VZCZCXYZ0000
RR RUEHWEB

DE RUEHYN #0178/01 0271144
ZNR UUUUU ZZH
R 271144Z JAN 10
FM AMEMBASSY SANAA
TO RUEHC/SECSTATE WASHDC 3657
INFO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SANAA 000178 
 
SIPDIS 
 
DEPT FOR NEA/ARP AMACDONALD 
DEPT FOR EB/IFD/OIA DAHN AND TWALSH 
 
E.O. 12958: N/A 
TAGS: ECON EINV EIND EFIN ENRG EPET ETRD PTER PGOV YM
SUBJECT: 2010 INVESTMENT CLIMATE STATEMENT - REPUBLIC OF YEMEN 
 
¶1. (U) Below is YemenQs submission for the 2010 Investment Climate 
Statement. 
 
¶2. (U) Begin text of 2010 Investment Climate Statement for the 
Republic of Yemen. 
 
--------------------------------------------- -------- 
2010 Investment Climate Statement - Republic of Yemen 
--------------------------------------------- -------- 
 
Openness to Foreign Investment 
Conversion and Transfer Policies 
Expropriation and Compensation 
Dispute Settlement 
Performance Requirements and Incentives 
Right to Private Ownership and Establishment 
Protection of Property Rights 
Transparency of Regulatory System 
Efficient Capital Markets and Portfolio Investment 
Political Violence 
Corruption 
Bilateral Investment Agreements 
OPIC and Other Investment Insurance Programs 
Labor 
Foreign-Trade Zones/Free Ports 
Foreign Direct Investment Statistics 
Web Resources 
 
------------------------------ 
Openness to Foreign Investment 
------------------------------ 
 
Yemen, one of the worldQs least developed countries, offers 
potential investors inexpensive labor and high tariff rates for 
project finance compared to more developed countries.  There are 
opportunities for significant returns in the power, fishery, real 
estate development, infrastructure, and energy sectors.  With the 
implementation of tax incentives for foreign investors, YemenQs 
investment climate has improved steadily in the past decade. 
Investing in Yemen, however, is not for the faint of heart.  A 
minefield of potential violations under the U.S. Foreign Corrupt 
Practices Act awaits potential investors, who should expect to 
encounter government officials of all levels who solicit bribes at 
every step of a project.  In addition to corruption, other 
challenges include a lack of security in under-governed areas, a 
lack of Intellectual Property Rights enforcement, opaque dispute 
settlement mechanisms, and unclear lines of decision-making 
authority within the government.  Official letters and memoranda to 
investors and instructions within Yemeni ministries are routinely 
issued, and then subsequently ignored, by government officials. 
With the exception of a small handful of Western-educated 
technocrats, many government officials have a deep cultural 
suspicion of foreigners profiting from projects in their country. 
Navigating the inner workings of competing centers of authority 
within the government is a task best left to a competent local 
partner. 
 
YemenQs preparations for WTO accession may eventually lead to a 
freer and more open investment climate for international investors. 
Yemen still has much ground to cover, however, before meeting WTO 
membership standards, including the passage of a WTO-compliant 
customs valuation law.  In 1992, the government adopted a uniform 
investment code for both domestic and foreign investors which 
created a General Investment Authority (GIA) to coordinate work 
among eight government agencies.  GIA is charged with publicizing 
investment opportunities and obtaining government ministry approvals 
on behalf of investors.  In 2002, GIA worked with the World Bank's 
Foreign Investment Advisory service to update YemenQs investment 
laws, reducing customs duties by 50 percent on imported raw 
materials and 100 percent on raw materials produced locally for 
agricultural and fisheries projects.  Investments in the oil, gas, 
and mineral sector are subject to special agreements under the 
authority of the Ministry of Oil and Minerals and do not fall under 
GIAQs authority.  Other sectors not covered by GIA include weapons 
and explosives manufacturing, banking and money exchange activities, 
and wholesale and retail imports.  Potential investors can obtain 
information packets from GIA, including a copy of the investment 
law, an investment guide summarizing GIA activities, and an 
application form with instructions, from: Promotion Section, General 
Investment Authority, P.O. Box 19022, Sanaa, Republic of Yemen 
(Telephone:  967-1-262-962/3 or 268-205; Fax:  967-1-262-964, 
E-mail: invest@giay.org, or m_muthana@giay.org;  Website: 
www.giay.org). 
 
