Aden: 68789 Commercial Capital of Yemen L O C A L E C O N O M I C D E V E L O P M E N T S T R AT E G Y   Foreword Since 000, with the issuance of the Local Authorities Law No. 4, Yemen has been pursuing an ambitious decentralization agenda. This agenda aims to delegate greater fiscal and administra- tive authority to local governments and to give communities –public leaders, residents, and inves- tors – more control over the economic and social development of their cities and towns. To date, city development strategies (CDS) have been initiated in four of Yemen’s largest urban areas – Sana’a, Aden, Hodeidah, and Mukalla. With support from Cities Alliance and The World Bank, the CDS process in each of these cities has brought together public and private sector leadership to assess the strengths and weaknesses of the city, think strategically about opportuni- ties for equitable economic growth, develop a long-term vision, and draft a prioritized action plan. In all four cases, the CDS process has been coupled with revisions to the cities’ master plans to ensure a strong link between economic development plans and infrastructure. The benefits of the CDS process go far beyond the writing of the CDS document. To create a long-term vision for the city required the participation of a variety of public, private, and civil soci- ety leaders who do not often have the occasion to come together to discuss the challenges and opportunities facing the city. The structure for cross-sectoral communication provided under the umbrella of the CDS has had a lasting effect in terms of helping to align the city’s social, eco- nomic, and environmental interests. In addition, with the financial support under the CDS, local leaders had access to much needed technical support and expertise focused on issues of local concern. The purpose of this publication is to summarize the main outcomes of the studies, discussions, and strategic planning accomplished during Aden’s CDS process. Moreover, it aims to serve as a guide for the city’s local economic development that is presented in a manner that is accessible to a broad audience. H.E. Mr. Abdel Kareem Al-Arhabi Deputy Prime Minister for Economic Affairs Minister of Planning and International Cooperation  Acknowledgements The development of this local economic development strategy would not have been possible without the financial support of the Cities Alliance. It was a collaborative effort involving many government officials, pub- lic agency staff, private sector representatives, and members of the Yemeni civil society. It is with special appreciation that the following stakeholders are recognized for their significant contribution to the creation of the Local Economic Development Strategy for Aden: Mr. Taha Ahmed Ghanim, Governor of Aden (996-00) Dr. Yahya Mohammed al-Shuaibi, Governor of Aden (00-006) Mr. Ahmed Al Kohlany, Governor of Aden (006-008) Aden Governorate Local Council Mr. Mohamed Zemam, National Coordinator of the Port Cities Development Program (00-008) Mr. Jamil Mahmoud, Director of the Aden Local Economic Development Department Mr. Sheikh Mohamed Omer Bamashmoos, Chairman of the Aden Chamber of Commerce and Industry The development of the Local Economic Development Strategy for Aden benefited from the support of lo- cal and international consultants including: Kaia Miller, Competitiveness Consultant, Aslan Global; Ismail Sharif, Consultant; Ala’edeen Shawa, Clusters and Local Economy Consultant; and David Sims, Urban Planning Consultant. In addition, the Strategy was facilitated by Sameh Wahba and Catherine Lynch of The World Bank, and builds on several studies, including: Ecorys, “Vision and Strategy for the Aden Free Zone.� June 008. Halcrow, “Revised Master Plan for Aden.� March 006. Miller, Kaia. “Building the Competitive Advantages of Aden: Designing and Implementing a Cluster- based Economic Development Strategy.� Aslan Global, 00. Shawa, Ala’edeen, “Potential Contributors to Aden’s Competitiveness: A Review of Clusters & Busi- ness Support Service Networks.� December 00. World Bank, “Challenges Facing the Aden Free Zone and Benefits of Special Economic Zones.� October 007. 4 INTRODUCTION X EXECUTIVE SUMMARY X ADEN TODAY Population, Employment and Poverty XX Land, Infrastructure, and Urban Development XX Local Economy XX Business Climate XX ADEN TOMORROW Cultivating Regional Cluster of Competitiveness XX Maritime XX Hospitality and Tourism XX Manufacturing XX IMPLEMENTATION XX  INTRODUCTION Aden thinks strategically about Local Economic Development. Aden’s position at the tip of the Arabian Peninsula airport facilities, and in upgrading the city’s infrastruc- near the entrance to the Red Sea, only four miles ture. The government’s flagship investment was the from the main East-West shipping route, and its nat- Aden Container Terminal (ACT), which opened for ural deep-water harbor have historically made the business in March 999. The ACT resulted in a sig- city one of the busiest refueling stations in the world, nificant expansion of activities in the Port of Aden. servicing most ships that pass through the Suez Ca- Indeed, the declaration of Aden as a Free Zone, the nal. construction of ACT, and the infrastructure invest- ments have been met with growing interest from Aden is an ancient city and its great status as a trad- both national and international investors to locate ing center dates back to the seventh century BC operations in the city. when it served as a station for merchants of spice and incense and a passageway for caravans. In In December 00, Aden began the formulation of modern times (89-967), Aden was the primary a Local Economic Development Strategy. The ob- trading post in the Arab region for the British and jective of the Strategy is to support private sector ranked fourth among the world most important ports. productivity and improve the quality of life in the At its peak, in 90, the number of vessels that en- city. In the last few years, significant attention and tered the port of Aden reached between 40 and 0 a study has been directed at the city of Aden – a re- day, putting Aden in second place after New York as vised and updated master plan, an assessment of the busiest port. the local economy, a clusters analysis, and a priority economic investment plan. Through a participatory After the unification of Yemen in 1990, and to capi- process, and with input from industry experts, Aden talize on Aden’s location advantage, the city was assessed its existing economic and physical assets, declared a free trade zone, which further enhanced and identified three strategic areas with high growth its role as the economic and commercial capital of potential – maritime, hospitality and tourism, and Yemen. Since then, the Government of Yemen has manufacturing industries. invested significantly in the expansion of port and 6 7 EXECUTIVE SUMMARY Aden is poised to assume its role as the commercial capital of Yemen. Aden has a number of widely recognized unique as- structure offerings that are attractive to businesses sets, which are critical inputs to its emerging strate- in key clusters, such as an international airport, sea- gic positioning within Yemen and the region. Most port and container terminal. The transport system in notable is its natural deep-water harbor on the Red Aden is a major driver of the local and regional econ- Sea, striking landscapes and distinctive topography, omy where land, sea and air transport modes all play abundance of raw materials, and rich urban heritage. significant roles and maintaining and enhancing the In addition, the residents of Aden are known for their physical linkages between them is a crucial objec- hospitable nature and openness to diversity.. tive for the efficient functioning of the city. ADEN TODAY Local Economy Today, leadership in Aden, both public and private, The city of Aden is differentiated from the rest of the are motivated to create prosperity. Despite a broad country in several important ways. First, Aden has a portfolio of assets and existence of key infrastruc- deep and naturally protected seaport. Second, the ture, the city must address constraints that are hold-immediate region has an abundance of raw mate- ing back economic growth. rials. Finally, Aden is well known for its hospitable culture and rich urban and physical heritage. These Population, Employment and Poverty characteristics, combined with the presence of the One of the most significant socio-economic chal- container terminal, international airport, and Aden lenges that Aden confronts today is unemployment. Free Zone, comprise the foundation for the future It is estimated that there are some 8,000 employ- growth of the maritime, hospitality and tourism, and ees and self-employed individuals in Aden, the ma- manufacturing industries in the governorate. jority of which work for the public sector. The sec- ond largest employer is wholesale and retail trade, Business Climate followed closely by transport and communications Recurring business problems and frustration at the and education, respectively. lack of progress since unification have created a strong desire for action and results on the part of Within the Yemeni context, Aden has lower than av- both public and private sector leaders in Aden. The erage urban poverty, ranking sixth out of the twenty- city has a long history of international trade, but is one governorates. In 006, an estimated 7% of currently dominated by the public sector and still urban families fell below the poverty line, versus struggling to shed the legacy of communism. Busi- % in Sana’a and % nationally. It was estimat- ness leaders and local authorities agree that the ed that 9.% of households are connected to the rules and regulations governing the private sector power system, 9% have access to running water, are in need of strengthening, especially in relation to and 78% of households are connected to sanitary customs and business licensing and registration. services. However, the city suffers from high levels of unemployment. In fact, the official unemployment While there is a Chamber of Commerce and Indus- rate is estimated at 8%, about double the national try in Aden, cluster-specific organizations are weak average.4 or absent. To spur innovation and ensure a pipeline of trained labor, there is also a need for better com- Land, Infrastructure, and Urban Development munication and coordination among universities, the Aden has much of the basic infrastructure required private sector, and the government. for businesses to compete, with a few areas requir- ing major investment. The city is spread across Finally, the emerging institutional architecture and 6,980 square kilometers and is composed of eight process for change in Aden needs further develop- districts, each with its own commercial center. The ment. The quality of dialogue, particularly between city developed on a peninsula and subsequently the public and private sector needs to improve, and expanded along the coast, following the main radial the responsibilities of the private and public sectors route inland. need to be articulated, acknowledged, and pursued. While the government needs to do everything it can Like the rest of Yemen, there are large gaps in basic to help the private sector, the businesspeople of infrastructure. However, Aden has a number of infra- Aden need to accept more responsibility for improv- ing the region’s economy.  