2013 Investment Climate Statement - Yemen
Openness to Foreign Investment
Yemen, one of the world’s least developed countries, offers potential investors inexpensive labor and high tariff rates for project finance compared to more developed countries. There are opportunities for significant returns in the power, fishery, real estate development, infrastructure, and energy sectors. With the implementation of tax incentives for foreign investors, Yemen’s investment climate has improved steadily in the past decade. Investing in Yemen, however, is not for the faint of heart. Investors should be familiar with the U.S. Foreign Corrupt Practices Act as they may encounter government officials of all levels who solicit bribes at every step of a project. In addition to corruption, other challenges include a lack of security in under-governed areas, a lack of Intellectual Property Rights enforcement, opaque dispute settlement mechanisms, and unclear lines of decision-making authority within the government. Official letters and memoranda to investors and instructions within Yemeni ministries are routinely issued, and then subsequently ignored, by government officials. With the exception of a small handful of Western-educated technocrats, many Yemenis and government officials have a deep cultural suspicion of foreigners profiting from projects in their country. Navigating the inner workings of competing centers of authority within the government is a task best left to a competent local partner.
Yemen’s WTO accession may eventually lead to a freer and more open investment climate for international investors. In 1992, the government adopted a uniform investment code for both domestic and foreign investors which created a General Investment Authority (GIA) to coordinate work among eight government agencies. GIA is charged with publicizing investment opportunities and obtaining government ministry approvals on behalf of investors. In 2002, GIA worked with the World Bank's Foreign Investment Advisory service to update Yemen’s investment laws, reducing customs duties by 50 percent on imported raw materials and 100 percent on raw materials produced locally for agricultural and fisheries projects. Investments in the oil, gas, and mineral sector are subject to special agreements under the authority of the Ministry of Oil and Minerals and do not fall under GIA’s authority. Other sectors not covered by GIA include weapons and explosives manufacturing, banking and money exchange activities, and wholesale and retail imports. On September 2012, the GIA board of directors decided to extend the deadline for investors by one year, in recognition of the impact of Yemen’s 2011 turmoil. The consensus transitional government’s decision will enable investors to complete their projects and restart licensed projects stalled during the period of instability. Potential investors can obtain information packets from GIA, including a copy of the investment law, an investment guide summarizing GIA activities, and an application form with instructions, from: Promotion Section, General Investment Authority, P.O. Box 19022, Sanaa, Republic of Yemen (Telephone: 967-1-262-962/3 or 268-205; Fax: 967-1-262-964; Website: www.giay.org).
Since the unification of North and South Yemen in 1990, Yemen has embarked on a series of reforms aimed at stabilizing the economy and increasing foreign investment. Reforms include the introduction of a General Sales Tax (GST) and a reduction in domestic petroleum and food subsidies. The IMF has helped introduce indirect monetary policy instruments, such as open market operations, rediscount facilities, and reserve requirements.
Between 2003 and 2004, eight companies were privatized, seven of them by public auction, with the remaining company being transferred to the Yemeni Economic Corporation (YEC). In 2007, the government announced the privatization of an additional 15 factories. The Central Bank of Yemen (CBY) has made an effort to improve commercial banks’ accounting procedures and loan recovery rates. The banking system remains weak, however, with most commercial banks owned by large families who are reluctant to lend outside small circles. Roughly 4% of Yemenis have bank accounts and most financial transactions occur outside of the commercial banking system. In 2011, Bank of New York (BNY) closed its correspondence accounts with Yemeni banks due to a change in the bank’s strategy. BNY was previously the main correspondent bank for most of Yemeni banking institutions. Consequently, most Yemeni banks have switched to European banks for transactions such as money transfers and letters of credit.
Yemen has stated that, absent an Arab League consensus, it will continue to implement the primary aspect of the Arab anti-Israel boycott.
Conversion and Transfer Policies
Investors may transfer funds in hard currency from abroad to Yemen for the purpose of investment and may re-export invested capital, whether in kind or in cash, upon liquidation or project disposal. Net profits resulting from investment of foreign funds may be transferred freely outside of Yemen. Cash transfers are limited to USD 10,000. Transfers above that amount must be approved by the CBY.
