Opportunities for partnership between the private and public sectors in Yemen

 

Dr. Sami Mohammed Qasem

 

Introduction:

 

 

The events that our world is going through today, which are moving in the direction of forming a new, multipolar world order, are also witnessing economic intellectual transformations, and the transformation of economic systems from the opposite to the opposite, the economic intellectual premises that used to rule in the Soviet Union are no longer governing the intellectual premises of Russia, the heir to the Soviet Union, which is also what can be said about China, Vietnam and other countries, which in their search for creating a model that achieves the desired growth rates have worked to change their economic ideas and search for what suits their goals.

 

 

Perhaps finding a greater role for the private sector to contribute to the economic life in the state, and working to contribute to meeting the needs of citizens in areas where the state will not be able to provide the same level of services, and in accordance with the general trends of the state's public policies; has become a key feature in most countries of the world, but we find most of the countries of the world with accelerated growth, are the countries that provide greater opportunities for the private sector to contribute to the economic arena.

 

 

In the case of Yemen, in light of the war, the political and military conflict, and its repercussions on the economic and living situation of citizens, the government has become suffering from the ability to mobilize financial resources to meet the diverse development needs in the country, which has negatively reflected on the level of services provided and the ability to continue financing them, and therefore the government should look for more appropriate sources to provide funding, and mobilize financial and administrative resources for the sectors that need this funding, in a manner that serves the general plan of the state and in line with the national goals set.

 

 

As there are economic sectors that the government cannot promote on its own, whether because it needs huge financial capabilities, or because it needs efficiency, expertise and specialties to manage them with a competitive mindset, they may not be available within the government administrative competencies, which can be available in the private sector, and therefore the private sector can contribute and partner in order to ensure the success and growth of these sectors, and increase their competitiveness under current conditions and also in the future.

 

 

In addition, in light of the current conflict, the government is still busy rectifying legal and legislative visions in light of the developments taking place, which calls for its cooperation with direct stakeholders in reviewing the laws and legislations governing the current economic situation.

 

 

In this paper, we will discuss the mechanism, objectives, possibilities and areas of this partnership in the sectors where the state wants to achieve competitiveness and what can be achieved from this partnership.

 

 

First: areas of economic partnership

 

 

It is no secret to anyone the difficult economic situation that Yemen is currently experiencing, the difficulties facing the government in light of the current ongoing war, and the political conflicts that have cast a shadow on the service and economic situation of the country.

 

 

The state is no longer able to perform its tasks optimally on its own, and it has become necessary for it, in order to promote the various economic sectors, to look for ways to create the necessary funding for the process of revitalizing these sectors, and here the role of the local private sector is highlighted, as Yemen is one of the developing countries where things require increased stimulation and development of the private sector, especially in light of the need for reconstruction, economic recovery, institutional structure, reconstruction and strengthening the elements of stability.

 

 

The Yemeni local private sector has the necessary capabilities and expertise to contribute to the revitalization of many economic sectors it also has the necessary expertise and successful experiences in many service and commercial projects locally and abroad. for example, the Yemeni private sector contributes through its investments in providing many services such as electricity, telecommunications, health and education services, land, air and even sea transportation. the Yemeni private sector also has competent administrative expertise capable of providing its expertise in various fields.

 

 

However, the private sector, like all economic sectors, has been affected as a result of the war, as the results of a survey conducted by the World Bank in October 2018 showed that approximately 35% of Yemeni companies closed their doors, while more than 51% of the surviving companies suffered from shrinking their size and declining business. About 73% of the companies that have suspended their activities indicated that security obstacles, financial restrictions, increased input costs, loss of demand and loss of consumer base are the main reasons for the contraction of many companies.[1]

 

 

However, the private sector was able to adapt and reintegrate its capabilities into the reality of the war economy in Yemen, as the available data indicate that the private sector in 2015 accounted for 80% of the total industries of the national economy, as its activities are concentrated in several sectors, contributing to the agriculture and fishing sector by 18% of GDP without oil for the same year, 16% in the manufacturing sector, 11% in wholesale and retail trade, and 10% in transportation and storage.[2]

 

 

The contribution of the private sector to the real gross product increased to 70.8% in 2019 compared to 67.1% in 2015, and its contribution to the services sector reached 74.3% in 2019 compared to 62.3% in 2015, which shows the importance of the role of the private sector in the Yemeni economy.

 

 

Prior to the current conflict, Yemen took steps that were ostensibly aimed at developing a competitive private sector, through the launch of several reform programs and development plans,the Yemeni government launched the economic reform program in 1995 with the support of the World Bank and the International Monetary Fund in order to enhance the role of the private sector within the Yemeni economy. the program has given priority to the development of all areas of the private sector, in addition to development projects at the governorate level.

