Yemen Socio-Economic Update, Issue 11 - February 2016
Yemenis had long been endowed with entrepreneurial spirit and had been successful traders and businessmen, mainly in the region, South East Asia, Africa and elsewhere. They succeeded in establishing thriving civilizations that played a pivotal commercial role between the east and west.
Yemen abounds with many diverse investment opportunities and potential resources. Yemen’s essential strategic location, workforce availability and diverse climate make it a potential regional and international commercial center as it used to be in the past.
Despite the vital role of the private sector in economic activity (contributing over 50% of the GDP) and orientation of the government policies to encourage the private sector to lead the economic growth, some obstacles and challenges prevented the private sector from performing the expected role, including the political and security instability, fragile infrastructure, and weak rule of law.
In light of the ongoing confict, the private sector has undergone painful shocks that went beyond the energy crisis, fnancial losses and business closure to cause physical damage on over quarter of the private sector enterprises. Thus, hundreds of thousands of workers have lost their jobs and source of income.
In brief, recovering the private sector, reconstructing its businesses, paving a way for local investments and attracting foreign investments is not a choice for the government, but a necessity to achieve sustainable development, reduce poverty and build a new Yemen.
Dr. Mohammed Al-Maitami Minister of Planning and International Cooperation
This edition highlights the war repercussions on the private sector in Yemen as follows:
Pre-War Status of the Private Sector:
● The private sector contributes about 53.7% of the GDP, and 75% of the gross investment.
● In 2013, the political instability; poor electricity services and rampant corruption were the main obstacles facing the private sector enterprises.
● In the Doing Business report, Yemen dropped by 5 ranks from 165 in 2015 to 170 (out of 189 economies) in 2016 (among the worst 20 countries worldwide).
War Implications on the Private Sector:
● Closure of 26% of businesses in the most confict-afected areas, and 42% of the women owned enterprises by September 2015.
● By September 2015, 95% of the closed enterprises sustained partial or total physical damage.
● Enterprises operating in the most afected areas have lost over 70% of their clientele on average by September 2015.
● Working hours in enterprises have been reduced by 50.6% from 13.5 hours / day before March 2015 to 6.7 hours / day after that period.
● By October 2015, 41% of enterprises laid of 55% of their workforce.
Key Challenges Facing the Private Sector:
● Structural challenges: predominance of the family business pattern and small enterprises, fragile infrastructure, low skills of workers, weak rule of law and the weak economic, political and security stability.
● Emerging challenges: war and political instability, external trade restriction, exacerbating energy crisis, widening fscal and monetary imbalances, uncertain future of business climate and difculty to access credit.