Since the unification of North and South Yemen in 1990, Yemen has 
embarked on a series of reforms aimed at stabilizing the economy and 
increasing foreign investment.  A successful International Monetary 
Fund (IMF) and World Bank-sponsored government economic 
restructuring program began in 1995.  Reforms included the 
introduction of a General Sales Tax (GST) and a reduction in 
domestic petroleum subsidies.  The IMF also helped introduce 
indirect monetary policy instruments, such as open market 
operations, rediscount facilities, and reserve requirements. Since 
then, YemenQs macroeconomic factors have largely stabilized. 
 
These reforms helped Yemen accumulate foreign currency reserves that 
dwindled during the last nine months of 2009 by more than USD 1.41 
billion to reach USD 7.41 billion, compared to USD 8.819 billion in 
the same period in 2008.  The Paris Club has rescheduled most of 
YemenQs external debt, which stood at USD 6 billion at the end of 
September 2009.  In 2008, YemenQs debt-to-GDP ratio was 31 percent, 
and its debt service-to-export of goods and services was 2.6 
percent, according to the Central Bank of Yemen (CBY).  YemenQs 
commercial debt has largely been eliminated through a World Bank 
grant program. 
 
Between 2003 and 2004, eight companies were privatized, seven of 
them by public auction, with the remaining company being transferred 
to the Yemeni Economic Corporation (YECO).  In 2007, the government 
announced the privatization of an additional 15 factories, but as of 
early 2010 their status was still pending.  In the past two years, 
the CBY has made an effort to improve commercial banksQ accounting 
procedures and loan recovery rates.  The CBY raised capital 
requirements for each bank to Yemeni Riyal (YR) 6 billion, or about 
USD 30 million.  The banking system remains weak, however, with most 
commercial banks owned by large families who are reluctant to lend 
outside small circles. Roughly 4% of Yemenis have bank accounts and 
most financial transactions occur outside of the commercial banking 
system. The CBY announced the first liquidation to date of a local 
bank, the Watani Bank, in 2006.  A CBY committee was assigned to 
evaluate the bankQs assets and financial obligations in order to 
start distributing the available and collected funds to the 
depositors and creditors. 
 
Boycott issues: Yemen has stated that, absent an Arab League 
consensus, it will continue to implement the primary aspect of the 
Arab anti-Israel boycott. 
 
-------------------------------- 
Conversion and Transfer Policies 
-------------------------------- 
 
As of mid-January 2010, the Yemeni Riyal was trading at YR 219YR/USD 
1, but inflation was expected to increase gradually.  Most foreign 
currencies, especially U.S. dollars, are readily available and trade 
freely at market rates.   Investors may transfer funds in hard 
currency from abroad to Yemen for the purpose of investment and may 
re-export invested capital, whether in kind or in cash, upon 
liquidation or project disposal.  Net profits resulting from 
investment of foreign funds may be transferred freely outside of 
Yemen.  Cash transfers are limited to USD 10,000.  Transfers above 
that amount must be approved by the CBY. 
 
The CBY intervenes regularly in the currency market, selling off 
U.S. dollar reserves to bolster the local currency.  In 2008, the 
CBY sold USD 1.1 billion to control currency depreciation, an 
increase from the USD 1.077 billion sold in 2007.  By the end of 
2009, the CBY had intervened at least seven times, injecting 
approximately USD 1.24 billion into the exchange market. 
 
------------------------------ 
Expropriation and Compensation 
------------------------------ 
 
Since YemenQs unification in 1990, there have been no cases of 
outright expropriation of property owned by foreign investors.  The 
government recognizes that expropriation, which existed in the 
former socialist PeoplesQ Democratic Republic of Yemen (PDRY), is 
contrary to its economic aspirations.  Most of the lands 
expropriated by the PDRY were returned to the rightful owners.  Land 
registration, however, is in its infancy and disputes over both 
residential and commercial plots are frequent and nearly impossible 
to adjudicate legally (see Dispute Settlement section).  Since deed 
information is inexact, owners are able to illegally sell multiple 
copies of a deed.  Commercial suit options are extremely 
time-consuming, prone to corruption, and judgments are often not 
enforced. 
 