As of December 31, 2012, the Yemeni Riyal was trading at YR 215YR/USD 1. Most foreign currencies, especially U.S. dollars, are readily available and trade freely at market rates. The CBY intervenes regularly in the currency market, selling off U.S. dollar reserves to bolster the local currency. In 2010, the CBY intervened on nine occasions, injecting approximately USD 1.15 billion into the exchange market. In 2011, the CBY pumped USD 340 million into the market. In 2012, the Yemeni Riyal was stable through the year and CBY was not required to make extraordinary interventions to stabilize the exchange rate.
Expropriation and Compensation
Since Yemen’s unification in 1990, there have been no cases of outright expropriation of property owned by foreign investors. The government recognizes that expropriation, which existed in the former socialist Peoples’ Democratic Republic of Yemen (PDRY), is contrary to its economic aspirations. Most of the lands expropriated by the PDRY were returned to the rightful owners. Land registration, however, is in its infancy and disputes over both residential and commercial plots are frequent and nearly impossible to adjudicate legally (see Dispute Settlement section). Since deed information is inexact, owners are able to illegally sell multiple copies of a deed. Commercial suit options are extremely time-consuming, prone to corruption, and judgments are often not enforced.
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.
Yemen’s judicial system is inefficient and subject to influence from bribes or family and/or tribal connections. While Yemen’s investment-related laws are generally sound, enforcement remains problematic. The government has special commercial courts which provide a mechanism for commercial dispute resolution, but they are generally considered unreliable. Yemen is a signatory to the 1965 Convention on the Settlement of Investment Disputes, but not to the 1958 New York Convention on Arbitration. Yemen was sued by U.S.-based Hunt Oil Company in a Paris-based International Chamber of Commerce commercial arbitration court in 2005. The court’s decision has been kept confidential, according to both sides’ wishes. Hunt Oil continues to operate in Yemen, although in a much smaller-sized oil exploration block.
Business disputes are generally handled by informal arbitration or within Yemen’s court system. In 1998, a private arbitration center, the Yemeni Center of Conciliation and Arbitration, was created by a group of lawyers, bankers, and businessmen as an alternative to the official government-run court system. The Center has settled 52 disputes thus far in the areas of trade, finance, construction, and industry, and is slowly gaining recognition as a viable alternative to the official courts in Yemen. Most Yemeni business owners, however, continue to eschew both government and commercial arbitration courts in favor of informal settlements, resulting in a serious deficiency in the equal application of the law. The Center suspended its operations in 2011 as a result of the political crisis in the country.
Outside investors are best served by establishing a partnership with a Yemeni entity that knows the system, including an international arbitration clause in their contracts, establishing an escrow account, and, where appropriate, demanding as much of the payment as they can get up front. 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 lend primarily to large established trading houses well known to them.
Performance Requirements and Incentives
Yemen’s collective body of investment laws 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 holidays 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. In July 2010, the Yemen Tax Authority began application of a general sales tax (GST) to the market. Initially, businessmen disputed the tax. As the political and economic crisis of 2011 dominated government and private sector attention however, the GST controversy has waned. At the end of 2012, the GST remained a point of tension between the government and the private sector, but application has been formally announced.
Right to Private Ownership and Establishment
Law 23 of 1997 (as amended) regulates agencies and branches of foreign companies and firms and outlines the requirements for establishing a Yemeni agent. Chapter 3 of Law 23 permits foreign companies and firms to conduct business in Yemen by establishing foreign-owned and managed branches. Foreign commercial entities wishing to open branches in their own name must obtain a permit from the Ministry of Industry and Trade.
Under a 2002 investment law, foreigners can own 100 percent 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). The 2002 investment law appears to contradict longstanding Yemeni commercial laws, however, which limit foreign ownership to 49 percent. The government is currently reviewing the laws in an attempt to remove inconsistencies, although work on the issue was temporarily suspended in 2011 as a result of the political crisis. In March 2008, the government amended a 1991 investment law allowing foreigners to operate businesses in Yemen without a Yemeni partner. During 2012, the ROYG conducted meetings with private sector entities and individuals to reach agreement on the investment law.
