Comprehensive integration to GCC expected to be achieved by 2015

Yemen must restructure its economy to meet the demands of globalization, says Minister of Industry and Trade 

Dr. Yahya al-Mutawakel

The Ministry of Trade and Industry has reorganized itself according to its new role, which is to restructure the Yemeni economy to meet the requirements of globalization, enabling Yemen to join the World Trade Organization and Gulf Cooperation Council.  Globalization depends on the free market and dissolves borders, but many problems have appeared in the course of applying this new system. Inflation is a continual problem, with dramatic price increases observed day by day. To learn more about Yemen’s economic prospects, the Yemen Observer recently interviewed Dr. Yahya al-Mutawakel, the Minister of Industry and Trade. 

Yemen Observer: What is the urgent plan that your ministry is working on? Dr. Yahya al-Mutawakel: Since 1995, Yemen has been working to apply a reform agenda that requires the restructuring of the roles of many governmental authorities. So, the decision to restructure the Ministry of Trade and Industry was made, and we have started to reorganize the ministry in line with the latest thinking. We work in three main fields, the industrial sector, the trade sector, and the internal trade, with a focus on price stability. The industrial sector is the main engine of development, but in the past it was neglected. This sector has witnessed no development since the establishment of the industrial zones two years ago. Now, to develope the industrial sector the ministry will support the sector to improve its products. 

YO: What about the trade sector and internal trade?
YM: In the trade sector, Yemen is obliged to finalize the requirements of joining the WTO by the end of 2008. Therefore, there are many legal and technical steps that are being taken, and we are continuing to complete all conditions of integration by next year. We are also working on simplifying business procedures. For example, we launched an automated system for recording all brands, which was supported by the United Nations Development Program and the International Finance Corporation. 

YO: Inflation is the main problem that you will face, correct?
YM: Price increases are a constant problem for the government, not just the ministry, because former governments tried to solve it promptly and they failed [because they were shortsighted]. Now, we are seeking a comprehensive solution. The governmental program has this problem as a priority. In this regard, we hold many meetings with the private sector and have formed committees to create trust between both sides and decrease prices. 

YO: The president’s speech to the Agricultural Cooperative Union conference threatened traders with the return of the closed market if prices continue to increase. [A closed markets means that the government works as a trader, controlling the market.] What did he mean, and what are the procedures that have been taken to stabilize prices?
YM: The president’s speech was so strongly worded because of the price increases. Decreasing prices is a religious and national duty, so the president confirmed an increase in food imports, especially wheat and flour. We agreed with traders on stabilizing prices, and the Yemen Economic Corporation will cover the market’s wheat requirements.  We agreed with the traders that they should announce price tariffs regularly, as well as providing the Ministry of Industry and Trade with the necessary information to enable it to control the market. The internal trade law forced importers to provide the Ministry of Industry and Trade with copies of the contracts to import wheat and flour, including the quantity and price, date of delivery, and standards. Also, traders must inform the ministry of the arrival of a shipment in port, and the quantity and price which the importers specify upon unloading the cargo. The traders and producers of flour must not increase the prices of wheat and flour unless they can present the ministry with sufficient justification for such an increase. The price of a 50-kilogram sack of wheat has been set at YR 3, 800.  

YO: We heard that you intend to build silos of wheat to ensure strategic stores of foodstuffs.  But the previous government sold the governmental crops silos worth $150 million to the private sector for a mere $7 million.  What do you have to say about that?
YM: Crops silos were sold by the previous government in the name of privatization. In the free market system, the government abandoned its role in terms of trade, which became the role of private sector for the most part. When free market mechanisms proved successful, then we were able to sell crop silos. Now, many countries are considering rebuilding crop silos to ensure food security because of prices increases. In this regard, we have entered negotiations with interested companies to do that and expand the Aden crop silo to store 100,000 tons and the Mocha silo to the same capacity. 

YO: Some economists have said that the WTO is an inevitable evil, what is your view on that?
YM: Absolutely, the WTO or globalization leads to the strongest partners controlling the weakest, so developing countries are disadvantaged, economists say. In fact, no country can afford not to join the WTO, because it will suffer from many disadvantages. The only way to reduce these is to join the WTO. It is clear that the countries that formed the WTO have eased the conditions for joining, so Yemen will find joining the WTO easier than countries that have joined previously. 

YO: What are the downsides for the Yemeni economy of joining WTO?
YM: Unfortunately, the industrial and agricultural sectors will face downsides in the form of serious competition. If they cannot compete with foreign products in terms of standards and quality with affordable prices, they will lose everything. A good example in this regard is China, whose products have taken over world markets because of their quality and cheap prices. 

YO: Yemeni businessmen are complaining because of the amendment to the trade law that allows non-Yemenis to set up companies for importing and exporting without a Yemeni partner. What do you think?
YM: This step aims to break down the monopoly and attract new businessmen, in order to expand competition among traders. The first beneficiary is the consumer, and the second is the Yemeni economy, which will attract new investors. The majority of countries give this right to foreign businessmen to establish commercial companies without any native partner. 

YO: Some economists have said that as a result of that amendment to trade law, in the long run, big commercial companies will control the market and create monopolies, what can the government do about that?
YM: We have a governmental agency for combating monopolies and encouraging competition. This agency will control and supervise the market the moment this amendment comes into force. On the other hand, there is an anti-monopoly system in developed countries that would greatly benefit the agency. Yemen should consider that system. 

Are there special incentives for Gulf investors? 
Commercial and industrial laws do not discriminate among Yemenis, Arabs and foreigners investors, so the door is wide open to investment. 

When will Yemen achieve comprehensive integration into the GCC?   
Yemen has membership in the following GCC councils: education, health, social affairs, and sports. Soon we will join others: the Industrial Counseling Center and the Gulf Metrology council. The GCC countries are to help with the restructuring of the Yemeni economy and improving its potential. Then we plan to achieve full integration to GCC by 2015.

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