Yemen's investment law stipulates that private property will not be 
nationalized or seized, and that funds will not be blocked, 
confiscated, frozen, withheld, or sequestered by other than a court 
of law.  Real estate may not be expropriated except in the national 
interest, and expropriation must be according to a court judgment 
and include fair compensation based on current market value. 
 
------------------ 
Dispute Settlement 
------------------ 
 
YemenQs judicial system is inefficient and subject to influence from 
bribes or family and/or tribal connections. While YemenQs 
investment-related laws are generally sound, enforcement remains 
problematic at best.  The government has special commercial courts 
which provide a mechanism for commercial dispute resolution, but 
they are generally considered unreliable.  Yemen is a signatory to 
the 1965 Convention on the Settlement of Investment Disputes, but 
not to the 1958 New York Convention on Arbitration.  Yemen was sued 
by U.S.-based Hunt Oil Company in a Paris-based International 
Chamber of Commerce commercial arbitration court in 2005.  The 
courtQs decision has been kept confidential, according to both 
sidesQ wishes.  Hunt Oil continues to operate in Yemen, although in 
a much smaller-sized oil exploration block. 
 
Business disputes are generally handled by informal arbitration or 
within YemenQs court system.  In 1998, a private arbitration center, 
the Yemeni Center of Conciliation and Arbitration, was created by a 
group of lawyers, bankers, and businessmen as an alternative to the 
official government-run court system.  The Center has settled 52 
disputes thus far in the areas of trade, finance, construction, and 
industry, and is slowly gaining recognition as a viable alternative 
to the official courts in Yemen.  Most Yemeni business owners, 
however, continue to eschew both government and commercial 
arbitration courts in favor of informal settlements, resulting in a 
serious deficiency in the equal application of the law. 
 
Outside investors are best served by establishing a partnership with 
a Yemeni entity that knows the system, including an international 
arbitration clause in their contracts, establishing an escrow 
account, and, where appropriate, demanding as much of the payment as 
they can get up front.  In cases involving interest, most judges use 
shari'a (Islamic) law as a guideline, under which claims for 
interest payments due are almost always rejected.  Local commercial 
banks are sensitive to this problem, and lend primarily to large 
established trading houses well known to them. 
 
--------------------------------------- 
Performance Requirements and Incentives 
--------------------------------------- 
 
YemenQs collective body of investment laws does not specify 
performance requirements as conditions for establishing, 
maintaining, or expanding investment.  Incentives permitted under 
the law include, but are not limited to: exemption from customs fees 
and taxes levied on fixed assets of the project; tax holidays on 
profits for a period of seven years, renewable for up to 18 years 
maximum; the right to purchase or rent land and buildings; and, the 
right to import production inputs and export products without 
restrictions and registration in the import/export register. 
 
-------------------------------------------- 
Right to Private Ownership and Establishment 
-------------------------------------------- 
 
Law 23 of 1997 (as amended) regulates agencies and branches of 
foreign companies and firms and outlines the requirements for 
establishing a Yemeni agent.  Chapter 3 of Law 23 permits foreign 
companies and firms to conduct business in Yemen by establishing 
foreign-owned and managed branches.  Foreign commercial entities 
wishing to open branches in their own name must obtain a permit from 
the Ministry of Industry and Trade. 
 
Under a 2002 investment law, foreigners can own 100 percent of the 
land and can execute projects without a Yemeni agent and without 
obtaining import/export license from the Ministry of Industry and 
Trade or implementing Law 23 of 1997 (the investment law implemented 
in October 2002 has precedence over other laws). The 2002 investment 
law appears to contradict longstanding Yemeni commercial laws, 
however, which limit foreign ownership to 49 percent.  The 
government is currently reviewing the laws in an attempt to remove 
inconsistencies.  In March 2008, the government amended a 1991 
investment law allowing foreigners to operate businesses in Yemen 
without a Yemeni partner. 
 
