AN OVERVIEW OF YEMEN - Shodhgangashodhganga.inflibnet.ac.in/bitstream/10603/88212/12/12_ chapter...

Chapter Three: An Overview of Yemen

Ph.D. Thesis, BAMU. Aurangabad

CHAPTER THREE

AN OVERVIEW OF YEMEN

2.1 SECTION ONE: VIEW OF YEMEN

3.1.1 Introduction

3.1.2 Strategic location of Yemen

3.1.3 Area and population

3.1.4 Language and religion

3.1.5 Historical Background

3.1.6 Geographical Divisions

3.1.7 Climate and Rainfall

3.1.8 Currency and National resources

3.1.9 The Business Environment in Yemen

3.1.10 Yemeni Economy and Economic policy

3.1.11 Investment

3.1.12 Free Zone

3.1.13 Labor

3.2 SECTION TWO: INDUSTRIAL SECTOR IN YEMEN

3.2.1 Introduction

3.2.2 Overview of Industrial Sector History

3.2.3 Overview of Yemeni Trade and Industry

3.2.4 Development of Industry in Yemen

3.2.5 The Most Important Industries in Yemen

3.2.6 Importance of industrial sector in Yemen

3.2.7 Problems and Difficulties facing the Yemeni Industrial Sector

3.2.8 Foreign Trade

3.2.9 Summary


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CHAPTER THREE

AN OVERVIEW OF THE REPUBLIC OF

YEMEN

**SECTION ONE: VIEW OF YEMEN**

3.1.1. Introduction

The Republic of Yemen is a Middle Eastern country located in the south of

the Arabian Peninsula in the south-west of the continent of Asia. It is bounded on

the north by Saudi Arabia, on the south Arabian Sea and Gulf of Aden, on the east

by the Sultanate of Oman and the Red Sea to the west. Sana'a is the capital of the

Republic of Yemen and has the administrative division of the Republic of Yemen

(20) governorates in addition to the secretariat of the capital (Ministry of Industry

and Trade, 2010).

The researcher attempted to present a background of Yemen in brief. The

first section of this chapter will include an overview of Yemen that will show the

strategic location, area and population, language and religion, history, Physical

Divisions, Climate and Rainfall, Currency and National resources, - National

Anthem and Administrative Division. The second section will include an

Analytical and Historical Presentation about the industrial sector and the economic

characteristics.

3.1.2. Strategic Location of Yemen

Yemen is located in Southwest Asia in the Middle East region and on the

Arabian Peninsula. It is bordered by Saudi Arabia to the north and Oman to the

east, with the Red Sea to the west, and the Arabian Sea & Gulf of Aden to the

south. Its territory includes over 200 islands, the largest of which is Socotra.

Yemen’s strategic location between Europe, Asia and Africa makes it a regional

and international business hub with global market access. It is well-equipped with

port of Aden, Free Zone and half dozen other ports along its extensive 1,906 km

coast and linked to one of the busiest shipping lanes globally. In fact, nearly half of


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the world’s cargo traffic passes within Yemeni international waters (General

Investment Authority, 2012).

The second more important strategic location of Yemen is Bab el-Mandab.

It acts as a strategic link between the Indian Ocean and the Mediterranean Sea, via

the Red Sea and the Suez Canal. In 2006, an estimated 3.3 million barrels (520,000

m³) of oil passed through the strait per day. The following two maps show the

location of Yemen, map no (3.1) presents Yemen location in the world map and

map no (3.2) presents Yemeni governorates location.

Map No. (3.1) Political Map of Yemen

Source: http://www.mapsofworld.com

http://www.mapsofworld.com/


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Map No. (3.2) Political Map of Yemen

Source: http://www.mapsofworld.com

3.1.3. Area and Population

The Republic of Yemen area is about 555,000 square kilometers excluding

the Empty Quarter.

The resident population of the Republic of Yemen, according to the

preliminary results of the General Population, Housing, and Establishment Census

2004, amounts to [19.721.643] distributed between 20 governorates and the capital

City of Sana'a. The population growth rate in 2000 was estimated at 3.36 percent,

but it is expected to drop significantly in the coming decade. With a projected

growth rate of 2.8 percent between 2000 and 2015, the population is expected to

reach 36 million by the year 2029. The majority of the population is Muslims.

There is also a small minority of Jews. Yemen's population growth is very high by

world standards, and the highest in the Middle East. The population is generally

young, with some 50 percent below the age of 15(Ministry of Planning and Co-

operation, 2005).

Yemen has one of the world’s highest birth rates, approximately 3% per

annum; the average Yemeni woman bears five children. Although this is similar to

http://www.mapsofworld.com/


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the rate in Somalia to the south, it is roughly twice as high as that of Saudi Arabia

and nearly three times as high as those in the more modernized Gulf States (Al-

Haj, 2012). According to the Central Statistical Organization’s recent report,

Yemen’s population is increasing by 700,000 every year. Yemen population 2011:

23,580,000 (23 million) and they will be double in 23 years.

3.1.4. Language and Religion

Arabic Language is the official language of the country, the second

language that is widely used is English.