Aden Local Economic Development Department  Yemen Poverty Assessment, The World Bank 007  Central Statistical Office, Statistical Yearbook 2006  Central Statistics Office 8 ADEN TOMORROW Stage : The President of Yemen has committed his atten- • Stimulation of Growth in Import/Export Reliant tion to Aden as the “economic growth pole� for the Manufacturing Activities; and country. To realize this vision, the city will build on • Enhanced Incentive for Warehousing and Re- its existing unique assets and strengths, differentiate Export Functions to Locate in Aden. itself from other regions, grow new economic clus- ters, and strengthen the existing clusters. Stage 4: • Mobilize Growth in other City-Based Linkage Clusters of Competitiveness Services (e.g. manufacturing, packaging, bank- Cultivating economic growth clusters is a long-term ing, maintenance services, etc.); endeavor involving multiple private and public sector • Growth in Passenger and Cargo Throughput at partners. Successful local economic development the Airport; and strategies do not pick winning clusters, but build • Stimulation of Growth in the Hospitality and on the surrounding region’s inherited assets (e.g. Tourism Cluster. geography, climate, population, research centers, companies, governmental organizations) to create Stage : specialized economies that differ from other regions • Triggering the Growth of Strategic Sectors (i.e. and offer advantages to local companies. In cultivat- IT and supply chain management). ing regional clusters of competitiveness, however, established and already emerging clusters offer the Infrastructure for Growth greatest prospects for short term. Based on Aden’s Strengthening the Maritime, Hospitality and Tourism, unique assets and relative strengths, clusters that and Manufacturing clusters requires a solid physical present the greatest prospects for near term produc- growth plan and targeted investments in infrastruc- tivity growth include: ture. The Aden Master Plan 0 was completed in 006, guiding the physical development of the city • Maritime; in line with economic and social goals. The Master • Hospitality and Tourism; and Plan emphasizes ease of access to the core eco- • Manufacturing. nomic infrastructure of the city, specifically the port, airport and free zone, as the physical map to eco- Implementing the LED Strategy nomic growth. A participatory process in which groups, including private and public sector leaders, and representa- A priority investment plan was created to realize the tives of relevant institutions define priorities and fill potential of Aden’s Local Economic Development then design solutions is the recommended path to Strategy. Twelve priority investments in the city of sustained productivity growth. The Local Economic Aden were identified and focus on (i) core economic Development Strategy embodied in this document assets and clusters and (ii) strategic infrastructure represents a shared economic vision. To build mo- investments. There are multiple synergies among mentum off of this foundation, a strengthened Aden the priority investments, and overall they provide Local Economic Development Department (LEDD) ample benefit to residents, existing business, and could facilitate cluster-specific workshops, organize future investors. high-level policy dialogue, and commission addi- tional studies of promising clusters. The following, phased action plan was developed during the strat- Strategic investments include: egy making process and reflects input from public, . Off-site Infrastructure for Aden Free Zone; private, and civil leadership in Aden. . New Berths and Cargo Village at Port; Stage : . ACT Concession Expansion; • Establish an Organization for Economic Devel- 4. Off-site Infrastructure for Bulk Commodity Port opment that Coordinates the Growth Process; • Ensure Strong Leadership from a Diverse Group and Raw Materials Processing Zone; of Aden’s Leaders; and . Off-site Infra. for City Periphery Industrial Zone; • Re-Initiate and Sustain a Healthy Rate of Growth 6. Improved Bonding/Warehousing in Tawahi; in Transshipment Volume. 7. Cargo Village and Cold Storage at Airport Stage : 8. Expansion of Power Facilities; • Invest in Specialized Research Institutes and 9. Expansion of Water and Wastewater Facilities; Cluster-Specific Institutions for Collaboration; • Trigger Growth in the Maritime Cluster; and 0. Roadway Improvements; • A Reduction in Shipping Cost and an Increase in . Natural Gas Pipeline to Aden from Belhaf; and the Number of Shipping Lines Calling on Aden. . Aden Causeway Widening. 9 ADEN TODAY Public and private leadership in Aden are motivated to create prosperity. With solid demographic indicators and widespread Aden fares better than the national average at only infrastructure coverage, the leaders in Aden are mo- 7% of the governorate population. However, as the tivated and ready to implement a strategy to spur second largest city in Yemen, Aden is home to about economic growth. Within the Yemeni context, Aden 0% of the country’s poor urban families (approxi- has lower than average urban poverty, ranking sixth mately 6,00 households). Compounding the pov- out of the twenty-one governorates. In 006, an es- erty challenge is the fact that urban areas have high timated 7% of urban families fell below the poverty income inequality. In Aden, for example, income in- line, versus % in Sana’a and % nationally. It equality increased by about 4% between 998 and was estimated that 9.% of households are con- 006.8 nected to the power system, 9% have access to running water, and 78% of households are connect- Employment ed to sanitary services.6 However, the city suffers The main socio-economic challenge that Aden con- from high levels of unemployment. Indeed, the of- fronts today is high unemployment, likely spurred by ficial unemployment rate is estimated at 28%, about a skills mismatch and increasing migration to Aden double the national average. from the neighboring Governorates. Population, Employment, Poverty and Migration As of 007, it is estimated that Aden had 8,000 Trend: Aden has many positive demographic in- employees/self-employed individuals, or .6% of dicators, but suffers from high unemployment. the Yemeni total.9 Of this workforce in Aden, 87% were paid employees and a further 0% were self- Demographic Characteristics employed. The comparative figures for Yemen as a The Aden Governorate, which is defined as 100% whole were 4% and % respectively, pointing to urban, is home to % of the total national population a relative lack of entrepreneurial spirit in Aden. Fur- at about 6,000 people in 006. According to the thermore, just 9% of the workforce was employed Population and Housing Census of 994, the Aden in the private sector compared to 80% for Yemen as Governorate had a population of over 400,000, a whole.0 Public employees account for the lion’s and the city a population of slightly less. It was the share of Aden’s workforce. The unemployment rate second largest population of any urban area after in 004 was estimated at almost 8%, a very high Sana’a City, which had a population of 94,000. The figure compared to only 16.2% nationally. two cities were also the most urbanized of the coun- try’s Governorates (being 00% and 88% urbanized Only % of working women in Yemen are employed respectively).7 However, there is a relatively high in the non-agricultural sector. With % participation number of people in Aden that are categorized as by women in the formal labor force, Aden is an ex- un-numerated by the Central Statistical Organiza- ception. The vast majority of these women (approxi- tion, which is understood to include unregistered mi- mately 9%) work in the public sector (in civil service grants from outside Yemen and estimates for those or state controlled enterprises) compared to only 6% people who refuse to cooperate with census officials of women in Yemen overall. These women mostly and procedures for various reasons. A large number work in the social sectors such as education, health of migrant workers from the adjoining Governorates and public administration which together account for live temporarily in the city in non-permanent hous- 66.7% of Adeni women’s employment. This sector ing. These are typically single male workers and provides more gender equal employment opportu- could represent a sizable additional element of the nities than elsewhere in the country. For instance, population. women account for % of employees in education compared to 8% for the country as a whole. The Poverty remaining 7% of women working in Aden’s formal Despite a reduction in urban poverty in Yemen over sector are employed in private enterprises. the past decade, % of urban households still fall 8 Yemen Poverty Assessment, The World Bank 007 below the poverty line. In regard to urban poverty, 9 Aden Local Economic Development Department; data adapted from 999 Labor Force Survey.  Yemen Poverty Assessment, The World Bank 007 0 Based on 999 Labor Force Survey 6 Central Statistical Office, Statistical Yearbook 2006 11 Central Statistical Office 7 Aden Master Plan, 006  “Women in the Local Economy of Aden, Yemen.� The World 0 Land, Infrastructure & Urban Development Trend: Aden has much of the basic infrastruc- Estimated Composition of ture required for businesses to compete, with a Employment in Aden few areas requiring major investment. The city of Aden has a complex urban structure. Un- like most port cities, which have a clearly defined central business district, residential suburbs and in- dustrial zones, Aden is made up of a number of sep- arate districts, each with its own commercial center. The city grew on a peninsula, which provides a good natural harbor. It has expanded along the coast and followed the main radial route inland. Today, the Governorate covers an area of 6,980 square kilo- meters. Crater, Ma’alla and Tawahi are districts on the peninsula separated by mountains, each with its own separate identity. Khormaksar lies on the isth- mus of the peninsula and is divided into a northern and southern half by the airport. Mansoura, Sheikh Othman and Dar Saad are three separate districts on the main radial route inland which are rapidly merging to become one large conurbation defined on its western edge by Wadi Al Kabir and potentially Migration extending to the eastern seaboard. To the west of In order to obtain a better understanding of migra- the Wadi Kabir is the district of Boreika, the principle tion patterns, a series of focus group discussions settlement of which is Little Aden. and interviews were conducted as part of the Mas- ter Plan research. A cross-section of the community Crater: Cater is located on the Aden peninsula, on was chosen in order to obtain a balance of social the east facing external volcanic slopes. It is bound groups. Those involved in the focus groups or in- by the sea to the east (Holkat Bay and Front Bay) terviews included teachers, housewives, business- and south, by steeply sloping volcanic rock faces to men, hawkers, workers and ahkdam (street sweep- the west, and by the District of Khormaksar to the ers) and included both those born in Aden and more north. recent migrants. Crater is the historic centre for Aden, having provid- All the teachers reported school overcrowding, part- ed port facilities until the deep water requirements of ly as a result of the influx of migrants. Students and more recent vessels forced a move to Ma’alla and their families came from not just the neighboring Tawahi. It therefore provides a setting for a number governorates of Lahj and Abyan but also Shabwa, of important historic structures and buildings. Taiz, Hodeidah, Mockha, and Sana’a. Thus there is no clear pattern of migration to the city and Aden ap- It is a thriving centre for retail and commercial activi- pears to attract people from all parts of the country. ties, supported by relatively high density residential development. It also boasts Aden’s first large scale A number of reasons were cited for people moving shopping centre and a number of public recreation to Aden but no clear differences emerged between areas on the seafront. The western fringes are char- the social groups. The two most frequently given acterized by informal residential construction that is reasons were for education, because schooling was climbing the surrounding slopes. believed to be better in Aden than their own gover- norate, and the availability of water. The availability In townscape terms this area offers a rich diversity of electricity was also cited but seemed to be less of imagery, supported by objects of cultural and his- important than water. Business opportunities were torical significance. The narrow streets that form the another reason given for the move to Aden but job bulk of the area are lined with small retail outlets in opportunities was considered less important. The the form of a traditional souq, and further retail is fact that a relatively low proportion of people cited provided with the city’s first major shopping centre job opportunities as a reason for migrating to the on the waterfront. City is perhaps a reflection of the high levels of un- employment in Aden. Ma’alla: Ma’alla is located on the northern side of the peninsula, bounded by the port on the north, Crater to the east, and Tawahi to the west. The south side Bank 00 is contained by the northern ridge of the volcanic for-  Districts in Aden mation. north side, as part of a unique tourist attraction. The area developed in importance when the dock Tiwahi: Tawahi is located on the western end of the facilities moved from Crater in the 9th century. The peninsula, with sea to the north, south and west, and primary activity focus is the port, but there is also a mountain slopes to the east. It is linked to the rest of busy major retail street. Residential development is Aden through Ma’alla to the east. characterized by 6 story apartment buildings front- ing