Mortgage lending in Yemen is rare because of the unwillingness of 
the court system to uphold the payment of interest or to accept land 
as a form of collateral.  In addition, Yemen has a long history of 
incomplete or inaccurate land records and frequent land ownership 
disputes, making the use of real estate as collateral difficult.  In 
2006, various agencies and ministry departments dealing with land 
ownership were merged into a common General Land Survey and Planning 
Authority.  This relatively new organization oversees land ownership 
and registration, as well as modest government urban planning 
efforts. 
 
----------------------------- 
Protection of Property Rights 
----------------------------- 
 
Yemen has a record of inadequate protection of intellectual property 
rights (IPR), including patents, trademarks, designs, and 
copyrights.  In late 2004, the Cabinet approved the Berne Convention 
for the Protection of Literary and Artistic Works, as well as the 
International Agreement on Protecting Intellectual Property Rights. 
Parliament has yet to ratify these agreements.  Yemen has yet to 
accede to any international IPR conventions and its IPR Law Number 
19 of 1994 is not compliant with the WTOQs Agreement on 
Trade-Related Aspects of Intellectual Property Rights (TRIPS).  The 
Ministry of Industry and Trade drafted new laws dealing with 
patents, trademarks design and copyrights.  As of early 2010, 
Parliament had not passed any of these draft laws.  Yemen became a 
member of the World Intellectual Property Organization (WIPO) in 
1999 and is now revising its laws with WIPO guidance.  Yemen gained 
observer status in the World Trade Organization in 2002 and has held 
regular WTO accession meetings ever since.  As part of its WTO 
accession requirements, Yemen will need to enact its recently 
revised IPR legislation and take concrete steps to enforce these 
laws adequately. 
 
In 1999, a large U.S.-based multinational firm won a trademark 
infringement case in a Yemeni court.  More than ten years later, the 
ruling is still technically under appeal and the violator continues 
to infringe on the trademark despite the court ruling.  In a second 
case involving a U.S. company's trademark, a Yemeni appeals court 
handed down a final ruling in April 2001 in favor of the U.S. 
company. In August 2003, the Yemeni Supreme Court rejected the 
appeal of the company producing the infringed products and ordered 
it to cease production and destroy the infringed trademark. 
However, this ruling has not yet been enforced. 
 
--------------------------------- 
Transparency of Regulatory System 
--------------------------------- 
 
Implementation and enforcement of YemenQs environmental protection 
regulations and labor laws are inadequate and non-transparent. 
Health and safety standards are rudimentary and not enforced. 
Customs tariff regulations and tax laws remain inconsistent and 
smuggling is common, but the government has taken steps in recent 
years to standardize the process with Automated System for Customs 
Data (ASYCUDA) systems and WTO-compliant customs valuation methods. 
Since July 2009, a draft customs valuation methods law has sat in 
Parliament waiting for approval. 
 
--------------------------------------------- ----- 
Efficient Capital Markets and Portfolio Investment 
--------------------------------------------- ----- 
 
In the 1990s, YemenQs banking system suffered from a large volume of 
non-performing loans, inadequate loan provisioning, low bank 
capitalization, and weak enforcement of government banking 
standards.  Under a 1997 World Bank-sponsored financial sector 
reform program, the government took actions to address these 
problems.  A bank reform law was passed in 1998 to update, 
strengthen, and regulate the industry.  By 2000, CBY had circulated 
strict regulations pertaining to credit risk management, liquidity, 
insider lending, foreign exchange exposure, financial leasing and 
external auditors.  Most commercial banks in Yemen comply with a 
government requirement that they reach a capital adequacy ratio of 
8% and meet new classification standards for loan portfolios. 
Nevertheless, commercial banks still suffer from extremely low 
capitalization rates and are often owned and operated by large 
trading families to service their own business needs.  As of 
September 2009, the consolidated balance sheet for all commercial 
banks operating in Yemen stood at only YR 1.463 trillion (USD 7.315 
billion). 
 