Islam is the official religion and the religion of the majority of the

population. There is a Jewish minority, too.

3.1.5. Historical Background

The history of Yemen dates back to the Minaean (1200–650 B.C.) and

Sabaean (750–115 B.C.) kingdoms. Ancient Yemen (centered on the port of Aden)

engaged in the lucrative myrrh and frankincense trade. It was invaded by the

Romans (1st century A.D.) as well as the Ethiopians and Persians (6th century

A.D.). In A.D. 628, was converted to Islam and in the 10th century came under the

control of the Rassite dynasty of the Zaidi sect, which remained involved in North

Yemeni politics until 1962. The Ottoman Turks nominally occupied the area from

1538 to the decline of their empire in 1918 (Infoplease, Yemen History, 2014).

Former North Yemen:

After the dissolution of the Ottoman Empire in 1918, Imam Yahya leader

of the Zaydi community took power in the north and established a Zaydi

government. During the period from 1958 to 1961, North Yemen joined with

Egypt and Syria to form the United Arab States. Imam Ahmad's son Badr assumed

power but his reign lasted only one week (Library of Congress, Country Profile:

Yemen, 2008).

Former South Yemen:

The British influence increased in the southern and eastern portion of

Yemen after the Britishers captured the port of Aden in 1839. It was ruled as part

of British India until 1937, when Aden became a crown colony, and the remaining

territory was designated a protectorate (administered as the Eastern Protectorate

and Western Protectorate). The last British troops were withdrawn on 29


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November 1967, after a Labor Party led government decided that, the commitment

was too expensive to maintain. The next day, 30 November 1967, the People's

Republic of Yemen comprising Aden and South Arabia was established. The

Yemeni Socialist Party (YSP) became the only legal party and the country's name

changed to the People's Democratic Republic of Yemen (PDRY) on 1 December

1970.

Unification of Yemen:

The Republic of Yemen was officially declared on May 22, 1990. President

Salih of the Yemen Arab Republic (YAR) became president of the new republic;

Ali Salim al Baydh, secretary general of the Central Committee of the Yemeni

Socialist Party (YSP) was named vice president; and PDRY President al Attas was

named prime minister. Al Attas led a transitional coalition of the Council of

Ministers whose membership was divided between the General People’s Congress

(GPC; the party supporting President Salih) and the YSP (the party supporting

Vice President al Baydh).

Unrest and Civil War:

In the end of 1991 and early 1992, the deteriorating economic conditions

led to significant domestic unrest, including several riots. In August, Vice

President al Baydh exiled himself voluntarily to Aden, and the country’s general

security situation deteriorated as political rivals settled scores and tribal elements

took advantage of the widespread unrest. In January 1994, representatives of the

main political parties signed a document of pledge in Amman, Jordan, that was

designed to resolve the ongoing crisis. But by May 1994, the country was in civil

war, and international efforts to broker a cease-fire were unsuccessful. On May 21,

1994, al Baydh and other leaders of the former South Yemen declared secession

and the establishment of a new Democratic Republic of Yemen centered in Aden,

but the new republic failed to achieve any international recognition. On July 7,

1994, to undermine the strength of southern military units loyal to the YSP,

President Salih prohibited party membership within the armed forces; he also

introduced amendments to the constitution abolishing the Presidential Council and

establishing universal suffrage (Library of Congress, Country Profile: Yemen,

2008).


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1994 to Present:

Following the civil war, Yemen’s currency, the riyal, was devalued; the cost of

fuel doubled, water and electricity were in short supply, and food costs rose. The

Public demonstrations ensued, and the YIP was at odds with the GPC over

economic reforms recommended by the World Bank. The country continued to

experience unrest due to economic hardship, coupled with increasing lawlessness,

particularly against tourists. In September 1999, the first direct presidential

election was held, reelecting the incumbent, President Salih, to a five-year term by

an overwhelming margin. Constitutional amendments adopted in 2000 extended

the president’s term by two years. President Salih was reelected in September

2006. In October 2007, he announced comprehensive political reforms, some of

which will not take effect until he is no longer in power, calling into question the

prospects for implementation. The September 2006 elections for local and

governorate council seats, as well as the May 2008 elections for governorate

governors have left power largely in the hands of the ruling (Library of Congress,

Country Profile: Yemen, 2008).

In early 2011, the Yemeni youth revolt to change the president Salih who

destroyed the Yemeni economy, dominated Yemen for 33 years and sought to

change the constitution to make himself the president for life and later led to the

president's ouster through a Gulf Cooperation Council (GCC) negotiated

agreement giving temporary power to the Vice President, Abdo Rabo Mansour

Hadi.

In February 2012, Hadi was elected by the Yemeni people to serve as

president during the two-year transition period at which new leadership will be

elected. Since the signing of the GCC agreement, Yemen has experienced a

significant transformation and is charting a path to democracy. A successful

democratic transition will require the country to overcome a number of serious,

complex, and interrelated challenges.

