Business

Politics, Security, and Donors are Keys Yemen’s Economy

National Yemen

Ramzi Al-Ariqi, the Managing Partner of Grant Thornton Yemen

By Fakhri Al-Arashi

Speaking with an eye on Yemen’s prosperous future, Ramzi Al-Ariqi, the Managing Partner of Grant Thornton Yemen, reflected on his economic thoughts and the new government. Mr. Al-Ariqi is a Certified Public Accountant (CPA),leading one of the most top ranking worldwide  Auditing and Consulting company operations in Yemen, Oman and Ethiopia. Al-Ariqi’s  profession in the Yemen commercial affairs, finance, tax law and so on, made him a co-partner with many working local and international firms, NGOs. His education in the US has given him the chance to join and help well recognized Orgs in their field study. Above to all that, he was the Ex-President of Yemeni Association of  CPA. This Interview was conducted by the editor in chief of National Yemen Mr. Fakhri al-Arashi.

To the Interview

National Yemen:  Would you please identify Yemen’s main problems and solutions for the new Yemen Government to know about?

Ramzi Al-Ariqi: Addressing Yemen’s economy is important. As far as I know, the economic side stands by three essential components. The first component is that, there should be a political settlement to end the major challenges and changes among the political powers. Since the 2011 Youth revolution, multiple political players have emerged with strong influence in politics. Therefore, a political settlement is a must before any investment plan. The second component is based on security improvement. Militants should evacuate the cities to let people live their lives peacefully and quietly so people can reinvest again. The third part is the most important one. It is donors’ fulfillment toward their old and new commencements. If there is a good political settlement without the support of donors, the transition will remain fragile. Without quick support the country will deteriorate worse than now.

NY:  Aha,You said quick financial support. Yemen has been financially backed for almost five decades. Now donors have lost confidence in Yemen and pledged their support to local and international CSOs, which will not build the country. How do you explain this?

Al-Ariqi: To improve any economy you need to inject money, otherwise there won’t be any improvement. Lately, donors have established a clear communication channel, which is the donors’ basket fund or Bureau to Accelerate Absorption of Donors’ Pledges which is now headed by the famous Yemeni women, Amat al-Alim Alsoswa. This Bureau has been designed to helps the donor to supervise the implementation key reformers in the government’s  agenda  with full responsibilities to improve the country’s economy. Again, it is designed to send positive signals to donors who wish to see their contribution achieving the ultimate goals like how they planned for it. With no doubt, the CSOs are part of the community and any money that comes into the country helps the economy immediately, even the illegal money that goes for the benefit of the political parties. This type of money could be the main sources of income for today’s economic survival.

NY: I do not agree with you. Yemen’s past and current problems are unemployment and lack of investment opportunities. Donors’ money does not serve those two major problems. How true is this fact from your point of view?

Al-Ariqi: In long-term yes, but for now it is very important to continue this way of building awareness. Look at the World Bank when they suspend their activities and projects. It negatively affected the economy. We need these projects to resume its activities once again. This suspension was because of the security issue. Now, most of these projects are operating their projects activates from outside Yemen. Some international organizations could not bring  their staff and experts to lead these projects. Let me tell you, when they were here they were facing some challenges to obtain such projects in an appropriate way. Now it is much more difficult to control it from a long distance. The success and opportunities are less than expected. For that, the donors need to see political and security improvements to come back and resume their support from within the country. Donors’ support is like an oxygen machine. If it stop it kills. The country is very badly deteriorating. I think that the Yemeni economy gradually decrease its dependency on Donors’ support on the long run but at this time we have no chose.

NY: Would it be possible to give your overview on the new government formation? How long do you think the government needs to cover public demands?

Al-Ariqi: The new government contains good qualified ministers. I think if the government is granted the chance by the politicians to work it might do something. There must be support from political parties and individuals to help the government achieve its mission. Moreover, the international community should support this government by all means. The political powers need to reach a certain settlement as well. The security issue should be improved and I am sure the support from the international community will come.

NY:  Most, if not all government authorities and ministries have excellent revenue like Tax, Fishery, Tourism, Culture etc. that should enhance the government treasury to improve they country’s infrastructure. Unfortunately it is not happening and it never goes to the treasury. Is there any chance in the future to control this with the new cabinet?  

Al-Ariqi: There was technical destabilization in the country’s economy for long time. First of all, the government totally depended on oil and gas revenues, which cover almost 70% of the state’s budget. This was supposed to be corrected a long time ago and I believe one government will not be able to make the necessary budget reform. On the other hand, most of the government’s other sources of income like how you mentioned it, do not have a proper and efficient collection process. Big wastes of these resources happen every day with the knowledge of the government. What happened in the past was the loss of government powers and fragile security has contributed to double losses of resources. With half government, Yemen could not collect that money. Do you think the government could do it now? Again, if there is no political support and improvement in the security issue the government will not be able to collect any money from these resources. Another issue is government expenditures, with significant portion goes to cover wage bill and fuel subsidies with small portion left for capital expenditures that should be able to create more jobs and reduce poverty.

The government should work hard to increase its revenue by improving tax compliance and collections and reducing its expenditure by farther control on the wage bill ( especially through the elimination of ghost workers), gradual reduction in fuel subsidies, gradual reduction on interest on public debit and minimize waste on its daily expenses. The government should redirect any savings into further investment in infrastructure that would contribute to creation of jobs.  If this will happen, it will help improve in reducing high unemployment numbers.

NY:  What type of investment would you like to see happening in the near future?

Al-Ariqi: Let me ask, what are the main incentives to invest in Yemen today? There is none! The security issue, again and again, if there isn’t a remarkable improvement in the security the investment will not come. Secondly, there should be an end to the political chaos. There are many investors who are willing to come to Yemen but they are waiting for significant breakthroughs in the political environment. Most of these companies (investors) have made serious investment studies, and these studies are on hold until further notice. The best solution for the government at this time to encourage medium and small projects, which can create big opportunities for thousands of people. These kinds of projects can generate more jobs than big projects, which are limited in numbers and very sensitive to any problems, while the small ones are growing every day. For the short term the government should focus on that. The businessmen who plans to investment one hundred million dollars or more will think one hundred times before he investing, but the small business that generates between 10-50 jobs have less concerns about security or political environment.

NY:  Your company is one of the auditing companies that works with oil companies and service companies, banks and etc. Do you agree with the law of terminating the international oil companies’ contracts at the end of PSA, or do you like to see it end with more partnerships with Yemeni local companies ?

Al-Ariqi: Local producing oil companies in the current situation will not be able to make the best revenue for the country. The main two government oil companies, PetroMasila and Safer, did not have the full freedom, cash and right to work the way they should be. The operational laws do not allow them to invest freely, they are very tied to the government offices and this does not grant them the  full authority to develop the existing oil blocks. For that, the Yemeni government should consider enabling those companies to be more independent from the government laws and regulations to be able to compete with international companies.

On the other hand, we still need international companies to work in the country, but what kind of international companies? Does international companies mean those companies who have no existence in the world but in Yemen or one or two countries? We need the big companies that have the ability to invest and inject money and have the technology that make a difference in oil and gas discoveries. Some of the existing companies working in Yemen are small and do not have the ability to invest more.

NY:   How would you like to conclude this interview?

Al-Ariqi: I mostly say, if Yemen needs to make real investments, they need to invest in human beings. Human beings are the core of any development in the world and if we can have long term investment in human beings then we are doing it right. In the next 10 years, we may have huge investment. Humans are the only ones who bring companies, operates and investment. If we focus on humans, revenue will immediately double.