In 2000, President Saleh signed a law granting CBY greater 
independence in order to stabilize prices, limit public sector 
financing to emergency loans, and increase accountability among 
commercial banks.  The CBY is now authorized to inspect bank 
implementation provisioning and capital increase schedules and 
enforce penalties and corrective measures accordingly.  In December 
2009, the Parliament passed an anti-money laundering and 
counter-terrorism finance law. 
 
Inter-bank activities are limited, and there are no equity or bond 
markets.  Elements in the government still hope to establish a stock 
market in Yemen to promote a private sector-led growth strategy. 
Most domestic and foreign observers, however, believe that the 
country lacks the expertise to establish a stock market, and that 
there are insufficient Yemeni investors to sustain an active stock 
market.  The interest rate on Yemeni treasury bills has fluctuated 
since a high of 23% in 1999 to about 12% in 2009. 
 
------------------ 
Political Violence 
------------------ 
 
Yemen faces significant, recurring problems with terrorism and 
tribal violence. The country has suffered from a number of terrorist 
attacks, including the September 2008 suicide attack on the U.S. 
Embassy in SanaQa in which 18 people were killed and the October 
2000 attack on the U.S.S. Cole in Aden harbor, in which 17 U.S. 
servicemen and women were killed.  On March 18, 2008, mortars fired 
at the U.S. Embassy hit a neighboring girlsQ school, injuring 
several Yemeni girls.  On January 18, 2008, two Belgian tourists and 
their Yemeni driver were killed in Hadramaut governorate in eastern 
Yemen.  On July 2, 2007, eight Spanish tourists and two Yemenis were 
killed in a suicide car bomb attack on their convoy in MarQib 
governorate. 
 
The security situation in Yemen continued to deteriorate during 
¶2009.  Al-Qa'ida Yemen announced its merger with al-Qa'ida elements 
in Saudi Arabia in January 2009, creating al-Qa'ida in the Arabian 
Peninsula (AQAP).  This strategy of consolidation and greater 
organization received significant publicity and demonstrated 
al-QaQidaQs reinvigorated recruitment efforts.  The creation of AQAP 
coincided with fewer attacks within Yemen, possibly due to the 
desire of its leadership to use Yemen as a safe haven for planning 
of future attacks and recruitment because the central government 
lacks a strong presence in much of the country.  The governmentQs 
response to the terrorist threat was intermittent and its ability to 
pursue and prosecute suspected terrorists remained weak due to a 
number of shortcomings, including draft counter-terrorism 
legislation stalled in Parliament.  The governmentQs focus on the 
"Sixth War" of the ongoing Houthi rebellion in the SaQada 
governorate in the north of the country, which began in August 2009 
and had not ceased as of early January 2010, political unrest in 
southern Yemen, and internal security concerns distracted its forces 
from focusing on counter-terrorism activities. 
 
On March 15, 2009 four South Korean tourists were killed in a 
suicide bomb attack in the city of Shibam in Hadramaut governorate. 
On March 18 a motorcade carrying South Korean government officials 
was attacked by a suicide bomber on the road to Sana'a International 
Airport.  There were also a number of terrorist attacks against 
Yemeni interests in 2009, particularly Yemeni security and military 
targets.  Revenge for the imprisonment or killing of fellow 
terrorists and raids on suspected terrorist safe houses by Yemeni 
security forces motivated the majority of attacks on Yemeni 
interests.  Terrorist elements, either explicitly aligned with AQAP 
or offshoot actors, attacked Yemeni targets of opportunity in MaQrib 
and Hadramaut in June, July, October, and November, including the 
assassination of three high-level security officials.  AQAP has 
shown signs of financial strain, and Yemeni authorities suspect them 
to have conducted the sophisticated, highly-coordinated attack on a 
Yemeni bank truck in Aden on August 17, 2009 that resulted in the 
theft of USD 500,000. 
 
While attacks inside Yemen decreased in number from 2008, AQAP 
launched a daring attempt on Saudi counterterrorism chief Prince 
Mohammed bin Nayef's life in Riyadh in August.  A known AQAP member, 
claiming to seek a royal pardon during Ramadan, succeeded in gaining 
access to bin Nayef and detonated a bomb, killing himself but 
failing to inflict serious injury on the prince.   The suicide 
bomber is thought to have crossed into Saudi Arabia via the northern 
Yemeni border. 
 
