Investment Is the Key to Economic Development in Yemen

National Yemen

Investment is the cornerstone of economic and social development and is the primary motivation for growth through increased domestic product. It provides additional raw materials added to the national savings, and investable resources within each country.

A further consequence of Yemen’s current economic predicament is that it fails to create an attractive environment for investors. The depreciation of the riyal and the budget deficit are deterring private investment and 20% interest rates are strangling access to credit, as not many private firms will take up loans at this rate.

However, increased investment in Yemen could provide the cash injection that is needed to revive the economy and reduce unemployment. Currently investment in Yemen is very low on a global scale, although forecasting suggests this is likely to improve over the next decade.

 There are some major infrastructure investments projected, although spending is weighted towards the oil and gas sector and the planned projects do not necessarily reflect the needs of the country. For example, there is also a firm onus on luxury real estate development.

There are a multitude of issues that adversely affect the investment climate in Yemen, including security fears and perceptions of corruption. Other issues are more practical, such as the lack of a guaranteed return on investment, the lack of infrastructure and skilled labor, and problems with supply chain management.

For that, the National Organization against violence and terrorism “Kefah” held a press conference in Sana’a about the difficulties, obstacles and negative phenomena that investors and businessmen face in Yemen. The press was in collaboration with the Ministry of Industry and the Tourism Promotion Board under the slogan “No To Violence and Extortion against Investors and Businessmen.”

The head of the promotion sector in the General Authority for Investment, Mohamed Ahmed Hussein, stressed the need for joint efforts to improve the investment environment and attract domestic and foreign investment because it represents the optimal guarantee to achieve sustainable economic development.

“The economic problems cannot be resolved without the promotion of investment that creates jobs and works to increase the gross domestic product. The security aspect is very important to create a good investment climate and investment environment and everyone must pay attention to security to ensure attracting investment,” Hussein added.

He pointed out that the authority aims to achieve three objectives to create a stimulating environment for investment, and activate the promotion work according to modern methods and to facilitate the investment process.

For his part, the Yemeni Federation of Pharmaceutical Manufacturers adviser Dr. Abdualrahman al-Olufi talked about a number of investment constraints and their impact on local and foreign investors.

There is no doubt that a good investment climate is an essential issue for the private sector and therefore economic development depends mostly on the investment climate, which also helps create more job opportunities and alleviate poverty. Examining investment limitations and obstacles is very important, as it provides useful information for decision makers and the government about the policies that should be taken or corrected, and the issues that should be tackled.

Investment is an economic process that uses capital to pay for production equipment, reach interests, raise the productive efficiency and make up for the old capital. In light of this concept, investment falls into two types. The first type is ” Compensation Investment” that aims at maintaining survival of the capital through the use of ruin allocations to replace the old capital with a new one. The second type is represented by net investment. The net investment is any money added to the original capital and increasing the productive capacity.

Yemen is rich with many primary components that help attract investment such as its strategic location, it being a linking point between Europe and Asia and the main entrance to the Horn of Africa. Another important component is the availability of human resources characterized by low offers but high competitive capacities and skills. According to 2003 statistics, the overall workforce aged 15 and over constitutes around 45 percent of the population of the country. In addition, Yemen has a 2,600 km-long coastline and its water is rich with fisheries.

Yemen’s regional waters include 183 islands in the Red Sea, Aden Gulf and the Indian Ocean. All these islands are qualified for tourist investment at the Arab level and internationally. These islands were clustered into sectors to attract investment in light of the new international economic system with its three components: the International Monetary Fund (IMF), International Bank for Reconstruction and Development (IBRD) and World Trade Organization (WOT).

Investment in Yemen suffers from legal, administrative, structural, financial, technical, judicial obstacles that need to be addressed and solved to enable internal and external investment in Yemen.

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