3.1.6. Geographical Divisions

Yemen is characterized by the diverse surface aspects and, therefore, has been

divided into five major geographic regions which are as follows:

1. The Coastal Plains Region.

2. The Highlands Region.


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3. The eastern Plateau and desert.

4. The Yemen Islands.

5. The Empty Quarter.

3.1.7. Climate and Rainfall

Since Yemen is endowed with a varied topography, the climate in general

also varies, although there are no major seasonal differences. We can say that there

are two long seasons: summer and winter. During summer, the temperature and

humidity are high in the coastal areas, while the climate is moderate during winter.

From time to time, the rainfall, due to the monsoon, moderates the temperature

over the coastal areas in summer. In the mountainous areas, the weather is

moderate in summer and cold in winter during the night and in the early morning,

but the bright sunrays raise the temperature during the day making the weather

very moderate in these parts of the country (Ministry of Tourism, 2013).

3.1.8. Currency and National resources

The Rial or Riyal is the currency of Yemen. It is technically divided into

100 Fils, although coins denominated in Fils have not been issued since Yemeni

unification.

National Resources:

National resources of Yemen are: Petroleum, fish, rock salt, marble, small

deposits of coal, gold, lead, nickel, and copper, fertile soil in the west.

3.1.9. The Business Environment in Yemen

The business environment in Yemen is conducive to various business

activities for both local and foreign entities. Businesses established under

Commercial Companies Law and Branches of foreign companies’ law or

established under Investment Law. Free Zone Law provides equal opportunities to

local and foreign businessmen. Yemeni Laws do not impose local participation for

businesses established by foreigners in any legal form. Business activities, when

carried out under commercial companies’ law, do not offer tax incentives and other

exemptions that are available to those businesses when established Investment Law

and Free Zone Law or special agreements like Production Sharing Agreement

(PSA) or Gas Development Agreement (GDA).

Yemen authorities continuously review legislation related to trade and

investment in order to ascertain its effectiveness. An effort to encourage more


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investment and promote private sector growth has been made through a new law

which is currently being reviewed by Parliament. This new law aims to improve

tax revenues by streamlining tax and customs incentives and reducing tax

exemptions. The law has been introduced in conjunction with an income tax law

designed to lower corporate income tax rates from 35% to 20% and 15%for

investments that create significant new job opportunities (Al-Haj, 2012).

3.1.10. Yemeni Economy and Economic policy

According to (The World Bank, 2014) Yemen is one of the poorest

countries in the Arab world. Poverty, which was already increasing prior to the

latest political crisis, has risen further from 42% of the population in 2009, to 54%

in 2012. Yemen has one of the highest population growth rates in the world, and is

one of the most food insecure countries globally. Approximately 45% of the

population have insecure food and Yemen’s scarce water resources are far below

the regional average.

During the crisis, Yemen faces a formidable web of economic,

environmental, and political challenges which contribute to the country’s low level

of human development. Expanded and concerted international cooperation is

addressing a wide range of development issues, including those related to

democratic governance where important steps are being taken. Yemen’s

development is guided by the National Strategic Vision 2025 and the Millennium

Development Goals (MDG) based on the 4th

Development Plan for Poverty

Reduction (2011 - 2015).

The Yemeni economy depends on the mechanism of market and giving the

private sector the leadership in the management of the wheel of development

through the participation of the private sector and its role in managing and

directing resources and utilization. It is characterized by the Yemeni economy

character traditional, as is still the agriculture sector is the sector most inclusive

labor with the percentage of its contribution to the GDP does not reflect its place in

the economic structure of the country. Yemen's economy depends on the oil sector

more where this sector contributes most abundant GDP (National Information

Center in Yemen, 2013).

The World Bank is closely collaborating with a number of Yemen’s

development partners including development agencies from France, Germany,

http://www.yemen-nic.info/english_site/contents/econmic/

http://www.yemen-nic.info/english_site/contents/econmic/


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Italy, Netherlands, United Kingdom, United States, European Union, and United

Nations agencies. The World Bank Group is also working closely with the

International Monetary Fund on the macroeconomic dialogue. A close dialogue

has also been established with the GCC Secretariat and bilateral agencies from the

sub-region (Al-Haj, 2012).

The Republic of Yemen has adopted an economic policy based on free

market mechanisms that aim to raise the level of private sector's involvement in the

economy. It redefines the role of the state in economic activity and work to

establish the rule of law, build the institutional infrastructure, remove obstacles

facing the sector, and ensure economic stability. It also encourages the private

sector to play a leading role in the development process and achieve economic

growth, through a set of financial, monetary and administrative policies and

procedures that encourage free trade. Further, it worked to reform tax legislation,

customs, investment and judiciary to improve the overall climate investment, in

addition to the implementation of the privatization program designed to expand the

areas of economic activities and attract national and foreign capital (Central

Statistical Organization, 2004).

Yemen is seen as a promising country with its important natural and

economic resources, where much of wealth and riches have not so far been

exploited economically, especially in the area of the mineral wealth (oil, gas and

minerals) in addition to fish and other resources.

