Tourism Council.


Quantitatively, Yemen faces several challenges, when compared with neighboring Gulf countries as well as Egypt, Lebanon, Tunisia and Morocco who have a more developed travel and tourism industry. As tables (28-30) show, future challenges for Yemen are the development of human resources providing structural business support; and supporting business development firms. Specifically, Yemen needs to address the following:

Availability of skilled and semi-skilled labor, technical and professional hotel management Availability of necessary infrastructure to attract tourists (accommodation and tourist

facilities) in addition to transport facilities and infrastructure (land, air and marine) Availability of relevant business development services Improving investment environment (investors can not invest unless they associate with local

partners who often have no financial capacity due to lack of legal protection and bureaucratic actions (e.g. dealing with authorities)

Quality control (of existing accommodation and tourist facilities), especially related to hygiene dining facilities (restaurants and cafés)

Environmental regulations. Government support programs & policies Contract enforcement and enabling legal and policy rules and regulations Safety and security concerns (kidnapping, proliferation of arms)

Benchmarking the position of each sector in Yemen and MENA countries shows that all sectors are comparatively weaker in relation to the conductive factor conditions (e.g. human resources and physical infrastructure), business environment (e.g. structural and technical support, business development services) as well as the regulatory environment and government policies specific to each sector. Future challenges for Yemen are meeting the demand of each economic sector with the skilled labor forces, providing efficient infrastructure, enabling the business environment for structural and technical support as relevant to each sector.


Table (28): Benchmarking conductive factors conditions and criteria for the tourism sector for MENA countries (2006)




Location Location advantage G G G G G G G G G G G G G G G G G G G

Human resources


M S S S G M M M G M G M M M M M M G M

Availability of raw materials G S S S G G G S G S G G S S G S S S S

Natural resources

Availability and accessibility of environmental resources needed

G G G G G G G G G G G G S G G G G G G



M S S S S S G G G G G G M G G M M G G



Table (29): Benchmarking business environment factors and criteria for the Travel and Tourism sector for MENA countries (2006)




N S M S M M M S N M M M N N N M S M

Scientific research N M M S N N M N N S N N M M N S S M Certification and testing relevant to the sector

N M M S N M M G N M M N M M N M M M

Press and publications M S S S M S S S M S S M S S M S S S Technical / commercial catalogues

M S S S M S S S M S S M S S M S S S

Exhibition and fairs M S S S M S S S M S S M S S M S S S

Structural support

Business and sector associations

M M M S M S M M M S S M M M M S S M

Construction of equipments N N N S N N N N N N N N N N N N N N Production of tools and consumables

N N N S N N N N N N N N N N N N N N Technical support

Technology assistance N N G S N N G G N N N N G G N N N G Quality of finance; access and cost of finance

N N S S N S S S N S S N S S N S S S


Consultancy services (e.g. techn.,engineering, architect and sector related knowledge and expertise)

N N N S N N N N N N N N N N N N N N

Trade union pressure M M S S M M S S M M M M S S M M M S Environmental obligations M M G S N M G G M M M N G G M M M G Administrative burdens G G G S M G G G G G G M G G G G G G Sector rel.infrastructure M M G S M S G G M S S M G G M S S G Waste disposal M M G S M M G G M M M M G G M M M G Availability of functioning touristic areas

M M G S M S G G M S S M G G M S S G Constraints

Price competitiveness in travel and tourism

G G G S G G G G G G G G G G G G G G

Source: Compiled during interviews and various internet sources. N: None, M: Minimal, S: Sufficient, G: Good


Table (30): Benchmarking regulatory environment factors and criteria for the Travel and Tourism sector for MENA countries (2006)




M S G G M G M G S G G M G G M M G G


M S G S M G G G S G G M G G M M G G


M N G G M G G G N G G S G G M M G G

Safety and security M M G S N G G G M G G M G G M M G G


Health and hygiene M S G S M G G G S G G M G G M M G G



10. Yemeni investment law and its influence on attracting investments in the identified sectors

The Yemeni Investment Law is open to all fields of investments related to the identified sectors. The following part of the study addresses its compatibility with the requirements for investing in those identified sectors. 10.1 Investment law no. 22 of 2002 In order to create an institutional and legal framework for effectively promoting and supporting private sector investment prospects in Yemen, the Yemeni Investment Law no 22 of 2002 has been issued. It sets the rules and operations of Yemeni, Arab and foreign investments. It stipulates among others the following main measures the involvement of the private sector in all economic activities;

the utilization and exploration of natural resources; the attraction of Arab and foreign investment; the completion of legislation related to investment and attunement to an encouraging

investment environment; The Law covers investments in all fields except the following prohibited sectors:

1. Exploration and extraction of oil, gas and minerals that are governed by special agreements. 2. Weapons industry and explosive materials. 3. Industries that harm the environment and health. 4. Banks and exchange bureaus 5. Financial trade, importing, wholesale and retail trade.

The Law has noted the following fields of investment; as are governed by its provisions: Industry and energy (except oil, gas and mineral exploration that are governed by special

agreements); Agriculture and livestock including fishing and fish culture; Tourism; Health; Education and vocational and technical training; Transport and telecommunication; Construction and housing.

It calls for the establishment of a general investment authority (GIA). Its main responsibilities are as follows:

Receiving applications and registrations for approval for registered properties; (b) Providing services to investors, including granting approvals needed to launch registered

projects Assigning land required for these projects Preparing lists of investment opportunities Helping investors to understand relevant laws and regulations, and increasing awareness of

the investment climate and conditions in the country Approving the repatriation of funds and profits of registered projects.