Despite these security challenges, the government did have some 
successes in 2009.  On January 19, 2009, the Yemeni Counter 
Terrorism Unit (CTU) conducted a raid on an al-Qa'ida cell in 
Sana'a, which resulted in the death of two suspects, and the capture 
of another suspect and a weapons cache, including machine guns, 
mortars, and rocket-propelled grenades.  In March 2009, Abdullah 
Abdul-Rahman Mohammed al-Harbi, a Saudi AQAP member, was arrested in 
Ta'iz.  Naif Duhais Yahya al-Harbi, another Saudi national AQAP 
member, surrendered and Hasan Hessian bin Alwan, a Saudi AQAP 
financier, was arrested in June 2009.  On December 17, 2009, strikes 
were conducted on two significant AQAP sites.  Similar strikes 
followed on December 24.  In the wake of these operations, ROYG 
officials affirmed that they will continue to pursue AQAP 
operatives. 
 
As Saudi security forces have clamped down on terrorism, and foreign 
fighters have returned from Afghanistan and Pakistan, Yemen's porous 
borders have allowed many terrorists to seek safe haven within 
Yemen.  At least 35 known al-Qa'ida operatives, veterans of fighting 
in Afghanistan, currently reside in Sana'a.  The government lacks a 
strong security apparatus outside major cities and its Counter 
Terrorism Unit (CTU) and Yemen Special Operations Force (YSOF), the 
state's two premier counterterrorism entities, still require 
additional training and funding in order to effectively target 
terrorist elements.  Unfortunately, the government has used the CTU 
and the YSOF in Sa'ada to fight the Houthis, which has limited their 
capacity to target AQAP.  The government's definition of "terrorism" 
differs greatly from the USG definition of terrorism.  In addition 
to AQAP attacks, the government also views the Houthi rebellion in 
the north, the southern separatist movement in the south, and piracy 
in the Gulf of Aden as acts of terrorism. 
Terrorists have also sought to attack economic targets, specifically 
in the oil industry, which accounts for more than 70 percent of 
YemenQs government revenue. On September 15, 2006, two significant 
attacks were carried out on oil installations. The first involved 
two explosive-laden trucks detonated at the Canadian Nexen oil 
pumping facility at Ash Shahir in the eastern governorate of 
Hadramaut, resulting in one death and two injuries among the local 
guard force. The second attack occurred at the Safer oil pumping 
facility in MarQib, where two trucks carrying explosives detonated. 
In 2002, a French oil tanker was bombed off the coast of Mukallah. 
 
Yemen continues to be plagued by frequent kidnappings, which have 
traditionally been used as a means for tribes to pressure the 
government to accede to their demands for resources or improved 
services. Although a government crackdown in recent years has 
reduced the number of kidnappings, a couple of high-profile cases 
occurred in December 2008: three Germans were kidnapped in the Beit 
Bous area of SanaQa and released after one week in captivity and a 
South African woman and her two sons were kidnapped in Abyan 
governorate in southern Yemen and released unharmed a few days 
later.  On June 12, 2009, seven Germans, one South Korean and one 
British citizen were kidnapped in Sa'ada, likely by al-Qa'ida in the 
Arabian Peninsula (AQAP) affiliates. The bodies of three women from 
the group were found on June 16. As of yearQs end, the remaining six 
hostages were still missing. 
 
Investment projects outside the capital often succeed or fail solely 
based on the strength of relations with the surrounding tribes. 
Tribes frequently hijack vehicles belonging to foreign companies in 
order to pressure the central government to provide additional 
social services in the area.  Attacks on oil pipelines are 
commonplace in Yemen. These types of attacks occur most frequently 
in oil exploration and production areas, including, but not limited 
to, the outlying governorates of MarQib and Shabwah.  Tribes in 
these regions claim they are not getting their fair share of 
economic activity in their areas, and investors should be very 
sensitive to the need to build strong and lasting community 
relations. The provision of community-based services, such as 
healthcare and education, can contribute to protecting investments 
in isolated areas. 
 
