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 (Sanaa / 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 nations 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
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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
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GIA Ye / GTZ (PSDP) Study on Identification and Benchmarking of Promising Sectors in Yemen
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/subsectors. 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
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2.
1. 2. 3. 4. 5.
Contents
2 5 7 8 10 10 10 17 18 19 19 21 29 29 30 30 32 34 38 40 42 54 54 54 58 58 63 68 71 76 78 82 82 85 89 94 95 98 99 101
Executive summary Contents List of tables and charts Abbreviation and acronyms Introduction 5.1 Objective of the study 5.2 Approach and methodology 5.3 Data availability 5.4 Structure of the report 6. Factors impacting sectoral potential 6.1 Human resources 6.2 Supporting physical infrastructure 7. Economic sectors in Yemen 7.1 Introduction 7.2 Economic sectors Agriculture Fishery Mining and quarrying Manufacturing Travel and tourism 8. Identification of promising economic sectors 9. Sector-level competitiveness and benchmarking 9.1 Introduction 9.2 Competitiveness of MENA business environment 9.3 Benchmarking promising economic sectors Agriculture Fishery Mining and quarrying Manufacturing Travel and tourism Benchmarking 10. Investment law and its influence on attracting investments in identified sectors 10.1 Investment law no. 22 of 2002 10.2 Attractiveness of investments in Yemen 11. Recommendations 12. Annexes Annex (1): Terms of Reference Annex (2): Time schedule of mission Annex (3): References / documents used Annex (4): Persons met during the assignment
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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): Porters diamond framework Chart (2): Diamond factors: sources of location competitive advantage
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4.
BCI BLT BOO BOT CSO EPI ESCWA FAO FDI GAFTA GCC GCI GDP GIA GNI GNP GSMRB GST GTZ HDI ICT IE ITC LD LIST LOA MC MENA MO&M MoT PSDP R and D SOA SOE SWOT TEVT TOR UAE UNICTAD
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Abbreviations and acronyms
Business Competitiveness Index Build-Lease-Transfer Build-Operate-Transfer Build-Operate-Transfer Central Statistical Organization - Yemen Environmental Performance Index Economic social committee of West Asia Food and Agriculture Organization Foreign Direct Investment Great Arab Free Trade Zone Gulf Cooperation Council Global Competitiveness Index Gross domestic product General Investment Authority - Yemen Per Capita Gross National Income Per Capita Gross National Product Geological Survey and Mineral Resources Board - Yemen General Sales Taxation German Development Cooperation Human Development Index Information and Communication Technology Investment Environment International Trade Commission Land Development Listing Lease of Assets Management Contract Middle East and North Africa Ministry of Oil and Minerals - Yemen Ministry of Tourism - Yemen GTZ Private Sector Development Project - Yemen Research and development Sale of Assets Sale of Equity Strengths, Weaknesses, Opportunities and Threats Technical Education And Vocational Training Terms of Reference United Arab Emirates United Nations Conference on Trade and Development
USAID WB WCY WEF WTO YCBI
U.S. Agency for International Development The World Bank World Competitiveness Yearbook World Economic Forum World Trade Organization The Yemeni Council of Businessmen and Investors
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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 Sanaa. 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.
The objective of the assignment was modified during the preparation for this study.
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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 nancial 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 ve 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): Porters 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
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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 twostep 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 nations competitive advantage. These attributes are factor conditions,
UN DESAS, International Standard Industry Classification of All Economic Activities, Revision 3.1, page 11.
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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.
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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 Domestic Economy International Trade International Investment Employment Prices Government Efficiency Public Finance Fiscal Policy Institutional Framework Business Legislation Education Business Efficiency Productivity Labor Market Finance Management Practices Impact of Globalization Infrastructure Basic Infrastructure Technological Infrastructure Scientific Infrastructure Health and Environment 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.
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Table (2): Framework for the identification criteria of promising sectors Description Definition Indicator Employment in sector Availability of Qualified Labor Human Resources Existence of relevant education/training services (specific to skills in the sector / sub-sector) Availability of raw materials Natural Resources Availability and accessibility of environmental resources needed for production Availability and adequacy of physical infrastructure for the delivery, production and distribution processes in the sector /sub-sector Productivity of production in the sector / sub-sector Value added in the sector Market size is significant and develops positively 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. Awareness of sector/subsector potential (business community identifies the sector as promising) Existing investment opportunities (sector provides business opportunities for investments) Output in the sector / subsector Governmental support programs and policies specific to the sub sector exist Investors perceive the legal and political environment in their specific sub sector as enabling. Sector/sub-sector is identified by sector specialists Sector/sub-sector is identified by business community Level of existing investments Criteria Sector employment Labor availability not viewed as constrained Positive Identification Not viewed as a constraint Not viewed as a constraint Source Statistics Perception of businessmen Secondary data Perception of businessmen Secondary data Perception of businessmen Perception of businessmen Secondary sources Perception of businessmen Statistics
Conductive factors conditions
Physical infrastructure required for production and distribution including transport, electricity, water and waste water
Not viewed as a constraint Productivity Indicators high relative to other sectors Contribution to National Value added relatively high Level of output in the sector is high as percentage of GDP Programs have been identified
Sector economic performance
Production is relatively efficient and competitive
Statistics Perception of businessmen
Conductive legal and Political environment
Not viewed as constraint
Perception of businessmen Perception of businessmen Perception of businessmen Statistics
Potential for investment
Sector/sub-sector is positively identified Sector/sub-sector is positively identified % of businesses operating in the sector/sub-sector is higher than average
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
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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 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 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
Internal (strengths and weaknesses)
External (opportunities and threats)
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 economic development (such as economic structure)? Building on the above framework, the identified sectors are identified using the framework of criteria shown in Table (4).