Tax incentives and removing restrictions and limitations on foreign investments (e.g. FDI). The law offers tax incentives on local and foreign investments (Seven-year tax exemption on fixed assets of investment projects, with possible extension to up to 14 years). The Law establishes equal treatment between foreign and local investments without any restrictions and limitation. It provides foreign investors with the right to buy property to be used for their projects. Such registered projects cannot be nationalized, and assets can only be expropriated in the interest of the public and with a court order and equitable compensation. Additionally, the Law allows investors to repatriate funds in foreign currency, including profits; and to import all materials needed to start or expand projects, with the relevant exemptions from custom duties and tax. Such incentives are the most attractive for FDI in MENA region. Oman, for example offers Five-year tax exemption for projects in industrial companies. Kuwait and Qatar offers 10-year exemption from income tax. The three countries however limit ownership of real estate to nationals of the GCC. Performance requirements and incentives Yemen’s investment law does not specify performance requirements as conditions for establishing, maintaining or expanding investment. Incentives permitted under the law include, but are not limited to: Exemption from customs fees and taxes levied on fixed assets of the project; tax holiday on profits for a period of seven years, renewable for up to 18 years maximum; the right to purchase or rent land and buildings; and, the right to import production inputs and export products without restrictions and registration in the import/export register. Right to private ownership and establishment Under the 2002 investment law, foreigners can own 100 % of the land and can execute projects without a Yemeni agent and without obtaining import/export license from the Ministry of Industry and Trade or implementing Law 23 of 1997 (the investment law implemented in October 2002 has precedence over other laws. This is contradicted by the commercial law, however, which limits foreign ownership to 49 percent. The government is currently reviewing the laws in an attempt to remove inconsistencies. Mortgage lending in Yemen is rare because of the unwillingness of the court system to uphold the payment of interest or to accept land as a form of collateral. In addition, Yemen has a long history of incomplete or inaccurate land records and frequent land ownership disputes, making the use of real estate as collateral difficult. While the General Survey Authority is working to establish a just and legally defensible land registry system, implementation remains years away. A republican decree has been issued in 2006 to merge agencies overseeing land tenure, registration and urban planning in one agency to avoid overlapping. Expropriation and compensation Yemen's investment law stipulates that private property will not be nationalized or seized, and that funds will not be blocked, confiscated, frozen, withheld or sequestered by other than a court of


law. Real estate may not be expropriated except in the national interest, and expropriation must be according to a court judgment and include fair compensation based on current market value. Land registration, however, is in its infancy and disputes over both residential and commercial plots are frequent and nearly impossible to adjudicate legally. Since deed information is inexact, owners can sell multiple copies of a deed, and commercial suit options are extremely time-consuming, prone to corruption, and judgments are often not enforced. Free zones Free economic zones as a new approach to attract foreign investors and FDI, given that investors are offered a package of incentives and broad market access. Yemen has only one (Aden free zone). And, Kuwait has, also, one free zone13. In MENA, United Arab Emirates (UAE) has, however the most successful at establishing such zones, particularly the Jebel Ali Free Zone in Dubai, whose success encouraged other countries to establish similar zones. There are currently a total of 16 free economic zones in UAE. Followed by Egypt (8 zones), Jordan and Qatar operate, each operate 7 free zones. In addition to Aden free zone, an industrial and warehousing estate called Aden District Park (ADP) and the Aden Container Terminal was launched in November 2002. The three services are promising areas for investment in light industry, repackaging and storage/distribution operations. Future plans include development of heavy industry and more extensive tourist facilities in the greater Aden area. Free zone incentives include 100 % foreign ownership, no personal income taxes for non-Yemenis, and a corporate tax holiday for 15 years (renewable for 10 additional years), 100 % repatriation of capital and profits, no currency restrictions, and no restrictions on, or sponsoring required, for the employment of foreign staff. Aden’s main selling point is its strategic location – nine days steaming from Europe and seven from Singapore. It is four nautical miles off the main Far East - Europe sea route. However, the regional and international competitive capacity of Aden free zone needs, however developing its management and training its employees to deal with the conditions and Properties of the zone, in addition to completion of the infrastructure projects and the utility services for the zone Industrial zones In November 2004, the government announced the creation of three industrial zones in Aden, Hodaida and al-Mukallah that will concentrate on manufacturing. The Executive Order provides for the regulation, management, and supervision of industrial zones. At present, the government is lobbying industrialists to invest in these zones, construct its infrastructure, and manage operations. However, the representatives of chambers of commerce interviewed expressed their concern towards the government’s shifting the infrastructure responsibility over the private sector’s shoulders. Signing trade and investment agreements Signing bilateral investment agreements with developed and developing countries offer foreign investors guarantees in terms of the adoption of high standards and of enforceable contracts and

13 H. Christiansen, Incentives and free zones in MENA region, Working Group 2 (MENA-OECD Investment Program, 2005


agreements. Yemen signed 35 of bilateral investment treaties with Algeria, Austria, Bahrain, Belarus, Belgium, Bulgaria, China, Djibouti, Egypt, Ethiopia, France, Federation of Russia, Germany, Hungary, India, Indonesia, Iran, Jordan, Kuwait, Lebanon, Malaysia, Morocco, the Netherlands, Oman, Pakistan, Qatar, South Africa, Sudan Sweden, Syria, Tunisia, Turkey, the UAE, Ukraine, USA and the United Kingdom. Yemen has initialed agreements with Croatia, Mongolia, and Romania. Egypt has concluded the largest number of agreements among MENA countries (at 78 agreements) followed by Lebanon (at 36 agreements) and Jordan and Kuwait, each at 33 agreements14. 10.2 Attractiveness of investments in Yemen The investment climate in Yemen achieved the strongest progress made in the MENA region (at the position 71) in business climate reform; in terms of quality of public administration. With Egypt at 92; Saudi Arabia, at 89 and Qatar, at 75 while Bahrain, at 77; Jordan, at 66; Oman, at 68; and Saudi Arabia, at 5715. Despite such overall improvement in the investment climate and regulatory framework in Yemen, there are still issues that need to be addressed to improve investments, including enhancing the one-stop shop to service investors in the country, facilitating project approvals and registration, and reforming the current investment laws. Moreover, the lack of both human and financial resources represent major constraints in terms of promoting local and foreign investments, particularly foreign direct investment (FDI), which is further exacerbated by the slow pace of implementation of relevant laws and regulations; bureaucracy and inefficient administrative systems; and an insufficiently trained commercial judiciary system, particularly in terms of settling investment disputes. Investment climate includes those factors that attract investments and directly and indirectly affect the entry and operations investment flows in Yemen, including foregn direct investments (FDI). It covers, in addition to offering tax incentives and free zone services the following factors