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. In 2006, various agencies and ministry departments dealing with land ownership were merged into a common General Land Survey and Planning Authority. This relatively new organization oversees land ownership and registration, as well as modest government urban planning efforts. In May 2011, armed clashes damaged the General Land Survey and Planning Authority’s headquarters. Authorities have also reported looting of documents and equipment in the building.
Protection of Property Rights
Yemen has a record of inadequate protection of intellectual property rights (IPR), including patents, trademarks, designs, and copyrights. In late 2004, the Cabinet approved the Berne Convention for the Protection of Literary and Artistic Works, as well as the International Agreement on Protecting Intellectual Property Rights. Parliament has yet to ratify these agreements. Yemen has yet to accede to any international IPR conventions and its IPR Law Number 19 of 1994 is not compliant with the WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). In December 2010, the legislation of Trade marks & Geographical indications, the amendment on the amendment of the trade registration law, the legislation of industrial design, Patent and Author law have been passed and approved by the parliament. Yemen became a member of the World Intellectual Property Organization (WIPO) in 1999 and is now revising its laws with WIPO guidance. Yemen gained observer status in the World Trade Organization in 2002 and has held regular WTO accession meetings ever since. As part of its WTO accession requirements, Yemen will need to enact its recently revised IPR legislation and take concrete steps to enforce these laws adequately.
United States and Yemen have successfully concluded bilateral market access negotiations as part of Yemen’s efforts to accede to the World Trade Organization (WTO). The bilateral agreement provides new market access opportunities for U.S. providers of agriculture, goods and services, and sets the stage for Yemen to complete accession negotiations with WTO Members. Both governments have been working intensively to finalize the tariff and services schedules after reaching an agreement in principal in April 2010. Officials from USTR and Yemen’s Ministry of Industry and Trade have signed the final schedules reflecting the results of the negotiations and deposited them with the WTO Secretariat. Both governments will continue to work with other WTO Members to conclude the multilateral Working Party negotiations. The primary obstacle to Yemen’s ascension to the WTO is ongoing negotiations with Ukraine.
In 1999, a large U.S.-based multinational firm won a trademark infringement case in a Yemeni court. More than ten years later, the ruling is still technically under appeal and the violator continues to infringe on the trademark despite the court ruling. In a second case involving a U.S. company's trademark, a Yemeni appeals court handed down a final ruling in April 2001 in favor of the U.S. Company. In August 2003, the Yemeni Supreme Court rejected the appeal of the company producing the infringed products and ordered it to cease production and destroy the infringed trademark. However, this ruling has not yet been enforced.
Transparency of Regulatory System
Implementation and enforcement of Yemen’s environmental protection 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 Automated System for Customs Data (ASYCUDA) systems and WTO-compliant customs valuation methods.
Efficient Capital Markets and Portfolio Investment
In the 1990s, Yemen’s banking system suffered from a large volume of non-performing loans, inadequate loan provisioning, low bank capitalization, and weak enforcement of government banking standards. Under a 1997 World Bank-sponsored financial sector reform program, the government took actions to address these problems. A bank reform law was passed in 1998 to update, strengthen, and regulate the industry. By 2000, CBY had circulated strict regulations pertaining to credit risk management, liquidity, insider lending, foreign exchange exposure, financial leasing and external auditors. Most commercial banks in Yemen comply with a government requirement that they reach a capital adequacy ratio of 8% and meet new classification standards for loan portfolios. Nevertheless, commercial banks still suffer from extremely low capitalization rates and are often owned and operated by large trading families to service their own business needs. The French Credit Agricole Bank for Finance and Investment has close its branches and operations in Yemen by June 2012. Although no formal explanation has been given, financial experts opine that the bank’s withdrawal is likely due to its insufficient profits. As of October 2012, the consolidated balance sheet for all commercial banks operating in Yemen stood at YR 1.754 trillion (USD 8.158 billion) compared to YR 1.714 trillion (USD 7.790 billion) for the same period in 2011.