---------- 
Corruption 
---------- 
 
Corruption is a significant impediment to U.S. investment in Yemen, 
since it is nearly impossible for U.S. investors to verify with any 
degree of certainty that local partners, the key to any projectQs 
success, will comply with the letter and the spirit of the U.S. 
Foreign Corrupt Practices Act.  U.S. investors should be aware that 
Yemeni businessmen have an operating definition of corruption that 
differs vastly from one that would satisfy an American corporate 
lawyer.  Kickbacks and bribes at every level of government and at 
every phase of a project are a common way of doing business. 
Despite ratifying the UN Convention Against Corruption in 2005, 
Yemen ranked as the 154th most corrupt country out of 180 countries 
and territories on Transparency InternationalQs 2009 Corruption 
Perception Index, compared to 141st in 2008.  The poorest country in 
the Arab world, Yemen has a hugely overstaffed and underpaid civil 
service.  One can see ministry employees who make less than USD 300 
per month driving luxury cars and traveling abroad in first class. 
Potential foreign investors are often approached, either directly or 
indirectly through an intermediary, with offers by government 
officials to swing a tender or a project license for a Qfee. 
Illicit activities include soliciting and paying bribes to 
facilitate project approval, leveraging dispute settlements, 
changing tax rates and customs tariffs, and engaging in family or 
tribal nepotism.  Government officials at all levels regularly 
approach investors to serve as Qproject consultantsQ for 
unjustifiably high rates, a common form of soliciting a bribe that 
provides officials with some form of plausible deniability.  The 
government recognizes that it must enact civil service and 
administrative reforms to create disincentives to corruption, but 
progress has been extremely slow. 
 
Parliament approved the creation of an 11-member Supreme National 
Authority for Combating Corruption (SNACC), an independent body with 
the authority to track down corrupt public officials and retrieve 
funds obtained through corrupt practices.  SNACC is charged with 
drafting and implementing anti-corruption policies and collecting 
financial disclosure forms from senior government officials.  SNACC 
can investigate individuals involved in financial crimes and public 
corruption and refer them to the judiciary for prosecution.  Since 
its creation in 2007, SNACC has collected more than 15,000 financial 
disclosure forms from public officials and sheikhs and has referred 
five corruption cases to Yemeni prosecutors for trial.  None of the 
five cases had resulted in convictions as of December 2009. 
 
------------------------------- 
Bilateral Investment Agreements 
------------------------------- 
 
The U.S. and Yemen signed a Trade Investment Framework Agreement in 
¶2004.  According to the General Investment Authority (GIA), Yemen 
signed three bilateral investment agreements in 2003 and one in 
2004, bringing the total number of bilateral treaties to 35.  Yemen 
has bilateral investment treaties with Algeria, Austria, Bahrain, 
Belarus, Belgium, Bulgaria, China, Djibouti, Egypt, Ethiopia, 
France, Federation of Russia, Germany, Hungary, India, Indonesia, 
Iran, Jordan, Kuwait, Lebanon, Malaysia, Morocco, the Netherlands, 
Oman, Pakistan, Qatar, South Africa, Sudan, Sweden, Syria, Tunisia, 
Turkey, the UAE, Ukraine, and the United Kingdom.  Yemen has signed 
initial agreements with Croatia, Mongolia, and Romania.  As of early 
2010, these agreements have not yet entered into force.  For more 
information on YemenQs bilateral investment agreements, please see: 
www.giay.org or www.investinyemen.gov.ye. 
 
-------------------------------------------- 
OPIC and Other Investment Insurance Programs 
-------------------------------------------- 
 
Yemen and the United States signed an investment guarantee agreement 
in 1972.  As of October 1997, OPIC and EXIM Bank provide guarantees 
for both private and public sector projects of short and medium 
duration.  Yemen is a member of the Multilateral Investment 
Guarantee Agency (MIGA).  The comparatively short length of export 
credit agency repayment terms for Yemen (in EXIMQs case, seven 
years) is a significant impediment to the financing of any major 
investment project.  Potential investors should consult early on 
with representatives from OPIC and EXIM Bank regarding the financing 
profile of a given project. 
 