the main street, and by lower density apartments This area is rich in the historic remains of the re- and houses to the south. There are also large areas cent past, particularly the residential buildings on of informal dwellings on the northern slopes of the the western slopes. The port element is still active, mountains. and historic buildings around this area attest to the past importance of Tawahi as a terminal for passen- The port has thrived in the past and is showing signs ger vessels. As with other areas on the peninsula of revival. However, there is limited space on the there is a creeping growth of informal housing up the landside for port-related industry and warehousing. slopes and into the wadis. Inland there are government offices, shops, banks and housing co-existing compatibly. A large vacant The core itself is a thriving area typical of the market site, formerly a tank farm and owned by Yeminvest, centers of Aden. Cars and pedestrians jostle for su- awaits redevelopment. premacy, and as in Crater, there is a clear need for a pedestrian friendly plaza area in the centre. Again, Access to this area is from Crater, via a narrow neck like Crater, this could be created by the demolition cut through the mountain. Until recently this neck of a number of semi-derelict single storey structures was spanned by a man-made arch, but road-widen- in the centre of the zone. The area would then also ing activities have led to the removal of this landmark have the benefit of a strong civic focus. structure. This has resulted in the loss of a very sig- nificant Gateway feature, and consideration should The western area demonstrates a completely inde- be given to re-creating an arch over the widened pendent character, largely due to the impact of the highway. This could serve the purpose of linking the topography, and the prevalence of a tropical archi- volcanic crater with the historic fortifications on the tectural style in the older buildings. Although mostly  in a sad state of repair (including the buildings used Aden. Army camps are still located here but are as a military hospital) these structures are unique in likely to be relocated outside the Governorate in the Aden and demonstrate definite qualities as appropri- near future thereby releasing large areas of land ate solutions to the climatic needs of the area. for development. Much of the area is relatively low density comprising villas that were formerly used by Over time the wadis and hill slopes have seen an army officers, some of which are now converted into accretion of development, much of it unplanned and offices. therefore making little contribution to the urban char- acter of the area. Roads are steep and dangerous, Major development took place in the 90’s, when and formal areas of open space are extremely limit- a substantial quantity of villa housing for British of- ed. However, there are areas of military land that are ficials and military families was constructed. Much underutilized. These could provide space for more of this housing is now used by private companies, open space and other much needed community fa- embassies and administration offices, although the cilities. area is still primarily characterized by simple plots with large villas. Small areas of industrial infill are an unfortunate ad- dition to the land uses in this area. Commerce is limited to one main street, and there are examples of small scale industry. The area is To the south developed is more dispersed. The area also characterized by large tracts of vacant or unde- is characterized by beaches and mountain slopes rutilized military land. with a number of individual developments built to take advantage of the unique setting. Unfortunately Northern Khormaksar: This area is shown in the lat- many of these do not make any effort to respect the est iteration of the Master Plan as predominantly environment, and act instead to reduce its quality. residential and subdivided into a number of neigh- Road improvements have made more of this area borhood blocks. Much of the area has by now been accessible, and proposed extensions of the coast demarcated for development but very little progress road through Gold Mohr Bay threaten to attract more has been made as water and electricity supplies development which, unless it is carefully controlled, have not yet been provided. The development has could also act to reduce the unique quality of this the potential for becoming suburban sprawl. Apart part of the Aden coastline. from one sizable park there does not appear to be any special feature providing interest in this area ex- Khormaksar: Khormaksar is a large flat area of land cept for the seafront. located in the neck of the Cape of Aden. It is bound- ed by the extended length of Abian Beach to the Sheikh Othman, Mansoura, and Dar Saad: These east, by the Inner Harbour area to the west, and by three areas have grown up as ribbon development Crater to the south. The northern part of the District along the main road to Lahej. Over the years the rib- is completely severed from the rest of the area by bon has widened and the three areas have merged the Airport. into a single conurbation. The latest iteration of the Master Plan shows new residential neighborhoods Khormaksar is the former military stronghold of planned as far as northern Khormaksar in the east Density in Aden Districts, 2004 District Area (ha) Built-up Area Residential Population Average (ha) (ha) Density (pp/ha) Crater ,00 40 00 9,600 96 Ma’alla 77 80 40 6,800 ,40 Tiwahi ,8 0 0 60,700 40 Khormaksar ,680 ,4  4,000 0 Mansoura ,940 660 6 6,800 49 Sheikh Othman ,6 0  99,00 46 Dar Saad 6,6 406 7 7,00 44 Little Aden 7,00 ,000 4 8,800 44 TOTAL 36,249 4,878 1,289 600,200 466 Source: Aden Master Plan, 006  Existing Land Uses in Aden, 2005 and Wadi Al Kabir in the west. Similar to northern Little Aden: Little Aden has grown up on the strength Khormaksar the areas give the appearance of be- of the oil refinery in the 1950s. British Petroleum coming a suburban sprawl. started the Little Aden refinery in 1952. Large flat ar- eas nestling between high steep rocky outcrops and Sheikh Othman District was started in the 880’s as ridges characterize the area. On the north the devel- a dormitory town for workers in the Aden docklands. opment is separated from the mainland by a wetland Mansoura bounds it to the west and by Dar Saad khor; the area to the east and south is bounded by to the north. Large areas of saltpans demarcate the the sea, and the west extends to the adjacent town southern boundary, and the eastern edge is unde- of Badar Fukum. fined by formal built development, although plans are in place for substantial expansion of Aden into The flat areas are dominated by the refinery and oil a number of new Districts in this area. Although the tanks, with limited planned and informal settlement area is largely characterized by relatively high-den- areas. To the south there are a number of unspoiled sity residential developments, there is also a strong beaches protected by the ridges. focus in the form of a major mosque and market de- velopment on the main commercial street. It is remote from the rest of the city and contains ex- tensive areas of undeveloped land, much of it zoned Mansoura was originally laid out as a new town ad- in the Free Zone Master Plan as industrial, and the jacent to Sheikh Othman in the 960’s. It has subse- coastline as tourism. As mentioned above, the re- quently grown to become one of the more densely finery is too distant to have an adverse impact on the populated Districts in Aden, characterised by mush- city as a whole but there may be local impacts within rooming developments of apartment buildings. its buffer zone. Further along the coast towards Wadi Al Kabir the steam turbine power station may The original plan is laid out as a strong grid, with have an adverse impact on the expanding communi- high levels of plot coverage leading to closely ty of Al Shaab. The main element in this community spaced buildings. More recent development has led is the city university. This campus is currently a long to a breakdown of the original grid, but with build- way from the rest of the City, although some facilities ing intensity maintaining similar levels. The intensity are located within other parts of the city. increases on properties fronting the major roads, as developers try to maximise the visibility potential of- Land in Aden has been widely allocated to private fered by these locations. parties in a manner that is far beyond that required to satisfy rates of growth. This has resulted in large 4 vacant areas, even in prime town center locations. historic sites, such as the Tawilah Cisterns, Sirah In fact, of Aden’s 6,000 hectares, it was estimated Castle, the Al Aidrus Mosque, the Aden Minaret, and in 004 that less than ,000 (or %) were devel- the Palace. oped. A variety of options for higher education and skills A strong physical and information infrastructure is training exist in Aden, but businesspeople are con- a baseline requirement to establish and sustain a cerned that there is a lack of a well trained workforce prosperous regional economy. This includes good in Aden. It was suggested that many of the better quality roads, highways, airports, railroads, telecom- educated and trained have left to work in the Gulf munications, water and power. These basic invest- and that the output of new students is not adequate. ments support the efficient movement of people, The content of courses was criticized as over de- goods, and services as well as the quality of life for pendent on theory but short on practical, hands on residents. Additionally, investments in unique and work. Aden possesses one of the larger universities specialized assets such as university campuses, in Yemen, with over 6,000 students registered. It research programs, and logistical infrastructure are is organized into 7 faculties. The largest faculty is important. Universities and research centers are Administrative Sciences, which includes accounting the driving force behind innovation in nearly every and business studies, followed by Education. Voca- region. Although companies and individuals create tional training is provided at secondary level in Voca- a large number of innovations, universities and re- tional Centers in Khormakser and Mansoora and at search centers institutionalize entrepreneurship and a number of post secondary level institutes, includ- ensure a steady flow of new ideas. While clearly there are gaps in basic infrastructure, Aden does have a number of advanced and special- ized infrastructure offerings attractive to businesses in key clusters. Aden is home to both an internation- al airport and active seaport. The airport is appropri- ately located with landing and take-off over the sea, which reduces safety and noise concerns, and with vehicular access to most parts of the city within  minutes. The airport is generally in good condition and well equipped and could handle a far greater volume of traffic than it is currently serving. A plan for developing a cargo village and cold storage facility would greatly expand the airport’s role in the import and export of goods. The first formal port in Aden was located in Crater, where warehouses were built and the customs post was constructed facing Front Bay by Sirah Island in the 9th Century. As trade increased, the focus of activity shifted to the more sheltered main harbor at Ma’alla, where the present day cargo port is still located, backed up by later commercial and resi- dential areas much of it built after the Second World War. Today port traffic has to penetrate through the main built up areas to reach the hinterland. A truck ban has been introduced during the daytime so that trucks/truck loading and unloading do not hinder or disturb the smooth flow of traffic. At night time trucks have to use the road to the east of the airport as the road to the west, i.e. the causeway, is not able to carry heavy traffic because of loading restrictions. The city has access to several important natural resources including fish reserves, minerals and stone quarries, and a long coastline including sandy beaches. Additionally, the city is home to several Before and After Upgrading of the Al  Michael E. Porter, et al, Clusters of Innovation: Re- gional Foundations of US Competitiveness. Durain Industrial Estate  Aden Free Zone Sector Master Plan Existing Free Zone Land Allocations Sector Land Use Area (ha) A Expansion of Aden Port 9 B Expansion of Warehousing Facilities 9 C Aden Container Terminal ,900 D Warehousing Facilities 9 E Expansion of Airport Traffic 0 F Expansion of Air Cargo Village 98 G Airport Related Industry 0 H Expanded Economic Activities 84 I Expansion of Aden Airport Facilities ,469 J Light Industrial Activities ,440 K Planned Future Airport ,770 L Heavy Industry 4,000 M Expansion of Little Aden Refinery Port ,00 N Petrochemical Industries 90 O Tourism 4,000 TOTAL 32,400 Source: Aden Free Zone Investor Guide ing the Technical Commercial Institute, the Maritime Technical Institute and the Industrial Technical Insti- The main industrial areas in Aden are the oil refinery tute. Because Aden will not realize its vision of pros- at Little Aden, the light industrial area at Al Durain, perity for its citizens without successful businesses, and the Aden Free Zone. The oil refinery utilizes an increased focus on business training (marketing harbor facilities in Little Aden and is sufficiently far and product development), and the creation of clus- removed from the city as not to cause any environ- ter-specific training facilities and research institutes, mental impact. The Al Durain area is conveniently with strong linkages to the private sector will be criti- located between the Mansoura conurbation and the cal to Aden’s economic development strategy. new development area to the east and can be seen 6 as part of a larger employment area extending along unloaded at the port was up an average of 6.