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Table (4): Benchmarking criteria for promising sectors Factors Location Human resources Conductive factors conditions Natural resources Physical infrastructure required for production and distribution including transport, electricity, water and waste water Benchmarking Indicator Location advantage Availability of Qualified Labor Availability of raw materials Availability and accessibility of environmental resources needed for production Availability and adequacy of physical infrastructure for the delivery, production and distribution processes in the sector /subsector Existence of relevant education/training services, specific to skills in the sector / subsector (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 Business and sector associations Construction of equipments Production of tools and consumables Technological assistance Availability and quality of industry credit 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 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 Health and hygiene Source
Structural support
Business environment
Technical support
Perception of Yemeni businessmen Internet sources for benchmarking countries
Business development services
Constraints
Regulatory environment and government policies specific to the sector
Legal framework and related Government policies (taxation, financial security, contract enforcement and competition regulations
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 Yemens 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).
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6.
6.1 Human resources
Factors impacting sectoral potential
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 Yemens 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 33.5% 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. Yemens 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
The Arab Monetary Fund: The Arab Economic Report - 2007
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in the Governorates of Taiz, Ibb, Sanna and Hudaida. The least populated Governorates are AlMahra, 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. Yemens 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 Sanaa (365 km) and Sanaa 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 5
Ministry of Planning and International Cooperation Such as: SOE (Sale of Equity), BLT (Build-Lease-Transfer), SOA (Sale of Assets), LD (Land Development), LIST (Listing) & LOA (Lease of Assets)
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the least percentage of paved roads (43.2%) when compared Jordan (100%), Egypt (80%), and Algeria (70%). Air transport Yemen has two major airports: Sanaa 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. Sanaa International Airport is the Yemens 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.
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Table (8): Air transport in MENA region (2004) MENA Country Total aircraft arrivals & departures (000) Total Arrival Air freight (Ton/KM)
Passengers carried (000)
Departure
Transit
Total
Passenger/tri p
Arrival
Departure
Yemen
Algeria Bahrain Egypt Iraq Jordan Kuwait Lebanon Morocco Oman Qatar Saudi Arabia Sudan Syria Tunisia UAE
22
47 72 228.4 13.6 42.4 40.6 39 106 437.6 99.2 238.6 10.8 33.2 92.2 290.8
747
-2309 11792 583 1219 26026 1599 3690 1572 1298 16180 223 1080 4669 13704
742
-2308 11752 834 1223 2443 1601 3759 1559 1206 15985 434 1148 4715 13388
--527 ---60 135 248 -1590 --87 202 1851
1489
3478 5144 23544 1417 2442 3131 5109 7697 13131 4094 32165 657 2315 9586 28943
68
-72 103 104 58 126 86 73 72 42 135 67 70 104 100 96
10
21 111 212 15 46 124 37 54 39 102 310 1 15 11 746 1833
9
-72 -6 48 41 25
28 9 184 6 17 11 702 1146
Total 1372.4 63271 63100 4700 131071 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 trans24/103 GIA Ye / GTZ (PSDP) Study on Identification and Benchmarking of Promising Sectors in Yemen
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 megacarrier of containers, the Maersk Sealand, now uses Aden as a hub for its operations serving East Africa and the Middle East. Hudaida is Yemens 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 Omans 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.
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Table (6): Maritime transport in MENA region (2004) MENA Country Ship calls No. % Imports Commodity (000Ton) Exports Total % Container GRT No. % National commercial feet No. %
Yemen
3860
3.4
7027
154
7181
2.5
8.1 1.3 14.8 2 6.9 7.7 1.9 2.3 -13.8 2 -0.7 18.4 -1.7 4.1 7.2 4.2 100 2005
521
512 192 3645 148 395 610 465 -315 612 2830 -218 3732 -240 451 318 10355 25567
2.0
2.0 0.7 14.3 0.6 1.5 2.4 1.8 -1.2 2.4 11.1 -0.9 14.6 -0.9 1.8 1.2 40.5 100
0.8
Algeria 7546 6.6 21165 2489 23654 Bahrain 1582 1.4 2863 1071 3934 Egypt 10313 9 29592 13595 43187 Djibouti --4900 1067 5967 Jordan 2694 2.3 11152 8771 19923 Kuwait 4269 3.7 18560 3797 22357 Lebanon 2876 2.5 5034 616 5650 Libya 2852 2.5 5840 869 6709 Mauritania -----Morocco 36210 31.5 24715 15625 40340 Oman 2117 1.8 2944 2869 5813 Palestine -----Qatar 3034 2.6 1901 168 2069 Saudi Arabia 10674 9.3 41081 12505 53586 Somalia -----Sudan 1589 1.4 4114 934 5048 Syria 3012 2.6 9432 2473 11905 Tunisia 5937 5.2 14032 6976 21008 UAE 16364 14.2 12151 -12151 Total 114929 100 17938 74057 291995 Source: The Arab League Transport Statistics Bulletin, Second Issue, (-- Not Available, also countries not shown are not available)
76 11 159 1 11 50 77 30 -53 7 -21 83 5 6 184 22 103 958
7.9 1.1 16.6 0.1 1.1 5.2 8.0 3.1 -5.5 0.7 -2.2 8.7 0.5 0.6 19.2 2.3 10.8 100
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 $/3minutes). Because of the relatively high international tariffs, international bypass (call back) seems to be a revenue issue. With the increased access to global satellite systems more private
sector consumers may be expected to bypass the system under the current tariff regime. This should encourage the telecommunications service providers and the Government to rebalance international charges and promote better regulations. The loss of revenue from high volume commercial users could have important adverse development consequences. Local tariffs are, however reasonable by regional standards but there is a high disparity between local and international tariffs. PTC receives an estimated 25% of gross revenues on outgoing calls; 20% of gross incoming revenues and 49% of all profits for its investment in TeleYemen which suggests that there could be scope for some possible tariff rebalancing in favor of reduced international charges which would help Internet growth and encourage export oriented firms. Internet users in Yemen are the lowest among MENA countries. For each 10,000 Yemenis only 8.2 use the internet. In Egypt 70.9 persons out of 10000 people are using the internet. The highest is in UAE (2820 people).
Table (7): Telephone line density and cost and internet penetration in MENA countries (2000) Internet Telephone mainlines Mobile international Penetration MENA Country
No. per 1000 people Waiting list per 1000 people Waiting time (Years) Local call cost (US$/3Min utes) No of mobile phone per 1000 people Outgoing traffic (Minutes/Sub scriber) Cost of call to USA ($/3Minu tes Users per 10,000 people Hosts10 ,000 people
Yemen
Algeria Egypt Iran Iraq Jordan Kuwait Lebanon Libya Morocco Oman Palestine Qatar Saudi Arabia Syria Tunisia Turkey
19
57 86 149 29 93 244 195 108 50 89 -838 137 103 90 629
159.5
646 1300 1203.5 -29.7 0.0 -80 5 --73 927 3026 83.7 --
3.8
5.4 1.9 1.2 -0.3 0.0 -1.2 0.1 0.5 0.7 -2.6 10 0.9 --
0.01
0.01 0.01 0.01 -0.02 0.00 0.07 0.00 0.07 0.07 0.04 -0.01 0.02 0.02
2
3 21 15 0 58 249 212 7 83 65 -44 64 2 6 109
105
86 34 24 29 275 340 124 78 172 518 --324 101 165 --
4.5
4.7 3.3 7.7 0 -5.4 4.5 -4.5 ---5.2 20.1 ---
8.2
16.19 70.9 --190.8 783.5 858 17.80 70.50 354.60 -501.2 92.6 18.5 104.3 728.4
0.04
0.01 0.83 0.00 0.00 1.80 16.60 18.12 0.11 0.21 2.4 -0.00 4.11 0.00 0.11 -132
UAE 391 0.3 0.0 0.0 548 1102 3.5 2820.5 Source: Compiled from various sources: World Bank, Global ICT Dept., and International Telecommunication Union and European Communication Group. -- Not available
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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 7
Data provided by the Ministry of Planning. Ministry of Agriculture
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MENA Country
Yemen
Table (8): Water supply and sewage systems (2004) Safe water supply (%) Sewage (%) Urban Rural Urban Rural Total population population population population
Total
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.
Ministry of Electricity and Ministry of Planning - annual economic report 2006.
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7.
7.1 Introduction
Economic sectors in Yemen
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)

