Invest in Yemen

There are ample opportunities for doing business in the Republic of Yemen. The government is fully committed in supporting investment activates. Benefits to invest in Yemen includes: liberal investment laws, tax free zones, low wages, strategic commercial location, and an active local market.

Strategically positioned, potential investors are able to easily base their operations in Yemen to enter neighboring markets. The door is wide open for the movement of imports and exports to link the east and the west via Aden and Hodaidah’s seaports. Its coastal area comprises of over 2500 kilometers, contiguous to the Red Sea, the Gulf of Aden, and the Arabian Sea. Territorial waters abound with scores of islands, the largest of which is the island of Socotra in the Arabian Sea. The long stretch of costal regions could be developed for tourism use. Also, the global fishing Industry can benefit greatly from rich marine life in the bordering bodies of water. 

Investment Laws:

Investment Law No. (22) was issued on 10/4/1991, and put into force 10/7/1991. In 2002, the law was amended and updated. The law aims to regulate, promote and license investments in all aspects of economic activity.

The most important guarantee underlined by the law is the prohibition of nationalization or seizure of the project or placing it under guardianship “freezing its capital”. Investment laws have also ensured the investor the liberty of re-exporting foreign capital invested in the case of liquidation or disposal, in addition to the freedom of exporting the profits resulting from the investment. Another aspect of the law is that it ensures equality between Yemeni, foreign and expatriate capital without distinction or discrimination between rights, duties and measures.*

The Legal and Institutional Infrastructure:

Yemen recognizes the importance and the strong relevance of promoting competition to create an attractive climate for investments. To that end, it has issued a number of laws in addition to the Investment Law , These include: The Commercial Law (encourages investments and attract new investors in various sectors), The Commercial Company Law ( facilitates registration procedures and attract foreign trade investments), The Sales Tax Law (decreases sales tax rate to 5%, and gives exemptions to most goods), The Customs Law ( reduces most customs rate to 5% and makes exemptions to most goods), and The Arbitration Law ( an important tool for settling commercial disputes).**

Free Trade Zones and Trade Agreements:

Free trade zones (particularly the Aden Free Zone) are significant ingredients for economic development in Yemen. The government of Yemen has exerted earnest efforts to strengthen its economic relations with other nations. This has been crowned by more than 60 commercial and industrial agreements and protocols in trade and industry which all are aimed to: achieve sustainable economic growth, help reduce existing trade barriers, and increase trade and investment with other countries.***

Current Free Zones:

The Aden Free Zone: In 1991, a Free Trade and Industrial Zone law was passed and the Republic of Yemen established the Aden Free Zone (AFZ). The AFZ lies on a major world trading route, and provides investors and businesses with a complete transportation center – including the services necessary for the transshipment of goods.

As a priority, the government works to maximize the utilization of the economic, geographical and human resources endowed in the city of Aden by developing it as an international trade center and as a source of economic growth and investment.

The Greater Arab Free Trade Area (GAFTA):

In 2002, Yemen became a member of the Greater Arab Free Trade Area. GAFTA requires member countries to undertake specific commitments regarding the elimination of tariffs, non-tariff measures, and rules of origin. In 1997, Yemen adopted the Executive Program of the Agreement for the Facilitation and Promotion of Trade for the implementation of GAFTA, which calls for tariff reductions at a rate of 16% annually. Thus, tariffs would be reduced to zero by 2010.

Trade Agreements:

World Trade Organization (WTO): Currently Yemen has an Observer Status within the World Trade Organization, and is moving strongly towards full membership. Yemen continues to make amendments to legislation to meet certain requirements to help advance in realizing the benefits of joining the WTO (i.e., boosting trade and attracting more investment).

The Gulf Cooperation Council (GCC):

GCC member states are the primary trading partners with Yemen and are the most significant importers of Yemeni [non-oil] products (including agriculture and fisheries). In the meantime, they top the list of countries exporting to Yemen. Commercial relations between Yemen and the GCC gained additional significance in recent years due to the signing of numerous economic and commercial agreements and protocols. The GCC secretariat and Yemen have established joint ministerial councils, committees and working groups to study the commercial legislative and legal aspects in Yemen and the GCC states.

Trade and Investment Frame work Agreement (TIFA):

In 2004, Yemen signed a Trade and Investment Framework agreement (TIFA) with the United States. The agreement creates a joint council for discussing a wide range of commercial issues and sets out a permanent dialogue with the expectation of strengthening bilateral trade and investment between the United States and Yemen. It is also considered to be the gateway to WTO accession and a stepping stone to a Free Trade Agreement with the United States.

Other Trade Agreements:

Yemen maintains strong trade relations with other countries. Currently, it has signed more than 60 trade and investment agreements and protocols; and it is dedicated to increase its participation in the world market by reforming its laws and policies.