% the saltpans to the northern side of the airport. In- annually, while tons of cargo loaded grew by .0% frastructure in Al Durain was recently upgraded as annually. The cargo moving in and out of the Aden part of the Port Cities Development Program. After seaport is dominated by oil which represents about the completion of the infrastructure improvements, 9% of cargo loaded and 68% of cargo unloaded in which included new roadways and utilities, it is esti- total tons in 007. The trade gaps of these two prod- mated that the 8-hectare area provides ,900 jobs uct groups are similar, highlighting the small role that in 6 light industrial establishments. exports of non-oil dry cargo play.6 Between 999 and 006, total tons of cargo sent by air increased The Aden Free Zone was established in 99 with by about 0% annually while cargo received in- the aim of transforming Aden into a hub for interna- creased only 7% annually, slightly closing a large tional trade. It is comprised of ,000 hectares of gap in goods traded by air. land (two-thirds of the total area of the Governorate of Aden) divided among  districts, allocated to dif- The port, although still dominated by the loading and ferent industrial, logistics, and services activities. unloading of oil, is increasingly integrated with Aden’s local economy and its international performance vs. Actual implementation of the project began on other regional ports is improving. Although still small March 8, 996 when the government signed an overall, there was a .6% average annual increase agreement with Yeminvest on the development of in exports between 999 and 007. Several new the Aden Container Terminal and the Industrial and companies located in the free zone are taking ad- Warehousing Estate. The Terminal comprises six vantage of Aden’s new high-performing container quays at a length of ,60 meters with 6 m depth terminal. Growth in the production of metal products expandable to an 8 m depth in the future. The ACT and marine maintenance services used by the port project will be implemented in three phases. Phase is creating future potential opportunities for busi- I was inaugurated and went into operations in March nesses to emerge. of 999. Phase I includes two quays of 680 m in length and 6 m in depth and a container yard of An analysis of the Aden Governorate’s share of  hectares capable handling an annual throughout national employment in its key economic activities of approximately 00,000 TEU. The Terminal facil- suggests several areas in which the governorate is ity spans a total area of 8 hectares of quay and outperforming the country overall in the creation of container handling equipment. It has ample space jobs. Total employment in Aden accounts for .6% for container storage, efficient yard operations, and of national employment. However, in three econom- service and administration facilities.4 A 6-hectare ic activities, Aden’s share of national employment Distri Park and the Industrial and Warehousing Es- is much higher than .6%: Mining and Quarrying, tate were completed in 00. Transportation and Storage, and Real Estate Ac- tivities. These higher than average shares of em- The Aden Free Zone Authority has licensed about 0 ployment suggest that the Aden Governorate has companies (mainly trade related) to establish offices relative advantages, and relatively higher ability to in the ACT complex and about 4 companies to im- support employment, in these areas. plement projects in the remaining parts of the Zone, of which less than 0 are operational. These compa- Business Climate nies include warehousing and a variety of manufac- Trend: Aden has a rich history of international turing operations. Most projects are oriented to the trade and shipping, but requires better public- domestic market, and include both foreign and local private coordination and entrepreneurial mo- businesses. The licenses issued also include licens- mentum to realize its full potential. es for the development of residential complexes in the zone. In total, licensed projects account for less The rules, incentives, and pressures governing the than  percent of the total area of the zone. competition in a region have a fundamental influence on productivity. Policies that encourage investment, Local Economy protect intellectual property, and open the local mar- Trend: Imports and exports from Aden are in- ket for trade, for example, foster productivity growth. creasing, and maritime, tourism, and manufac- Strong rivalry and the intensity of local competition turing-related industries show growth potential. also contribute. Aden has a rich history of interna- tional trade, but must leave behind the vestiges of The data from the Port of Aden and Aden Interna- its communist period during which most productive tional Airport reveal that Aden’s trading connections assets were nationalized in order to seize the entre- increased in from 999-007. Total tons of cargo preneurial opportunities of the future. 4 Ministry of Planning and International Cooperation website 6 Kaia Miller; data updated with information from the  Ecorys, 008 Port of Aden. 7 A survey of business leaders in Aden in 00 re- fluence on the process of creating and improving vealed that there are some negative perceptions of products and services. Sophisticated customers in the business environment in Aden, relative to that a region pressure firms to improve and offer insights of neighboring countries such as Egypt and Jordan. into existing and future customer needs. Customer The challenges are not surprising and include: the demand in Aden could be described as weak and quality of basic infrastructure, particularly roads and unsophisticated, frequent tourists and Yemeni ex- electricity; administrative bureaucracy, particularly patriates visiting from abroad represent groups with in customs and business licensing and registration; generally more sophisticated demand which local underdeveloped business management and strat- businesspeople could learn from to improve their egy skills, weak clusters, and lack of a real culture of products and services. For example, tour compa- competitiveness and entrepreneurship. Additionally, nies, hotels, handicraft shops and restaurants could the quality of life was criticized by local leaders and institute regular surveys with visitors to improve their foreigners looking to do business in Aden and via offerings, and exporters could do the same with their the port and must be addressed if Aden is to posi- international customers. Additionally, the local gov- tion itself as a competitive, international port which ernment could work with the central government on stands out from its peers, and attract outside com- stronger consumer protection laws and enforcement panies to locate there.7 of the laws. The emerging institutional architecture and process As part of the Port Cities Development Program, the for change in Aden needs further development. The Aden Investment Advisory Council, which includes quality of dialogue, particularly between the public key public officials and private sector representa- and private sector needs to improve, and the re- tives, was created, and an investors’ services facility sponsibilities of the private and public sectors need was established. However, the city lacks a strong to be articulated, acknowledged, and pursued. The and active chamber of commerce. Moreover, clus- survey results highlighted the importance of an im- ter-specific organizations in Aden are either weak proved private-public sector dialogue. The roles of or nonexistent, and there are few practical linkag- both the private sector and the government are easy es between the universities and the private sector. to describe but difficult to achieve in practice. The Forming and institutionalizing informal groups such government needs to do everything it can to help the as women entrepreneurs, university alumni groups, private sector, except show favoritism and impede and cluster-specific groups with broad representa- competition -- investing in the business environ- tion from all related and supporting industries as well ment, reducing administrative bureaucracy, engag- as training institutes can contribute greatly to the ing in a dialogue with not just the few large firms, improvement of strategies, the development of new but the smaller and medium-sized firms where the businesses, and cooperative efforts to strengthen region’s growth appears to be most dynamic, and, key clusters. finally, investing in the image and promotion of Aden internationally. On the other hand, the businesspeople of Aden need to accept more responsibility for improving the region’s economy. Currently, according to the survey results, there is a strong tendency among private sector leaders in Aden to view the govern- ment as the leader in the economy and to blame the government for their problems. These business leaders need to invest in their own strategies for up- grading the differentiation, sophistication and quality of their products and services. This means investing in business strategy skills in areas such as under- standing customers and markets, analyzing costs and benchmarking the competition. Both govern- ment and business leaders need to invest in a more effective and ongoing dialogue with each other and design a strategic process for change that combines ongoing, data-based analysis of Aden’s current com- petitive position with broad-based leadership, short- term wins, and clear performance metrics. The quality of demand in a region has a strong in- 7 Kaia Miller 8 Tonnage Loaded and Unloaded at the Port of Aden Source: Port of Aden Aden’s Share of National Employment by Economic Sector Source: Central Statistical Office 9 ADEN TOMORROW Aden: The Commercial Capital of Yemen The vision and strategy for Aden’s future must be vide the city a comparative advantage in maritime, based on its unique assets and history, and the tourism, and manufacturing industries. But, for the strategy for achieving the vision must be consis- city to achieve a competitive advantage in those in- tent with the elements of an effective regional eco- dustries, local authorities and business leaders must nomic development strategy. An effective regional establish positive feedback mechanisms. In short, strategy will build on the region’s existing strengths they must leverage Aden’s static assets to grow in a and unique assets, will be differentiated from other new and dynamic way. regions, will encompass a wide range of clusters, and will strengthen established, traditional clusters. Clusters of Competitiveness Leaders in Aden have recognized these critical ele- Cultivating economic growth clusters is a long- ments of their future strategy. The shared vision for term endeavor involving multiple private and Aden is to evolve into a truly modern city which ef- public sector partners. fectively utilizes its competitive advantages to attract local and international investment and to function as To realize its long-term vision of high and rising a highly competitive regional hub for sea and air car- prosperity for its residents, Aden will not only have go, passenger transport activities, and related sup- to invest in upgrading its business environment, but port services such as manufacturing, international it will need to cultivate regional “clusters of competi- trade, and tourism. tiveness.