In 2000, President Saleh signed a law granting CBY greater independence in order to stabilize prices, limit public sector financing to emergency loans, and increase accountability among commercial banks. The CBY is now authorized to inspect bank implementation provisioning and capital increase schedules and enforce penalties and corrective measures accordingly. In December 2009, the Parliament passed an anti-money laundering and counter-terrorism finance law. On September 2012, the Saudi Fund for Development (SFD) placed a $1 billion deposit in the CBY to support Yemeni government activities and to stabilize currency exchange rates.
Inter-bank activities are limited, and there are no equity or bond markets. Elements in the government still hope to establish a stock market in Yemen to promote a private sector-led growth strategy. Most domestic and foreign observers, however, believe that the country lacks the expertise to establish a stock market, and that there are insufficient Yemeni investors to sustain an active stock market. On December 2012, ROYG established a specialized public-private partnership unit in the Ministry of Planning to increase participation and communication, and to mitigate challenges faced by the business sector.
Competition from State-Owned Enterprises (SOEs)
There are several SOEs in Yemen in various sectors including electricity, water, oil and gas, construction, and telecommunications. Yemen Economic Corporation (YEC), Public Electricity Corporation (PEC), Yemen Petroleum Company (YPC) and Yemen Telecommunication Corporation are the most prominent examples of SOEs in Yemen. Government ministries supervise the operation of each SOE. There are also mixed-sector enterprises with mixed public/private ownership, including the Yemen Bank for Reconstruction and Development and the Yemen Drug Company. Yemen’s president appoints the Executive Directors of each SOE, after receiving nominations provided by the relevant ministers. The Executive Director coordinates with the relevant ministries in taking vital decisions. Each SOE is required by law to publish an annual report under the supervision of the related ministry and submit their books to an independent auditing company.
The government budget appropriates funds to SOEs, but SOEs are not subjected to hard budget constraints and have some independence. Occasionally, government ministries have access to relevant SOEs. For example, the Public Electricity Corporation (PEC) occasionally funds some of the Ministry of Electricity’s expenditures. All ministries have their respective appropriations in the government budget.
The private sector is allowed to some extent to compete with public enterprises under the same terms and conditions in the market. Areas in which only SOEs are allowed to work within include the selling of refined fuel productions and power distribution through transmission lines.
Corporate Social Responsibility (CSR)
In Yemen, awareness of corporate social responsibility (CSR) among consumers and producers is low. International companies such as Yemen Liquefied Natural Gas (LNG) and mobile telecommunications company MTN pursue CSR principles and often advertise their policy. Yemen LNG produced an Environment and Social Impact Assessment (ESIA) in compliance with the international standards and implemented a sustainable development and environmental (SDE) strategy to ensure the protection of wildlife and fishermen’s livelihoods. MTN is engaged in sponsoring a variety of activities in education, health, and other sectors. Yemenis tend to view Yemen LNG and MTN favorably in light of their CSR activities.
Yemen faces recurring problems with terrorism and tribal violence. The country has suffered from a number of terrorist attacks, including the September 2008 suicide attack on the U.S. Embassy in Sana’a in which 18 people were killed and the October 2000 attack on the U.S.S. Cole in Aden harbor, in which 17 U.S. servicemen and women were killed.
In January 2009, Al-Qaeda Yemen announced its merger with al-Qaeda elements in Saudi Arabia creating al-Qaeda in the Arabian Peninsula (AQAP). This strategy of consolidation and greater organization received significant publicity and demonstrated al-Qaeda’s reinvigorated recruitment efforts. As Saudi security forces have clamped down on terrorism, and foreign fighters have returned from Afghanistan and Pakistan, Yemen's porous borders have allowed some terrorists to seek safe haven within the country. The government lacks a strong security apparatus outside major cities and its Counter Terrorism Unit (CTU) and Yemen Special Operations Force (YSOF), the state's two premier counterterrorism entities, still require additional training and funding in order to effectively target terrorist elements. In 2011, amid the political crisis, 300 Islamic militants suspected to be associated with al-Qaida attacked and captured the coastal city of Zinjibar the capital of Abyan, a southern governorate.
