Doing Business in Yemen

Business and Economic Overview

The civil war combined with the fall in oil prices has crippled Yemen’s economy, as GDP has fallen to US$25.67 billion from US$43.23 billion in 2014. Indeed, 2015 saw real GDP contract by 28.1% and real GDP growth currently remains negative. The consequences of the civil war and the depletion of oil reserves have severely curtailed Yemen’s ability to produce hydrocarbon products, which account for over 70% of its exports. Positive economic forecasts are predicted, although these are highly dependent on the course of the civil war and any conflict resolutions which may arise.

The poor economy, conflict, weak state, lack of infrastructure and corruption, amongst other factors, all prove to be major obstacles to conducting any sort of commercial business in Yemen. Yemen ranks 186 of 190 in the World Bank’s Ease of Doing Business Index. There are also a number of sanctions by Western nations in place against a number of Yemeni citizens and firms, as well as a UN arms embargo directed against non-governmental forces, such as the Houthis.

Current commercial opportunities are severely limited. The Yemeni General Investment Authority (GIA) reported that in 2016 just US$65.12 million was invested into Yemen, predominantly in the extractive, construction and manufacturing sectors. Currently international aid is a primary source of state financing as public accounts remain severely depleted.

Humanitarian organisations have replaced the state in regions which have seen heavy fighting and health crises. Even these organisation’s ability to operate within Yemen are dependent on the Saudi-led coalition’s decisions to open or close Yemen’s airspace and ports, both of which were temporarily shut in the wake of the Houthi missile fired toward Riyadh on 4 November 2017.  As such, currently most foreign organisations operating inside Yemen are those humanitarian NGOs and the UN.

Nevertheless, the long term, that is post-conflict, there may be opportunities. Yemen is geo-strategically important; thus it is likely that a number of Arabic and Western countries will provide financial backing to the future nation.

Significant reconstruction will be required, currently estimated at US$19 billion. Before the conflict the GIA had outlined areas of investment opportunities in a number of sectors including energy and transport infrastructure, extractive industries, the health sector and the tourism industry. Given the destruction caused by the conflict, the investment needed in these sectors will only increase once a conflict resolution is found.


Security Situation

The security threat in Yemen is severe. Military operations continue across the country by and against a variety of actors. Houthi rebels and forces loyal to former President Saleh have continued to clash with clash with forces of the internationally recognised Hadi government, whilst the Saudi-led coalition have continued to provide direct military assistance to the latter. This conflict has also extended offshore. Furthermore, US counter-terrorism operations, against al-Qaeda in the Arabian Peninsula (AQAP) and Daesh-Yemen, are ongoing.

Owing to the conflict, the quality of law enforcement is low. Weapons are widely available and seemingly criminal acts may be linked to terrorism. Tribal disputes are common, including in metropoles, and may involve the use of small-arms. The risk of kidnap or arbitrary detention by militias, terrorists, criminals or tribes remains high and in particular a number of kidnappings have resulted in the death of the victims. There is also a threat of piracy in Yemen’s territorial waters.

The terror threat is also severe, and further heightened in isolated areas where AQAP have strong tribal connections. Daesh also have a presence in Yemen. Both groups have enacted a large number of attacks through a wide variety of methods, including suicide bomb attacks, car bombings, firearm attacks and the use of improvised explosive devices. Attacks thus far have widely been focused on Houthi and the Aden governments, and security forces, although Western concerns are also likely to be viewed as targets.

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