Investment Incentives

Under the Investment Code (Law 22 of 1991) foreign investors are accorded national treatment and receive investment incentives. Republican decree number 14 of 1995 amended the Investment Code to reduce government control. The General Investment Authority (GIA) was established under the Investment Code. It currently screens investments, but since 1991 only one proposal out of over 600 applications has been rejected (on the grounds that it was not really an investment). The Embassy recommends that potential investors make the GIA their first contact, and acquire a copy of the Investment Code, which details investment incentives and procedures, early on.

Although the government encourages foreign investment, it is blocked by the same barriers which cripple domestic i investment. Yemeni firms complain bitterly about investment constraints but existing firms benefit from the distortions which keep competitors out of the market and have shown a marked reluctance to make a strong and unified case for across-the-board reforms. Post is not aware of other opposition to foreign investment, including by organized labor. Investors, especially in the oil sector, can face unrealistically high expectations by potential beneficiaries of the investment (employees, nearby villagers), which can lead to disappointment and subsequent problems.

Foreign and domestic investors are bound by the same visa and work permit requirements for foreign workers. While time consuming, the regulations are not prohibitive. However, there is strong pressure to hire Yemenis when possible. While foreign investors receive national treatment, they do not receive extra privileges. Tariff and non-tariff barriers, such as efforts to limit imports and pressure to control prices of basic products made of imported goods, are applied to all producers.

Foreign investment is restricted in some areas, primarily to protect existing production and small individual investors. For example foreign investors are prohibited from one-vehicle transport investments but bus or trucking companies are not restricted. Bread production is also reserved to domestic investors. Investments in cement, electricity, small hospitals and schools, sea and air transport, fisheries, energy, construction materials and below-three-star hotels and restaurants usually require 25-30 percent participation by a Yemeni partner.

Yemen is just beginning privatization of a wide range of state owned enterprises. Early signs are that foreign investment will be welcomed. The Ministry of Industry handles industrial privatization and the Ministry of Planning and Development handles other areas. Investors are advised to contact the appropriate ministry for information on privatization possibilities.

Although foreign investors are not legally restricted from participation, the Yemeni government does not, to our knowledge, currently finance research or development projects.