� In fact, to maximize results in the shorter term, the clusters Aden elects to focus on first should In addition to focusing on cluster development, a determine the prioritization of improvements in the successful regional strategy also must align with business environment and urban infrastructure. national objectives and differ from other regions in Yemen based on the unique assets and relative The development of clusters is a long process oc- strengths present in the city and its surrounding re- curring over decades. Clusters often originate as a gion.8 In the expanded version of Aden’s future vi- result of strengths in the business environment. In sion, the alignment with Yemen’s national vision and Aden’s case, the city’s natural harbor and location objectives becomes much more apparent in areas near the entrance to the Red Sea, strategically situ- such as exploiting the potential in tourism, strength- ated between the Suez Canal and the Indian Ocean, ening the link between the city and the Free Zone, increasing exports, strengthening links between higher education and society, strengthening insti- Private Sector Investment tutes of innovation, and strengthening government- in Aden (1996-2002) private sector relations. There is a shared sense of pride in Aden, particularly around the city’s strategic location and port, the his- tory and culture of the city, and the hospitality of the people. These themes not only present foundations for defining the future city that Aden wants to be, but they are directly connected to two dynamic indus- tries in Aden: tourism and port maintenance prod- ucts and services. Aden’s international competitive positioning as a port city should be guided by these themes. There is a strong desire for action and re- sults expressed by both public and private sector leaders. The President of Yemen has committed his attention to Aden as the “economic growth pole� for the country and local private and public sector lead- ers are rising to the occasion. Aden’s strategic location, port, and history may pro- 8 Michael E. Porter, et al, Clusters of Innovation: Regional Foundations of US Competitiveness. 0 on major international shipping lines, gave rise to the companies, which makes them unnecessarily vulner- shipping and maritime cluster. The region’s colonial able. For example, in Aden, where shipping related history and spectacular topography contributed to services is one of the region’s key clusters, incidents the emergence of the city as a recognized tourist such as the bombing of the USS Cole in 000 and destination. Clusters can also arise from unusual, the attack on the French oil tanker Limburg in 00 sophisticated, or stringent local demand, or from the can decimate the cluster temporarily. An overdepen- formation of a few innovative companies that stimu- dence on shipping means the people of Aden suffer lates the formation of more. One of the questions disproportionately. A wide array of specialized clus- central to Aden’s economic development strategy ters can help protect a region against such economic is how to speed up the process of cluster develop- shocks. ment. That said, in cultivating regional clusters of competi- A sound regional economic development strategy tiveness, established and already emerging clus- will build on the region’s unique assets and relative ters offer the greatest prospects for short-term re- strengths to develop specialized clusters. Success- sults with an explicit cluster development process. ful city strategies do not pick winning clusters, but Short-term positive results can encourage other build on the surrounding region’s inherited assets clusters to engage in an explicit cluster develop- (e.g. geography, climate, population, research cen- ment process. Based on Aden’s unique assets and ters, companies, governmental organizations), to relative strengths, as well as its existing industries, create specialized economies that differ from other clusters that present the greatest prospects for near regions and offer advantages to local companies. term productivity growth include Maritime, Hospital- ity and Tourism, and Manufacturing. Other clusters Aden’s strategy must include the cultivation of a that should be considered based on recent dynamic broad array of clusters. Although all regions tend to growth, existing assets, potential sources of advan- specialize in a few clusters, some are especially over tage and excitement and commitment of local lead- dependent. They have a disproportionate share of employment in one cluster, and even in a handful of  ers include Wood Products and Seafood. Kong. However, in the 960s, the Port of Aden was struck by two blows from which it is still recovering. Overlapping clusters offer potential synergies in skill, Nationalist feelings ran strong in south Yemen and technology and partnership. Exciting opportunities an increasingly violent series of confrontation with can often be found at the intersection of clusters and the British Authorities followed. Eventually the Bris- Aden should pay particular attention to these areas tish left Aden in 967, leaving a very doubtful secu- of overlap. rity situation, which continued until after unification in the 990s. Almost all the dhow trade left Aden at this The city of Aden is known for its port and its rich point and international shippers were very reluctant physical and cultural heritage. However, the compo- to take ships into the port. sition of its economy suggests a much more diverse set of existing and emerging “clusters� beyond port Also in 967, the Suez Canal was closed following a activities and tourism. Aden’s industrial production regional conflict and it remained closed for 7 years. grew .% annually from 998-00. Production is This cut off the flow of international shipping past dominated by the Food/Beverage/Tobacco sector Aden, and the only ships entering the Red Sea were at about 8% of total industrial production in 00, those accessing local ports. As a result, there were followed by Chemicals, Wood Products and Met- no opportunities to act as a distribution point and the als. Food/Beverage/Tobacco, although significant, bunkering business disappeared. After unification, remained stagnant while Wood Products showed the the Port of Aden expanded steadily with the refinery strongest growth at 9% annually over the four-year throughput continuing and bunkering re-establishing period.9 itself, albeit at a lower level than pre-967. Some of the dhow trade returned but it had become much As a port city, Aden has tough competition in a re- more centered on the Arabian Gulf, leaving Aden on gion where ports abound. The region’s leading port, a limb rather than at the center of the trade. Jebel Ali, offers all of the services found in Aden (particularly transshipment and container services) In the intervening years, the patterns of world trade as well as additional services often for better rates had changed with much cargo switching from tramp (particularly repair services) and much higher quality steamers to container ships and vessels demand- of life onshore. However, Jebel Ali’s positioning as ing much shorter turn around times. Aden therefore a new, modern port city is quite different from those had to adapt to servicing ships lying alongside rather elements that characterize Aden: history, culture, than discharging into lighters. Aden responded to and people. If the quality of services and rates in this by building the Ma’alla terminal, which was com- Aden continue to improve, the port’s geographic po- pleted in 99. sition close to parts of India and Northern Africa, and a deep history of trade connections with these areas, In the mid 990s, the Aden Free Zone Authority along with a differentiated positioning based on his- let a concession to Yeminvest to build a new con- tory and culture, could combine to set Aden apart. tainer terminal in Aden harbor and this was opened in 999. As part of this work, the channel was also Aden’s Maritime Cluster dredged to a depth of 15 meters, sufficient to accept Maritime, and it related industries, is Aden’s most the largest container ships afloat. Trade at the ACT promising growth cluster. This cluster is also expect- developed rapidly up to nearly 00,000 TEU per year ed to function as a conduit for the transfer of eco- and showed signed of continuing growth. Unfortu- nomic returns from regional infrastructure to the city nately, this growth was interrupted by the bombing economy. In addition this cluster is also expected to of USS Cole in Aden harbor in 000, followed by the contribute to the equitable distribution of economic destruction of the French tanker, the Limbourg, off value and employment and income generation op- Aden by terrorists. These incidents destroyed Aden’s portunities to marginalized segments of the city’s hard won progress, and the port has been trying to economy through direct employment of all skill lev- recover ever since. els and genders of local workers as well as through the engagement of micro, small and medium scale The Maritime cluster includes city-based as well as enterprises operating in Aden. Free Zone-based suppliers of products and servic- es. City-based firms have to obtain licenses from In the 90s, Aden was one of the major ports of both the Port of Aden and the Aden Free Zone in or- the world, acting as the regional distribution center der to secure entry to the two major cargo-handling and also taking many calls from ships for bunkers. terminals at the port. An additional license is usu- At this time, the port was growing as fast as world ally required for entry to deliver services to vessels trade and everyone was confidently predicting that (Tankers) calling on the Oil Terminal. Most of the Aden would become the regional equivalent of Hong larger city-based firms operate as umbrella entities playing the role of securing orders and sourcing their 9 Kaia Miller: updated based on data from the Central Statis- tics Office various supplies or services through local venders.  However, some of these firms are vertically integrat- Currently, the Maritime cluster is maintaining a stable ed and maintain bonded warehouses at the Port of level of activity, but it has not witnessed significant Ma’alla, which they tap and replenish as needed. rates of sustained growth over the past few years. However, it is anticipated that growth will begin to Such firms specialize on the supply of goods and occur once transshipment throughput is recovered services to vessel crew that include, but are not limit- and other business environment related improve- ed to, fresh and processed foods and other supplies ments are made that focus on facilitating access for that meet the personal needs of crew members, in- city and region-base suppliers to gain streamlined cluding: clothing, communication cards, temporary access to all shipping terminals through the consoli- use cellular phones, and a range of other items. dation of the licensing process as well as through They also includes suppliers of spare-parts (unspe- the set-up of specialized bonded zones that could cialized at this stage), lubricants, and a range of me- be used by city-based firms for housing supplies as chanical, electrical, hydraulic, and pneumatic parts, well as their maintenance workshops. Growth in this and other maintenance services required for minor cluster will also be further and significantly expanded vessels as well as for maintaining and repairing car- once a modern, well equipped and suitably located go handling or holding equipment. There is a small, dry dock facility is established at the port, which will but potentially growing, number of free zone-based begin to attract vessels seeking more substantial suppliers of products and services that at this stage maintenance services requiring the input of a range seem to specialize in the provision of high technol- of service providers. ogy services to vessels that include navigation and wireless systems repairs and calibration, in addition The broader Maritime cluster also includes several to other more complex vessel electronic equipment sub-sectors, including: banking, shipping and freight repair services. Such suppliers source some of their forwarding, insurance, legal services, cargo han- base components from city-based suppliers, when dling, logistics, and land transport, as well as man- and if available, but generally tend to maintain a agement consulting and accounting. Currently, there small stock or place orders from their headquarters is significant activity taking place in some of these or from international suppliers when they are notified subsectors, driven primarily by its city-based client