Terrorists have also sought to attack economic targets, specifically in the oil industry, which accounts for more than 70 percent of Yemen’s government revenue. On September 15, 2006, two significant attacks were carried out on oil installations. The first involved two explosive-laden trucks detonated at the Canadian Nexen oil pumping facility at Ash Shahir in the eastern governorate of Hadramaut, resulting in one death and two injuries among the local guard force. The second attack occurred at the safer oil pumping facility in Marib, where two trucks carrying explosives detonated. In 2002, a French oil tanker was bombed off the coast of Mukallah.
Yemen continues to be plagued by frequent kidnappings, which have traditionally been used as a means for tribes to pressure the government to accede to their demands for resources or improved services. A government crackdown in recent years has reduced the number of kidnappings however. Investment projects outside the capital often succeed or fail solely based on the strength of relations with the surrounding tribes. Tribes frequently hijack vehicles belonging to foreign companies in order to pressure the central government to provide additional social services in the area. Attacks on oil pipelines are common in Yemen. These types of attacks occur most frequently in oil exploration and production areas, including, but not limited to, the outlying governorates of Marib and Shabwah. Tribes in these regions claim they are not getting their fair share of economic activity in their areas, and investors should be very sensitive to their need to build strong and lasting community relations. The provision of community-based services, such as healthcare and education, can contribute to protecting investments in isolated areas.
Armed conflict continued as government control weakened during the 2011 crises. The Houthi opposition movement in Saadah governorate reached a peace agreement with the central government that ended the 6th round of clashes between Saadah and Sana’a. The Houthis took advantage of instability to expand influence to other governorates, including some areas of Hajjah and Al-Jawf. Media reports also suggest that some Houthis are accumulating weapons.
The political crisis of 2011 resulted in a series of youth and public protests, political tensions, and armed clashes. In the largest protests in Yemen for decades, protesters, tribal members, and army soldiers and security personnel were killed and injured. On March 18, at least 45 anti-government protesters died and over 200 were injured as unidentified gunmen opened fire on them in Sana'a. There continues to be uncertainty as to the perpetrators of the attack with protesters blaming the government and the government denying such accusations. Throughout Yemen, other major cities experienced protests against the government. As a result, several high ranking military commanders including Ali Muhsen, Commander of the First Armored Division and a long time close ally of Saleh defected. A number of MPs, ministers, ambassadors and senior party members also resigned from the ruling GPC party and announced their support for the revolution.
GCC countries brokered a transition agreement between the government and the opposition where Saleh would resign as President and a coalition government would be formed. Saleh’s initial refusal to sign the agreement resulted in Sheikh Sadiq al-Ahmar, the head of Yemen’s largest tribal confederation, Hashid, to declare his support for the opposition. Armed Hashid supporters clashed with government forces in Sanaa. Heavy street fighting ensued, including artillery and mortar shelling. Armed tribesmen seized control of several government buildings.
On June 3, an attack in the Presidential Mosque severely injured President Saleh and other high-ranking Yemeni officials. On November 23, President Saleh finally signed the agreement in Riyadh, leading to the inclusion of the opposition in a National Coalition Government.
Assassination of local military and security officials occurred after the defeat of AQAP-affiliated Ansar Al-Shari’a in Abyan. Throughout Yemen, 84 police and military officers were assassinated by unidentified gunmen on motorcycles. The US embassy in Sana’a was stormed by protesters September 13, 2012. Embassy security investigator Qasim Aklan was assassinated in Sana’a shortly after the embassy attack.
Corruption is a significant impediment to U.S. investment in Yemen, since it is difficult for U.S. investors to verify that local partners, the key to any project’s success, will comply with the letter and the spirit of the U.S. Foreign Corrupt Practices Act. U.S. investors should be aware that Yemeni businessmen have an operating definition of corruption that differs vastly from one that would satisfy an American corporate lawyer. Kickbacks and bribes at every level of government and at every phase of a project are a common way of doing business. Yemen has ratified the UN Convention against Corruption in 2005. In Transparency International’s 2012 Corruption Perception Index, Yemen ranked at 154th out of 174, virtually the same as its 164th ranking out of 183 in 2011.
