International Trade in Yemen

News Related to International Trade in Yemen

Business outline for Yemen

Economic Overview

The economy of Yemen is highly dependent on oil, which represents almost 70% of the government's income. The country registered an economic growth of around 8% in 2010, due to the beginning of the activity of exporting gas. Growth estimates for 2011 are of 3.5%.

In addition to the hydrocarbons, the country's economy depends on agriculture (14% of the GDP) and remittances from yemenian emigrants. However, the agricultural sector is currently very weak, given the desert country's considerable demand for water. Khat cultivation takes up a third of the country's cropland, while the cultivation of cereals fails to meet the needs of even a quarter of the population.

In order to improve the economic situation, the government has recently launched a program of economic reforms and governance, aiming to diversify its economy, to create jobs and to attract foreign investment. The main reforms undertaken concern the restructuring of fiscal spending and the consolidation of the banking sector and public finances through a reform of the tax system.

Yemen officially belongs to the list of  the "Heavily Indebted Poor Countries" (HIPC). More than one third of the population lives below the poverty line and the illiteracy rate is very high (30% for men and almost 70% for women), as well as the unemployment rate. Only 40% of the population have access to electricity and 31% does not have access to drinking water. The consumption of khat creates a real public health challenge. Moreover, security is very unstable, with several embassies, as well as foreign nationals, having been the targets of bomb attacks in 2010.

FDI in Figures

FDI stocks significantly increased between 2006 and 2009. However, because of the risk of destabilization linked to the strong social tension that exists in the country due to the sudden rise in prices of basic food products, foreigners are becoming more reluctant to invest in the country.  

In addition to the security problems associated with conflicts affecting the northern part of the country, Yemen lacks infrastructures and its advantages are very limited due to the scarcity of natural resources and low productivity of its workforce. The country has recently launched a program of economic reforms in order to attract more FDI. A national commission for fight against corruption has also been created.

Up to this point, foreign investors have been interested mainly in the oil sector; notably, the United States and France, which are the main investing countries.

Foreign Trade Overview

Although Yemen is seeking to become more open to global trade and to diversify its economy, which remains heavily dependent on oil (91.8% of exports), there are many barriers that complicate this goal. Customs duties tend to be high and there are some trade restrictions, in particular the admittance of pork (and pork by-products), coffee and alcohol into the country. Moreover, there is inconsistency and lack of transparency in the regulations of customs duties and tax laws as well as out-dated standards which limit  the development of foreign trade.

The country exports more than what it imports, which created in 2008 a slight surplus trade balance. However, as a consequence of the price fall of hydrocarbons, Yemen registered a slight trade deficit in 2009, which might continue. 

Its main trading partners are the countries of the Gulf Cooperation Council (GCC), Southeast Asia and Switzerland.