Agriculture (without Qat) Qat
Contribution to Gross Output (%)
Value (at current prices, mil Riyals)
Contribution to GDP (%)
Growth rate (2004-06) (%)
No
% of national employment
Agriculture
464468 199390 52268 1665399
7.11 3.05 0.80 25.51
242630 95829 43069 1318672
6.45 2.55 1.15 35.07
6.48 1 -5.47 -8.26
1,060,00 0
29.8
Fishing
Fishing Crude oil and natural gas extraction Mining and quarrying (excluding oil) Manufacturing (excluding oil refining) oil refining
430,000
12
Mining and quarrying
18,000 4470 0.07 3353 0.09 6.73
0.5
Manufacturing
756876 585089 89384 88745
11.59 8.96 1.37
274249 17462 47900 1.36
2.29 0.46 1.27 0.73
5.18 1.81 2.6 6.5
210,000
5.9
Tourism
Restaurant and hotels
80,000 17,000
2.3 0.5
Electricity and water
Source: The Central Statistical Organization (2006)
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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 twothirds 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 200306, 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).
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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.

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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
Yemen is endowed with rich and diversified geological resources. Yemens 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
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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
50 15 16 6 6 50 50 16 9 35
Lime Stone and Dolomite
3.5 milliard m3 391 million ton 1 billion m3
Gypsum Marble Volcanic Glass

Granite
Bio-mass Berlet
Tuff
34.5 million rn3 35 million m3 1.6 million m3 350 million m3 121 million m3 365 million ton 13 million m3
Building stones
Basalt Rock Silica 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
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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 Yemens 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
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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 cafs) 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.
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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 Yemens comparative and
Ministry of Oil and Mineral Resources
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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 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)
Major constraints:
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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. Building social capital and infrastructure sustains Yemen economic growth
Unique selling proposition: 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) 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
Promising sub-sectors:
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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) 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.
Major constraints:
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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 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.
Promising subsectors:
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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 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 postharvest 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.
Major constraints:
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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
Yemens natural and location advantage is high. Yemens 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, Yemens 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)

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
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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 58 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
Unique selling proposition:
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Investment promotion measures:
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 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)
Major constraints:
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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 Sanaa 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 Sanaa 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
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Tourism
Potential:
unexploited extensive resources and attractive natural characteristics support various tourism products including unique UNESCO cultural heritage (historical cities: Sanaa, 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 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 cafs) 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 its 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 Sanaa 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 worldfamous destination for bird watching and reef diving. Yemens 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,
Major constraints
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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 sectors 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 Yemens 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.
9.1 Introduction
Sector-level competitiveness and benchmarking
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 MENAs 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 longdistance 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 countrys 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).
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Table (11): Competitive performance of MENA countries (2007)

