The Second Yemeni Economic Conference
Sana'a  18 - 20 April, 1998

Abstract 7:

Economic Reform and Structural Adjustment

Mr. Abdulkader Ba-Jammal
Minister of Planning and Development

In light of the diversity of the Yemeni economy and its inter-relationships, and in view of its transitional status, ambiguity of its features and characteristics in relation to production, consumption and savings, as well as the absence of a culture based on stable and constant concepts, structural adjustment for the Yemeni economy should be founded on the following criteria and rules:

Accomplishing the merger of the economy towards total integration requires a solid reliance on a clear economic methodology, philosophy and policy, whose basis is market economy and competition for all economic forms, with no restrictions except for some exceptional cases that take a temporary and conditional status.

The basis for structural adjustment implies, in first place, amending the economic functions and the role of the state in the fields of production, services, and distribution. That is, transferring its role from a goods and services producer to a role that vitalizes, refreshes and monitors the production of goods and services by the private sector at set quality standards. The intervention of the state will be limited to prevent monopoly and the concentration of wealth so as to ensure a balanced and sustainable development.

Structural adjustment should include the restitution of means of production to their previous owners. However, property restitution should at the same time acknowledge established rights of the working parties that have accrued during the public ownership period.

Structural adjustment (privatization) should lead to a broader ownership base to enhance the middle income group. This can be achieved by transferring government ownership to the workers, that is workers who become shareholders, as it is the case in the privatization model of the leased stations.

The concept of privatization should not be absolute nor constrained to the mere transferring of ownership from the public to the private sector through direct sale. Privatization ought to reflect a broader concept to incorporate the following operations:

Transferring ownership to workers.

Holding public tender.

Co-sharing in relation to capital and operations.

Selling government shares and stocks to the partners in the mixed sector.

Offering long term leasing contracts for land and buildings.

 

From the experiences of structural adjustment in many countries, legal, administrative and procedural rules and criteria have stabilized over the years to the extent that they have gained unanimous acceptance by specialists, academicians, international organizations, and national participants. They provide guarantees for privatization operations against deviation as well as minimizing mistakes. These rules are represented in the following:

 

All operations should rely on laws or by-laws that are clear in text and procedures.

Fulfilling openness and transparency in privatization procedures to allow for maximum possible participation on competitive grounds.

Evaluation should be undertaken on neutral basis and rules and by a qualified firm that has acquired the techniques and the know-how. The selection of the evaluator should exclude those who have vested interest in privatization directly or indirectly.

However, these criteria and rules require capable technical tools and inter-linked mechanisms of defined and clear norms that are totally committed to the implementation of the methodology, the legal rules, the accounting and evaluation tools, on the one hand, while preventing any intervention or creation of loopholes in the working norms, on the other.

It is well known that some countries have resorted to establishing new ministries, higher independent councils, or committees of specific and independent functions to undertake privatization operations. However, selecting any of these forms to administer privatization in any county rests on the following factors:

Size of the public sector.

Circumstances behind establishing the public sector in its various historical phases.

Financial and organizational ability of the private sector to undertake the functions of the public sector.

Technical and administrative level of the production and service structures and complications rising from absorbing modern technology.

Size of accruing revenues or spending burden as a result of the government operating production and service units.