The Banking Sector:

The CBY coordinates with the Ministry of Finance to ensure stability in the foreign exchange market. By extension, it has adopted a floating exchange rate policy. Moreover, its monetary policy has also entailed allowing some flexibility for movement of the interest rate of the Yemeni Riyal to reflect the real picture with respect to liquidity and inflation. The CBY has worked towards developing its own resources of foreign currency by means of improving the management of reserves through an investment mentality, without prejudice to the standards and controls of liquidity and security. CBY has decided to raise the capital requirements of banks operating in Yemen to YR 6 billion, in a bid to enhance their conditions to meet international standards and to keep pace with international banking requirements.***

Improvements in the Banking Sector:

Banking in Yemen has made significant progress with the introduction of consolidated balance sheets of Commercial and Islamic Banks. The balance rose to YR 660.2 billion by the end of 2004, with an annual growth rate of 22.4%. National banks increased the volume of their banking activities to YR 449.8 billion (i.e., by an increase of YR 91 billion over 2003). The contributions of local banks rose to 68.1% of all banking activities, with a growth rate of 25.4%. In the meantime, Arab and foreign banks contributed about 31.9% with an annual growth of 16.4%. The balance of deposits with the Yemeni banking sector amounted to YR 576 billion; and Yemeni Riyal deposits increased to YR 309.4 billion, with an annual growth rate of 31.1%. The foreign currency deposits increased to YR 266.9 billion or the equivalent of $1.4 billion by the end of 2004. Balances for loans, credits and transfers by commercial banks operating in Yemen to the various economic sectors reached YR 183.6 billion. Yemeni Riyal loans and transfers however amounted to YR 101.5 billion; and foreign currency loans, credits and financing rose to YR 82.1 billion. Investment in securities and certificates of deposits rose to YR 187.8 billion at a growth rate of 26.1% per annum. Local securities increased to YR 156.4 billion, an increase of 41.9%.

 By the end of 2004, international monetary agencies improved Yemen’s credit rating from (C-) to (B+), due to improved efficiency in monetary policies and credit conditions safeguarding banking transactions. The government also took several precautionary measures and safeguards in the banking system. A special ministerial committee was formed to combat money-laundering activities in accordance with a relevant law that was issued in April 2003. CBY is also implementing strict regulatory measures on all operations that entail illegitimate fund earnings. The government is also considering the prospect of joining a Uniform Banking Network of regional Gulf states as part of regional integration. The latter move would facilitate inter-banking cooperation within the region. The government is also considering the prospect of establishing a stock exchange in Yemen as the government contemplates the implementation of the privatization program.

Infrastructure Projects:

There has been good progress in establishing a sufficient infrastructure for the various sectors. The advances that Yemen has realized in the service and infrastructure sectors have been linked to the need for providing investors with the adequate means to establish businesses.***

Transport Sector:

The Transportation sector has seen notable progress. In the last ten years, there have been great improvements in the infrastructure of airports, sea ports and roads. All were developed and improved to link businesses and people domestically and internationally..

Yemeni airports have been upgraded with equipment and enhanced technical capacities, meeting modern international classifications, standards and requirements. An Air Control Center was set up with five terminals for communicating with aircrafts by satellite; and 14 international routes and 26 local routes were opened up to link African states with Southeast Asia and Gulf States through Sana’a Aviation Region. The government has also modernized and maintained the country's airports. Currently, construction of the new Sana’a international airport is underway (at a cost of $500million), and it is scheduled to be completed in 2008.

Yemen also possesses a good road network which is an integral component for realizing socio-economic development and the growth of trade and investments. The road network in Yemen currently consists of 10,000 km of asphalted roads and about 3,200 kilometers of gravel roads in addition to 54,000-60,000 km of dirt roads. The road network is divided into strategic roads that link more than one governorate, with international linkage roads for passing through Yemen. The length of these roads extends to 4,000 km and includes a coastal strip of 1,800 km linking Yemen with Saudi Arabia and Oman.

Sea transport is also a major link – which stimulates world trade and investment –that connects Yemen with international shipping lines. The government has doubled investment in this sector in excess of YR 48 billion by 2004. The investment helped improve and expand capacities in the various ports. In 2005, Dubai Port International (DPI) won the bid to operate and develop the Aden and Mualla container terminal for the next 35 years. Investment on the infrastructure and upgrades of the port are valued at $490 million, with $370 million made as an initial investment in capacity expansion. These improvements to the port infrastructure will drive yearly container capacity to an estimated 1.5 million containers by 2007.****

Yemen is also party to a number of international conventions and treaties on maritime safety and risk mitigation resulting from illegal activities in regional and international waters.