by an approaching vessel of its special needs. base. However, the scale of operations is expected to grow as growth begins to take place in warehous-  ing and re-export activities at the Free Zone and as port support cluster which, for cost reasons is usu- local imports of raw materials and exports of unpro- ally located outside the zone and in some cases, in cessed or semi-processed locally sourced primary a different country or region. In the case of Aden, goods and manufactured products begins to grow. the foundation of this cluster already exists within the city and must be positioned to capture as much Revitalizing this cluster will require rebuilding trans- of the demand which will be generated as growth shipment throughput at the port and triggering begins to take place in warehousing and re-export growth in investment in warehousing, re-export and activities. manufacturing activities at the Free Zone. It would also benefit significantly from improvements to the Participating firms in this cluster will have to main- quality, consistency and cost competitiveness of tain high levels of product quality and offer highly cargo handling operations and procedures at all port competitive prices in order to maintain their competi- terminals and from the resolution of the monopolis- tive edge over competing regional suppliers. For tic conditions that have hindered the performance this reason, facilitating the growth of such firms and of the stevedoring and land transport sectors. Im- proactively supporting their efforts to develop their provements in the capacity of the commercial court competitive advantages through the enhancement and enhancement of the level of knowledge of mari- of their product quality and the efficiency of their pro- time and international trade law among local con- duction and product delivery systems will be critical. signees (importers/exporters) will also contribute to improving the business environment within which Aden’s Hospitality and Tourism Cluster this cluster functions. A successful Hospitality and Tourism cluster is cor- related with above average economic growth rates, It is anticipated that sustained growth in transship- accelerated local and foreign investment, high qual- ment traffic through the Port of Aden will contribute ity job creation, and improved public education, and to a reduction in shipping cost which, coupled with with the right strategies, can incubate regional pros- other improvements to be carried out will trigger perity and economic growth. Upgrades required for growth in investment in warehousing and re-export a successful Hospitality and Tourism cluster benefit activities. Such activities typically tap a range of ordinary citizens and increase the competitiveness products and services of a warehousing and re-ex- of a region’s business environment. These up- 4 arrangements, restaurants and other food catering entities, household support and supply services, and family and general entertainment facilities. From a quality-of-life perspective it could also encompass hospitals, clinics and pharmacies, preschools and grade schools, public libraries, museums, and pub- lic parks, open urban spaces and children’s play- grounds. The cumulative quality of all of the above subsectors and entities, determine the quality of life in a city and its livability from the perspective of its various categories of inhabitants and users. Aden offers a good foundation under most of the above categories, but gaps do exist, especially in the quality and consistency of services. At the cur- grades include: a stable and risk-free political and rent level of demand for short and long-term accom- regulatory environment, a high degree of safety and modation, the city experiences a surplus in capacity security, good health, hygiene and environmental during most periods of the year. Capacity limitations standards, respect and protection of foreign and become clear during national events that lead to private ownership, secure property rights, techno- the influx of visitors from various parts of the coun- logical innovation, integrated air, ground and tourism try and during the Arab tourism season. However, networks, high quality hotels and banks, broadband these peaks in demand are infrequent and do not at access, cellular phone coverage, electronic pay- this stage justify significant investment in additional ment systems.0 capacity. The same situation applies in the case of demand for restaurants and food catering as well as The number of foreign tourists visiting Aden has in other areas related to household support and sup- more than doubled from just fewer than 6,000 in ply services. The quality of such services should be 998 to some 4,600 in 007. However, this is still improved to adhere more consistently to internation- a relatively low number. The striking modesty of the al standards. This will be a prerequisite that must latter figures emerges when compared, for example, be achieved and maintained in order to ensure that with tourism arrivals to Hammamet in Tunisia, Aga- the city can offer the needed capacity and quality to dir in Morocco and Sharm-el Sheik in Egypt, which, meet growing demand. in 006, received 6,000, 78,700 and . million international visitors, respectively. According to official data, the number of hotels in Aden has also increased in recent years and in 006 it was recorded that there were  hotels offering ,0 hotel rooms (6,468 beds). In 998 there were only  hotels providing 8 beds. Of the total hotels in Aden for 006, the majority were three star estab- lishments or lower, with only five offering four and five star accommodation. During the nd National Conference for Tourism held in Sana’a in 00, it was estimated that on average tourists spent $0 per night in Yemen, with the av- erage number of nights in the country being four. On average the number of nights per tourist in Aden in 007 was less than three. Given the relatively low nights per tourist in Aden this suggests that it is mainly a stop-over location. In 007, over 00 travel and tour companies were registered with the Aden Chamber of Commerce and Industry. The Hospitality and Tourism Cluster encompasses a wide range of subsectors and activities that in- clude hotels, inns and other rental accommodation 0 See “Travel and Tourism Competitiveness Report 007,� Booz Allen Hamilton and the World Economic Forum.  Quality-of-life related services are less developed There are three key areas with tourism growth po- and represent a critical gap in the city’s capacity to tential in Aden – Crater, Tawahi, and Gold Mohr. accommodate an influx of regional and international new comers and to meet their higher standards for Crater is the historic center of Aden. It possess a rich healthcare, schooling and other basic living support historic urban fabric nestled within a distinctive and services. Moreover, the number of usable and good dramatic landscape which offers an ideal physical quality urban spaces, parks and playgrounds as well foundation for the development of a beautiful and well integrated central city district which could house as cultural institutions is limited and will require a fo- cused effort to expand and develop. mixed-use activities including residential, commer- cial/business as well as recreational and tourism Given the high potential of Yemen’s cultural tourism functions. sector and the role that Aden is expected to play as a gateway for investors as well other travelers to and Historically the area boasts the Tawila Tanks, the Al through Yemen, it is recommended that initial action Aidrus Mosque, the Aden Minaret, and a partially be taken to ensure the readiness of the city to handle restored Hindu Temple that is buried in the moun- such growth once it begins to occur. It is anticipated tain-side. The Tanks and the Minaret act as points of that growth in business related travel and tourism focus for the area, as does the recent Bank of Aden will drive growth in this cluster in the near-term. The building, located at one of the major road junctions. capacities developed to meet the requirements of Other notable structures include the Palace and a growth in business travel will also serve as a founda- prominent church building. tion for other types of tourism activities. Tawahi is rich in the historic remains of its heritage Currently, Aden is experiencing growth in tourism as a transit passenger terminal. Old hotels and retail from the surrounding Arab region. It is also witness- premises in the town centre mark the importance of ing growth in business related and event (national/ the area for duty-free shopping lend an atmosphere political as well as economic/commercial) driven in- of history. Particular notable are the Crescent Hotel, flows of travelers, but such activities are character- The Seaport Terminal Hall (recently renovated), an ized by peaks in demand rather than steady flows. historic mosque (opposite the Hall), the Department Therefore, annual cumulative numbers remain mod- of Antiquities Building, and the Port Authority Build- est but potential for growth is significant and is ex- ing on the waterfront. These seafront structures are pected to materialize once the Aden Free Zone de- separated from the historic core of the town by a velopment begins to pick-up pace and triggers other large, well maintained public park with a statue of sectors in the city’s economy. Queen Victoria. The Tourism Department is based here and there are hotels, resorts, restaurants and beaches. A key issue is whether the road giving access to the Sher- aton Hotel on the south coast should facilitate exten- sion of the coastline and connect into Crater, there- by creating opportunities for development alongside the beaches. Finally, Gold Mohr, occupies the western most part of the volcanic peninsula upon which the original parts of the city developed. The area has dramatic vol- canic topography interspersed with small bays and sandy beaches. The core of Gold Mohr measures about .9 square kilometers, of which approximately % is developable – either already occupied or has development potential for recreational and tourism facilities. The majority of the area is comprised of volcanic hills and desert terrain. There are 4. kilo- meters of coastline, of which . kilometer is sand beaches. In regard to existing development, there is a Sheraton Hotel, a beach bungalow complex, a beach club, a few small hotels and chalet complex- es, restaurants, and outdoor food outlets. There is considerable potential for beach-based tourism de- velopment in Gold Mohr. For that reason, an urban design strategy for the area is currently underway 6 with the aim of maximizing tourism potential and helping guide the Governorate in its task of planning infrastructure improvements, preserving natural at- tractions, allocating sites to developers, and regulat- ing development. Specific actions that need to be taken to catalyze the development of the Hospitality and Tourism cluster in Aden include: • Protection and Preservation of Historic Sites and Land Marks. With their historical buildings and dramatic landscapes, the Crater and Tawahi neigh- borhoods are critical to Aden’s tourism development. Government should develop plans and regulations to protect these areas from development that can harm their historic and commercial assets like in- dustrial development and the construction of infor- mal housing. Moreover, efforts should be taken to improve the flow of traffic and enhance pedestrian access. In Crater, for example, there is potential to improve the pedestrian environment by enlarging the square by demolishing a number of semi-derelict buildings. This would also link the square to the Mili- be shared among all the parties concerned. With tary Museum, and help to create a strong civic focus the development of tourism, appropriate institutions for the area. The area suffers from traffic congestion should be established to promote partnership and to and its narrow streets are not suited to today’s traffic facilitate coordination. Two initiatives could be par- demands. Either there should be targeted upgrad- ticularly helpful: (i) the Governorate should establish ing to enable widening of a number of key streets a High Commission for Tourism Development and or there should be a more effective traffic manage- Operations to support the development of the tour- ment scheme with possibly some rationalization of ism sector, assess its operational needs, facilitate the land use in order to reduce the traffic demand. In activities of hotels and other tourism establishments, Tawahi, the older building stock is in a poor state of and assist the tourism industry to