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
Countries
Algeria Bahrain Djibouti Egypt Jordan Iran Israel Kuwait Lebanon Libya Mauritania Morocco Oman Saudi Arabia Syria Sudan Tunisia Turkey Qatar UAE Yemen
33.4 0.7 0.7 72.1 5.6 69.7 6.8 3.0 3.7 5.9 2.8 30.4 2.5 23.6 19.1 36.2 10.2
102 39 148 111 86 96
83 35 132 91 79 105
63 --85 64 53 45 --
76 49 -63 52 --
85 51 -76 52 --
116 -161 165 78 119
23
33 78 64 153 123 56 76 107 141 87 92 46 49 150
14
60 93 109 154 68 81 75 104 136 87 52 38 37 128
15
44 -114 70 ----30 59 38 32 --
19
44 --101 66 ----26 46 34 31 --
26
46 86 -148 115 55 38 130 154 80 91 -77 98
36
-131 68 60 59 97 124 82 49 -47 122
72.5
0.8 5.0 26.9
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 20062007) 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 economys 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.
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MENA
Israel Saudi Arabia Kuwait Oman UAE Jordan Tunisia Lebanon Yemen Morocco Algeria Iran West Bank and Gaza Syria Iraq Djibouti Egypt
Table (12) EDB overall ranking for MENA Countries (2007)
EDB
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
STA
1 14 6 5 13 10 3 7 16 2 8 4 17 11 12 15 9
LIC
8 2 11 14 4 3 12 7 1 15 13 16 10 5 6 9 17
EMP
8 2 1 5 7 3 10 4 6 17 11 15 12 9 13 14 16
REG
16 1 7 3 2 11 8 10 5 6 17 15 12 9 4 13 14
CRE
1 3 6 14 9 6 8 2 9 14 9 3 3 9 14 9 17
PRO
1 6 2 3 9 9 15 5 9 9 3 16 6 9 6 17 9
TAX
11 3 5 1 1 4 15 8 12 14 17 13 9 10 6 7 16
TAB
2 3 5 14 1 8 4 9 12 7 13 11 6 15 17 16 10
CON
10 7 6 9 11 5 3 14 2 12 4 1 8 15 13 17 16
CLO
2 10 6 4 15 9 1 12 8 5 3 11 16 7 16 14 13
Source: Adopted from the World Bank (2006): Doing Business 2007, How to reform and World Economic Outlook Database (2007).
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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
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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 Contribution to GDP (%) Net imports (Million $)
Yemen
Algeria Bahrain Djibouti Egypt Iraq Jordan Kuwait Lebanon Libya Mauritania Morocco Oman Qatar Saudi Arabia Sudan Syria Tunisia UAE MENA
15851
12990 71 113 40922 7778 1087 103 426 750 1106 13053 659 49 2970 19885 8276 3608 722 130420
12.15
09.96 00.05 00.09 31.38 05.96 00.83 00.08 00.33 00.58 00.85 10.01 00.51 00.04 02.28 15.25 06.35 02.77 00.55 100
9753
7448 7 555 24946 2108 568 29 98 252 1585 10357 988 5 1771 19870 4808 2288 119 87555
11.14
08.51 00.01 00.63 28.49 00.65 00.65 00.08 00.11 00.29 01.81 11.43 01.13 00.01 02.02 22.69 05.49 02.61 00.14 100
3069
2873 3 275 8657 602 198 34 40 90 706 4308 --605 8037 1674 983 110 32631
45.44
23.00 00.80 76.50 30.20 07.90 09.82 01.80 02.70 04.33 51.68 32.40 32.60 01.20 07.10 56.60 25.70 22.80 04.50 28.17
2536
8804 53 23 7067 3911 341 256 1818 1294 189 7907 447 64 10499 13567 6564 3454 3333 79274
03.20
11.11 00.07 00.03 08.91 04.93 00.43 00.32 02.29 01.63 00.24 09.97 00.56 00.08 13.24 17.11 08.28 04.36 04.20 100
592
2750 17908 79 1446 4907 1590 7440 43572 13201 607 1641 1205 14835 16866 1336 3752 3303 592 2143
00.23
12.00
07.80 00.30 03.10 13.20 09.30 08.70 00.30 07.80 02.40 07.80 12.00 -00.10 03.00 30.90 32.60 11.00 02.00 06.20
1119
4775 5366 99 1083 1713 1101 1207 1297 774 -163 1059 447 259 7524 -141 265 -266 2114 24601
00.33 00.47 00.04 00.46 01.12 00.25 00.16 02.88 00.17 00.17 0.37 00.04 00.12 00.46 00.57 00.87 00.49 00.50 00.22
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
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Table (14): Benchmarking conductive factors conditions and criteria for the Agriculture sector for MENA countries (2007)
Factors Location Human resources Benchmarking Indicator Location advantage Availability of Qualified Labor Availability of inputs Availability and accessibility of environmental resources needed for production Availability and adequacy of physical infrastructur e for the delivery, production and distribution processes in the sector
Yemen Algeria Bahrain Egypt Iran Iraq Israel Jordan Kuwait Lebanon Libya Morocco Oman Palestine Qatar Saudi Arabia Sudan Syria Tunisia UAE
G S M
S M S
M S M
G S M
G S M
G S M
G S M
M S M
G M S
G S M
S M S
G S M
G S M
M S M
M S M
G S M
G M S
G M S
M S M
Natural resources
Physical infrastructur e (transport, electricity, water and waste water)
Source: Compiled during interviews and various internet sources N: None, M: Minimal, S: Sufficient, G: Good
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Table (15): Benchmarking business environment criteria for the Agriculture sector for MENA countries (2007)
Factors Benchmarking Indicator
Structural support
Technical support
Business developmen t services
Constraints
Existence of relevant education/training services, specific to skills in the sector / sub-sector (university instructions and professional schools) Scientific research Certification and testing relevant to the sector Press and publications Techn. / comm.. catalogues Exhibition and fairs Business and sector associations Construction of equipments Production of tools and consumables Technology assistance Quality of credit Consultancy services (e.g. providing technical, engineering, architect and sector related knowledge and expertise) Trade union pressure Environmental obligations Administrative burdens Sector related infrastructure Water resource Availability of functioning areas Extension
M N N N N M N N N M
M S S S S S S S M S
N N N N N M N N N
S S S S S S S S M S
S S S S S S S S M S
S S S S S S S S M S
N N N N N M N N N
N N N N N M N N N
S S S S S S S S M S
S S S S S S S S M S
N N N N N M N N N
S S S S S S S S M S
N N N N N M N N N
N N N N N M N N N
S S S S S S S S M S
S S S S S S S S M S
N N N N N M N N N
M N M M M G M
S S S S S S S
S S M G M S M
S S S S S S
S S S S S S
S S S S S S
S S M G M S M
S S M G M S M
S S S S S S
S S S S S S
S S M G M S M
S S S S S S
S S M G M S M
S S M G M S M
S S S S S S S
S S M S S S S
S S M G M S M

Table (16): Benchmarking regulatory environment and Government policy for the Agriculture sector for MENA countries (2007)
Legal framework and related Government policies
Availability of Government support programs and policies specific to the sector Enabling legal and policy rules and regulations ((taxation, financial security, contract enforcement and competition regulations) Availability environmental regulations Safety and security Drainage
M M M
S S S
S S S
S S S
S S S
S S S
S S S
S S S
S S S
S S S
S S S
S M S
S S S
S S S
S S S
S S S
S S S
S S S
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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 19952006. 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) Imports (Tones in life weight)
Production (Tones in life weight)
Production as % of MENA
Exports (Tones in life weight)
Exports as % of MENA
Yemen
Algeria Bahrain Djibouti Egypt Iran Iraq Jordan Kuwait Lebanon Libya Morocco Oman Palestine Qatar Saudi Arabia Sudan Syria Tunisia Turkey UAE MENA
25,000
136,959 12,026 350 970,924 415,138 32,100 1,077 6,677 4,473 33,557 965,224 154,078 196 8,829 61,404 59,400 15,155 97,160 603,513 102,528 3,731,927
0.67
3.67 0.32 0.01 26.02 11.12 0.86 0.03 0.18 0.12 0.90 25.86 4.13 0.01 0.24 1.65 1.59 0.41 2.60 16.17 2.75 100.00
77,484
24,221 6,877 44 2,665 13,550 28 935 346 178 2,007 333,164 84,484 2,250 6,809 1,024 29 16,337 29,935 2,935 606,105
12.78
4.00 1.13 0.01 0.44 2.24 0.00 0.15 0.06 0.03 0.33 54.97 13.94 0.37 1.12 0.17 0.00 2.70 4.94 0.48 100.00
299
16,507 4,747 445 95,409 15,694 848 2,275 15,912 25,055 23,652 19,254 3,187 4,850 110,440 488 20,786 26,055 75,571 75,571 648,383
Source: FAO: Fishery Statistics, Commodities (2005)
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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)
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Table (18): Benchmarking regulatory environment factors and criteria for the Fishery sector for MENA countries (2006)
Factors Location Human resources Benchmarking Indicator Location advantage Availability of Qualified Labor Availability of raw materials Availability and accessibility of environmental resources needed for production Availability and adequacy of physical infrastructur e for the delivery, production and distribution processes in the sector
G M G
G S M
G M S
G S M
G S M
G S M
G S M
G S M
G S M
G M S
G S M
G M S
G S M
G S M
G S M
G S M
G S M
G M S
G M S
Natural resources