The poorest country in the Arab world, Yemen has a hugely overstaffed and underpaid civil service. Potential foreign investors are often approached, either directly or indirectly through an intermediary, with offers by government officials to swing a tender or a project license for a “fee.” Illicit activities include soliciting and paying bribes to facilitate project approval, leveraging dispute settlements, changing tax rates and customs tariffs, and engaging in family or tribal nepotism. Government officials at all levels regularly approach investors to serve as “project consultants” for unjustifiably high rates, a common form of soliciting a bribe that provides officials with some form of plausible deniability. The government recognizes that it must enact civil service and administrative reforms to create disincentives to corruption, but progress has been extremely slow.
Parliament approved the creation of an 11-member Supreme National Authority for Combating Corruption (SNACC), an independent body with the authority to track down corrupt public officials and retrieve funds obtained through corrupt practices. SNACC is charged with drafting and implementing anti-corruption policies and collecting financial disclosure forms from senior government officials. SNACC can investigate individuals involved in financial crimes and public corruption and refer them to the judiciary for prosecution. In February 2010, the Supreme Judicial Council (SJC) decided to establish a Public Funds Prosecution to tackle issues submitted by the SNACC. The new formed Public Funds Prosecution's task is to study all cases investigated by the SNACC. The aim of forming this prosecution is to accelerate investigation process in those cases in order to promote the efforts exerted by the government in combating corruption. SNACC referred 97 corruption cases to the Public Prosecution between 2007 and 2012. On January 2013, the government stated that the SNACC Board of Directors’’ legal term had ended and directed its ministries not to deal with the SNACC until new members were assigned to replace the outgoing board. According to the law, the Shura Council nominates 30 experts and submits the list to the parliament for its decision on the final 11.
Bilateral Investment Agreements
The U.S. and Yemen signed a Trade Investment Framework Agreement in 2004. According to the General Investment Authority (GIA), Yemen has a total of 38 bilateral treaties. Yemen has bilateral investment treaties with Algeria, Austria, Bahrain, Belarus, Belgium, Luxembourg, Bulgaria, China, Czech Republic, Egypt, Ethiopia, France, Germany, Hungary, India, Indonesia, Iran, Italy, Jordan, Kuwait, Lebanon, Malaysia, Morocco, Netherlands, Oman, Pakistan, Qatar, Russian Federation, South Africa, Spain, Sudan, Sweden, Syria, Tunisia, Turkey, Ukraine, United Arab Emirates, and United Kingdom. Yemen has signed initial agreements with Croatia, Mongolia, and Romania. These agreements have not yet entered into force. For more information on Yemen’s bilateral investment agreements, please see: www.giay.org or www.investinyemen.gov.ye.
OPIC and Other Investment Insurance Programs
Yemen and the United States signed an investment guarantee agreement in 1972. As of October 1997, OPIC and EXIM Bank provide guarantees for both private and public sector projects of short and medium duration. Yemen is a member of the Multilateral Investment Guarantee Agency (MIGA). The comparatively short length of export credit agency repayment terms for Yemen (in EXIM’s case, seven years) is a significant impediment to the financing of any major investment project. Potential investors should consult early on with representatives from OPIC and EXIM Bank regarding the financing profile of a given project.
The Yemeni Government follows International Labor Organization (ILO) standards regarding labor laws and worker rights. In 1999, it ratified ILO conventions on the elimination of the worst forms of child labor and the minimum work age for employment. As in other areas, the government’s implementation and enforcement of labor laws is weak. Child labor is an issue of special concern. Some children work with their families in agriculture. To address this issue, the government signed an agreement to cooperate with the International Program on Elimination of Child Labor (IPEC) in 2000. After ratification of the ILO conventions, the government established the Child Labor Unit at the Ministry of Social Affairs and Labor to implement and enforce child labor laws and regulations. The local pool of skilled labor for technology-intensive ventures is limited.
