Stock exchange to be established soon

Stock needs legislative, administrative, and regulative structures to be established in either the public or private sector.

The Cabinet approved on Tuesday during its weekly meeting headed by Premier Ali Mujawar the draft republican decree establishing a national stock board and ordered to finalize legal procedure for issuing the decree.
 
The board will prepare the investment climate for investing deposits and funds at the stock market as well as finalizing the legal and organizational procedures and law of the stock market.
 
On Aug 28, 2010 ,The Supreme Committee to establish the stock market approved Monday a proposal for forming a board of directors for the Securities Authority, consisting of a chairman and four full-time members.
 
The committee, chaired by Finance Minister Nu’aman al-Suhaybi, also approved referring the final draft decision on the establishment of the Securities Authority to the Council of Ministers for discussion and approval at its next weekly meeting.
 
Also the committee approved a plan submitted by Jordanian experts to set up the stock market in Yemen and its financial cost, completing the existing deficiencies in the plan according to the memorandum of understanding signed between the two sides.
 
Economists have confirmed the importance of establishing a stock exchange in Yemen because of the advantages it would provide, and because it would enhance economic growth and spur development.

“The establishment of a stock market is essential for economic growth and development, particularly when it comes to collecting individual resources and savings, which can then be used for local development projects,” said Professor Mohammed Al Maitami. “Setting up a stock exchange can be used to transfer the financial surplus from people who have excess capital to investors and companies which are in need of such financing,” al-Maitami said.
 

The establishment of a stock market is essential for economic growth and development, particularly when it comes to collecting individual resources and savings.

Al-Maitami went on to note that there are several important reasons for the establishment of a functioning stock market in any country. Good banking institutions, joint stock companies, and convenient security and legal structures which ensure the transfer of money from debtors to creditors are just a few of these factors. In Yemen, it is estimated the savings of ordinary citizens in banks exceeds YR 1 trillion, in addition to savings stored in houses, which can be exploited during the development of a stock-exchange. Even though the government aims to establish a stock exchange by 2011, al-Maitami hopes it will be sooner.
 
 “The private sector is the first beneficiary and the most fundamental actor in setting up a stock market in Yemen,” added Professor Taha Al Fosiel. Unfortunately, the private sector is evading their responsibilities of corporate governance. “A lack of business transparency in Yemen is one of obstacles facing the establishment of a stock market,” Al Fosiel said. “Stock needs legislative, administrative, and regulative structures to be established in either the public or private sector,” he continued. “There are clashing interests between concerned bodies, both private and governmental, concerning the establishment of a stock market in Yemen. One side demands the establishment of this market, and the other does not due to a lack of awareness concerning its importance.”
 
“Five years ago, the World Bank prepared a study about the financial environment, and whether or not Yemen is competent enough to establish a stock exchange,” said Ahmed Mohammed Al Khawi, Chairman of the Yemen Bankers Association. The World Bank sent one of its consultants in stock affairs to consider all concerned sectors related to stock market. The outcome of this study proved that Yemen is in fact ready for such an endeavor. This same expert returned to Yemen along with another representing an international company specializing in stock markets in order to hold two workshops concerning stock markets. Those workshops were attended by all concerned authorities, and the outcome was Yemen proving its desire to establish a stock market. “There are large commercial enterprises that showed their readiness for rehabilitation in order to be registered in a stock exchange,” Al Khawi said.
 
The exchange is a very important step towards Yemen’s integration into the Gulf Cooperation Council (GCC) as well as the WTO. It must be established because time is required to train and to rehabilitate our economy in order to develop a stock exchange.
 
In neighboring countries such as Saudi Arabia, the establishment of a stock market created opportunities for closed companies to sell some of their stock for general underwriting. This provided cash for those companies, and reengineered them to be able to register in the stock market.  Al Khawi said that the Bankers Association is the head of a technical committee in Yemen to set up a stock market. This association helped the Yemeni government prepare a stock market by beginning to restructure financial organizations, and it plans on assisting the government until the stock market is actually set up.
 
“A stock market is like a mirror which reveals financial events and the reality of what happens in companies. In this way it will help us to combat financial corruption in both private and public sectors,” said Al Khawi. He continued: “Someone said after the global financial crisis that we are safe because there is no stock market in Yemen.  But I am against this belief, because the negative affect on world banks doesn’t necessarily affect the stock exchange, because every financial issue has special reasons which don’t always have relations with others.” Clearly, many of Yemen’s experts believe that Yemen is ready for a stock exchange.

“Stock has many economic benefits, such as reinvesting expatriate capital, accumulating savings, and attracting investments that will help gain interest in different areas,” he said. Professor Saif al-Asali, the former Minster of Finance, prepared a study for the establishment of a stock exchange when he was minister. This study stated that the Yemeni economy needs stock because there are negative points in investment and monetary reserves that have had a bad effect on the growth rate of the Yemeni economy. Information issued by the government pointed to an increase in the rate of domestic savings accounts instead of investment as a percentage of GDP; the opposite is preferred, and would create opportunities to invest in sectors like electricity, gas, minerals, tourism, and others.

Thus, the banking sector has failed to fill the gap between the savings and investment; therefore, potential investment capital has escaped from Yemen. It is necessary to set up a stock exchange in Yemen, as this will act as a new source of financing for investment. Consequently, the banking sector will be more active than before, as the capital will be used to attractive foreign investment. Arab countries’ experiments with stock have proven that the establishment of a stock exchange has many benefits for the economy and can help to solve many economic problems, such as unemployment and poverty, thereby helping to increase GDP, according to al-Asali’s study.
 
Yemen does not differ from those countries that have made economic reforms and has recently issued much legislation in this regard. It has substantial reserves of hard currency and the national currency is stable. Therefore, Yemen appears to be ready for the establishment of a stock exchange.

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