 

 

The government tried to implement a number of institutional and legislative reforms, as well as financial reforms and the privatization of some public institutions between 2000 and 2010 in order to stimulate and improve the business environment, for example, the government launched the poli grant for the development of institutional reform, in an effort to stimulate private sector activity outside the circle of hydrocarbons, this included two main elements:

tax reforms to rationalize incentives for private investments. 1-

 

reform of registration and property rights. 2-

 

In 2008, the governments enacted some reforms in order to facilitate access to financial services and credit facilities, and adopted - on this basis - the banking microfinance law the following year.

 

By 2010, the microfinance market was providing its services to more than 51 thousand clients.

 

 

Despite these efforts, the results were disappointing, as the World Bank, in its assessment of these reforms and the extent to which they achieved the desired results, said that these ambitious initiatives failed to achieve their goals, due to heavy political interference, bureaucratic government obstacles, lack of coordination and implementation of plans at the level of government ministries and at the level of private government structures, in addition to the weak mechanisms of governance and accountability, and the lack of a clear vision in addressing the challenges facing the work environment in Yemen.[3]

 

 

Therefore, partnership mechanisms emerge as one of the possible solutions to benefit from the private sector and integrate it more and benefit from it in the development of the Yemeni economy.

 

 

But the question that arises here is, what are the possible areas of economic partnership between the private and public sectors

 

 

There are many possible areas of economic partnership between the private sector and the public sector and they can be mentioned in detail below:

 

 

Electricity sector:* 

 

 

The participation of the private sector in the electricity sector began in 2006, and it was mainly limited to electricity generation. Based on short-term contracts, the public Electricity Corporation purchased power from private producers and supplied them with the necessary fuel for generation.the role of the private sector was mainly to provide support to the public Electricity Corporation in filling the electricity supply gap. in 2013, the share of purchased power accounted for about 38% of total generation.[4]

 

 

After the war, due to the cessation of many generating stations due to their deterioration and the inability of the state to maintain them and raise their efficiency, the private sector emerged as the savior of the situation, in Houthi-controlled areas, privately owned commercial generating stations became the main provider of electricity service to citizens.

 

 

As for the areas under the control of the legitimate government, and in light of the increasing demand for electricity, contracting operations with the private sector to provide electricity ( purchased electricity) have increased, but these measures have increased the cost of electricity production as a result of small commercial projects in this area, and their dependence on high-cost fuel, and here the possibility of creating a partnership between the private sector and the public sector in finding permanent solutions to the problem of electricity at the lowest possible cost, to ensure the provision of continuous electricity :service to citizens at the lowest possible cost, which achieves the following results

 

 

Reducing the bill for the purchase of oil derivatives used in electricity generation.*

 

 

Providing continuous electricity service to citizens.*

 

 

.Cancellation of the process of costly and burdensome energy purchase contracts for the state treasury*

 

Provide a suitable profit for both private and public:*

 

 

This can be achieved through the establishment of an investment fund in partnership with the private sector in the field of electricity and the start of the construction of gas-fired power plants with their accessories from gas liquefaction ports, distribution networks in all governorates, with part of the project being offered to citizens to contribute and partner in it.

 

 

Transport sector:*

 

 

There is no doubt that the transport sector is one of the important economic sectors for any country, and Yemen, in light of the war, suffered a lot of problems related to the transport sector, whether from the closure of ports or airports, the closure of transport routes, or the high costs of transportation and insurance, all of which contributed to the high cost of goods, and therefore the rise in commodity prices, which burdened citizens, and caused a decrease in the purchasing power of families.

 

 

Here, the private sector can contribute to enhancing the capabilities of this sector along with the public sector and the government by creating a strategic partnership in all components of this sector, and this can be explained in detail in the following:

Air transport sector:*

 

 

Yemenia Airlines stands out as the main operator of flights to and from Yemen with minor competition from the private sector represented by Belqis Airlines.

 

 

Yemenia Airlines is a joint stock company of which Yemen owns 51%, while Saudi Airlines owns 49% of it and owns only 6 aircraft serving a community of more than 32.6 million people.

 

 

Here, a partnership between the private and public sectors can be created by opening the partnership door and contributing to the private sector to contribute to the company, raise the company's capital and use it to strengthen the company's fleet and expand its activity, in addition to establishing companies associated with the main company specialized in providing logistics and technical services and air supply companies, while restructuring the company financially and administratively.

 

 

All this will strengthen the role of the company, raise its capabilities and competitiveness, and raise the level of services provided in it.

 

 

*Ports and airports sector:

 

 

Yemen's geographical location and proximity to international transport lines is one of its most prominent advantages, however, Yemen's ports still suffer from financing and administrative problems that have weakened their capacity and limited the possibilities of their competition.it suffices to look at the Sultanate of Oman and the port of Duqm, which was established in 2020 and the size of the huge investments it received, to see the size of the missed opportunities for Yemen.

 

 

The port of Aden and its free zone, as well as the port of Mokha, the port of Nashtoon and the port of Mukalla, are all ports that can be the real tributary of the state budget as long as they can work professionally efficiently.