deal with local so- repair, and this is especially unfortunate in the case cial and economic realities; and (ii) the Chamber of of the hillside dwellings in the western area. There is Commerce and Industry should establish a formal considerable scope for renovation of existing stock tourism industry chapter and sponsor the creation to provide good quality, well-designed residential de- of local branches of the Yemen Hotel Union and the velopment. Yemen Travel and Tourism Association. • Protecting and Developing Aden’s Beachfront. • Improving the Quality of Tourism Services. The The unchecked construction of housing and other quality and consistency of tourism services should structures in Gold Mohr would compromise the im- be improved to meet international standards. This age of the city as a tourism destination and result in must be achieved and maintained in order to ensure the permanent loss of valuable land. As such, it is that the city can offer the needed capacity and qual- critical that a moratorium on development be upheld ity to meet growing international demand. The es- until a detailed planning and development strategy tablishment of an Aden branch of the National Hotel for the area is completed. and Tourism Institute (NAHOTI), located in Sana’a, should be considered as a means of improving tech- • Enhancing Public and Private Partnership in the nical and operational skills in the tourism and hospi- Tourism Sector. In Yemen, partnership and coordi- tality industry. nation between government officials and private en- trepreneurs in the tourism sector has yet to reach Aden’s Manufacturing Cluster satisfactory levels of efficiency and effectiveness. Aden’s consumable and durable goods manufactur- It is true for tourism promotion, the organization of ing subsectors rely on demand in local and nation- cultural events, the protection, conservation and ex- al markets and to a limited extent, regional export ploitation of cultural assets, the facilitation of tour- markets, particularly in East Africa. Firms active in ism investments, and the development of human re- these subsectors are, public, public/private (mixed), sources for the tourism industry. No one is in charge and private, and cover the range of scales from of assessing the challenges faced by the local tour- micro to large (over 0 workers) with the majority ism industry and offering adequate solutions that can (over 90%) falling in the micro and small category 7 Composition of Aden’s Manufacturing Sector employing less than 0 workers. Aden’s manufactur- tobacco sector in Aden in 00. The total value of ing and industrial production is a growing cluster that Beverages, which is composed almost entirely of is dominated by the Food/Beverage/Tobacco sector. distilled water and soft drinks, experienced a sharp Indeed, it accounted for the majority of total industri- decline in 00. al production in 00, followed by Chemicals, Wood Products, and Metals. The quality of these prod- The total value (YR) of all categories of non-fish ucts varies, but currently the majority remains basic food industries in Aden also decreased sharply in and only suitable for meeting demand in the lower 00. Production of spices increased slightly annu- income local market. ally, while the largest contributors, flour and bran, dropped to zero. Production of lobster appears to Aden’s Food/Beverage/Tobacco Sector: The Food/ have remained steady. Beverage/Tobacco sector dominated industrial pro- duction between 998 and 00, but experienced Aden’s Chemicals Production Sector: Aden’s Indus- uneven growth. Major products included cigarettes trial Chemicals production, which grew at .9% an- (Tobacco); soft drinks and distilled water (Bever- nually from 998-00 to 8% of Aden’s total indus- ages); and flour, bran, lobster and fresh & frozen trial production in 00, is driven almost exclusively fish (Food Industries). Most key products are semi- by two major products: paint and plastic footwear. processed commodities suggesting opportunities The value of paint production increased .6% dur- for Aden to explore increasing its production value ing the period while the value of plastic footwear through further processing, branding, packaging production declined by % over the same period. Interviews with the producers of plastic footwear and other forms of differentiation for local and export markets. revealed that although the industry is declining and producers are struggling to survive, innovative strat- Aden’s tobacco sector consists of the production of egies could change that. Currently one of the major only one product – cigarettes – whose production products is plastic beach shoes but reportedly there value represents 86% of the entire food/beverage/ are few varieties produced and nothing to compete 8 with the more stylish shoes available from abroad. ing/packing plants have set-up in Aden and have col- A concerted effort to introduce new, more stylish op- located adjacent to the Ma’alla terminal. Additional tions and even marketing the traditional “Aden� style applications for the set-up of new plants are pending differently are strategic options worth exploring. The approval, which has been slowed down as a result of fundamental challenge is that innovative, strategic land area limitations with facilitated access to cargo thinking and real business strategy skills are lacking handling facilities. It is clear from such demand that on the part of most of Aden’s business owners. Even this sector will grow significantly in the near future the business owners themselves name business and especially if dedicated and well services land ar- strategy and management as one of the top priori- eas with direct cargo terminal access are allocated ties for improving Aden’s competitive advantages in and developed to accommodate this demand. Add- the survey conducted as part of this assessment. ing more processing plants in the Ma’alla area has become unfeasible as a result of the negative impact Aden’s Metal and Non-metal Industries: Overall, in the area of traffic congestion, pollution and inap- Aden’s metal industries remained stagnant from propriate activity mix in the Ma’alla District which has 998-00, but the dock yard products subsector been caused by the clustering of existing processing grew by about % annually over the same period). activities there. Aden’s non-metal industries including ready-made concrete, cement, tiles and bricks declined substan- It is expected that demand for the set-up of a range tially over the period. of base-commodity processing facilities will increase dramatically during the coming 0 years that could Aden’s Wood and Wood Products Sector: Aden’s transform Aden into a national hub for the this ac- wood and wood products sector increased dramati- tivity to meet the total demand for such products in cally from 998 to 000, catapulting the sector to the national market and gradually, regional markets. Aden’s second largest. It grew an average of 9.% In order to accommodate the unleashing of poten- annually during the period, meriting a closer look at tial growth in this sector, it is recommended that a what specific products are fueling the growth. dedicated estate be developed with direct access to a bulk cargo handling terminal with a phased ex- Related to Aden’s manufacturing growth is the de- pansion option to relieve pressure off the Ma’alla velopment of the base-commodities processing in- terminal and facilitate the gradual transfer of exist- dustry. Aden’s strategic location and the growth of its ing processing operation from this central commer- port facilities and the volume of their throughput pro- cial/residential district. The facilitation of the opera- vide a critical prerequisite for attracting investment in tion of firms in this sector and the streamlining of the the base-commodities processing sector. Significant business and regulatory environment they operate growth has taken place in the production volume of within is also recommended, with the ultimate aim of the base-commodities sector in Aden, driven by de- enhancing the competitiveness of their products in clines in shipping cost and improved cargo handling local and regional markets. efficiency at the port. To date, three major process- 9 IMPLEMENTATION Institutions and Infrastructure for Growth The best way for recommendations to be developed tify, prioritize and solve the economic and related is- for creating the conditions in Aden for sustained re- sues confronting the region. gional productivity growth and for cultivating Aden’s regional clusters of competitiveness is through a par- Re-Initiate and Sustain a Healthy Rate of Growth ticipatory process in which groups, including private in Transshipment Volume: A sustained increase in and public sector leaders, and representatives of transshipment throughput at the port of Aden primar- relevant institutions for collaboration, come together ily in containerized cargo will function as a trigger to first analyze the current situation, define priorities for a number of related economic activities at the and then design solutions with clear allocations of Free Zone and indirectly, in the local economy. This responsibility. The leaders in Aden will ultimately be would require a high level of operational efficiency, responsible for periodically updating, implementing responsive level of capacity and cost competitive- and monitoring their strategy for economic develop- ness at AFZ and airport facilities and an optimal, ment. sustainable and comprehensive system of coordina- tion between authorities. The leaders of Aden have already taken an initial pass at summarizing and prioritizing some high level Stage 2 strategic actions and investments that they are con- sidering over the short, medium and long term. The Invest in Specialized Research Institutes and Clus- sequential implementation of the series of recom- ter-Specific Institutions for Collaboration: These mended actions is designed to trigger subsequent institutions for collaboration facilitate the flow of in- local economic development outcomes. formation and resources throughout the cluster. Di- verse groups (e.g. rival firms, related and support- Stage 1 ing industries, universities and research centers, training institutions, government) contribute to clus- Establish an Organization for Economic Develop- ter strength, but their contribution is not automatic. ment that Helps Coordinate the Process: A formal Each cluster activated should have a world-class organizational structure and process for working on research program and training institute either within economic issues helps maintain a consensus behind an existing organization or within a new institution, an economic strategy through periods of economic where cluster innovations can be researched and and political change. Aden needs to make its organi- implemented. zational architecture explicit, with clearly defined ar- eas of responsibility. Currently the Local Economic Trigger Growth in the Maritime Industries Cluster: Development Department is understaffed and under- Growth in the number of vessels calling on Aden will resourced and will need to be strengthened if it is to lead to growth in demand for the products and ser- play a key role in cultivating regional clusters. vices of Aden’s evolving Maritime Industries Clus- ter which could be further strengthened through the Ensure Strong Leadership from a Diverse Group of development of a modernized dry dock facility. The Aden’s Leaders: Strong leadership committed to re- evolution of an efficient, cost competitive and high gional economic development is needed to ensure quality Maritime Industries Cluster in Aden support- that companies, knowledge centers, governments, ed by a modern dry dock would contribute further and collaborative institutions contribute to their full to the attractiveness of the seaport and could con- potential. Leaders are found in the public sector, pri- tribute further to the growth in the number of calling vate sector and civil society. Both government and vessels. business leaders need to invest in a more effective and ongoing dialogue with each other and design a A Reduction in Shipping Cost and an Increase in the strategic process for change that combines ongoing, Number of Shipping Lines Calling on Aden: Growth data-based analysis of Aden’s current competitive in transshipment throughput usually contributes to position with broad-based leadership, short-term a reduction in shipping cost to a given destination. wins, and clear performance metrics. This ongoing The growth in the density of transshipment activity dialogue must be the centerpiece of Aden’s econom- at a port attracts