Yemen

Trade in Services

Foreign Direct Investment Policy

1. 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. In 1992, the government adopted a uniform investment code for both domestic and foreign investors which created the GIA to coordinate work among eight government agencies.


2. In attending the Belt and Road Summit in Beijing in May 2017, the Yemeni delegation presented the country’s needs to reconstruct and develop infrastructure, calling for investment in the energy and mineral sectors. In July 2017, China provided a grant of USD22.5 million in relief assistance to the Yemeni government. Apart from trade with Yemen, many Chinese enterprises have invested in the country, particularly in the oil fields exploration (e.g. Sinopec) and telecoms infrastructure (e.g. Huawei).


3. In 2002, GIA worked with the World Bank's Foreign Investment Advisory service to update Yemen’s investment laws, reducing customs duties by 50% on imported raw materials and 100% on raw materials produced locally for agricultural and fisheries projects. Investments in the oil, gas, and mineral sector are subject to special agreements under the authority of the Ministry of Oil and Minerals and do not fall under GIA’s authority. Other sectors not covered by GIA include weapons and explosives manufacturing, banking and money exchange activities, and wholesale and retail imports.


4. Since the unification of North and South Yemen in 1990, Yemen has embarked on a series of reforms aimed at stabilising the economy and increasing foreign investment. Reforms include the introduction of a General Sales Tax (GST) and a reduction in domestic petroleum and food subsidies. The IMF has helped introduce indirect monetary policy instruments, such as open market operations, rediscount facilities, and reserve requirements.


5. Between 2003 and 2004, eight state-run companies were privatised, seven of them by public auction, with the remaining company being transferred to the Yemeni Economic Corporation (YEC). In 2007, the government announced the privatisation of an additional 15 factories.


6. The Central Bank of Yemen (CBY) has made an effort to improve commercial banks’ accounting procedures and loan recovery rates. The banking system remains weak, however, with most commercial banks owned by large families who are reluctant to lend outside small circles. Foreign investors generally seek capital from outside the country.


7. Investors may transfer funds in foreign currency from abroad to Yemen for the purpose of investment and may re-export invested capital, whether in kind or in cash, upon liquidation or project disposal. Net profits resulting from investment of foreign funds may be transferred freely outside of Yemen. Cash transfers are limited to USD10,000. Transfers above that amount must be approved by the CBY.


8. Since Yemen’s unification in 1990, there have been no cases of outright expropriation of property owned by foreign investors. Yemen's investment law stipulates that private property will not be nationalised or seized, and that funds will not be blocked, confiscated, frozen, withheld, or sequestered by other than a court of law. Real estate may not be expropriated except in the national interest, and expropriation must be according to a court judgment and include fair compensation based on current market value.


9. Yemen’s collective body of investment laws does not specify performance requirements as conditions for establishing, maintaining, or expanding investment. Law 23 of 1997 (as amended) regulates agencies and branches of foreign companies and firms and outlines the requirements for establishing a Yemeni agent. Chapter 3 of Law 23 permits foreign companies and firms to conduct business in Yemen by establishing foreign-owned and managed branches. Foreign commercial entities wishing to open branches in their own name must obtain a permit from the Ministry of Industry and Trade.


10. In March 2008, the government amended a 1991 investment law allowing foreigners to operate businesses in Yemen without a Yemeni partner. Under a 2002 investment law, foreigners can own 100% of the land and can execute projects without a Yemeni agent and without obtaining import/export license from the Ministry of Industry and Trade or implementing Law 23 of 1997 (the investment law implemented in October 2002 has precedence over other laws). The 2002 investment law appears to contradict longstanding Yemeni commercial laws, however, which limit foreign ownership to 49%. The government is reviewing the laws in an attempt to remove inconsistencies, although work on the issue was temporarily suspended in 2011 as a result of the political crisis.


11. Mortgage lending in Yemen is rare because of the reluctance of the court system to uphold the payment of interest or to accept land as a form of collateral – all products in this arena must be Shari'a compliant. In addition, Yemen has a long history of incomplete or inaccurate land records and frequent land ownership disputes, making the use of real estate as collateral difficult. In 2006, various agencies and ministry departments dealing with land ownership were merged into a common General Land Survey and Planning Authority. This new organisation oversees land ownership and registration, as well as modest government urban planning efforts.


12. Yemen has a record of inadequate protection of IPR, including patents, trademarks, designs and copyrights. In late 2004, the Cabinet approved the Berne Convention for the Protection of Literary and Artistic Works, as well as the International Agreement on Protecting IPR. Parliament has yet to ratify these agreements. Yemen has yet to accede to any international IPR conventions and its IPR Law Number 19 of 1994 is not compliant with the WTO's Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). In December 2010, the legislation of trademarks and geographical indications, the amendment on trade registration law, the legislation of industrial design, patent and author law were passed and approved by parliament.


13. Outside investors are best served by establishing a partnership with a Yemeni entity that knows the system, including an international arbitration clause in their contracts, establishing an escrow account and, where appropriate, demanding as much of the payment as they can get up front. In cases involving interest, most judges use Shari'a (Islamic) law as a guideline, under which claims for interest payments due are almost always rejected. Local commercial banks are sensitive to this problem, and lend primarily to large established trading houses well known to them.