----- 
Labor 
----- 
 
The Yemeni Government generally follows International Labor 
Organization (ILO) standards regarding labor laws and worker rights. 
 In 1999, it ratified ILO conventions on the elimination of the 
worst forms of child labor and the minimum work age for employment. 
As in other areas, the governmentQs implementation and enforcement 
of labor laws is weak.  Child labor is an issue of special concern. 
Some children work with their families in agriculture.  To address 
this issue, the government signed an agreement to cooperate with the 
International Program on Elimination of Child Labor (IPEC) in 2000. 
After ratification of the ILO conventions, the government 
established the Child Labor Unit at the Ministry of Social Affairs 
and Labor to implement and enforce child labor laws and regulations. 
 The local pool of skilled labor for technology-intensive ventures 
is limited. 
 
There is a high rate of illiteracy in Yemen, and the few students 
who complete secondary education or even university studies often do 
not possess the same professional standards as their counterparts 
from Western educational institutions.  University graduates also 
experience difficulty finding appropriate employment and are 
sometimes unwilling to accept lower skilled jobs.  The government is 
beginning to focus on increasing access to and improving the quality 
of vocational training as a means to develop a cadre of skilled 
laborers in high demand fields such as construction workers, medical 
technicians, electricians, mechanics, plumbers, and carpenters. 
 
------------------------------ 
Foreign-Trade Zones/Free Ports 
------------------------------ 
 
The Yemen Free Zone Public Authority was established in 1991 to 
develop the Aden Free Zone (AFZ).  Yeminvest, a joint venture 
between the Port of Singapore Authority (PSA) and the Bin Mohfoud 
Group of Saudi Arabia, was awarded the concession to develop the 
area.  Dubai Ports World (DPW) now operates the Aden Container 
Terminal (ACT) in the AFZ. 
 
ACTQs current annual capacity is 650,000 Twenty-Foot Equivalent 
Units (TEUs).  The 35 hectare container yard can store up to 10,000 
boxes.  Yemen Ports Authority recently constructed a new 270-meter 
long and 12 meter-deep dock assigned for unpacking the wheat-loaded 
vessels.  The dock will alleviate burdens of the other seven docks 
in the port. 
 
An industrial and warehousing estate called Aden District Park (ADP) 
was launched in November 2002.  The Aden Container Terminal and the 
Aden Free Zone are promising areas for investment.  Opportunities in 
light industry, repackaging and storage/distribution operations are 
welcomed.  Future plans include the development of heavy industry 
and more extensive tourist facilities in the greater Aden area, 
although, as of early 2010, the government had made little headway 
in implementing any of these projects. 
 
Free zone incentives include the possibility of 100 percent foreign 
ownership, no personal income taxes for foreigners, and a corporate 
tax holiday for 15 years (renewable for 10 additional years), 100 
percent repatriation of capital and profits, no currency 
restrictions, and no restrictions on, or sponsoring required, for 
the employment of foreign staff.  AdenQs main selling point is its 
strategic location Q nine days steaming from Europe and seven from 
Singapore.  It is four nautical miles off the main Far East - Europe 
sea route. For further information, contact: Free Zones Public 
Authority (AFZPA), (Main Center) P.O. Box 5842 Khormaksar, Aden, 
Republic of Yemen, Telephones: 967-2-234484/5/6, Fax: 967-2-235-637, 
e-mail: adenfz@y.net.ye; website: www.adenfreezone.com. 
 
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Foreign Direct Investment Statistics 
------------------------------------ 
 
As of early 2010, the General Investment Authority had not yet 
released foreign direct investment statistics for 2009.  In 2008, 
foreign direct investment in Yemen totaled USD 1.947 billion, 70 
percent of total investment.  Most U.S. investment in Yemen is in 
the oil and gas exploration and production sectors. 
 
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Web Resources 
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United States Embassy in SanaQa, Yemen 
http://yemen.usembassy.gov 
 
Export.gov 
http://www.export.gov/ 
 
Export.gov provides online trade resources and one-on-one assistance 
for U.S. businesses who would like to start or expand global sales. 
 
BRYAN