Table No (3.1.1)

Main Total Economic Indicators

Indicat

or 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

GDP ( Million

Rials) 1.756 1.895 2.150 2.486 2.885 3.646

4.495.17

9 5.099 6.072 5.697 6.725

GDP ( Million

dollars) 11.2 12.27 13.5 15.6 19.0 22.8 25.64 30.3 11.9 30.6 30.3

Total Final

Consumption(

Million Rials) 1478 1707 1911 2171 2509 3358 4036 4837 5108 5786 5518

Local Saving

(Million Rials) 417 443 575 714 1136 1136 1063 1234 596 939 980

Total

Investment

(Million Rials) 403 45 608 690 974 1121 1378 1534 1171 1332 1091


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National Income

( Million Rials) 1895 2132 2421 27077 3398 4252 4792 5719 5408 6418 6087

National Income

( Million

dollars) 11.2 12.1 13.2 1 4.6 17.7 21.5 24.1 28.6 26.6 29.2 28.4

GDP - per capita

(dollars) 633 670 719 863 1036 1131 1288 1181 1230 1149

GDP-per capita

( Rials) 9949

3 10889

8 12097

1 13462

3 16521

2 20408

5 224980

25728

8 23960

5 27017

8 24568

7

Source: Statistical Year Book – Central Statistical Organization - Yemen.

According to (Mareai, 2013) Yemen faces a host of social and economic

problems that must be addressed to achieve a higher growth rate of economy.

Therefore, the government has to prerequisite to significantly boost the low

standard of living and generate the resources needed to upgrade the inadequate

infrastructure. The main challenges are as follows:

1. The most important challenge is the declining oil production.

2. The government needs to speed up their form and privatization process to

stimulate the private sector and reduce the government's dominant role in

the economy.

3. The Riyal needs to increase its value to stimulate manufacturing exports.

4. Yemen faces a serious water crisis.

5. The population growth rate must be reduced.

6. The corruption must be tackled urgently.

7. The government must restore political stability.

3.1.11. Investment

The Yemeni economy is nascent in many areas; Yemen is undergoing its

initial stages in the process of economic and social development. This imposes

significant burden especially with regard to the establishment of the infrastructure

requirements of production and service sectors together. The focus of efforts has

been devoted in recent times to infrastructural projects. However, investment in the

Republic of Yemen is facing many fundamental problems, most importantly is

funding due to limited resources of Yemen. Yemen is actively seeking ways to

encourage and attract local and foreign investments to participate in the

development of a legal infrastructure that can boost the economy and attract

investment.


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3.1.12. Free Zone

Free Zone represents the economic gateway of Yemen and the junction of

Asia and Africa has declared the city of Aden as a free zone in the year 1991 and

issued the Law on free zones in the year 1993. The free zone gains strategic

importance due to the distinguished geographical location advantage of the port of

Aden geographical as it is located directly on the main trade route around the

world and the Middle East to Europe and America. It is characterized by the

possibility of providing transit services to East Africa, the Red Sea, Indian sub-

continent and Arabian Gulf. The storage and distribution area is suitable for Africa,

the Red Sea and Arabian Gulf (Ministry of Industry and Trade, 2010).

3.1.13. Labor

According to the (World Bank,2014) Yemen’s civil service is characterized

by a large, poorly paid work force and inadequate salary differential between high

and low skilled jobs to attract and retain qualified workers. In 2004, the

government increased civil service salaries by 20 to 40 percent in order to alleviate

the impact of anticipated economic reforms that were never implemented. The

result was a 20 percent rise in wage costs; civil service wages constituted 7 percent

of gross domestic product in 2004. The 2005 budget reduced economic subsidies

but in exchange required the government to make various concessions, including

increasing civil service wages another 10 to 15 percent by 2007 as part of a

national wage strategy.

The economic assistance package of the International Monetary Fund

(IMF) pledged to Yemen is contingent on the implementation of civil service

reform, which the government has resisted because of the country’s estimated 20

to 40 percent unemployment rate. In 2004, the government claimed to have

reduced the civil service labor force through retirements and layoffs, but it appears

that the large salary increases have lessened the impact of any reforms. The IMF

has stated that civil service salaries as a component of gross domestic product

should be reduced 1 to 2 percent, a level that can only be achieved with continued

reductions in the size of the civil service. It is unclear whether the national wage

strategy, which may succeed in streamlining the system and removing

irregularities, will in fact be able to reduce employment costs (Library of Congress,

Yemen Country Profile, 2008).

http://en.wikipedia.org/wiki/World_Bank


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SECTION TWO

**INDUSTRIAL SECTOR IN THE REPUBLIC

OF YEMEN**

3.2.1. Introduction

The industrial sector plays an important role in the economies of all

countries in the world where this sector is one of the most important sector that

contribute to an effective contribution to the GDP, hence the support of the

industrial sector and the upgrading of industries located should be the main

objectives of any policy of comprehensive development, especially since the sector

has a significant relative weight between economic sectors.