Length of procedures and cost related to starting and/or closing a business Length of procedures and cost related to getting licenses for starting a new business. Regulatory framework Trade policy reforms The Judiciary system Enforcing contracts Settling disputes Corruption perception

The above factors are required to be addressed as a package to be integrated into the Yemen economic policies with the aim to attract and boost private investments; particularly those related to the operations, services and protection these investments

14 A. Bohmer, Inventory of International Investment Agreements concluded by MENA Countries, Working Group 1 (MENA OECD Investment Program, 2005. 15 The World Bank, Economic development and prospects 2006: financial markets in anew age of oil, MENA region, 2006


Length of procedures and cost related to starting and/or closing a business16 Starting a business in Yemen requires 12 procedures and takes 63 days to finalize. In UAE, 12 procedures (same as in Yemen) but takes less days (54 days). In Kuwait and Saudi Arabia, It requires 13 procedures and takes an average of 35 and 64 days, respectively. In Lebanon, requires 6 procedures and 46 days, In Oman, 9 procedures and 34 days. By contrast, starting of a business in Australia requires only 2 procedures and takes 2 days to complete, and 2 procedures and 3 days in Canada. The cost of starting a business in Yemen is 240.2% of per capita income: the highest when compared with other MENA countries. Starting a business cost 110.6 % of per capita income in Lebanon, 104.9 % in Egypt. Kuwait is the only country in the region where the percentage, at a modest 2.2 %; closer to that in developed. In Australia starting a business costs 1.9% of per capita income. It is even as low as 0.9% in Canada In Yemen, there is a minimum capital required to start a business that amounts to 2703.2% of per capita income which is the highest among MENA countries after Syria (5111.9%). The least countries are Iraq (31.6%), in Lebanon (68.5%) and Oman (97.3%). There is no minimum capital required to sart a business in most developed countries such as Canada and Australia. Yemen, on the other hand has the least number of days needed to closing a business (3 years) after Saudi Arabia (2.8 years). The highest is Jordan (4.3 years) followed by Egypt and Kuwait (4.2 Years each). The cost of bankruptcy proceedings is 8% of debt in Yemen as well as in Oman. But, 1% in Kuwait and as high as 30% in UAE, 22% in both Egypt, Lebanon and Saudi Arabia. Length of procedures and cost related to getting licenses for starting a new business17 Getting a license to start a ne business in Yemen requires 13 procedures and takes 131 days to finalize which compares favorably with all countries in MENA. The highest is Egypt in which an investor completes 30 procedures in 263 days to get a license. In Yemen, on the other hand the cost of getting the license is as high as 274%of per capita income. The cost is only 2.1% in UAE and 82.1% in Saudi Arabia Regulatory framework Yemen lacks adequate institutional infrastructure required to overcome regulatory barriers, promote a healthy business environment and enabling business climate. This is due to:

Absence of clear standards system and accreditation procedures that meet international standards and guarantee access to world markets.

Ineffective competition law and absence of a competition authority aiming to prevent anti-competitive behavior such as monopoly and commercial deception.

Absence of anti-dumping authority. Absence of strong financial sector that can act as an intermediary between saving and

investments, improve financial services and investment finance. Inadequate protection of intellectual property rights (IPR), including patents, trademarks,

designs, and copyrights. On the other hand, implementation and enforcement of Yemen’s environmental protection

16 The World Bank, Doing Business in 2006 (2005) 17 The World Bank, Doing Business in 2006 (2005)


regulations and labor laws are inadequate and non-transparent. Health and safety standards are rudimentary and not enforced. Customs tariff regulations and tax laws remain inconsistent and smuggling is common, but the government has taken steps in recent years to standardize the process with ASYCUDA systems and a WTO-compliant valuation methods. Trade policy reforms Yemen among other MENA countries namely, Egypt, Jordan, Lebanon and Saudi Arabia have made substantial progress in trade policy reform. These countries showed greater progress in improving their rank during 2000-2005, with Yemen achieving a good score of 62 with Egypt achieving the highest score of 100, Oman (at 71), Lebanon (at 61) and Kuwait (at 53)18. Judiciary system While Yemen’s investment-related laws are generally sound, enforcement remains problematic at best. The government has special commercial courts which provide a mechanism for commercial dispute resolution, but they are generally perceived as unreliable. Business disputes are generally handled by informal arbitration or within Yemen’s court system. In 1998 the Yemeni Center of Conciliation and arbitration, a private arbitration center, was created by a group of lawyers, bankers, and businessmen as an alternative to the courts. The center has settled about 52 disputes so far in the areas of trade, finance, construction and industry, and is gaining recognition as a viable alternative to court battles. Most investors are best served by establishing a partnership with a Yemeni who knows the system, and by including an international arbitration clause in their contracts. In cases involving interest, most judges use Shari'a (Islamic) law as a guideline, under which claims for interest payments due are almost always rejected. Local commercial banks are sensitive to this problem, and rarely lend to other than large established trading houses well known to them. Despite concerted efforts aimed at passing laws and regulations and at reforming national economies, the judicial system in Yemen, as such needs to be reformed in order to contribute positively to the investment climate. The performance of Yemen is one of the least independent systems when compared to MENA countries with an index of 2.9. Qatar has the most independent system with an index of 5.6, followed by the United Arab Emirates at 5.0, Jordan at 4.6, Oman at 4.5, Bahrain at 4.4, Saudi Arabia at 3.3, Lebanon at 2.4, and Egypt at 2.019. Enforcing contracts The procedures needed to enforce contracts in court proceedings. Specifically, the number of court procedures in Yemen is 37 procedures (taking 360 days for a final verdict) which is the lowest among MENA countries where it varies from 55 in Egypt that can take up to 410 days from court to reach a decision, to 39 procedures in Lebanon that can take up to 721 days. In Syrian, court procedures are estimated at 47 and final verdicts can take up to 672 days20.

