Stock Market Hindered by Legislative and Economic Shortcomings

Yemen has seen relative stability over the last few years, accompanied with demonstrative and financial reforms under direct sponsorship of the World Bank. However, this relative stability necessitates in establishing a stock market.

According to a study prepared by researcher Yaser Saghari from Sana'a University's Faculty of Commerce, there are legal shortcomings that prevent the establishment of stock markets.

The researcher stresses the importance of issuing regulating laws and bylaws. These laws will ensure protection to investors against deceit and cheating of stock brokers.

Saghiri hinted the stock market will provide information on the financial positions of all companies recorded in the stock. It will also help distribute citizens' deposits to all economic activities, therefore, helping revitalize the country's economic development. It could also reflect the situation of economy when suffering recession or collapse. 

The study further points out that establishing a stock market can develop deposits and resources that could be allocated later for activating different investment activities, resulting in more work, less unemployment and increase of the national income. It will also help the private sector to play a role in development and lead to different investments.

Moreover, a stock market can pull foreign capitals to invest in the country; but this requires the availability of basic services including water, electricity, sanitation, ports, airports, telecommunications, etc. 

It can also attract the Yemeni migrating capitals whose investment could reach $7 billion yearly.

Stock market’s existence is an important condition for implementing the economic reforms program and privatization because it can provide transparent and authentic information on the financial positions of companies under privatizations to those interested in buying shares and bonds in them.

Requirements for stock market

The study stated the importance of providing the suitable and investment-pulling environment in all its political, social, economic, security and legislative aspects.

In this regard, the research hinted that the country managed to achieve relative stability and considerable success as for containing the flow of money, decreasing budget deficit and inflation together with liberating exchange rates, building hard-currency reserves and issuing investment law.

However, the infrastructure elements still suffer shortcomings which are in need for prompt attention by the government, together with limited financial deposits and capitals.

The researcher also observed that the matter is in need for issuing a separate stock market law that can regulate the whole process and prevent any future problems resulting from the interplay of laws. The law should include the market components, work mechanisms, listing measures, shares and bonds circulation and disclosure requirements.

Meanwhile, establishing a stock market requires the existence of numerous companies, whether public, mixed or family-owned that can offer their bonds and shares in the market.

The study also emphasized that state should resort to long-term securities to achieve the economic goals instead of short-term treasury bills used for financing the budget deficit, along supporting banks to play an important role.

Study recommendations

Saghiri recommended issuing legislations that could encourage people and institutions to form more joint companies as well as laws that regulate the work of the stock market.