Prospects of investment Prepared by Ahmed Mohammed Sofan Minister of Planning & Intl. Cooperation Yemen enjoys a number of natural advantages that attract investment. One is its location at the Southwestern corner of the Arabian Peninsula and Asia, overlooking the Strait of Bab Al- Mandeb that controls the entry to the Red Sea.? It also possesses a variety of landscapes, with various climates from the coastal mountains to the interior desert.? These features make Yemen a place of promising investment opportunity - especially when one is aware of the fact that the country is a virgin market, just getting underway in many economic activities. The most prominent new sector is oil and gas, which aims at extracting a wealth of treasures hidden below the surface. The General Investment Authority is aware of the significance of involvement of the private sector in the development process in our country and the necessity to bring about a greater leap in the investment level of various sectors, in pursuance of diversifying the Yemeni economy, and in coordination with a number of concerned agencies. It provides investment opportunities in the production, agricultural and services sectors among a number of opportunities available in the Republic of Yemen. It aims at promoting them at the local and international levels to be within reach of Yemeni, Arab and foreign investors and other concerned agencies to contribute in interpreting these investment concepts and bringing them into reality. The Authority welcomes establishment or any other investment projects not included in the booklet and expresses readiness to accord all the necessary facilities, incentives and guarantees, as provided under the Investment Law No: (22) of 1991 and amendments thereof. It shall also endeavor to mitigate all difficulties that may encounter progress of implementation of such projects. Among the most significant objectives pursued by GIA is the creation of new job opportunities, on one hand, and application of an advanced technology to minimize the environmental hazards emanating therefrom, on the other hand. To keep pace with the economic, financial and administrative reform program adopted by the Yemeni Government and to cope with international economic and investment variables, GIA engages as a one-stop shop to serve investments and investors. It also persistently pursues promoting, simplifying and accomplishing procedures in the shortest possible periods to encourage and attract more local, Arab and foreign investments to contribute towards achieving the comprehensive development plans of the Republic of Yemen. The country's shift to a free-market economy and the implementation of economic reforms in the mid-nineties have created an attractive environment for investment.? In order to provide a proper legal system generating confidence in investors, investment law No. 22 was passed in 1991. It has encouraged both local and foreign investments. Characteristics of the investment law The advantages of the investment law given to investors are as follows: * The law governs all types of investment, in which each enjoys the same privileges. * Arab and foreign investors are given the same treatment as Yemenis. * Administrative procedures for obtaining an investment license are simple and easy. * Repatriation of investment capital and profits are guaranteed. * Procedures used to settle disputes are recognized internationally. The General Investment Board is the only government body given the task of facilitating the work of an investor. Investment incentives in Yemen The investment law has provided a number of incentives for investing in projects in Yemen. The most important incentives are the following: * Exemptions from custom fees and taxes on fixed assets. * Exemption from taxes on profits for seven years with a possible extension up to 16 years. * Exemption from taxes on real estate, capital and contract authorization fees. * Exemptions from returns as a result of technology utilization licenses for five years. * Exemption from custom duties on animal, agriculture and fishing production. * The right to own land and buildings. * Permission to open outlets to market products of the project in any part of the Republic of Yemen. * Management of the project at the investor's discretion without any interference. * Prohibition of imposing financial or non-financial burdens that might disturb equality among projects or of imposing any pricing system. Investment Guarantees If privileges alone are not enough to attract investors, the investment law has also given adequate guarantees against nationalization, expropriation or sequestration of projects, or the freezing of assets unless done through legal means. The law also emphasizes the prohibition of confiscating buildings unless there is a court order for public interests with compensation that is based on the market value of the buildings. The Republic of Yemen joined a number of regional and international organizations for investment insurance to help provide guarantees for investors regarding protection of their investments and noncommercial risk.? In addition, the law has many ways for investors to settle investment disputes, among themselves or between an investor and the government. The investor is allowed to make a choice on how to pursue settling a dispute. Institutions involved in disputes are as follows: * Arab Organization for the Insurance of Investment, Kuwait. * Islamic Corporation of the Insurance of Investment and Export Credit, the Kingdom of Saudi Arabia. * Multilateral Investment Guarantee Agency (World Bank Group), the United States of America. Legal and institutional framework Apart from the investment law, the Yemeni government issued a number of other laws that are closely connected to providing an appropriate environment that would attract investments. These relate to law offices, public before the courts and the commercial register. The General Investment Authority (GIA) was established to implement the investment law. Development of the volume of investments Between the establishment of the GIA in March 22, 1992, and December 2000, it granted 1,733 licenses for investment projects. The total value of the investments was estimated at YR 457 billion and created 28,772 jobs. Projects have been established in every economic sector. There were 859 projects in the industrial sector at a cost of YR 145.2 billion, 127 projects in the agricultural sector at a cost of YR 12.7 billion, 32 projects in the fishery sector at a cost of YR 9.5 billion, 476 projects in the service sector at a cost of YR 212.2 billion, and 230 projects in the tourist sector at a cost of YR 78.1 billion. However, the number of projects implemented over the same period amounted to 1,362 with a total cost of around YR 320 billion. Investment in the service sector was the leader taking up 47.6% of total investments, followed by the industrial sector (30.4%), agriculture and fishery (13.3%) and tourism (8.7%). Promising investments in Yemen Natural and human resources available in Yemen provide opportunities for investing in Yemen. Some of the most promising opportunities are the following: * Manufacturing of fertilizers for farmers to increase and improve agricultural production. This industry could depend on natural gas, which is available in large quantities but has not been utilized yet. * Production of raw materials for manufacturing detergents, in which there are many manufacturers in Yemen. * Export of liquid gas and the establishment of export points, or putting in place a pipeline reaching African Horn countries.? There is also a need for gas-burning power stations to supply electricity for large organizations whose consumption is bound to increase in the near future. * Production of limestone used by a number of industries and in agriculture and is available in the Sana'a and Dhamar provinces. * Manufacturing of rock wool, which is used for insulation. Basalt can be extracted in the Sana'a, Dhamar, Hodediah and Taiz provinces. * Extraction, breaking and burnishing of granite to make granite tiles. Granite is available in large quantities in the Shabwa, Al-Baidha and Abyan provinces. Opportunities to export to neighboring countries are promising. * Manufacturing of glass, in which raw materials, such as limestone, sandstone and sodium carbonates, are available in large quantities in the Shabwa, Al-Baidha, Abyan, Hodeidah and Sana'a provinces. Opportunities to export to neighboring countries are promising. * Construction of three or four-star hotels for tourists with the required facilities and utilities in the provinces of Sana'a, Ibb, Taiz and Hadramout. * Building of tourist villages with chalets, amenities and basic hotel services that are considered centers for water sports in Al-Khokha on the Red Sea and on Yemeni islands. * Establishment of three-star tourist villages with all amenities and basic hotel services in places close to hot springs. They should be designed for tourists and physical therapy in the Sana'a, Dale and Ibb provinces. * Production of fodder for animals from protein-rich fish byproducts available from fish canneries in Abyan and Hadramout. * Establishment of a smelter for melting scrap iron and imported alloys to manufacture iron pipes for irrigation and other purposes. * Manufacturing of concentrated orange juice and tomato paste from raw materials abundantly available through agricultural production. * Fishing and exporting fish and other marine life through the use of modern fishing boats, in which fish and other marine life are available in abundant quantities along the 2,500km coastline. * Establishment of chicken farms for raising chickens and furnishing them with hatcheries. * Raising livestock on modern farms for the production of meat and dairy products in the Tihama province.