18 Ibid. 19 An index close to 7 implies that the Judicial system is independent, while an index close to 1 implies a system that is heavily influenced. K. Schwab, The Global Arab World Competitiveness Report 2005, World Economic Forum, 2005. And k. Schwab & M. Porter, The Global Competitiveness Repot 2004-2005, World economic Forum, 2005. 20 The World Bank,, Doing Business in 2006 (2005).


Settling disputes The cost of settling disputes as a percentage of the debt is, in Yemen 11%; higher than Jordan (9%) but lower than Syria (34.3%) and Lebanon (27%). This can be attributed to lower fees of lawyers. Still, there is a need to reduce the number of procedures and days required to settle disputes21. Corruption perception Corruption is perceived as a major obstacle to doing business in the Middle East region. A survey conducted by the Organization for Economic Cooperation and Development (OECD) showed that the perception of corruption as an obstacle to business in Yemen among other countries. Bahrain, Jordan, Kuwait, Oman, Qatar and United Arab Emirates are, however doing better in fighting corruption22. In 2005, Yemen’s ranked 103rd out of 158 countries on Transparency International’s corruption perception index. Yemen has a significant and widely acknowledged corruption problem. Illicit activities include soliciting and paying bribes to facilitating or obstructing projects, leveraging dispute settlements, skewing taxation and customs tariff augmentations, and engaging in family or tribal nepotism. The government recognizes that it must enact civil service and administrative reforms to create new disincentives to corruption, but progress has been slow. In September 2004, the Cabinet approved the United Nations’ Convention combating different forms of corruption. In 2006, the government proposed a law creating an independent anti-corruption committee, which awaits approval by Parliament.

21 The World Bank, Doing Business in 2006 (2005) 22 A. Bohmer and K.Davis, Investment climate and regulation of international investment in MENA countries, Working group 1 (MENA-OECD Investment Program, 2005.


11. Recommendations

General recommendations Prioritize the sectors identified and its sub-sectors using competitive criteria and ranking, in

addition to identifying the potential and influence of investment opportunities of the priority sectors / sub-sectors on the national economic growth, employment, poverty as well as other socio economic factors contributing to the challenges that Yemen faces. Identifying the priority sub-sectors will also assist GIA in focusing its targeting and promotion on investment opportunities that contribute most to Yemen socio-economic development (e.g. sector specific promotion strategy) and targeting donor organization to support and implement necessary interventions (e.g. preparing detailed sectoral / sub-sectoral strategies for upgrading and assisting the priority sectors).

Review the investment law to improve incentive framework related to the priority sectors/sub-

sectors. At sector / sub-sector level, develop detailed studies, mapping and strategic plan to support the

development of the promising sub-sectors. Develop a marketing communication program for each sector defining the economic development

message, the sector unique selling proposition to attract investors, identity tools (brochures, pocket folders, website etc., showing communications and promotions designed to build awareness and deliver value to local stakeholders and foreign investors (e.g. newsletters or bulletins, annual events (economic forums), regular meetings and specific awards). As well as activities to building confidence, trust and program support (e.g. regular reporting).

Develop knowledge and understanding of the promising sub-sector among stakeholder in addition

to sub-sector specific promotion strategy. Support the regulatory and institutional reforms for promoting investment and exports through

collaborative efforts and capacity development between the General Investment Authority (GIA) and the Higher Council for Exports and its technical organs.

Adopt an integrated policy approach covering all drivers of competitiveness to enable

sustainable prosperity growth and develop competitiveness strategy at national and sectoral levels.

With the globalization and the increase in economic competition for markets, Yemen needs also

to adopt an integrated marketing and communications campaigns for Yemen branding using an effective strategic marketing to integrate the promotion of the country image, products, and attractiveness for tourism and foreign direct investment. Effective Yemen branding not only serves to reinforce positives images but also helps to fight negative ones (e.g. security related) by shaping new images and associations. It is a tool of Yemen competitiveness and seriously affects Yemen’s ability to compete. Thus, effective branding of the country can give it a competitive advantage in world markets and opens many opportunities for investment. It is,


more importantly consumers and investors continue to rely heavily on country images to make their economic decisions. Brands or images have become a shortcut to a purchasing decision. Yemen has unique history and culture that can help in sustaining its brand image through national and international cultural events like exhibitions, competitions and festivals, art exhibits, and student exchanges, in addition to investment promotion activities and public diplomacy with NGOs aimed at furthering its image and reputation through mutual understanding. Branding can plays pivotal role in attracting foreign investment. This calls for defining and prioritization of the promising sectors in Yemen, providing the basic information foreign companies are looking for when searching for a location: local labor market, access to customer and supplier markets, infrastructure, transportation, education and training opportunities, quality of life, business climate, capital availability, taxes and regulations.

