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Businessmen Lose $ 2 Billion; Effects of World Financial Crisis on Yemen Unrecognized
Written By: Moneer Al-Omari (YEMEN POST STAFF)
Article Date: January 26, 2009
Like the Yemeni government, Yemeni businessmen have not disclosed the volume of their direct or indirect losses under the current financial crisis. There have been no official or exact figures about the volume of financial losses incurred by the world crisis on both sides.
Moreover, there is a disagreement between economists and financial experts over the effect of the world financial crisis on Yemen. Some see that the country's economy in particular and banking sector in general have not been affected, while others see the opposite.
Sana'a University Professor Ahmed Ismail Al-Bawab, also a financial expert working for the Yemen Bank for Reconstruction and Development, stated to the Yemen Post that Yemen will never get affected by the current world crisis, specifically when the country has no investments outside the country.
Al-Bawab continued that the country was hardly affected by the collapse of oil prices that rose to record levels by the mid of 2008 ($140) and fell dramatically later to reach $38 this month, hinting its only effect was reflected in the 2009 state budget where the government was forced to cut 50 percent of allocations and expenditures.
He also assured that the effects of the world financial crisis fell heavily on Gulf countries, particularly Saudi Arabia and United Arab Emirates, as they have lost over $2 trillion.
However, there have been indirect effects on the banking industry because the crisis generated fears in customer's hearts, resulting consequently in recession, as most banks depend on treasury bills to secure primary liquidity, according to Al-Bawab.
Al-Bawab also denied any losses incurred on welfare, insurance or pensioners' funds and stated that these funds invest their money inside the country, primarily because they have no specialized cadre, known as foreign investment administration, to undertake such investment activities.
However, economy professor Abdullah Al-A'dhi told the Post earlier that the current financial crisis across the world, especially in America, will directly affect the Yemeni economy which is directly dependent and tied to the U.S. Dollar.
Al-A'dhi continued that the disengagement from the U.S. Dollar could reduce the direct effects on the country's economy and emphasized that we should diversify our basket of currencies.
"Yemen will get directly affected by the fall of the U.S. dollar because the country's exports, mostly oil, are sold in this currency. Any forced devaluation of the U.S. Dollar will devalue the exports," said Al-A'dhi.
He added that the biggest fault in Yemen is that the country relies greatly on oil, and any fall in its prices will directly or indirectly affect other sectors in the country, advising that the country should diversify its products and exports so that the fall of any commodity would not affect the overall economy.
Instead, officials mentioned late last year that the current financial crisis which afflicted the world's major economies, especially America, left little or no effect on the Yemeni economy because the country has no stock market, noting that having no strong banking relations with banks and financial institutions in America and Europe was a bless for the country.
They further stressed that the current crisis could turn the eyes of Gulf investors to Yemen as they had suffered huge losses under the mortgage crisis, adding that it is necessary to invest part of the country's cash reserves in infrastructure and development projects to help attract the foreign and Gulf capitals.
A businessman admits losses
Despite the fact that most Yemeni businessmen prefer not to disclose the volume of their losses due to the current financial crisis that hit the economies across the globe, an economic source noted that several Yemeni businessmen and commercial houses were subject to huge financial loses.
The Yemeni businessman Abdullah Ali Al-Sunaidar, running one of the oldest companies of Yemen and shareholder in several banks and insurance companies, told the Kuwaiti Al-Siyasah newspaper that Yemeni businessmen have so far lost over $2 billion.
Though he made some money out of trading in lands, Al-Sunaidar further revealed that he has lost about 15 percent of his company's assets and capital, stressing that other businessmen's losses could be larger especially those having securities and shares in the international stocks.
He also criticized the Yemeni government for failing to say the truth about its losses under the current world financial crisis.
"The government with no plain reason hid information which is supposed to be announced for people so that they can be well aware about any future economic measures aiming to alleviate the crisis's effects," Al-Sunaidar said.
Al-Sunaidar criticized what he called the businessmen's Lobby (referring to those businessmen who started their business during 1994 civil war and just its aftermath. He noted that these businessmen make up 70 percent of Yemeni businessmen, hinting they started their business as war traders.
He continued that most of them got rich by winning government tenders through the connivance of government officials, calling for setting different conditions and rules that decide upon who is a merchant and who is a businessman.
Media sources also revealed that several Yemeni businessmen have been subject to big losses, especially those having securities and shares in the stock markets of U.S., UAE, Egypt and other countries.
Some Yemeni and foreign companies, particularly those working in contractions, started to halt their business last month and this move was prompted by the instability in the financial markets.
Several experts stress that the country's industrial and commercial sectors were exposed to huge losses and this applies to banking industry and insurance companies, which are also affected by the increased activities of pirates in the Gulf of Aden and the Indian Ocean.
New government plans
Yemeni government has announced implementing a detailed plan for the year 2009 and 2010 seeking to strengthen the Yemeni banking sector so that it can stand firm in the face of the international competition, the world financial crisis and the requirements for joining the World Trade Organization.
According to a report recently issued by the Ministry of Planning and International Cooperation, the government prepared a comprehensive plan for monetary policy to be implemented during 2009 and 2010. This policy will help provide economic stability and enhance further sustainable economic development as well as controlling inflation.
The report further noted that the plan includes additional measures and policies which guarantee the improvement of monetary and banking policies and control the excess money supply.
To face the drop of oil prices, the report pointed out that the government will work, through the Central Bank of Yemen, to control the money supply, liberalize the interest rates, diversify and develop the tools of the foreign exchange market and modernize the internal payments system along with a review of the current monetary policy. It will work as well on preventing tax evasion and restructuring the public expenditure.