Table (19): Benchmarking business environment criteria for the Fishery sector for MENA countries (2006)
Structural support
Technical support
Constraints
Existence of relevant education/training services, specific to skills in the sector / sub-sector (university instructions and professional schools) Scientific research Certification and testing relevant to the sector Press and publications Technical / commercial catalogues Exhibition and fairs Business and sector associations Construction of equipments Production of tools and consumables Technology assistance Quality of industry credit 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
M N M M M M M N N M
M S S S S S S S M S
N N N N N M N N N
S S S S S S S S M S
S S S S S S S S M S
S S S S S S S S M S
N N N N N M N N N
N N N N N M N N N
S S S S S S S S M S
S S S S S S S S M S
N N N N N M N N N
S S S S S S S S M S
N N N N N M N N N
N N N N N M N N N
S S S S S S S S M S
S S S S S S S S M S
N N N N N M N N N
M N G M M G
S S S S S S
S S M G M S
S S S S S
S S S S S
S S S S S
S S M G M S
S S M G M S
S S S S S
S S S S S
S S M G M S
S S S S S
S S M G M S
S S M G M S
S S S S S S
S S M S S S
S S M G M S


Table (20): Benchmarking regulatory environment criteria for the Fishery sector for MENA countries (2006)
Availability of Government support programs and policies specific to the sector Enabling legal and policy rules and regulations ((taxation, financial security, contract enforcement and competition regulations) Availability environmental regulations Safety and security Health and hygiene
M M M
S S S
G G G
S S S
G G G
S S S
G G G
G G G
M M M
G G G
G G G
S S S
G G G
S S S
M M M
S S S
G G G
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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-ofthe-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 Egypts 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)
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Table (21): Comparative data stone sub-sector in Egypt and Turkey (2006) Factor Unit Egypt 000 Ton 3200 Sector production World % 4.3% 000 Ton 3 Raw import World % 0.0% Raw material 000 Ton 3203 Raw availability World % 3.6% 000 Ton 900 Raw export World % 6.6% 000 Ton 1036 Finished production World % 3.3% 000 Ton 1267 Finished import World % 2.9% 000 Ton 1270 Finished export World % 2.1% Finished product 000 Ton 600 Domestic use World % 3.7% Domestic use equivalent Domestic use per capita Quantity of processed products Quantity of processed products Productivity Directly employed workers
Turkey 3250 4.3% 68 0.5% 3318 3.7% 1266 9.3 841 2.7% 1211 2.7% 1272 2.1 796 5% 476 123 1211 22.4 32000 101.5 699.9 1.92
000 m2
m2 x 1000 nh. 000Ton
670 182 1267 23.43 37000 67.5 633.3 1.74
millions m2 equivalent (th.2)
Unit Ton/person Total productivity M2/person M2/person/day Sources: Internet sources: Ministry of Trade - Egypt and Mining Ministry Turkey
--
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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 Structural Scientific research N N S support Press and publication N N S Technical/commercial catalogue M M G Exhibition and fairs M M S M S Sector and business associations M Construction of equipment N M S Technical Production of tools and consumables N N G support N G Technology assistance N Quality of industry credit N M M Engineering studies N M S Other related Architecture studies M M S Support Geological studies M M S M S Technical cartography N Trade union advocacy N N M Environmental obligations N N N Administrative burdens M M N Constraints Quarrying infrastructure M S M Waste disposal N N N Availability of industrial areas None None None None None Workforce turnover None Source: Compiled from internet sources Ministry of Trade - Egypt and Mining Ministry - Turkey N: None, M: Minimal, S: Sufficient, G: Good
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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 Sectors 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)
16,000.0
Contribution to GDP (%)
Exports (Million $)
124.5
Exports of total exports (%)
Yemen
Algeria Bahrain Djibouti Egypt Iran Iraq Israel Jordan Kuwait Lebanon Libya Mauritania Morocco Oman Palestine Qatar Saudi Arabia Syria Tunisia UAE MENA
1,388.2
9.90
4.10 12.30 2.30 16.00 2.00 17.90 6.70 9.10 2.20 3.30 15.80 10.40 -7.30 9.40 10.20 16.90 12.10 9.50
3.00
69.00 --31.00 -72.00 -68.00 --69.00 12.00 --3.00 11.00 78.00 -11.10
4,779.1 1,951.3 -17,155.0 823.9 25,147.7 6,800.1 2,115.7 114.7 89.2 10,401.9 3,697.5 -3,873.1 33,043.0 3,476.6 5,305.4 19,995.4 121,852.6
26,854.0 69,899.0 780.0 5,336.0 21,559.0 19,005.0 207,177.0 4,868.0 95,347.0 14,936.0 4,364.0 233,797.0 -207,177.0 302,599.0 7,410.0 26,854.0 302,490.0 32,341.0
6,719.9 --2,381.4 -2,798.6 -1,188.0 --6,719.9 1,604.0 --124.5 542.3 7,554.3 -38,779.2
Source: various internet sources, including The Arab Organization for Agriculture Development, FAO and UNICTAD /ITC.
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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 Sanaa 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.
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Table (24): Benchmarking conductive factors conditions and criteria for the Manufacturing sector for MENA countries (2006)
Factors Location Human resources Benchmarking Indicator Location advantage Availability of Qualified Labor Availability of raw materials Availability and accessibility of environmental resources needed for production Availability and adequacy of physical infrastructur e for the delivery, production and distribution processes in the sector
G S M
G M S
G M M
G S S
G S S
G M M
G S S
G M M
G S S
G M M
G S S
G M M
G M M
G M M
G M M
G M S
G S S
G S S
G M M
Natural resources
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Table (25): Benchmarking business environment criteria for the Manufacturing sector for MENA countries (2006)
Factors Benchmarking Indicator Yemen Algeri a Bahrai n Egyp t Ira n Ira q Isra el Jorda n Kuwai t Lebano n Liby a Morocc o Oma n Palestin e Qata r Saudi Arabi a Suda n Syri a Tunisi a UAE
Existence of relevant education/training services, specific to skills in the sector M S / sub-sector (university instructions and professional schools) Scientific research N S Structural Certification and testing N S support relevant to the sector Press and publications M S Technical / commercial M S catalogues Exhibition and fairs M S Business and sector M S associations Construction of equipments N S Technical Production of tools and N S support consumables Technology assistance N S Quality of industry credit: M S availability and cost of finance Business Consultancy services (e.g. developmen providing technical, t services N S engineering, architect and sector related knowledge and expertise) Trade union Advocacy N S Environmental obligations N S Administrative burdens S S Sector related infrastructure M S Constraints Waste disposal M M Availability of functioning M M industrial areas Competition from informal G S firms Source: Compiled during interviews and various internet sources N: None, M: Minimal, S: Sufficient, G: Good
N S G G S S N N N S
S S S S S S S S S S
N N M M M M N N N M
S S S S S S S S S S
N S G G S S N N N S
S S S S S S S S S S
N N M M M M N N N M
S S S S S S S S S S
N S G G S S N N N S
S S S S S S S S S S
N S G G S S N N N S
N S G G S S N N N S
N N M M M M N N N M
N N M M M M N N N M
S S S S S S S S S S
N S G G S S N N N S
S S S G G S M
S S S S M M S
N N S M M M G
S S S S M M S
S S S G G S M
S S S S M M S
N N S M M M G
S S S S M M S
S S S G G S M
S S S S M M S
S S S G G S M
S S S G G S M
N N S M M M G
N N S M M M G
S S S S M M
S S S G G S M


