Yemen is planning to establish a stock market despite a secessionist rebellion in the south, an ethnic civil war in the north and growing Al-Qaeda presence.
The Yemeni Minister of Industry and Trade discussed the opening of a stock market in Yemen with a Jordanian advisory team on Monday.
The Minister, Yahya al-Mutawakel, met with a team of consultants from the Jordanian stock market to finalize the regulatory, legal and technical procedures involved in setting-up the trading institution, the official Yemeni news agency SABA reported.
According to SABA, Al-Mutawakel reportedly stressed the importance of setting a timetable for the stock exchange but no dates were announced following the meeting.
“The commercial sector is relatively underdeveloped and as such there are certainly market opportunities,” Justin Crump, Director of Threat Intelligence at Stirling Assynt International Group, told The Media Line.
“Tourism is one of the main income generators, but this may be adversely affected by declining security,” he continued. “Instead, manufacturing support for the construction industry, resource extraction (other than oil and gas, e.g. granite tiles), telecoms and possibly the financial sector are areas of potential growth.”
“Investors should undertake full due diligence to counteract the primary risks in the business environment, which include fraud, exposure to terrorist financing, and ties to various political clans,” Crump said.
In the 2010 report by the Doing Business project, Yemen ranked 99 out of the total 183 countries covered by the survey in terms of the ease of conducting business in the country. The study, an initiative of the World Bank, uses ten different parameters including starting a business, paying taxes and cross border trading.
While Yemen showed significant improvement in the category ‘Getting Credit’, rising from its previous place at 150 to174, its ‘Protecting Investors’ ranking fell 5 places, from 132 to 127.
Yemen’s dire economic situation is frequently cited as one of the underlying reasons for the country’s chaotic political situation.
Oil reserves account for more than 75 percent of the government’s revenues but are rapidly declining. A natural gas plant that went into operation last year is expected to generate $30 to $50 billion over the next 25 years.
Since 2004 the central government in Sana’a has been fighting with Al-Houthi rebels belonging to Zaidi Shia Islam, in the north east of the country.
The recent round of fighting is taking on a regional dimension, as rebels fleeing north encroach on Saudi Arabia, and Iran comes under accusations of supporting the Shia rebels.
The Al-Houthis are protesting against discrimination and the systematic neglect of their rights by the government in Sana’a.
In addition, the Yemeni government is facing a secessionist movement in the south, who accuse the government of unfairly diverting the region’s oil wealth, and call for a return to the two state division which was in place prior to Yemen winning independence in 1967.
Recently the international community has expressed fears Al-Qaeda is using Yemen’s unstable political situation to further establish itself in the region.
Crump said the deteriorating security situation was having a direct impact on international trade.
“Attacks on foreign interests in Yemen have increased significantly since the formation of Al-Qaeda in Yemen in early 2008,” Crump said. “The new Al-Qaeda in the Arabian Peninsula views the country as a safe haven.”
“Successive statements and attacks have confirmed its intent to target Western interests and Westerners throughout the Arabian Peninsula,” he continued. “Its ultimate goal is to carry out attacks in Saudi Arabia.”
“The group has threatened further attacks on shipping numerous times over the last twelve months, and this is likely to be followed by action,” Crump suggested. “The Bab al-Mandab strait remains particularly vulnerable in this regard,” he said referring to the channel between Yemen and Somalia connecting the Indian Ocean to the Red Sea and the Suez Canal.