14. The Yemen Free Zone (YFZ) Public Authority was established in 1991 to develop the Aden Free Zone (AFZ). Yeminvest, a joint venture between the Port of Singapore Authority and the Bin Mohfoud Group of Saudi Arabia, was awarded the concession to develop the area. Dubai Ports World (DPW) now operates the Aden Container Terminal) in the AFZ. An industrial and warehousing estate called Aden District Park (ADP) was launched in November 2002. Furthermore, investment opportunities in light industry, repackaging and storage/distribution operations are welcomed. The free zones bill stipulated prospects for the establishment of other free zones in Yemen and the AFZ Public Authority is undertaking the relevant studies identifying such zones and relevant investment opportunities.


15. In October 2018, The Qatar Fund for Development (QFFD) announced that it had signed a memorandum of understanding to fund the water and sanitation sector in Yemen. The financial assistance is being provided in co-operation with the United Nations Children's Fund. The funding will be used for the rehabilitation of water networks, and distribution and drainage networks in the country.


16. Saudi Arabia announced plans in November 2018 to finance the redevelopment of Marib Airport in Yemen. The airport project will be financed under the SDRPY.

Sources: WTO – Trade Policy Review, ITA, US Department of Commerce, Fitch Solutions

Fitch Solutions Risk Summary

ECONOMIC RISK
The economic gap between Yemen and the rest of the Middle East remains considerable. In order to improve the situation, Yemen needs investment in education, economic diversification through the development of its non-hydrocarbon sectors and infrastructure; however, against the backdrop of internal conflict, this is unlikely to be forthcoming. The ongoing conflict will prevent a sustained uptick in Yemen's hydrocarbon exports over the quarters ahead, ensuring continued depreciation of the rial and associated elevated inflation. Together with the government's challenges in paying public sector salaries, this will cause consumption to fall in the near term. Yemen's economic recovery will rely on foreign assistance and the country remains highly vulnerable to external shocks. In 2020, the country could see some upside as oil output from some of Yemen’s more stable oil-producing governorates will continue to rise gradually in the quarters ahead, as federal and local authorities work to increase production capacity. Oil and Minerals Minister Aws al-Awd stated on January 2, 2020 that his government targeted output of 80,000 barrels per day (b/d) in Q120, up from an estimated 50,000b/d currently. Efforts to complete hydrocarbon transport facilities and arrange gas exports are reportedly also being made, with the assistance of Saudi Arabia. This should help encourage some export growth over 2020, although volumes look set to remain small relative to the levels seen prior to the outbreak of conflict.

OPERATIONAL RISK
Yemen is a small oil-producing country outside of OPEC with limited economic diversification outside the oil sector. Security challenges in Yemen impede educational attainment in affected areas, as well as logistics capacity enhancements in the short- to medium term. According to the World Bank, almost 55% of power infrastructure such as power stations and transmission lines in Yemen have been damaged by the conflict with around 8% of facilities destroyed. Reconstruction works will be heavily reliant upon regional funding, most likely from the United Arab Emirates and Saudi Arabia. A lack of domestic expertise and capacity will also necessitate the involvement of foreign construction companies.

Source: Fitch Solutions
Date last reviewed: August 14, 2019

Fitch Solutions Political and Economic Risk Indices

Exchange Rate HK$/US$, average
7.75 (2015)
7.76 (2016)
7.79 (2017)
7.83 (2018)
7.77 (2019)

Treaties and agreements between Hong Kong and Yemen

Yemen has a Bilateral Investment Treaty with the People's Republic of China which entered into force in April 2002.

Source: UNCTAD

Chamber of Commerce (or Related Organisations) in Hong Kong

Commercial and Economic Section in Hong Kong
The Arab Chamber of Commerce & Industry (ARABCCI) was established in Hong Kong in 2006 as a leading organisation at promoting commercial ties between Hong Kong/mainland China and the Arab World.

Address: 20/F, Central Tower, 28 Queens Road, Central, Hong Kong
Email: info@arabcci.org / secretariat@arabcci.org
Tel: (852) 2159 9170

Source: The Arab Chamber of Commerce & Industry

Yemeni Honorary Consulate in Hong Kong
Address: Units 8-12, 1/F, Heng Ngai Jewelry Centre, 4 Hok Yuen Street East, Hung Hom, Kowloon, Hong Kong
Email: yemen.consulate@aaronshum.com
Tel: (852) 2334 8612
Fax: (852) 2334 7427

Source: Protocol Division Government Secretariat

Visa Requirements for Hong Kong Residents

• HKSAR passport holders do not require a visa for up to 30 days. It is necessary to obtain confirmation of good health from a doctor.


• Yemeni law requires that all visitors/tourists register at a Yemeni police station or at the Passport and Immigration Authority within two weeks after arrival to Yemen. Failure to register will result in complications on departure and a possible fine.

Source: Hong Kong Immigration Department
Date last reviewed: March 14, 2020