Support updating and/ or reforming laws and regulations that govern the entry and operations

of local and foreign investment Support upgrading the regulatory and legislative reform to overcome regulatory barriers,

create healthy business environment and enabling business climate including effective enforcement mechanisms of both the competition law and intellectual property rights law. In addition to strengthening the anti-dumping authority and creation of an effective competition authority preventing anti-competition behavior.

Support the development of clear standard system and accreditation procedures that meets

international standards to guarantee access to world market. Support the judicial enforcement including land titling and property rights development.

Support the liberalization of exporting services (e.g. financial services, travel and tourism, air

transport, construction and telecommunications) in order to reap the potential comparative advantages in those services.

Support collaboration between private and public sector (educational/research institutions) as

well as institutions that enable collective action by private sector, such as Business Associations.

Supports the role of the Free Zone in Aden and improvement of the competitive capacity of the

zone regionally and internationally by developing its management and training its employees to deal with the conditions and Properties of the zone, in addition to completion of its infrastructure projects and the utility services. In addition clarifying the roles and responsibilities of various agencies involved and establishing clear lines of conduct and reporting.

Support the assessment of industrial zones as means of demonstrating best practice regulation

to attract investment over existing land infrastructure services. Enhance sector /sub-sector level data availability and accessibility in order to enable assessing

the operational performance at each sub-sector, identify gaps and needs for its development.


Human resources and physical infrastructure Promote investment in infrastructure sectors and sub-sectors through public- private partnerships with the objective to improve the access, use and cost of infrastructure services (e.g. improve service quality) through restructuring the infrastructure sub-sectors by separating political decision making from economic regulations (e.g. creation of independent regulating agencies) and specifying the role of national operators with respect to new actors.

Privatization of national operator in each sub-sector under BOT (Build-Operate-Transfer) arrangements.

Upgrade national skills in bidding process licensing design and contractual arrangements with private sector operators under BOT (Build-Operate-Transfer).

Open markets to private service providers to reduce costs as related to each sector/sub-sector

Agriculture Promote investments and improve incentive framework in the following sectors:

Traditional coffee sub-sector with improved modern farm systems. Traditional honey sub-sector with efficient extension and support services Olives and cereal sub-sectors (rain-fed/drought resistant cultivations competitive to Qat) Fruits and vegetables sub-sector introducing (e.g. mango and date palm) with provision of

improved irrigation management and extension services. Livestock production with improved husbandry, cross breeding and improved range

management. Rural road rehabilitation and management Private agriculture and veterinary extension services Seed producing plantations

Fishery Promote investments and improve incentive framework in the following sectors:

Fishery and fish processing sub-sectors using intensive promotional programs aiming at enhancing fish marketing and strengthening export marketing networks.

Infrastructure and facilities (e.g. cold storage and, transportation) Support related Ministry and institutions in:

Reviewing and updating fish stock assessments and its potential for commercial exploitation. Improving fisheries resource management and development of small scale fisheries. Improving management, control and evaluation of fishing activities, their proper exploitation

and protection from pollution and over-exploitation. Enforcing international standards for consumer and environmental protection. Improving local capacities for monitoring and implementing international standards and

controls to ensure quality improvements and protect consumers.


Establishing quality control labs in main ports and fishing centers to ensure international quality standards

Reviewing the legislative and institutional framework for regulating the exploitation of fish resource of both traditional and commercial fishing.

Improving capacity in marine control and inspection to prevent pollution, foreign piracy and overexploitation

Improving the performance of the institutions and research centers in developing modern breeding and culture farms.

Ensuring that essential basic infrastructure to improve fishing operations and access to domestic and overseas markets by removing constraints to private sector to engage in providing basic infrastructure and facilities (e.g. cold storage and, transportation)

Mining and quarrying Promote investments and improve incentive framework in the following sectors:

Building stone sub-sector (particularly FDI ) in industrial rocks, dimension and ornamental stones.

Physical infrastructure aiming to improving extraction, exploitation and access to domestic and overseas markets

Support relative Ministry and institutions in:

Reviewing and updating geological surveys, mining maps and assessments of mineral reserves and its potential for commercial exploitation.

Reviewing the legislative and institutional framework for regulating the exploration and exploitation of industrial and construction material

Promotion of the investment opportunities in the mining sector using intensive promotional programs.

Manufacturing Promote investments and improve incentive framework in the following sectors:

labor-intensive investments requiring shorter training duration (e.g., garment, apparel, leather goods, footwear and sown goods using domestic cottons, raw skin and imported fabrics, yarns and processed leather

High value added food processing Training institutions and initiatives aiming at supporting well trained manpower through on-

the-job training, vocational schools and universities. Support Ministry and institutions in:

Improving incentives framework facing exporters and simplifying export procedures to remove administrative constraints

Review, streamline and simplify the laws and regulations related to industrial activities. Attracting FDI and encouraging joint investments opportunities to enhance technology

transfer and ease credit constraints through strategic alliance programs targeting regional, European and international businesses.


Striving for product and process innovation through technology searching, acquisition and adoption

Enforcing international standards and quality for consumer and environmental protection through engineering, production techniques and field lab testing.

Improve local capacities for monitoring and implementing international standards and controls to ensure quality improvements and protect consumers.

Assisting small industries focusing on the promotion of business development services (e.g. training, promotion, marketing and credit).

Re-orienting the education system outcomes to private sector demand and needs for specialization, skills and qualifications.

Travel and tourism Promote investments and improve incentive framework in the following sectors:

Resort areas, attractions and tourism related facilities in sites of cultural, scenic and ecological interests to extend the length of stay

Eco-tourism facilities Infrastructure and related services providing access for domestic and international travelers. Support relative Ministry and institutions in: Strategic tourism marketing development in order to ensuring that market demand is fully

met—in terms of both service quality and quantity. Increasing performance efficiency by engaging in deregulation and privatization to stimulate

demand and growth as the case of European aviation where all industry players were forced to improve efficiency and to expand their network at competitive prices to survive the pressure of new market entrants.