Table (26): Benchmarking regulatory environment factors and criteria for the Manufacturing sector for MENA countries (2006)
M M
S S
G G
S S
G G
S S
G G
G G
M M
G G
G G
S S
G G
S S
M M
S S
G G
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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 20002005 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 tourists 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 4star 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
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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) Estimated annual employment growth (%) 2007-2016 forecast GDP Estimated annual GDP growth (%) 20072016 forecast
1995
2005
1995
2005
(000)
% of total employment
(000)
% of total GDP
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.
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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 cafs) 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.
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Table (28): Benchmarking conductive factors conditions and criteria for the tourism sector for MENA countries (2006)
Factors Location Human resources Benchmarking Indicator Location advantage Availability of Qualified Labor Availability of raw materials Availability and accessibility of environmental resources needed Availability and adequacy of physical infrastructur e for the delivery, production and distribution processes in the sector
G M G
G S S
G S S
G S S
G G G
G M G
G M G
G M S
G G G
G M S
G G G
G M G
G M S
G M S
G M G
G M S
G M S
G G S
G M S
Natural resources
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Table (29): Benchmarking business environment factors and criteria for the Travel and Tourism sector for MENA countries (2006)
Structural support
Technical support
Constraints
Existence of relevant education/training services, specific to skills in the sector / sub-sector (university instructions and professional schools) Scientific research Certification and testing relevant to the sector Press and publications Technical / commercial catalogues Exhibition and fairs Business and sector associations Construction of equipments Production of tools and consumables Technology assistance Quality of finance; access and cost of finance Consultancy services (e.g. techn.,engineering, architect and sector related knowledge and expertise) Trade union pressure Environmental obligations Administrative burdens Sector rel.infrastructure Waste disposal Availability of functioning touristic areas Price competitiveness in travel and tourism
N N M M M M N N N N N
M M S S S M N N N N N
M M S S S M N N G S N
S S S S S S S S S S S
N M S S S S N N N S N
N G S S S M N N G S N
S M S S S S N N N S N
N M S S S S N N N S N
M M G M M M G
M M G M M M G
S G G G G G G
S S S S S S S
M N M M M M G
M M G S M S G
S G G G G G G
S G G G G G G
M M G M M M G
M M G S M S G
M M G S M S G
M N M M M M G
S G G G G G G
S G G G G G G
M M G M M M G
M M G S M S G
M M G S M S G
S 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 M M
N M S
G G G
G S S
M N M
G G G
G G G
G G G
N M S
G G G
G G G
S M M
G G G
G G G
M M M
M M M
G G G
G G G
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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.
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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 Fiveyear 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

Yemens 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 nonYemenis, 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. Adens 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 governments shifting the infrastructure responsibility over the private sectors 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
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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
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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 anticompetitive 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 Yemens environmental protection
16 17
The World Bank, Doing Business in 2006 (2005) The World Bank, Doing Business in 2006 (2005)
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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 Yemens 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 Yemens 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 19
Ibid. 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).
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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, Yemens ranked 103rd out of 158 countries on Transparency Internationals 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 22
The World Bank, Doing Business in 2006 (2005) A. Bohmer and K.Davis, Investment climate and regulation of international investment in MENA countries, Working group 1 (MENA-OECD Investment Program, 2005.
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11.
General recommendations
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/subsectors. 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 Yemens 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.
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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 onthe-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.
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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 metin 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 industrys 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
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12.
Annex 1: Terms of Reference of the study
ANNEXES
Annex 2: Time schedule of the mission
Annex 3: References / Documents used
Annex 4: Persons met during the assignment
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Annex 1, Terms of Reference
ARGEINTEGRATIONDialog PrivateSectorDevelopmentProject(PSDP) PN2007.2031.8VN81098513