 

 

*Here, a partnership between the private and public sectors can be created using the experiences of other countries by:

 

 

*Establishment of a joint investment company between the public and private sectors to manage the container port and the free zone in Aden with the establishment of the industrial zone.

 

 

*Establishment of a joint investment company between the private and public sectors to establish and manage the port of Broome.

 

 

*Establishment of a joint investment company between the private and public sectors to establish and manage the mineral export port in Mokha.

 

 

*Establishment of a joint investment company between the private and public sectors to establish and manage the Air Cargo Village at Aden airport.

 

 

*Establishment of a joint investment company between the private and public sectors to establish a commercial shipping company.

 

 

All these companies can promote this sector and fill the financing gap for the establishment of these important projects.

 

 

Communications sector: *

 

 

The telecommunications sector is considered the most important service sector in countries looking to achieve high levels of development and is considered the fastest profitable sector than other sectors.

 

 

This sector constitutes an area of conflict between the recognized government and the Houthis in light of the Houthis ' control over this sector and the recognized government's weak ability to compete with the Houthis in this field.

 

 

Despite the establishment by the government, represented by the Ministry of transport, of adennet to enter and compete in this sector and pull the rug from the Houthis, however, the weakness of the state's financing capabilities led to delays in providing the service appropriately, and the Yemeni private sector can enter this sector and inject large investments in it to provide a distinctive service since it is a promising sector in Yemen, but incentives must be provided to enter this field and facilitate legal and tax procedures to encourage it to invest in it, and remove political and legal obstacles in front of it.

 

Insurance and banking sector:*

 

 

The private sector can effectively contribute financially and administratively to strengthening the banking sector in Yemen by investing in these aspects, with incentives provided by the government and finding opportunities for partnership by finding a mechanism and formula for partnership between the public and private sectors through the establishment of joint banking entities, and creating a mechanism for integration that helps raise the efficiency of this sector.

 

 

The insurance sector, which is heavily linked to investment support, suffers from severe weakness in Yemen, and its financing capabilities are weak, and here the private sector can enter to revive this sector, which contributes to enhancing its role, raising its capabilities and enhancing confidence in it, which increases its competitiveness.

 

 

Partnership in the insurance and banking sector can be achieved through the following:

   Finding joint banking entities with a common tripartite capital(Public, private and community sector) linked to the Central Bank of Aden*

 

Creation of a joint-stock insurance company with a common share capital.*

 

 

Second: partnership in the administrative, legislative and legal fields

 

 

The field of partnership between the private and public sectors is not limited to the economic aspect only, but it is necessary to find a real partnership even in the administrative field, planning and legal legislation.

 

 

Strategic development plans cannot be prepared without the involvement of the private sector in all stages of planning and preparation of strategies and plans, nor can Legal legislation related to the economic field be approved without reference to the private sector.

 

 

Decisions affecting economic life must take into account the needs and requirements of the private sector as an important element of the state and society.

 

 

But how can we find partnership in these areas?

 

First: before answering this question, we must recognize that it is important to create a community partnership between all segments of society for the success of any government, and that the private sector is an important element of society formation in any country, and therefore the partnership of the private sector in economic life is not a luxury, but it is essential for the advancement of society, and therefore it is necessary to expand the principle of partnership to serve public plans and society.

 

 

Second: the private sector should be involved in making decisions related to economic life through:

 

 

*Finding a joint coordination mechanism, whether through the establishment of a higher Economic Council representing the government and the private sector or the restructuring of the announced Economic Council through the involvement of the private sector.

 

 

Be one of his tasks:

 

 

Study economic decisions and submit proposals to the head of government.*

 

 

Providing integrated economic studies to the government.*

 

 

.Creation of a joint-stock insurance company with a common share capital *

 

 

It is an experience that Singapore has preceded us in its journey towards growth and progress.

 

 

*Establishing a mechanism for joint coordination regarding the approval and amendment of legal legislation related to the economic situation through increasing communication and communication between the government on the one hand, the parliament on the one hand and the private sector on the other, and establishing a mechanism for coordination and consultation.

 

 

*Involve the private sector in the planning processes and the preparation of strategic plans for the state.

 

 

All of the above are mechanisms that can contribute to strengthening the partnership between the private and public sectors, and bridge the gap between them in a way that contributes to enhancing the competitiveness of the joint economic sectors in all different areas of partnership.

 

 

Recommendations:

 

 

*Develop an updated and clear investment map that identifies the investment sectors in which the private sector can contribute.

 

 

*Designing a mechanism for partnership between the private and public sectors in accordance with specific legal and social frameworks that guarantee the parties their rights without affecting the rights of society.

 

 

*Seeking to find a mechanism for legal and legislative consultation so that the private sector participates within the various segments of society in consultation on the proposed laws and legislations related to the economic aspect before their adoption.

 

 

 *Removing obstacles to investment and providing facilities to investors, in order to encourage them to invest in the country despite the war and to spare the economy from conflict.