Saturday,22 September, 2018
Current issue | Issue 1232, (5 - 11 February 2015)
Saturday,22 September, 2018
Issue 1232, (5 - 11 February 2015)

Ahram Weekly

Investors losing faith in Yemen

As conditions in Yemen worsen, local entrepreneurs are struggling to stay afloat, writes Charlene Rodrigues in Sanaa

Al-Ahram Weekly

Six-year-old Sameh Al-Abhashi awoke on Monday trembling. Outside the window of his home in Yemen’s capital Sanaa, he could see a rising column of smoke. Gunfire rattled nearby and an ambulance siren wailed. He was petrified. Sameh and his family live in the shadow of Nahdain, mountains that overlook the heavily fortified presidential palace in Sanaa.

Last week, after a fierce gunfight with the guards of President Abd Rabbuh Mansour Hadi, the palace was seized by militiamen loyal to the Houthis, a predominantly Zaydi Shiite group from northern Yemen.

“My wife and kids had to hide in the basement of the house,” said Mohamed Al-Abhashi, Sameh’s father. The businessman was in Dubai at the time. “I couldn’t sleep. My son was crying on the phone, fearing that something might happen to them,” he said.

Last Thursday evening, after two days of fighting and with Hadi under virtual house arrest, the president, his prime minister and entire cabinet resigned, further crushing hopes for a democratic transition in Yemen.

Al-Abhashi has lived in Yemen his entire life and stayed throughout the unrest of 2011. He now says he considering leaving. “As a businessman, I want a safe environment, and right now Yemen is far from that, not for me or my family and kids. I am moving to the US next month. My kids will follow me after they have finished school,” he said.

Al-Abhashi is not the only one: several local and foreign investors spoken to this week said they are moving their investments overseas to neighbouring Gulf countries, and even the US and Malaysia. Their decision comes in the face of a collapsed government, the Shiite insurgency and a spike in suicide bombings by Al-Qaeda in the Arabian Peninsula, the local Al-Qaeda franchise.

A week before Monday’s attack, Hassan Al-Ahdal stood in his office in Burj Aman, Sanaa’s financial hub, and stared glumly out the window. “I have no hope for 2015, or 2016,” Al-Ahdal said. Though unwilling to disclose an exact figure, the 42-year-old operations manager at the Yemen Kuwait Bank said, “Millions of dollars have been retracted from the Yemeni market and invested abroad.”

Inspired by the protests in Egypt and Tunisia, young men and women in Yemen filled the streets in 2011 to oppose the 33-year rule of former president Ali Abdullah Saleh. They called for freedom and social justice, and demanded an end to the corruption that has left millions jobless and the economy in tatters.

Today, almost two years after Saleh stepped down, the offices of four international airlines have closed, rates of return on investment have sunk from 12 per cent in 2011 to eight per cent today, and embassies are evacuating their nationals.

In 2013, investor Abdo Elfgeeh returned to Yemen from New York to start a snack food factory. He planned to produce and sell affordable potato crisps in Yemen. He was optimistic after the World Bank reported economic growth of 4.8 per cent in 2013.

Elfgeeh invested in the Ajial Company, a factory producing potato crisps. He said he had done his research, identifying a demand that wasn’t being met, and was confident that more money would flow in from fellow business partners, including Yemenis living in the United States.

With the political situation worsening, he is no longer confident that he will see any profits. Eight months after his original investment, the factory’s new equipment remains unused.

“Looking at the situation, I’m having to reconsider my decision — either find new partners or relocate to New York. I’ve been using my savings for nearly eight months. I cannot continue like this. I’m getting into debt,” Elfgeeh said. “It’s not only me. Businesses, banks, schools and hospitals have all taken a massive hit.”

Some investors, cautiously hopeful, have turned to short-term investments in the real-estate sector and stock markets in Turkey and neighbouring GCC countries. Others are in long-term trading and involved in industrial projects in Africa, predominantly in Ethiopia and Djibouti.

Yemen’s Saba Islamic Cooperative and Agriculture Credit Bank (CAC) has opened branches in Djibouti. Similarly, sources at the Yemen Kuwait Bank and Sanaa-based Tadhamon International Islamic Bank said they are also looking into investing in Africa.

The governments of Djibouti and Ethiopia have offered Yemeni investors tax concessions, free land and other perks.

Yahya Mohsen, chairman of the General Investment Authority (GIA), a national agency facilitating investments in Yemen since 1992, dismissed claims about the decline in investments in the country as “inaccurate.” Said Mohsen, “There are no official statistics to prove the exact number of companies leaving the country. It’s only talk.”

While a GIA investment report showed a 40 per cent decline in registered projects from 2013 to 2014, the capital invested increased by more than $465,000. But Mohsen said these numbers do not reflect the oil and banking sectors, in accordance with the country’s investment law, which excludes investments in oil, gas, minerals, banking and exchange from the data. Instead, the numbers only cover tourism and agricultural and industrial services.

Despite the crisis, Yemen’s GDP grew by 5.1 per cent in 2014, up from 4.4 per cent in 2013, according to the IMF’s World Economic Outlook Report. Said a source at the CAC bank, “People didn’t want to repeat the same foolish mistakes from 2011, which was when GDP fell considerably. This time not everybody has moved their money.”

“The main factor is the militia,” Elfgeeh said. “The security forces took one step back and allowed the militia to lead. These people are not trained, are unprofessional and have enemies that want to hurt them. How can we expect the situation to improve?”

Al-Ahdal blames the country’s political parties for the situation. “If everyone was doing their job, the Houthis would not find a power vacuum in which to operate,” he said.

According to Ahmed Alakwar, however, the environment for his telecommunications business has improved with the Shiite rebels in control of the capital. “At least now I have regular electricity and I feel the new protection and security,” he said.

“Under the old government, there was nothing. We’ve quickly seen some progress. In the future things will be better under the Houthis,” he added.

Al-Abhashi said that in recent months the Houthis have increased the burdens on the state treasury and created an unhealthy atmosphere for investors to enter the market or continue their businesses.

Since the Houthis took over the capital in late September, they have stormed government offices, rampaged through universities and media offices, and plundered the homes of journalists, including the house of Nobel Peace Prize laureate Tawakkol Karman.

Apart from the Houthis, Elfgeeh cites foreign interference as a key concern for the country’s economy. “I cannot ignore the foreign factors. I am suspicious of foreign intelligence as they make Yemen a battlefield for their conflicts,” he said.

“The latest one is French intelligence and Total [the French oil and gas company]. We suspect they have been co-operating with the Houthis. Now the Houthis have replaced the oil company people with their own people.”

While the investments abroad will ultimately benefit business, the status quo for the Yemeni people remains unchanged. After four years of political wrangling, more than half the population — 25 million Yemenis — lives below the poverty line, subsisting on less than $2 a day.

“Ten million Yemenis do not have enough to eat, including 850,000 acutely malnourished children,” said Grace Ommer, Yemen country director of the international aid agency Oxfam.

But banks and investors remain largely indifferent. Al-Ahdal said the banks have been left with little choice but to protect themselves and their clients in the absence of a government.

Disconcerted by what he sees as warring factions with self-interested agendas, Al-Abhashi is keen to build a new life and business elsewhere. When asked how long it would be before Yemen returns to stability, he replied, “I suspect it will take us five years, maybe more. I don’t know anymore.”

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