Industry represents one of the main components of the national economy

and contributes to about (10-15) % of the GDP. Yemen has a weak productive base

and lacks diversity of its industry. The industrial sector represents the axis of the

long term strategic development axes. It plays an important role in developing the

economy of the country, as it participates in raising the national income and

various income resources, by creating new job vacancies. In addition to its firm

relation to the progress and growth of the industrial sector and economic

development in general, there can be no developed economy without developed

industry.

Industrial sector is considered as one of the important sectors in the

country, it is an essential aspect to develop the national economy. In this era of

planned development, industrial sector is a leading sector in the economic growth

of a country. In fact, in a modern context, economic development is synonymous

with development of industry, trade, transport, power and other core sectors.

Industrial sector has played a very significant role in the process of

economic development of a country. It leads to high national and per capital

income, increased employment and greater production and creation of wealth.

Hence, contribution of the industrial sector to the national economy can be treated

as economic barometer of country's industrial growth.

Industrialization is regarded as the world's first Greatest Revolution.

Industrialization has played a very significant role in the process of economic


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development of all countries in the world. Industrialization involves the

organization of production in business enterprises. This is characterized by

specialization of division of labor. This specialization is based on the application

of technology and of mechanical, electrical power to supplement the human effort,

and motivated by the objectives of minimizing costs per unit and maximizing

returns. This will invariably lead to economic growth by the application of new

marketing methods and new labor skills.

The society world has accepted industrialization as a means of stepping up

the economic progress and ushering in an era of planned development of country.

Hence, real progress of economy largely depends upon performance of industrial

sector. It is through a vibrant industrial economy that all agricultural, mineral,

forest and human resources can be put to the maximum use, leading to fulfilling

the economic aspirations by improving the standard of living of the society

(Arthur; Sheffrin, 2003).

The modern industry can directly or indirectly raise the productivity of

labor force and increase national output and income. So, the industry depends on

the historical circumstances and also on other objectives that differ from country to

country.

3.2.2 Overview of Industrial Sector History

Industrialization is the period of social and economic change that

transforms a human group from an agrarian society into an industrial one. It is a

part of a wider modernization process, where social change and economic

development are closely related with technological innovation, particularly with

the development of large-scale energy and metallurgy production. It is the

extensive organisation of an economy for the purpose of manufacturing.

The Industrial Revolution was the transition to new manufacturing

processes in the period from about 1760 to sometime between 1820 and 1840. This

transition included going from hand production methods to machines, new

chemical manufacturing and iron production processes, improved efficiency of

water power, the increasing use of steam power and the development of machine

tools. It also included the change from wood and other bio-fuels to coal. It began in

Great Britain and within a few decades had spread to Western Europe and the

United States (Lucas, 2002).

http://en.wikipedia.org/wiki/Arthur_O%27_Sullivan

http://en.wikipedia.org/wiki/Water_wheel

http://en.wikipedia.org/wiki/Machine_tool

http://en.wikipedia.org/wiki/Machine_tool

http://en.wikipedia.org/wiki/Great_Britain


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3.2.3 Overview of Yemeni Trade and Industry

Trade and industry plays an important role in the economic development,

which participates in increasing the national income and various income resources

creating new job vacancies. In addition, the progress and growth of economy

cannot be developed without developing industry and trading sector.

The industrial sector in the Republic of Yemen is new and has gone

through different stages which have their origins, characteristics and historical

roots. The activity of industrial sector was confined only before the Yemeni

revolution on some manufactures, primitive and traditional crafts and it did not

mention any industry except oil refinery which was founded in 1956 in Aden and

the textile factory in Bajel. After the outbreak of the revolution, especially in the

early seventies the Yemeni economy witnessed remarkable refreshment included

all areas of economy and the government measures began to make plans, policies

and programs that aim to support and encourage the industrial sector.

The private sector began, especially expatriates sector, to invest in the

industrial sector and the industrial projects started in the production of consumer

goods for the domestic market and accommodate the growing number in the labor

force. Also, the contribution of the industrial sector started in Gross Domestic

Product (GDP) and rises continuously. This development return to the support that

is given to this sector by the State and represented by policies and government

measures that are taken to protect local products and get easily the necessary

funding to do such projects and imposing restrictions of importing and the rising of

customs tariffs, etc, which encouraged this sector for growing and developing

during this period and until the early nineties (Central Statistical Organization,

2010).

The industrial sector is a major source of economic development. The

industrial sector seeks to occupy a suitable place among the different economic

sectors; its contribution will raise GDP. The Yemeni economy could benefit from

the excess labor in many manufacturing activities such as textiles, clothing,

handicrafts, foods and other medium and small industries. This sector is also

considered a source and vehicle for increasing non-oil exports. The private sector

is investing in the industrial activities to raise its contribution to GDP and lead the


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economy towards achieving appropriate growth rates by exploiting its links with

other sectors.

Trading in Yemen has also benefited tremendously from stable political

climate as well as foreign investors are hugely drawn towards the Yemen market.

The rise in oil prices has helped the GDP to rise further. The trade sector of Yemen

has improved a lot in the past few decades and expected to flourish further in the

coming years.

