12 May 2016
Yemen: Market Profile
Major Economic Indicators
- Yemen sits at the southwest tip of the Arabian Peninsula, between Oman to the east and Saudi Arabia to the north. It overlooks the Bab al-Mandab Strait where the Red Sea joins the Gulf of Aden. The country has suffered from persistent geopolitical instability despite the 1990 merger of North and South Yemen. It has been locked in a complex civil war for a year, with the rebel Houthi group and fighting against a disunited array of forces, including loyalists to the president-in-exile backed by Saudi Arabia, the Islamic State and Al-Qaeda. The latest ceasefire agreement brokered by the UN took effect on 10 April, though some participating parties have expressed reservations over the deal and thus the willingness to abide by it.
- Yemen is a small oil-producing country outside of OPEC. Despite this, it is one of the world’s poorest countries and has fairly large and young population compared to many other Middle East nations. Yemen allows foreign oil companies to exploit its oil fields in light of their capital and technology resources. The oil sector currently accounts for 70% of its fiscal revenue and one-quarter of its GDP. Yemen’s oil exports have been suspended since early 2015, with the civil war devastating oil production facilities and driving away foreign oil companies. (China evacuated its citizens from Yemen in April 2015.)
- Petroleum products are Yemen’s key exports, with China being the prime export market followed by Korea and Thailand. Yemen mainly imports wheat, machinery and equipment from China, Saudi Arabia and India. It runs a recurrent trade deficit and its economy is also dependent on foreign aid and remittances from Yemeni workers in neighbouring Gulf countries. Agriculture is also an important sector of the Yemeni economy, employing half of the labour force. The scarcity of water remains a major challenge for Yemen in its attempt to increase its harvest. The IMF approved a loan to Yemen in late 2014 to support its plans to strengthen fiscal and external positions, noting the devastating impact of the political chaos on production activities, exports and foreign investment.
- Yemen acceded to the WTO in 2014 and is also a member of the Greater Arab Free Trade Area (GAFTA). Apart from trade with Yemen, many Chinese enterprises have invested in the country, particularly in the oil fields exploration (e.g. Sinopec) and telecom infrastructure (e.g. Huawei).
- Yemen’s General Investment Authority (GIA) is the national agency for FDI promotion and coordination. Incentives are offered to foreign companies investing in sectors targeted for development, including agriculture, transport, housing, tourism and industrial zones.
- Yemen’s cumulative FDI stood at US$3.1 billion as at end-2014 compared with US$3.68 billion as at end-2013. According to statistics from China’s Ministry of Commerce, Chinese cumulative FDI in Yemen was US$555.1 million as at end-2014.
More information on the Belt and Road countries’ economic and investment environment, tax and other subjects that are important in considering investment and doing business are available in The Belt and Road Initiative: Country Business Guides.