GRM 2010 GRM 2011

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Attract Foreign Direct Investment to Yemen and maintain its presence: Strategic policy paper
Paper Proposal Text :
There is a considerable mobility of capital across countries’ boarders in the world economy today. Movement of capital from one country to another is the trend in international business relationship in the twenty-first century. A major part of the global capital movement comes in the form of Foreign Direct Investment (FDI). It is a key ingredient in sustainable economic growth, economic and social development, and national competitiveness. It can impact the host country’s economy through a variety of channels. For instance, by adding to investable resources and capital formation, by transferring technology, skills, innovative capacity, and organizational and managerial practices between countries, and by accessing several international marketing networks. In addition, as a continues process, Evidence shows that FDI can be an efficient instrument in developing natural resource, building infrastructure, creating jobs, reducing poverty. However, these positive effects may vary in their magnitude depending on the quality of the business environment in the host country’s economy and the characteristics of foreign investors.
Yemen, one of the world least developed country and one of the poorest country in the Arab world, with a large labor force, high unemployment, inadequate physical infrastructure, untapped Natural resources, and lack of sufficient capital. It is among those countries that are competing to attract FDI. Yemen realizing that FDI is an essential mean to introduce new capital and develop Yemen human resources, issued in 2010 “Investment Law NO. 15.” The investment law aim is to provide the environment to attract FDI to the country. Therefore, the question for Yemen is no longer, in great part, whether Yemen should attract FDI or not, instead it is a question of how Yemen will be able to increase its inflow, in what form, and what should be done to maintain the presence of FDI and for a long period of time.
Yemen has had some limited success in attracting FDI in comparison to other countries in the region. In addition, Yemen in some years experienced some out-flows of capital. According to the U.S Department of State’s report “2012 investment climate statement” based on the World Bank’s Foreign Direct Investment Report, USD 239 million was withdrawn from Yemen in 2011. The finding of preliminary research on Yemen FDI indicates the absent of strategic policy that creates an environment that maximizes Yemen ability to attract and maintain the presence of FDI.
The purpose of this paper is to develop a strategic policy that outline steps Yemen must take to create an environment which maximizes its ability to attract FDI. Section one presents facts and figures on FDI distributions worldwide and among countries in the region; FDI overall benefits, factors that determines FDI flows. Section two reviews the existing investment law in Yemen; the role of the General Investment Authority (GIA), FDI benefits to Yemen; and will assess Yemen progress over the years. Section three, identifies some key areas as determinants of FDI for Yemen; legal reform; talent pool; investment incentives; regional integration; transparency. Section four, summary of findings and recommendations.