In the beginning of nineties, the outbreak of unity, the integration of

different economic systems and the attendant during the transitional period from

crises that affected on the investment side in this sector. The Yemeni government

depended on a mechanism of market power as a method of economic development

and opens the opportunity to the private sector to play its role in the development

process leadership, and the role of the state was just limited on the supervisory,

regulatory and directives process. So, the private sector in the late nineties

possessed 95% of the total industrial establishments.

The manufacturing industries witnessed a significantly development in the

early seventies and until the early nineties because of the industrial policies that

were pursued by the State and represented with the support and protection of

domestic industry which reflected on the growth and expand of industrial

production base. The increasing of production and manufacturing capacity for

local producers and the increasing of industrial establishments' number and the

growing labor force in these facilities achieve high growth rates for the industrial

sector during that period.

The industrial sector witnessed during the last period a modest performance

rate and focused on a limited number of industrial activities such as; food and

construction industries. Despite of the government's attention to this sector as it

capable of attracting the private domestic and foreign investments. But this sector

faced many problems and difficulties that have hampered the growth and

development in the light of newly established Yemeni industries that unable to face

the effects of policies and actions that taken by the Yemeni government after the

implementation of financial and management reform program in 1995. The most

important is the foreign trade liberalization, releasing restrictions on import

licenses, reducing customs tariffs and rising interest rates on borrowing. As a result


999


to the rise in production costs, the industrial projects are unable to produce

competing goods for foreign goods which forced some projects for closing.

However, the status of this sector began to improve, especially with the increasing

of investments volume in this sector ((National Information Center in Yemen,

2013).

In the early nineties, many and various variables local, regional and

international had occurred. These variables has produced a number of challenges,

risks and negative effects on the manufacturing industries sector and its growth

,development and their competitiveness in domestic and international markets.

They led to a decline in the performance of the manufacturing industries sector and

growing problems and obstacles during that period. Therefore, the fundamental

transformation that has occurred in the State's policy toward the industrial sector

caused damage to this sector which represented to open the door to foreign imports

of manufactured goods. It also raised support for the industrial sector and abolition

of the transfer, subsidies and concessions that were presented to the Yemeni

producers and manufacturers.

This radical transformation in the policy of industrialization, the opening of

the Yemeni market for various goods , the imported products, the competition for

local production before the rehabilitation of Yemen industry and the preparation it

for this transformation, lead to the inability of these industries to compete the

foreign goods and some of the institutions displays into bankruptcy.

The food industries comprised the largest ratio of the manufacturing

industries production if the total production of oil refining industry was removed

which constitutes the highest percentage in the value of industrial production

transformation. The construction industries come in the order and the cement in the

forefront. Then, the tobacco producers come in the third order, after that various

metal then clothing. This distribution reflects the weakness of the productive base

and lack of diversity, where most of the facilities specialized in food products

manufacture (National Information Center, 2013).

3.2.4. Development of Industry in Yemen

According to the above statements, it may be said that, the 22nd

of May,

1990 is considered by the Yemenis as a new historical era, and formation of two

states and two authorities ended within the framework of the United State


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(Republic of Yemen). Since that date, Yemen has entered a new era of progress,

economic and social development. It concentrated on improving its production

abilities.

The new state gave special importance to the industrial section and

concentrated on the investment in this field, in order to complete the industrial

foundation and provide consumer requirements by adding new industrial methods

to different industrial branches.

The Early Nineties, after uniting two different economic regimes into one

state, was followed by the transitional period of crises that affected investment in

that sector. The Yemeni government depended on the market power mechanism as

a method for the economic development by opening the field for the private sector

to carry on its role, in the development process. Such that the government role is

restricted to supervision, guidance and organization whereas the private sector at

the end of the nineties revealed a ratio of 95% growth from the total industrial

institutions (National Information Center, 2013).

The Yemeni unity participated, to some extent, in providing suitable

political and economic conditions, despite the problems that followed uniting the

two regimes in Yemen. The investment activity's direction in the industrial field

was a matter of concern to the successive governments; this can be understood

through the following facts:

1- Privatization of some of the lagging projects and dismissal terms of

projects owned by the public sector in both areas before the unity, the largest

portion of this sector was in South Yemen. These privatized projects worked in

the framework of the measures taken by the government during implementing

of the economic reform programme, where it was able to manage their

situations and overstep the effects of poor administration. The consideration

was that the industrial sector has to be dealt with as an economic sector

participating in the formation of the local production, while creating real man

power job opportunities, sometimes these measures by the government didn't

bring the required results, because of the lack of ability and efficiency among

those who handled the implementation processes.


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2- Encouraging investment in the industrial side, in particular from the private

sector, so that it could participate in the completion of the industrial foundation

that provide for consumer needs and add numerous types of industrial branches.

In spite of encouragement to private sector in investing in the industrial

field, yet it was not able to increase the economic development to meet the

targets that the government had drawn up, because of poverty of skills and

expertise that were lacking. The paper of the Industrialists Association looks out

for the Yemeni private sector, that is a growing sector, which is poor in

knowledge, skills, expertise, behaviours, foresight and communication ability;

"where it specified, and was characterized that it is still weak and lacking an

accepted level of performance efficiency and to the factors of progress and

development" (Maeen Magazine, 2002).