MissionofaRegionalandLocalExpert 2 Experts: Senior /regional and Junior/national level Subject: Economic Sector Study (Investment Road Map) ESS Part II for GIA (General Investment Authority) see below CVs attached ToR Time in Yemen 21. June till 29. July 2008 Title: Investment Priority Sectors and Bench Marking 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 TheInvestmentprioritysectorsandbenchmarkingstudyisbasedonPartIEconomicSectorStudy (InvestmentRoadMap)StructureandConcentrationPartIidentifiesthestructureandconcentration oftheYemenieconomicsectorsaswellasexaminesandassessesthedifferentaspectsofthemain economicsectorsincludingSWOTanalysis. Objectives: DerivefromtheresultsoftheeconomicsectoranalysistheYemeniInvestmentPrioritySectorswhich arecurrentlyalreadyrepresented,underrepresentedornotrepresented ExaminetheinfluenceoftheexistingYemeniinvestmentlawontheInvestmentPrioritySectorsto ensurethatthelawiscompatibletotherequirementsofinvestinginthesesectors. Study and compare competitive advantages in other MENA countries with the Investment Priority SectorsinYemen(BenchMarking). TheGIAexpectsacompetitivebenchmarkinganalysisonPrioritySectorsofYemen Report(s) Provideapracticallyorientedreportwithallnecessaryfactsandfigures. Attachmentstothereportaresummariesofallrevieweddocuments. Approvedby ByKunoFischer,GTZYemen,orpersonauthorizedbyhim
TermsofReference(TOR) EconomicSectorStudy(InvestmentRoadMap)ESS(PartTwo) InvestmentPrioritySectorsandBenchMarking

A.Background: InordertodevelopasuccessfulFDI(foreigndirectinvestment)promotionstrategyitisvitaltoanalyze theeconomicsectorsofthecountryandidentifyfocalInvestmentPrioritySectors.Currently,theGIAin 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 evaluatedonafundamentalbasis.Thisagainhastoloopintotheillustratednecessityofaclearrangeof prioritysectors. 1. Industry Manufacturing ExtractionandProcessing 1.2.1.OilandGas 1.2.2.Metals 1.2.3.MineralRecourses 2. Tourism SmallTourismProjects TouristResortandVillageProjects MineralBaths FiveStarTourism SpecialTourism 3. Agriculture(andagriculturerelatedindustries)andFishery 4. Electricity,WaterandTelecommunication 5. RealEstate,Infrastructure(land,airandsea),ConstructionandHousing 6. Logistic(TransportationMeans,CargoandWarehousing) 7. ServicesandFinancialServices 8. HealthSector 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 examinesandassessesthedifferentaspectsofthemaineconomicsectorsincludingtheirstrengthsand weaknesses. This first economic sector study is based on the Investment Environment Study of Dr. KhalidKassemKaidandwillbeelaboratedbyDr.AdnanHydarAlasnoytilltheendofMay2008. Theresultsofthisfirsteconomicsectorstudyarethebasisforthesecondstudy,theEconomicSector Study (Investment Road Map) ESS Part Two Investment Priority Sectors and Bench Marking. The objectivesandactivitiesofthisEconomicSectorStudyPartTwowillbedescribedasfollows:
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B.ObjectivesandActivitiesoftheEconomicSectorStudyPartTwoInvestmentPrioritySectorsand BenchMarking: ObjectiveOne:DerivefromtheresultsoftheeconomicsectoranalysistheYemeniInvestmentPriority Sectorswhicharecurrentlyalreadyrepresented,underrepresentedornotrepresented(e.g.packaging industry,orlowend(laborintensive)manufacturing). ObjectiveTwo:ExaminetheinfluenceoftheexistingYemeniinvestmentlawontheInvestmentPriority Sectorstoensurethatthelawiscompatibletotherequirementsofinvestinginthesesectors. ObjectiveThree:StudyingcompetitiveadvantagesinotherMENAcountriesandcomparethemwiththe Investment Priority Sectors in Yemen (Bench Marking). The GIA expects a competitive benchmarking analysisonPrioritySectorsofYemen,whichshouldconsiderespeciallyquestionsasfollow: 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 Yemens 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 Yemens 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.)Provideapracticallyorientedreportwithallnecessaryfactsandfigures. 2.) Summarize into a separate attachment to the text part of the study the reviewed documents. All available reports orstudiesthat have been carried outby related institutions (Government as well as privateinstitutions)anddevelopmentpartnersshouldbereviewedandanalyzedforthepurposeofthe elaborationofthispartoftheeconomicsectorstudy. 3.)2daysdiscussionwithInternationalDevelopmentIreland(IDI)presentlyworkingwithGIA: D.Timeline: ThestudyshouldbecompletedandhandedovertoGIAon21.July2008. SanaainMay2008 MohammedHusseinYahya Dr.JosefIglhaut GIAHeadofInvestmentPromotion GIAAdvisor
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Annex 2: Time schedule of the mission

Month (2008) Date 21st, 22nd 26th 27th 29th 30th, 1st 17th July 18th -21st 22nd 31st 1st -3rd August 4th 5th 6th 12th 13th Activities Arrival to Sanaa from Cairo Sanaa: Orientation, meetings with GTZ PSDP and GIA staff, data collection and office work Field visit to Aden: interviews with GIA staff, business people, port of Aden officials and World Bank experts in fishery sector. Return to Sanaa Sanaa: Interviews with business people in tourism, mining & quarry sectors, Government officials and representatives of Business Associations Field visits in Mukalla: Interviews with business people and associations in fishery sectors Sanaa: Interviews with business people in tourism, mining & quarry sectors, Government officials and representatives of Business Associations Field visits in Hudaida: interviews with business people in manufacturing, agriculture and tourism sectors Field visits in Taiz: interviews with business people in manufacturing sectors Sanaa: Interviews and preparation of final report and briefing of results to GIA and GTZ SIM Experts in Yemen Fly to Cairo
June
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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, 1622 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.421. 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.3764. 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.87105. 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 unions Mediterranean policy: what prospects for development? New Political Economy, Vol. 5, No. 2, pp.14699932. Shetty, Y.K. and Buehler, V.M. (1991) The Quest for Competitiveness: Lessons from Americas 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 Available at: http:// Scarcity: Power, Poverty and the Global Water Crisis, 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.
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Appendix 4: Persons met during the assignment