Communication Sector:

The infrastructure of telecommunication sector has witnessed distinctive progress in the recent years. The progress in this sector has been achieved by:
-The establishment of reliable telecommunication systems covering all the areas and governorates of the country;
-The establishment of digital systems and satellite telecommunications; -Providing a reliable telephone system and internet services for companies in most areas of the country;
-Providing private cable and wireless telecommunications for investment companies.

Also, a regional linkage project was launched connecting Yemen with neighboring Saudi Arabia, the other the Arabian Gulf Countries, and Jordan using digital transmission at a cost of YR 630 million. Inter-connection using fiber-optics cable also linked up the remaining regions of the country spanning 2,455 kilometers. Yemen and other countries have contributed to the financing of the CMD2 undersea cable project extending from Singapore in Southeast Asia, and passing through the Middle East to Marseilles (France). Yemen, along with Djibouti, also contributed to financing a subsidiary Aden-Djibouti cable, linking Yemen with the CMD2. The significance of CMD2 cable link is seen in supporting international telecommunication to and from Yemen. The capacity allotted for Yemen in submerged cable network is 345 telephone channels. PTC has signed an agreement with Arabsat Corporation for partially investing in a satellite channel in Arab satellite for local calls and the interconnection of a number of remote regions through V-Sat system.

Electricity Sector:

The electricity sector has witnessed considerable development. The Public Electricity Corporation (PEC) was able to raise the average generated electricity by 8.7% during 2003; and coverage by the national grid expanded to 42.9%, with maximum load capacity reaching 766.2 megawatts. Four new power stations have been introduced in 2003, which are expected to generate a total capacity of 60 megawatts. Other Power Stations are being expanded to reach an additional 80 megawatts. The new power stations and the expansion of others are meant to boost power generation to meet the growing demand from businesses and to meet the economic and social development needed for growth.

Oil and Gas Sectors:

After unification, the government further promoted the development and exploration of oil and gas in the country, inviting international oil companies and creating a more efficient mechanism to market concession areas. Revenues from oil exports are a primary source of foreign currency and financing for Yemen’s development plans and programs. Oil contributes about 30% of GDP, about 76% of total government revenues and more than 90% of export revenues. The General Authority for Petroleum Exploration and Production was created and is in charge of overseeing exploration and production activities in the country. Giant international oil companies, such as Exxon, Shell and Chevron maintain exploration and production areas in different areas of Yemen. The current petroleum map shows 84 concession blocs and 26 exploration blocs, in which 14 companies operate. There are nine production blocs where eight companies are working.

The discovery of gas coincided with the discovery of oil in Bloc 18 in Marib/Al-Jouf in 1984. Proven gas reserves are estimated at 17 trillion cubic feet, against 31 million metric tons of liquefied petroleum gas reserves. The total daily production is about 2.75 billion cubic feet per day. Some 2.5 billion cubic feet is re-injected daily in order to preserve the latent pressure and to keep oil production steady.

In 1996, the Yemen Liquefied Natural Gas Company was created. Since then, the company has been responsible for building and operating the facilities for liquefying natural gas, production lines, storage facilities, loading and ship docks and exports. Recently, three agreements for the sale and export of liquefied natural gas to international markets were signed with international companies (i.e., Tractel of Belgium for the export of 2.5 million tons per annum; Total of France for export of about 2 million tons per annum; and KOGAS of Korea for the export of 1.3 to 2.0 million tons per annum for twenty years, beginning in 2008).

Key Business Players:
Private Sector:

The private sector has contributed to the development of the economy through expanding its activities to include the industrial, agricultural, fisheries and services sectors. As a result, its contribution to the Non-oil GDP has increased to about 79-80% year ending 2004. Also, the number of foreign companies operating in Yemen rose to include 312 companies; and the number of foreign companies doing business (either through agents or regional distributors) rose to 5534 companies.

The sector’s share is expected to increase when further investment policies and rules that hinder economic growth are removed, hence inviting and increasing FDIs.

Private Sector Organizations:

Private sector organizations (Federation of Commerce and Independent Chambers of Commerce) tend to improve their activities and programs by way of strengthening their research base in economic, professional and technological fields which enables the private sector to be aware of new changes, perform assessments of present conditions, diagnose constraints and devise counter-proposals. It also organizes and participates in exhibitions that promote Yemeni products and services; and it establishes centers to provide investors with various trade and investment services – such as feasibility studies, administrative and technological consultancies, information on technology import markets, raw materials and exports markets.

Investments Opportunities:

The government of Yemen understands the significance of involving the private sector in the development process, and recognizes the necessity to bring about a greater leap in the investment levels for various sectors. It provides investment opportunities in all sectors and aims at promoting them at the local and international levels to be within reach of Yemeni, Arab and foreign investors.***

Telecommunication, Transportation, and Energy:

Investments in the Telecommunication and Transportation sectors along with Energy are vast, and further development of infrastructure in these sectors is needed. In the telecommunication sector, attention is focused to expand the telecommunication systems and mobile services, and to increase the efficiency and quality of service. In the transportation sector, opportunities are available to further develop the sea ports, air ports and roads.