The illiteracy rate is high in Yemen and the few students who complete secondary education or university studies often do not possess the same professional standards as their counterparts from international educational institutions. University graduates also experience difficulty finding appropriate employment and are sometimes unwilling to accept lower skilled jobs. The government is beginning to focus on increasing access to and improving the quality of vocational training as a means to develop a cadre of skilled laborers in high demand fields such as construction workers, medical technicians, electricians, mechanics, plumbers, and carpenters.
Foreign-Trade Zones/Free Ports
The Yemen Free Zone Public Authority was established in 1991 to develop the Aden Free Zone (AFZ). Yeminvest, a joint venture between the Port of Singapore Authority (PSA) and the Bin Mohfoud Group of Saudi Arabia, was awarded the concession to develop the area. Dubai Ports World (DPW) had a contract to operate the Aden Container Terminal (ACT) in the AFZ, but in September, 2012, Yemen reached an agreement with DPW, finalized in Turkey, that DPW would divest the entirety of its 50 percent shareholding in the Dubai and Aden Port Development Company – the now-former managing company of the port’s container terminal – to its joint venture partner, the Yemeni state-owned Gulf of Aden Ports Corporation. The agreement was reached after Yemen officials publicly accused DP World of failing to meet its contractual obligations – which included a planned expansion of the port container terminal – and of deliberately downgrading conditions at Aden Port which some considered designed to divert ships to Dubai Port. ROYG is planning to invest around $500 million to revive and develop Aden port.
ACT’s current annual capacity is 650,000 Twenty-Foot Equivalent Units (TEUs). The 35 hectare container yard can store up to 10,000 boxes. Yemen Ports Authority recently constructed a new 270-meter long and 12 meter-deep dock assigned for unpacking the wheat-loaded vessels. The dock will alleviate burdens of the other seven docks in the port.
An industrial and warehousing estate called Aden District Park (ADP) was launched in November 2002. The Aden Container Terminal and the Aden Free Zone are promising areas for investment. Opportunities in light industry, repackaging and storage/distribution operations are welcomed. Future plans include the development of heavy industry and more extensive tourist facilities in the greater Aden area, although, as of early 2010, the government had made little headway in implementing any of these projects.
In June 2010, the Aden Free Zone (AFZ) signed three contracts to set up three industrial factories at a sum of USD 11.7 million. In December 2010 Aden Gulf, a Hail Saeed Group subsidiary signed with AFZ Authority a memorandum of understanding to invest and operate sector (J) in AFZ. The agreement delegates Aden Gulf to operate and endow required infrastructure for Sector (J), and promote it to interested investors. Sector (J) encompasses the following: light industries area, logistical area, commercial area, residential area and a complete pier project with its facilities. Additionally, (AFZ) and Inma Company signed five real-estate development agreements in April 2011.The Company is intending to build integrated residential cities over phases in Kabota and Abuharbah in (J) sector.
Free zone incentives include the possibility of 100 percent foreign ownership, no personal income taxes for foreigners, and a corporate tax holiday for 15 years (renewable for 10 additional years), 100 percent repatriation of capital and profits, no currency restrictions, and no restrictions on, or sponsoring required, for the employment of foreign staff. Aden’s main selling point is its strategic location – nine days steaming from Europe and seven from Singapore. It is four nautical miles off the main Far East - Europe sea route. The Ministry of Transportation is seeking to conclude a contract for a foreign operator to manage Aden port. For further information, contact: Free Zones Public Authority (AFZPA), (Main Center) P.O. Box 5842 Khormaksar, Aden, Republic of Yemen, Telephones: 967-2-234484/5/6, Fax: 967-2-235-637, e-mail: email@example.com; website: www.adenfreezone.com.
Foreign Direct Investment Statistics
The General Investment Authority has not released foreign direct investment statistics for 2012. Most U.S. investment in Yemen is in the oil and gas exploration and production sectors.
Additional Web Resources
United States Embassy in Sana’a, Yemen
Export.gov provides online trade resources and one-on-one assistance for U.S. businesses who would like to start or expand global sales.