N0. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 Name Marwan Frag BinGanem Montaha Muthana Mohamed A. Husein Dr Joseph Iglhaut Eugene Reilly John Magill Taufik Aldobhani Juma Abu Hakmeh Fawaz Qaid Dr. Hamoud El-Nagar Dr. Motaher Al Abassi Dr Mohamed A. Al-Hawri Dr Abdul Hakim Al-Obeid Hamdi El-Shargaby Abdul Gafar A. Muthanna Eng. Nabil Magam Eng. Gamal Raga Soad A. Khan Dr Omer A. Subeih Dr Ismail N. Al-Ganad Eng. Ashraf S. Al-Jailani Eng. Amer M. Assabri Franz Moll Jurgen Hecks Mohamed Saleh Al-Roubi Mohamed A. Al-Akwa Abdulla Thwaba Raidan Al-Saqaf Ansgar Josef Cordier Noman M. Al-Mulsi Nagib M. Yousof Omer Bajersh Eng. Badr BaSalma Captain Mohamed AbouBakr Ali Habshi Hussein Tamimi Mohamed Al-Basseri Saleh Ba-Lehwal Mohamed Ba-Musalem Hanan Ba-Humaid Awad BaSweid Mohamed A. Baza Position General Manager Head of Promotion Sector Advisor to Chairman Advisor to the Chairman Advisor IDI Senior Advisor Senior Industrial Expert - IDI National Coordinator Regional Expert Business Enabling Environment Expert Business Enabling Environment Chief of Communication and Coordination Office With WTO Undersecretary Deputy - Economic Studies and Forecast Deputy Chairman Central Statistical Org. General Manager Int. Trade Statistics General Manager Nat. Statistics Deputy Minister Investment and Research GIS Dept Economist Director Fisheries Resource Management and Conservation Project Chairman Senor Geo-chemist Chairman Office GM Promotion and Evaluation Consultant Consultant Owner / Manager Partner / Manager Owner / Manager Program Manager / CTO Advisor Secretary General Secretary General Assistant Chairman General Manager Deputy Chairman Managing Director Owner / GM Owner / Manger Businessman Contracting and trading Partner PSDP Mukalla representative Chairman GM Institution GIA GIA - CIM IDI
GTZ PSDP
Ministry of Industry and Trade
Ministry of Planning and Int. Cooperation
Ministry of Fish Wealth
Geological Survey and Mineral Resources Board AL-Roubi Co. for Marble and Granite The Yamani Jordanian Co. for Quarry Thawaba for Marble and Granite USAID Federation of Yemen Chamber of Commerce Yemen Export Supreme Council Hadramout Chamber of Commerce and Industry Hadramout Chamber of Commerce and Industry Port of Mukalla Burum Sea food Co Tamimi Fisheries Co Boat Manufacturing Co. / Chairman AlShehr Chamber Branch Ba Musalem Trading Ba Musalem Trading PSDP / GTZ Al-Shehr Fishermen Association Cameleers Tours
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N0. 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65
Name Abdul Salam A. Al-Athwary Sheikh Mohamed BaMashmous Adel Al-Ashtal Dr Abdul Galil Al-Shaibani Dr Reyad Nader Dr. Fatma Omer Mohamed A Noman Fatma S. Abdalla Roy A. Fancey Mohamed Farouk SamirEl-Kady Hesham A. Sheibani Mohamed Al-Megahed Mohamed Farouk Samir Qadi Hesham Al-Shaibani Galal El-Din Saeed Ahmed El-Hashedi Jamil Al-Gannami Hassan El-Meligi Fadl Sannan Ali Al-Saiidi Ahmed Al-Mossaouri Mohamed Al-Taweel
Position Secretary General Chairman Manager Vice Chairman Director Dept. for Investment Services Director Dept. for Promotion and Marketing Director Dept. for Planning and Int Coop Director - Planning Port Development Advisor Assistant General Manager Product Manager Assistant General Manager Ibb Agric Office Manager GM International trading Business Development GM Assistant Executive Manager Marketing Manager General Manager Senior Consultant Chairman Chairman Member Chairman
Institution The Yemeni Council of Businessmen and Investors Chamber of Commerce and Industry Aden General Investment Authority Aden Branch
Yemen Free Zone Authority - Aden
Port of Aden AlSaeed Tading Co. Al-Takamol for Management trading and Marketing Ministry of agriculture and irrigation Al-Saeed Trading Co. Al-Takamol for Management, Trading and Marketing Salah el-Din Metals Household Appliance Red Sea Detergent Co Al-Ganami Chloride Battery Megacom Cooperative Union - IBB Qaa el-Hakl Agric Cooperative Water Users Association - Makhader
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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 (Sanaa / Yemen)

List of tables and charts

Abbreviations and acronyms

USAID WB WCY WEF WTO YCBI

5.1 Objective of the study

Approach and methodology

Identifying promising sub-sectors

1. Formulating a concept of promising sub-sectors

2. Factors impacting sector/sub-sector potential

Source: IMD World Competitiveness Year book, 2006

Conductive factors conditions

Sector economic performance

Production is relatively efficient and competitive

Statistics Perception of businessmen

Conductive legal and Political environment

Not viewed as constraint

Perception of businessmen Perception of businessmen Perception of businessmen Statistics

Potential for investment

Internal (strengths and weaknesses)

External (opportunities and threats)

Perception of Yemeni businessmen Internet sources for benchmarking countries

Business development services

Regulatory environment and government policies specific to the sector

5.3 Data availability

Structure of the study

Factors impacting sectoral potential

The Arab Monetary Fund: The Arab Economic Report - 2007

Supporting physical infrastructure

Passengers carried (000)

--527 ---60 135 248 -1590 --87 202 1851

28 9 184 6 17 11 702 1146

76 11 159 1 11 50 77 30 -53 7 -21 83 5 6 184 22 103 958

Data provided by the Ministry of Planning. Ministry of Agriculture

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

Economic sectors in Yemen

Value(At current prices, mil. riyals)

Contribution to Gross Output (%)

Value (at current prices, mil Riyals)

Contribution to GDP (%)

Growth rate (2004-06) (%)

464468 199390 52268 1665399

7.11 3.05 0.80 25.51

242630 95829 43069 1318672

6.45 2.55 1.15 35.07

6.48 1 -5.47 -8.26

Mining and quarrying

18,000 4470 0.07 3353 0.09 6.73

756876 585089 89384 88745

11.59 8.96 1.37

274249 17462 47900 1.36

2.29 0.46 1.27 0.73

5.18 1.81 2.6 6.5

Restaurant and hotels

Electricity and water

Source: The Central Statistical Organization (2006)

current licensing schemes in light of the study.