Opportunities also exist for international companies to participate in joint ventures with Yemeni local companies for the construction of power plants as well as to supply equipment and technical information. Some of the opportunities in this sector include:
-Establishing an electric power station with all units using natural gas as a power generation fuel;
-The exportation of liquid gas and the establishment of export points, or putting in place a pipeline reaching African Horn countries;
-Establishing gas-burning power stations to supply electricity for large organizations whose consumption is bound to increase in the near future;
-Establishing transmission systems and distribution Centers;
-Establishing a power station on the Aden Free Zone to enhance the electrical power for the industrial projects in the zone.

There is also a need for projects in renewable energy, such as establishing wind energy plants (wind farms), and solar thermal power stations.

Industrial Sector:

There are several investment opportunities in the manufacturing sector in areas like food manufacturing and processing of fruits – such as mangos, grapes, peaches; in addition, investment opportunities exist for packaging and canning of fish and apparel manufacturing due to the availability of high quality Yemeni cotton. The construction industry is another area for investment, mainly in production of cement, marble and granite which are available in commercial quantities in Yemen.

Great opportunities also exist in the petrochemical industry such as:

-Establishing ammonia and urea plants for production of manure and other products;
-Establishing ethylene plants for production of plastic of all types( films, synthetic fibers, and building materials);
-Establishing acetylene plants for production of pipes, hoses, electrical cables, and fibers.

Other Opportunities also include

-The production of brick molds, and tile presses and polishing equipment. -Manufacturing of rock wool, which is used for insulation. Basalt can be extracted in the Sana'a, Dhamar, Hodediah and Taiz provinces;
-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;
-Establishing of a smelter for melting scrap iron and imported alloys to manufacture iron pipes for irrigation and other purposes;
-The production of limestone used by a number of industries and in agriculture and is available in the Sana'a and Dhamar provinces;
-The production of raw materials for manufacturing detergents, in which there are many manufacturers in Yemen;
-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;
-Establishing aluminum processing plants;
-Establishing sugar refining plants.

Tourism Sector:

Tourism is seen as a promising sector, given its impact in supporting the national economy with new and renewable resources. However, the sector lacks the infrastructure required to support the growing number of tourists coming every year. The infrastructure investment opportunities in this sector include:
-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 tourist villages with chalets, with amenities and basic hotel services;
-Centers for water sports in Al-Khokha on the Red Sea and on Yemeni islands;
-Establishing tourist villages in places close to hot springs (i.e., Sana'a, Dale and Ibb provinces) with all amenities and basic services. They should be designed for purposes of physical therapy;
-Establishing land transportation for tourists;
-Establishing entertainment facilities, movie theaters, theme parks and resorts for sports, scuba diving, climbing, camping and hiking.

Investors can also invest in developing the infrastructure of the Yemeni islands, and provide sea transportation for tourists visiting the islands.

Oil, Gas, and Minerals:

There are ample opportunities for doing business in the oil, gas, and minerals in Yemen. Concession areas for oil exploration span through a vast area of Yemen, extending from the central to the eastern parts of the country, in addition to off-shore drilling in the Gulf of Aden, the Red Sea and around Socotra Island.

The Petroleum and Exploration Production Authority (PEPA) manages all concessions and promotion activities in Yemen. PEPA has conducted two major international concession license rounds and winners of the third license round are expected to be announced on July 2006.

The average current production of oil reached about 414,000 barrels per day, whereas the oil in place of the productive blocks reaches 7.9 billion barrels in reserves. Production of 2.1 billion barrels took place by the end of June 2005, whereas the gas reseves in Yemen reaches about 17 trillion cubic feet.

Opportunities on the mineral sector include;
-Exploitation and extraction of gold.
-Extraction, breaking and burnishing of granite to make granite tiles. (Granite is available in large quantities in the Shabwa, Al-Baidha and Abyan provinces; and opportunities to export are promising).
-Exploration and exploitation of copper, nickel and cobalt.
-Exploration and exploitation of iron.
For more information on available opportunities on the oil sector visit the Ministry of Oil and Minerals website. (

Fisheries Sector:

Both the government and the private sector helped advance the development and expansion of the fisheries sector in Yemen. Plans for maximizing fisheries production over recent years contributed to raising the value of fish exports from $33 million in 1996 to about $213 million in 2004. Plans are set to realize financial returns exceeding $500 million by the end of 2010 in this sector. Opportunities in this sector include;

-Fishing and marketing fish.
-Packaging & canning.
-Establishing fishery plantations in fresh and salt water.
-Establishing of fishery service units.