Drastic price increases prompt new regulations

This customer carefully checks the prices before buying.

To curb the runaway food prices in Yemen, the Ministry of Industry and Trade is creating list of prices for various goods. The ministry plans to announce this new list on May 15, 2007, said Yahya al-Mutawakal, Minister of Industry and Trade. The price list is a result of a partnership between the ministry and commerce and industry chambers to control the prices after recent dramatic price increases.  Government and commercial private sector organizations must work together, according to a permanent system, to curb price increases, al-Mutawakal, said.

“On May 15, the Ministry will start to control the market strictly and bring traders, wholesalers, and retailers who fail to abide by the list to the court, and a punishment will be approved by the Cabinet. Thus, we will make a media campaign to traders about that,” he said. The government has found some good temporary ways to cope with the price increases when they are crises, but now we have to have a permanent system, in cooperation with the private sector, to curb price increases, he said. 

The government will support consumer associations, and there is coordination between the ministry and consumer association in terms of the market, al-Mutawakal said. On May 2, the Cabinet passed a set of decisions on the prices of basic requirements. These would work on fixing prices in markets and try to ferret out those trying to monopolize the market. It confirmed the setting up of a committee, headed by Minister of Interior, with a membership of ministers of Industry and Trade, Local Administration and Justice. 

This committee would run field commissions formed to follow up the inflation rate at markets and to conduct reports on the reasons for prices rising. It approved the formation of an operations chamber at the Industry and Trade Ministry to receive information related to prices, and to prepare a list of these prices to be promulgated by media.  In this regard, it stressed the importance of the role played by the Yemeni General Economic Corporation, by providing markets with food materials and to stop monopolies from forming.

On May 5, the Cabinet and private sector agreed to form a joint committee to discuss topic of establishing a food council to coordinate between the two sides over tackling problems of the local markets. In a meeting headed by Prime Minister Ali Mujawar, participants discussed mutual directives of the Cabinet and private sector to enhance partnership between them over the stability of prices for basic foodstuffs. The meeting brought together representatives of the general union for commercial and industrial chambers, the council of Yemeni businessmen, and the importers of basic foodstuffs. Participants discussed topics associated with executive steps to stabilize prices of basic foodstuffs.

It is expected that the committee would present a report on its meeting to the Prime Minister next week. Prices have been rising dramatically from day to day, on every kind of food, but especially basic items, such as cooking oil and milk, said Fadhel Mansour, the deputy of the consumer association. The association prepared a list of prices that includes the old and the new prices of all products, both imported products and local products. “We send this list to the Ministry of Industry and Trade to compare between the old and new prices, in order to give solutions and find out the reasons for that,” said Mansour.

Prices of some products increased by 100 percent, according to consumer associations. The price of a 50-pound bag of cement, for example, went from YR900  to YR1,800  in mere days.  Prices of foodstuffs purchased by ordinary people have increased by 40 to 70 percent. These items include: cooking oil, eggs, wheat, rice, sugar, milk, medicine and other products, Mansour said. The government must work on creating the strategic storage of basic requirements, such as foodstuffs, to face or overcome the monopoly of traders, especially when there are food shortage crises.

The association’s role includes observing the market and reporting their findings to the ministry.  There has not been a good relationship between the ministry and the government, because the government has not done anything to stop the prices increases. It has only held meetings on the topic, with no real results. Right now, there are no real reasons that prices should be increasing.  Mohammed Ahmed, a student, said, “We don’t know why prices increase; I think this is a consequences of the sales tax law.”

This comment demonstrates how little most people understand about the new sales tax law, which is meant to curb corruption and stabilize prices. Ali Saleh, a worker, said that the traders made up for what they pay in taxes by increasing the prices of their goods.  “We don’t have in Yemen a strict government to punish those who increase prices, so the prices increase every minute, and the prices differ from trader to trader for the same products,” said Naji Abdullah, a lawyer. Ahmed Ali, a wholesaler, said that “in trade you can earn or lose your business.

These days, I’m getting unbelievable profits because I have a big store of foodstuffs whose prices are increasing every day.”  Ahmed Mohsen, a contractor, said sadly that his house would be sold soon due to high prices of cement. “Thus, maybe, I lose my business because I will not be able to complete the building that I built for a great client.” Abdul-Jabbar Ahmed, an employee in a commercial company, said that if prices stay high, he would quit buying qat and meat.

“Even though I buy meat for my family once every week, and also fruit. Now I will probably do that just once every month,” he said.
There is a higher demand for cement currently, due to the insufficient production by the General Cement Corporation GCC. This corporation produces only 30 percent of the market’s needs, so the GCC cannot meet the market’s needs, said Mohammed Shuneif, the deputy chairman board of General Cement Corporation. That means that more expensive cement must be imported from other countries, and this cement is not always of high quality.
The total of the production of Yemeni cement is about 1.5 million tons annually.

The Yemeni government plans to raise the production of cement to 7 million tons annually by the end of 2009 and 9 million tons by the end of 2012. “In order to face the market demand for cement, we have to think of a strategy to improve the productivity of the company’s factories. For example, there is a planned expansion of the productive capacity of the Amran Cement Factory to reach 1.2 million tons per year, which will start production next year,” he said.

“The price for one bag of cement that is produced by General Cement’s factories is YR 1,018. Therefore, we are searching for traders who raise the price of the cement that is produced by the corporation factories to levels higher than that,” he said. The government ordered the GCC to sell directly to the clients by outdoor sales or by point of sale, which deal directly to the people. It ordered the GCC to import cement from abroad to bridge the shortfall in cement production and fill the market’s needs, so the prices of cement decreased from YR1,850 to 1,450 during Tuesday, and reduced the need for imports, Shuneif, said. 

The Euro has increased against the dollar, which meant that the prices of material raw increased, too. The majority of raw material comes from Europe, and the Yemeni importers rely on the dollar as a main currency for importing. Then, the price increase happened, said Mohammed Salah, A Member Director Board of Sana’a Chamber of Commerce. Global price increases don’t exceed 25 percent, but domestic price increases exceed 70 percent, Salah said. There is not a higher demand for foodstuffs but there is monopoly. Some traders rely on price increases to get high profits, said Salah. 

Professor Taha al-Fosiel, an economic expert, said that price increases would create many economic problems, like local inflation exceeding the rate of global inflation, which represents 5 to 6 percent. The government should depend on the free market for importing foodstuffs, instead of depending on special traders. And the Yemeni General Economic Corporation must take lead role in these crises of food to break down the monopoly.

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