Cross-border liberalization of a whole national and regional and international policy framework, which can effectively attract new market entrants and improve the industry’s overall performance.

Review air transport policies to facilitate access by foreign airlines to reduce ar travel costs by liberalizing landing rights, review landing fees, allow charter flights and open more airports to international traffic

Engaging in tourism promotion campaigns To exhibit local cultural heritage and treasures, raise awareness about the value of traditional architecture, handicraft and life style.

Fostering the extension of the length of stay of international visitors by combing their visits to the country by motivating them to visit sites of cultural, scenic and ecological interest (main motivation) or beac and resort areas (subsidiary product.

Promoting the use of domestic inputs and materials, national management and labor with compromising the quality of services


12. ANNEXES

Annex 1: Terms of Reference of the study Annex 2: Time schedule of the mission Annex 3: References / Documents used Annex 4: Persons met during the assignment


Annex 1, Terms of Reference

ARGE INTEGRATION – Dialog

Private Sector Development Project (PSDP) PN 2007.2031.8 VN 81098513

Mission of a Regional and Local Expert

2 Experts: Senior /regional and Junior/national level

Time in Yemen 21. June till 29. July 2008

Subject: Economic Sector Study (Investment Road Map) ESS Part II for GIA (General Investment Authority)

Title:Investment Priority Sectors and Bench Marking

ToR see below

CVs attached

Input of Experts: Senior Expert: 32 working days + 2 flight days = 34 working days = 1,55 MM Junior Expert: 20 working days = 0,9 MM

Background The Investment priority sectors and benchmarking study is based on Part I “Economic Sector Study (Investment Road Map) ‐ Structure and Concentration” Part I identifies the structure and concentration of the Yemeni economic sectors as well as examines and assesses the different aspects of the main economic sectors including SWOT analysis. Objectives: • Derive from the results of the economic sector analysis the Yemeni Investment Priority Sectors which

are currently already represented, underrepresented or not represented • Examine the influence of the existing Yemeni investment law on the Investment Priority Sectors to

ensure that the law is compatible to the requirements of investing in these sectors. • Study and compare competitive advantages in other MENA countries with the Investment Priority

Sectors in Yemen (Bench Marking). The GIA expects a competitive benchmarking analysis on Priority Sectors of Yemen Report(s) Provide a practically oriented report with all necessary facts and figures. Attachments to the report are summaries of all reviewed documents. Approved by By Kuno Fischer, GTZ Yemen, or person authorized by him


Terms of Reference (TOR)

Economic Sector Study (Investment Road Map) ESS (Part Two)

Investment Priority Sectors and Bench Marking

A. Background: In order to develop a successful FDI (foreign direct investment) promotion strategy it is vital to analyze the economic sectors of the country and identify focal Investment Priority Sectors. Currently, the GIA ‐in cooperation with other related institutions‐ is recognizing the following economic sectors. These economic sectors should be the basic structure for the required study. But these sectors have to be evaluated on a fundamental basis. This again has to loop into the illustrated necessity of a clear range of priority sectors.

1. Industry Manufacturing Extraction and Processing

1.2.1. Oil and Gas 1.2.2. Metals 1.2.3. Mineral Recourses

2. Tourism Small Tourism Projects Tourist Resort and Village Projects Mineral Baths Five Star Tourism Special Tourism

3. Agriculture (and agriculture‐related industries) and Fishery 4. Electricity, Water and Telecommunication 5. Real Estate, Infrastructure (land, air and sea), Construction and Housing 6. Logistic (Transportation Means, Cargo and Warehousing) 7. Services and Financial Services 8. Health Sector

The analysis of the economic sectors is divided into two separate studies: The first economic sector study, the “Economic Sector Study (Investment Road Map) ESS – Part One – Structure and Concentration” identifies the structure and concentration of the Yemeni economic sectors as well as examines and assesses the different aspects of the main economic sectors including their strengths and weaknesses. This first economic sector study is based on the “Investment Environment Study” of Dr. Khalid Kassem Kaid and will be elaborated by Dr. Adnan Hydar Alasnoy till the end of May 2008. The results of this first economic sector study are the basis for the second study, the “Economic Sector Study (Investment Road Map) ESS – Part Two – Investment Priority Sectors and Bench Marking”. The objectives and activities of this “Economic Sector Study – Part Two” will be described as follows:


B. Objectives and Activities of the Economic Sector Study – Part Two – Investment Priority Sectors and Bench Marking: Objective One: Derive from the results of the economic sector analysis the Yemeni Investment Priority Sectors which are currently already represented, underrepresented or not represented (e.g. packaging industry, or low‐end (labor‐intensive) manufacturing). Objective Two: Examine the influence of the existing Yemeni investment law on the Investment Priority Sectors to ensure that the law is compatible to the requirements of investing in these sectors. Objective Three: Studying competitive advantages in other MENA countries and compare them with the Investment Priority Sectors in Yemen (Bench Marking). The GIA expects a competitive benchmarking analysis on Priority Sectors of Yemen, which should consider especially questions as follow: • What are the latest developments and trends in the different sectors? • What specifically is driving competitiveness at a company level and what are motivating recent investment activities in the sectors. • Which countries are Yemen’s competitors in the different sectors, seen by investors? • What are the critical and important location criteria evaluated by investors in these sectors? • Based on these criteria, what does Yemen have to offer and how does Yemen’s locations compare to the competing locations for the investments in the different sectors? • What is the labour and skill availability situation in each sector in Yemen and what gaps are reported by investors? • What is the unique selling proposition, including key marketing messages? • What are the main weaknesses and obstacles in the industrial and regulatory environment? C. Output: 1.) Provide a practically oriented report with all necessary facts and figures. 2.) Summarize into a separate attachment to the text part of the study the reviewed documents. All available reports or studies that have been carried out by related institutions (Government as well as private institutions) and development partners should be reviewed and analyzed for the purpose of the elaboration of this part of the economic sector study. 3.) 2 days discussion with International Development Ireland (IDI) presently working with GIA: D. Timeline: The study should be completed and handed over to GIA on 21. July 2008. Sana’a in May 2008 Mohammed Hussein Yahya Dr. Josef Iglhaut GIA Head of Investment Promotion GIA Advisor