Table No. (3.2.1)

Development of Total Industrial Output and its Contribution to the National

Income during the Period of 1995- 2005 (Million Riyals).

Source: Yemen Information Center, Sana'a.

Year Total Industrial

Output

Gross National Income The Contribution of

Industrial Income

1995 143688 594037 24.2

1996 233994 765069 35.8

1997 339626 902287 37.6

1998 225867 922382 24.5

1999 424039 1222500 35.7

2000 636830 1568612 40.6

2001 617950 1662083 37.2

2002 683763 1859791 36.8

2003 795595 2095365 38.0

2004 985264 2385607 41.3

2005 1374357 2956304 46.5


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3.2.5. The Most Important Industries in Yemen

According to the (Ministry of industry and trade, 2005) There are around

(33,648) industrial institutions in the Republic of Yemen, it contains (128,816)

workers (of both sexes) in the industrial sector, as we can distribute these

institutions as follows:

1- Industrial Enterprises are estimated at around (31978) industrial institutions.

2- Medium Industrial Enterprises are estimated at around (1294) industrial

institutions.

3- Big Industrial Enterprises are estimated at around (376) industrial institutions.

Small scale industries represent about 95% of manufacturing enterprises, achieving

34% of the value added in the sector and employing 53% of the total labor in

manufacturing. It is observed that, the most important industries in the Republic of

Yemen are as follows:

Firstly: The strategic Industries:

Industries depending on different natural ores, the national components in it reach

more than 50%, excluding different minerals and oils. These comprise the

following industries:-

1- Cement industry.

2- Fabric and textile industry.

3- Fish reserving and canning industry.

4- Tannery and skin industry.

5- Salt industry.

6- Iron and steel industry.

7- Tomato and nourishment canning industry.

Secondly: Transformation Industries:

These industries comprise the following: -

a) Nourishment Industry:- represented by

1- Oils and Ghee.

2- Sweets, biscuits and chocolates.

3- Mineral water filling industry.

4- Gas water filling industry.

5- Juices and soft drinks industry.

6- Flour milling industry.


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b) House ware, Cosmetic Materials and luxuries, represented by:-

1- Cleaning soap, cosmetic material and perfumes industries.

2- Medical industries.

3- Cigarette industries.

4- Building material industries.

5- Plastic industry.

6- Sponge and toilet paper industries.

7- Wood industry.

8- Aluminium and metal formation industry.

9- Readymade clothing industry.

10- Coffee grinding and milling industry.

11- Honey refining industry.

Thirdly: Traditional Handicrafts.

The handicraft industry is an important part of Yemen's economic heritage

despite external competition for alleviating poverty and broadening the base of

comprehensive development. There are several industries in Yemen .The most

important of these industries are traditional steel/ iron products, fabrics, sewing,

embroidery ceramics, handicrafts, building materials, gold, jewelry and silver

works, food preservation, food products (cheeses, sweets, etc.) and incense and

perfume manufacturing.

3.2.6. Importance of Industrial Sector in Yemen:

The Republic of Yemen is one of the developing countries; it needs to

establish national industries that help in the civilized development of construction

process, which offer or rather provide the society with the necessary required

items. The Construction industry in Yemen and other developing countries are now

coming under more pressure to meet future demands for sustainable economic

development. This will require changes in culture and the formulation of

appropriate policies and strategies which spearhead these changes. The proposed

policies and strategies are specifically chosen as they are considered to be

compatible with the Yemen's construction industry and are also seen to be more

readily able to integrate with cultural aspects of Yemen. Particularly, by focusing

on the hardships of the existing local needs capabilities, priorities, and the

willingness for development (Alsalahi, 2010).


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3.2.7. Problems and Difficulties facing the Yemeni Industrial Sector

The Yemeni industrial sector is facing a lot of problems and difficulties such as:

1. Limited ability of business men and small enterprises in getting funds and

resources needed for their activities.

2. Technical problems represented by scarcity of technical skills and trained

Personnel.

3. Administrational, organizational and marketing problems.

4. Problem of getting information concerning investment loans.

5. Problem of laws and complicated regulations.

6. Concerning setting up of projects.

7. Foreign items and national items have incompatibility.

8. The national industry is unable to compete with foreign markets.

9. The phenomenon of the spread of smuggled goods.

10. Lack of clear strategy for industrial development.

11. Lack of suitable industrial fundamental ratio.

12. No importance to the sectors that represent basic block in developing of the

industrial sector.

13. Lack of importance to industrial and development research centers.

Problems of Industrial Labor:

1. Lack of perfect training.

2. Less skill hence less Pay.

3. Bad working condition disturbs health of workers.

4. Workers are not punctual.

5. Workers are not efficient.

6. Relaxing habit is very high.

Those were the main problems facing the industrial sector in the republic of

Yemen which have been affecting the growth of industries (Central Statistical

Organisation, 2004).

