Chinese-Yemeni Joint Venture in Fish Industry

Introduction

With the fish and seafood industry growing rapidly in recent years, productions are increased and new businesses are developing to meet the demands of consumers. A joint venture in fish industry between a Chinese company and a Yemeni company could be a potential successful business. When assessing political, economical, social, and technology and infrastructure environment in both countries, we will be able to get a clear picture of the potential benefits, costs, and risks of creating such business.

Political Environment

Republic of Yemen was formed in 1990 after the unification of North and South Yemen. President Ali Abdulla Saleh’s status as the president (he is currently serving his second term) has been confirmed by Yemen’s citizens through elections in which all Yemenis are allowed to vote. One of the redeeming strengths of Yemen’s political infrastructure is the country’s vibrant multi party electoral system where the political party in power has to stand against opposition parties in elections and in parliamentary debates. The latest Yemeni parliamentary elections took place in 2007. (MEEPAS 2008)

The Communist Party of China, or the CCP, was founded in 1921 and became the dominant political party of China in 1949. The system of government is complex, but basically focuses on a governing council of 300 who are responsible for making laws that support the will of the Chinese people. Economic reforms have taken place in the party in the recent past to encourage business in a more capitalist way. The current constitution was adopted by the 5th National People’s Congress on December 4, 1982. (China Guide 2008)

Economical Environment

Yemen is an open economy that welcomes foreign direct investment in all sectors. Its stable political and economic environment, well-qualified workforce and strategic position in the south of the Arabian Peninsula make it an attractive place for investment.

Fish wealth is counted the second source for the population. The country has rich marine life and is home to over 350 species of sea creatures. Yemen’s marine wealth is estimated at approximately 850,000 tons. Production in 2005 was estimated at 290,000 tons with an annual growth rate of 21.4 percent. Exports in 2003 reached 38 billion Yemeni Riyals (YR), giving an average yield of 168 YR per kg, which is less than $1 (USD) per kg. (R. Al-Saqqaf & M. Al-Kamali 2006)

Almost 90 percent of all fishing activity remains traditional in nature, while the other 10 percent utilized relatively advanced equipment. Such investments include the creation of a cooperative society to buy seafood wholesale from fishermen and retail the catch on the local market or pack it for export. The canned tuna industry has also seen investment as Yemen now has three canning facilities producing over 30 million cans of tuna both for the local market and for export. (FAO 2002)

The economy of the People's Republic of China is the second largest in the world after the US with a GDP of $10.21 trillion (2006). China has been the fastest growing major nation for the past quarter of a century with an average annual GDP growth rate above 10%. China's per capita income has grown at an average annual rate of more than 8% over the last three decades drastically reducing poverty. (Wikipedia 2008).

China is very much a global player in the world of fish. Far and away the world's largest producer of fish, with roughly 1/3 of global production, China's total haul is five times that of Peru, the second-largest. Fisheries represent a $30 billion component of China's economy, equal to 3% of GDP. China exports $3 billion of fish each year, and fish is an increasingly important food source for the nation large and still-growing population. (US Embassy in China 2002)

Chinese fisheries officials state frankly that their biggest problem is overfishing. China's Bureau of Fisheries (BOF) in the Ministry of Agriculture has a multi-pronged strategy for reducing fish catch to sustainable levels:

1. Adhering to international fisheries treaties;

2. Beefing up enforcement of domestic fisheries law;

3. Using administrative tools such as moratoria and catch limits;

4. Developing the fisheries processing industry as an alternate employment source;

5. Cutting the number of fishing boats;

6. Cutting the number of fishermen; and

7. Promoting aquaculture as a substitute for wild catch. (US Embassy in China 2002)