Annex 2: Time schedule of the mission Month (2008)

Date Activities

21st, Arrival to Sana’a from Cairo

22nd – 26th Sana’a: Orientation, meetings with GTZ PSDP and GIA staff, data collection and office work

27th – 29th Field visit to Aden: interviews with GIA staff, business people, port of Aden officials and World Bank experts in fishery sector.

June

30th, Return to Sana’a

1st – 17th Sana’a: Interviews with business people in tourism, mining & quarry sectors, Government officials and representatives of Business Associations

18th -21st Field visits in Mukalla: Interviews with business people and associations in fishery sectors

July

22nd – 31st Sana’a: Interviews with business people in tourism, mining & quarry sectors, Government officials and representatives of Business Associations

1st -3rd Field visits in Hudaida: interviews with business people in manufacturing, agriculture and tourism sectors

4th – 5th Field visits in Taiz: interviews with business people in manufacturing sectors

6th – 12th Sana’a: Interviews and preparation of final report and briefing of results to GIA and GTZ SIM Experts in Yemen

August

13th Fly to Cairo


Annex 3: References / Documents used

The Arab Monitory Fund (2007) The Arab Economic Report The Arab League (2005) “Transport Statistics Bulletin”, second issue. The Arab League (2006) “Social Statistics Bulletin”. UNIDO (2006) Industrial Statistics Yearbook. The World Bank (2005) “International Development Indicators. World Water Forum (2006) Fourth Forum. Middle East and North Africa Regional Document, 16–22 March

2006, Available at: http://www.worldwaterforum4.org. The Ministry of Planning – Yemen (2006) “Annual Economic Report. The World Bank (2007: “Doing Business Series”. The World Bank (2006) ‘Doing business 2007: How to reform’, A Co-publication of the World Bank and the

International Finance Corporation, Washington, DC: The World Bank, Available at: www.doingbusiness.org. The World Bank (2007: “World Economic Outlook database”. IMD (2006) “World Competitiveness Yearbook” Ali, A. (1996) ‘Organizational development in the Arab world’, Journal of Management Development, Vol. 15,

No. 5, pp.4–21. Bartholomew, S. (1997) ‘The globalization of technology: a socio-cultural perspective’, in J. Howells and J.

Michie (Eds). Technology, Innovation and Competitiveness, Cheltenham: Edward Elgar, pp.37–64. Gnesotto, N. and Grevi, G. (2006) ‘The new global puzzle: what world for the EU in 2050?’ EU Institute for

Security Studies (ISS), Paris, France. Hanouz, M.D., El Diwany, S. and Yousef, T. (2007) ‘The Arab world competitiveness report 2007: sustaining

the growth momentum’, World Economic Forum, Available at: http://www. weforum.org/en/initiatives/gcp/Arab%20World%20Competitiveness%20Report/index.htm.

Henry, C.M. and Springborg, R. (2001) Globalization and the Politics of Development in the Middle East, Cambridge, UK: Cambridge University Press.

International Monetary Fund (IMF) (2007) ‘World economic outlook: spillovers and cycles in the global economy’, Available at: http://www.imf.org/external/pubs/ft/weo/2007/01/pdf/c2.pdf., p.78.

Mellahi, K. (2003) ‘National culture and management practices: the case of gulf cooperation council countries’, in M. Tayeb (Ed). International Management: Theories and Practices, pp.87–105.

Nasr, M. (2003) ‘Assessing desertification in the Middle East and North Africa: policy implications’, in H.G. Brauch et al. (Eds). Security and Environment in the Mediterranean: Conceptualizing Security and Environmental Conflicts, Berlin-Heidelberg: Springer Verlag.

Schlumberger, O. (2000) ‘Arab political economy and the European union’s Mediterranean policy: what prospects for development?’ New Political Economy, Vol. 5, No. 2, pp.1469–9932.

Shetty, Y.K. and Buehler, V.M. (1991) The Quest for Competitiveness: Lessons from America’s Productivity and Quality Leaders, USA: Quorum Books, p.413.

Smith, D. (2006) The State of the Middle East. An Atlas of Conflict and Resolution, London, UK: Earthscan.

United Nations Development Programme (UNDP) (2006) ‘Human development report 2006’, Beyond Scarcity: Power, Poverty and the Global Water Crisis, Available at: http:// hdr.undp.org/hdr2006/statistics/.

World Economic Forum (2006) Environmental Performance Index, Available at: http:// www.yale.edu/epi/. World Information Society Report (WISR) (2006) International Telecommunication Union (ITU), Geneva,

Switzerland, Available at:http://www.itu.int/osg/spu/publications/worldinformationsociety/2006/report.html. World Information Society Report (WISR) (2007) International Telecommunication Union (ITU), Geneva,


Switzerland, Available at: http://www.itu.int/osg/spu/publications/ worldinformationsociety/2007/index.html. World Telecommunication/ICT Development Report (2006) ‘Measuring ICT for social and economic

development’, 8th edition, International Telecommunication Union (ITU), Geneva, Switzerland, Available at: http://www.itu.int/ITU-D/ict/publications/wtdr_06/index.html.