3.2.8 Foreign Trade

Yemen's trade exchange with the outside world varies annually depending

on the variables taking place every year on both exports and imports. Generally,

the annual value average of exports of Yemen reached (794) billion riyals during

the period 2001-2006, oil exports constitute more than 90% of the total exports of


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Yemen followed by fish and agricultural crops. The annual value average of

Yemeni imports during the same period was (719) billion riyals with food imports

and transportation vehicles come first on the list of Yemeni imports. The most

important exporting countries to the Republic of Yemen are: Emirates, Saudi

Arabia, China, Kuwait, United States of America, India, Singapore and South

Korea. The most important commodities exported are: fish, oil and crops. As for

the imported goods, the most important ones are: foodstuffs, and transportation

vehicles of chemicals and pharmaceuticals (National Information Center, 2013).

Table No. (3.2.2)

Exports, Imports and Trade Balance - (Million Riyals)

Item 2004 2005 2006 2007 2008 2009 2010 2011

Exports 753 1074 1316 1256 1519 1270 1414 1478

Ratio of the GDP 26.1 29.5 29.3 24.6 25.0 22.3 21 23.8

Imports total 736 1029 11961 1693 2087 1861 2022 2069

Ratio of the GDP 25.5 28.3 26.6 33.2 34.4 32.6 30.1 31.9

Trade balance 17 44 119 -437 -568 -591 -608 -591

Source: National information center - Yemen

3.2.9. Summary

The Republic of Yemen is a Middle Eastern country located in the south of

the Arabian Peninsula in the south-west of the continent of Asia, across from the

Horn of Africa near vital shipping lanes. It is bounded on the north by Saudi

Arabia, on the south by the Arabian Sea and Gulf of Aden, on the east by the

Sultanate of Oman and the Red Sea to the west. The area of Yemen is about

550,000 sq. km. It is estimated that by the end of 2011 the population is about

23,833,000. Arabic language is the official language of Yemen. Sana'a is the

capital of Yemen, and the official currency of the Republic of Yemen is the Riyal.

The unification of Yemen on 22nd

May, 1990 helps the two parts to make

Yemen famous in the Middle East and the country has got more power in the area.

The Yemeni economy has passed through consequent crises due to internal and

external factors on one side, and poor administration and weak law on the other

side. The economy of Yemen is based on gas, oil, fish and agriculture (coffee,


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dates, herbs, fruits, wheat, millet, and maize). Food processing, mining and

petroleum refining continue to thrive the country and foreign assistance and aid

helped to establish and develop infrastructure. The Yemeni government openness

to foreign investment stimulates growth, employment and exports. The main

countries to which Yemen exports its products are China, India, Thailand,

Singapore, South Africa, UAE, Japan, Saudi Arabia, Kuwait, Somalia, and South

Korea.

The major imported goods to Yemen include; machinery, sugar products,

manufactured goods, textiles, pharmaceuticals, electrical appliances, food and

livestock and transport equipment. The major countries from which Yemen obtains

its imported goods are UAE, China, Saudi Arabia, USA, Switzerland, Kuwait,

Turkey, Holland, Australia, Brazil, India and Thailand.

Through the industrial indicators and statements we have mentioned, it is

clear that the industry is still lagging compared to other countries. Republic of

Yemen is still classified in the list of the least developed countries in the world. In

order to improve the Yemeni society, the state must give special attention to the

industrial sector which is in crisis. There is urgent need to achieve economic

development and social balance to face the difficult circumstances of Yemeni

society with the constant increase in the population growth.


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References

1. Al-Haj, A. M. (2012). Doing business in Yemen. Sana'a: HLB International.

2. Alsalahi, S. A. (2010). Evaluation of financial performance of YCCIM,

Ph.d, thesis. Jalgaon: North Maharashtra University.

3. Arthur, S., & Sheffrin , S. M. (2003). Economics: Principles in action. New

Jersey: Pearson Prentice Hall.

4. Central Statistical Organization. (2004). A-Yearly Statistic Books (1995-

2004). Sana'a: Central Organisation of Statistics.

5. Central Statistical Organization. (2010). Books of annual Statistics (1990-

2010). Sna'a: Central Statistical Organization.

6. General Investment Authority. (n.d.). Overview of Yemen. Retrieved 8 7,

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web: http://www.infoplease.com/country/yemen.html

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http://memory.loc.gov/frd/cs/profiles/Yemen.pdf

9. Lucas, R. E. (2002). Lectures on economic growth. Cambridge: Harvard

University Press.

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from Ministry of Industry and Trade web site:

http://www.moit.gov.ye/moit/node/465


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13. Ministry of Planning and Co-operation. (2005). Statistical Year-Book.

Sana'a: Central Statistics Organisation.

14. Ministry of Tourism. (n.d.). Geographical Divisions. Retrieved 8 9, 2013,

from Ministry of Tourism Web Site:

http://www.yementourism.com/information/detail.php?ID=2712

15. National Information Center. (n.d.). Industrial Sector. Retrieved 8 22,

2013, from National Information Center Web Site: http://www.yemen-

nic.info/english_site/contents/Idustrial/

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World Bank Web site :

http://www.worldbank.org/en/country/yemen/overview

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