Yale Centre for Environmental Law and Policy, Yale University (2002) 2002 Environmental Sustainability Index, Available at: http://www.yale.edu/esi.

Yale Centre for Environmental Law and Policy, Yale University (2005) 2005 Environmental Sustainability Index, Available at: http://www.yale.edu/esi.


Appendix 4: Persons met during the assignment N0. Name Position Institution

1 Marwan Frag BinGanem General Manager 2 Montaha Muthana Head of Promotion Sector 3 Mohamed A. Husein Advisor to Chairman

GIA

4 Dr Joseph Iglhaut Advisor to the Chairman GIA - CIM 5 Eugene Reilly Advisor – IDI Senior Advisor 6 John Magill Senior Industrial Expert - IDI

IDI

7 Taufik Aldobhani National Coordinator

8 Juma Abu Hakmeh Regional Expert – Business Enabling Environment

9 Fawaz Qaid Expert – Business Enabling Environment

GTZ PSDP

10 Dr. Hamoud El-Nagar Chief of Communication and Coordination Office With WTO Ministry of Industry and Trade

Dr. Motaher Al Abassi Undersecretary 11 Dr Mohamed A. Al-Hawri Deputy - Economic Studies and Forecast

12 Dr Abdul Hakim Al-Obeid Deputy Chairman – Central Statistical Org.

13 Hamdi El-Shargaby General Manager – Int. Trade Statistics 14 Abdul Gafar A. Muthanna General Manager – Nat. Statistics

Ministry of Planning and Int. Cooperation

15 Eng. Nabil Magam Deputy Minister – Investment and Research

16 Eng. Gamal Raga GIS Dept 17 Soad A. Khan Economist

18 Dr Omer A. Subeih Director – Fisheries Resource Management and Conservation Project

Ministry of Fish Wealth

19 Dr Ismail N. Al-Ganad Chairman 20 Eng. Ashraf S. Al-Jailani Senor Geo-chemist – Chairman Office 21 Eng. Amer M. Assabri GM – Promotion and Evaluation 22 Franz Moll Consultant 23 Jurgen Hecks Consultant

Geological Survey and Mineral Resources Board

24 Mohamed Saleh Al-Roubi Owner / Manager AL-Roubi Co. for Marble and Granite 25 Mohamed A. Al-Akwa Partner / Manager The Yamani Jordanian Co. for Quarry 26 Abdulla Thwaba Owner / Manager Thawaba for Marble and Granite 27 Raidan Al-Saqaf Program Manager / CTO USAID

28 Ansgar Josef Cordier Advisor Federation of Yemen Chamber of Commerce

29 Noman M. Al-Mulsi Secretary General 30 Nagib M. Yousof Secretary General Assistant

Yemen Export Supreme Council

31 Omer Bajersh Chairman Hadramout Chamber of Commerce and Industry

32 Eng. Badr BaSalma General Manager Hadramout Chamber of Commerce and Industry

33 Captain Mohamed AbouBakr Deputy Chairman Port of Mukalla

34 Ali Habshi Managing Director Burum Sea food Co 35 Hussein Tamimi Owner / GM Tamimi Fisheries Co

36 Mohamed Al-Basseri Owner / Manger Boat Manufacturing Co. / Chairman – AlShehr Chamber Branch

37 Saleh Ba-Lehwal Businessman – Contracting and trading Ba Musalem Trading 38 Mohamed Ba-Musalem Partner Ba Musalem Trading 39 Hanan Ba-Humaid PSDP Mukalla representative PSDP / GTZ 40 Awad BaSweid Chairman Al-Shehr Fishermen Association 41 Mohamed A. Baza GM Cameleers Tours


N0. Name Position Institution

42 Abdul Salam A. Al-Athwary Secretary General The Yemeni Council of Businessmen and Investors

43 Sheikh Mohamed Ba-Mashmous Chairman Chamber of Commerce and Industry -

Aden

44 Adel Al-Ashtal Manager General Investment Authority – Aden Branch

45 Dr Abdul Galil Al-Shaibani Vice Chairman 46 Dr Reyad Nader Director – Dept. for Investment Services

47 Dr. Fatma Omer Director – Dept. for Promotion and Marketing

48 Mohamed A Noman Director – Dept. for Planning and Int Coop

Yemen Free Zone Authority - Aden

49 Fatma S. Abdalla Director - Planning 50 Roy A. Fancey Port Development Advisor

Port of Aden

51 Mohamed Farouk Assistant General Manager 52 SamirEl-Kady Product Manager

AlSaeed Tading Co.

53 Hesham A. Sheibani Assistant General Manager Al-Takamol for Management trading and Marketing

54 Mohamed Al-Megahed Ibb Agric Office Manager Ministry of agriculture and irrigation 55 Mohamed Farouk GM – International trading 56 Samir Qadi Business Development

Al-Saeed Trading Co.

57 Hesham Al-Shaibani GM Assistant Al-Takamol for Management, Trading and Marketing

58 Galal El-Din Saeed Executive Manager Salah el-Din Metals Household Appliance 59 Ahmed El-Hashedi Marketing Manager Red Sea Detergent Co 60 Jamil Al-Gannami General Manager Al-Ganami Chloride Battery 61 Hassan El-Meligi Senior Consultant Megacom 62 Fadl Sannan Chairman Cooperative Union - IBB 63 Ali Al-Saiidi Chairman Qaa el-Hakl Agric Cooperative 64 Ahmed Al-Mossaouri Member 65 Mohamed Al-Taweel Chairman

Water Users Association - Makhader

Final Report GIA 190908_Final

Documents

economic sectors

sector competitiveness

sector position

sector political

sector potential

selected sector

sector related experts

yemen identification