other shipping lines to that port and ic development strategy, as these city leaders iden- encourages existing shipping lines to expand the 0 Implementation Strategy Overview Stage Actions  • Establish an Organization for Economic Development that Helps Coordinate the Process • Ensure Strong Leadership from a Diverse Group of Aden’s Leaders • Re-Initiate and Sustain a Healthy Rate of Growth in Transshipment Volume  • Invest in Specialized Research Institutes and Cluster-Specific Institutions for Collaboration • Trigger Growth in the Maritime Industries Cluster • A Reduction in Shipping Cost and an Increase in the Number of Shipping Lines Calling on Aden  • Stimulation of Growth in Import/Export Reliant Manufacturing Activities • Enhanced Incentive for Warehousing and Re-Export Functions to Locate in Aden 4 • Mobilize Growth in other City-Based Linkage Services • Growth in Passenger and Cargo Throughput at the Airport • Stimulation of Growth in the Hospitality and Tourism Cluster  • Triggering the Growth of Strategic Sectors ism, immigration) Source: Adapted from Ala’edeen Shawa range of their services and vessel types/sizes call- cost. Such improvements will contribute to a reduc- ing/serving a port to include both mother vessels as tion in operating cost and an increase in operating well as feeder vessels. efficiency of warehousing, manufacturing, assembly, and re-export activities. This environment would be Stage 3 further enhanced through the improvement in the quality and cost competitiveness of city-based trade Stimulation of Growth in Import/Export Reliant Man- and warehousing and re-export support services. ufacturing Activities: A decline in shipping cost and an increase in the efficiency and capacity of shipping Stage 4 and cargo handling services at the port will increase the viability and competitiveness of Aden-based man- Mobilize Growth in other City-Based Linkage Ser- ufacturing and processing activities that are heavily vices: Growth in AFZ-based activities (warehous- reliant on the import of raw materials or the export of ing, manufacturing and re-export) as well as in finished of semi finished products. Improvements in city-based export/import activities will generate the performance, quality and cost competitiveness of significant demand for the products and services of services offered by the city-based trade support ser- city-based linkage services such as trade support vices cluster will further contribute to the enhanced services (banking, shipping and freight forwarding, competitiveness of export/import-reliant manufactur- insurance, law and cargo handling, and logistics ser- ing and processing activities. Beneficiary sectors vices) and warehousing and re-export support ser- include base-commodity processing and consumer vices (packaging materials and products, printing, and durable goods manufacturing. They could also IT-based supply chain management and general include natural resource processing (stone/marble maintenance services). Such demand will invigo- and minerals processing, fish processing and petro- rate these clusters and will result in the enhance- chemicals production. ment of the quality and cost competitiveness of their products and services which in turn would contribute Enhanced Incentive for Warehousing and Re-Ex- to enhancing the competitiveness of the AFZ and its port Functions to Locate in Aden: An increase in the attractiveness to its investors. These linkage servic- number of vessels calling on/serving Aden will lead es are expected to function as the conduits for chan- to increased competition among shipping lines and neling economic value to the city economy through will improve shipping services, increase the frequen- direct employment of city residents and through the cy of ship calls on the port and will reduce shipping direct and indirect (subcontracted) engagement of  a network of small and medium sized suppliers of Aden Master Plan 0 to establish a framework related products and services. through which to address the physical challenges facing the city. Three master plan scenarios were Growth in Passenger and Cargo Throughput at the devised in order to provide differing emphasis for the Airport: Demand for an effective multi-modal trans- future development of Aden, taking into consideration port system (sea, air and land) will gradually evolve the existing residential and economic assets and the as growth is achieved and sustained in port through- anticipated growth in each by 0. After delibera- put, warehousing and re-export activities as well as tion and debate, it was decided that the preferred in the scale and scope of the operations of city-based vision for physical growth was one emphasizes ease export and import firms. Such growth will also lead of access to the core economic infrastructure of the to growth in demand for additional air travel service city, specifically the port, airport and free zone. providers and an expansion of capacity at the airport to meet the needs of business travelers. The revised and updated Aden Master Plan 0 carries with it many advantages. Strengthening ac- Stimulation of Growth in the Hospitality and Tourism cess and flow among the city’s main transport hubs, Cluster: As sustained growth in AFZ and city-based the airport, seaport and container terminal, will fa- economic activities begins to take hold, demand will cilitate expansion in the Maritime cluster. Moreover, also grow for city-based hospitality services. Im- provision of additional utility capacity and high qual- provements in the quality and scope of services pro- ity infrastructure will promote the Manufacturing, as vided by the hospitality cluster will contribute directly well as the Hospitality and Tourism cluster. Finally, a to improving the quality of life in the city, its attrac- more rationalized mix of land uses and open space tiveness to national and international investors as a will permit an improved quality of life for residents suitable place for long-term residence and will lay the and tourists alike. preliminary foundation for viable future growth in the activities of a potentially vibrant business and cul- Roads: The land transport system is highway-based tural tourism industry. The hospitality cluster would and movement of goods and people is by trucks, also function as an effective conduit for channeling buses and taxis. The car ownership level in the Gov- economic value to be generated by the AFZ to typi- ernorate is around 00 vehicles per thousand of cally marginalized segments of the city’s population. population, which is the highest car ownership level in Yemen. In 00, there were approximately 70,000 Stage 5 registered vehicles in the Governorate of Aden, out of which 4,000 were private cars, 800 taxis and Triggering the Growth of Strategic Sectors: As growth 0,00 were registered trucks. In the last decade in AFZ-based economic activities is achieved, it is car ownership has been increasing at a rapid pace anticipated that demand would also grow for in- in the Governorate, with numbers of cars and trucks creasingly more sophisticated IT support services. growing at 6% p.a. and growth of taxis has been at Activities in the area of logistics and supply chain around % per annum. management in addition to a range of higher tech- nology manufacturing and services operations at the This increase in mobility together with the city’s AFZ and in the city will drive demand for a range of coastal location and its mountainous setting have high value added IT services and will provide suf- created some formidable constraints to the smooth ficient incentive and opportunity for a local IT sector flow of people and goods and a number of critical to develop the quality and scope of its services. This pinch points are beginning to emerge. For example, outcome could potentially provide a viable founda- increasing car ownership and use has resulted in tion upon which advancing local IT firms could begin widespread traffic congestion on the major arterial to test regional and global markets. Other strate- roads of the city and in centers of commerce and gic sectors could also begin to reflect viability and trade. However, congestion appears to be mainly should thus be detected and supported. Growth and related to the interaction of a number of issues in- enhanced competitiveness of such strategic sectors cluding the age and maintenance of the vehicle will enable Aden to diversify its economic base and stock, regulation enforcement, driver behavior and to gradually reduce its reliance on a single source for lack of effective traffic management measures rather sustaining future growth. than heavy traffic volumes alone. One response to help reduce congestion and improve environmental Infrastructure for Growth conditions has been the introduction of restrictions Strengthening the Maritime, Tourism, and Man- on truck movements during day time hours: heavy ufacturing clusters requires a solid physical goods vehicles are now confined to specified times growth plan and targeted investments in infra- of day on certain route within the city. structure. A new highway between Amran and Aden is at an In 004, Aden embarked on the development of the advanced stage of planning. This road will be about  460 kilometers long and form the main axis between square meters (0 x 60) – single level horizontally the north and south of the country, linking many segregated, with a second level for offices and shops. of the principle cities of Yemen, notably Sana’a, The most imposing feature of the airport is the new, Dhamar, Taiz and Aden. The road will be a  lane fully equipped Control Tower and ATC Building. Both dual carriageway built to motorway standards, with a buildings are fully equipped with new consoles, tele- limited number of grade separated junctions. communications and approach control. Airport: Aden International Airport (AIA) has under- The airport is owned, managed and operated by the gone significant facility rehabilitation and expansion. Civil Aviation and Meteorological Authority (CAMA), The airport has been equipped to handle a relatively which also includes Air Traffic Control Services. Air good level of transit and final destination aircraft, BP, an aviation fuel supplier, operates the only non– passenger and cargo volume. However, as of 00 government owned facility on the premises. The air- it was utilizing less than 0% of its capacity and han- port has about 60 staff. dling an average of only 69 flights per week. The current volume is generated by Yemenia’s interna- Several buildings are in poor condition, including the tional and local flights, which represents over 60% fire station, the chemical storage facilities, the cargo of flight and passenger volume while the remainder building, and the old British terminal. Mention has is generated by regional airlines including Royal Jor- been made of the latter’s architectural interest with a danian (2 flights per week), Egypt Air (1 flight per view to its possible rehabilitation. However, the pres- week) and Djibouti Airlines (1 flight per week). ervation of airport buildings is generally not recom- mended where they remain in a location which might The Aden airport is situated  kilometers north of the constrain future expansion, as is the case in Aden city, and has a single ,00 meter runway, full length parallel taxiway, and a main passenger apron with The land earmarked for the development of a cargo other disused aprons to the west. It has a newly re- village remains neglected and uncleared, with equip- furbished passenger terminal of approximately 9000 ment and buildings in poor repair. In order to realize Aden Master Plan 2025  Existing Road Network in Aden the development of freight or other airport-related clined from just over ,900 in 999 to just over ,000 development on this site, the land must be improved in 00. The number of local passengers travel- by clearing and providing basic services, infrastruc- ing through AIA increased from 0,000 (inbound) & ture and security. ,000 (outbound) in 00 to 9,000 (inbound) and 6,000 (outbound) in 006. The number of interna- The airside system has good very long-term capac- tional passengers who traveled through AIA in 00 ity. A single runway can handle up to 40 or more air- decreased from 86,000 (inbound) and 9,000 (out- craft movements per hour, compared to the 0 or bound) to 40,000 (inbound) and 49,000 (outbound) so daily movements currently experienced at Aden. in 006. There is no evident capacity restriction up to and well beyond the timeframe of the Aden Master Plan In order for Aden to fulfill its role as the economic 0. The passenger terminal has a total (domestic capital of Yemen, AIA’s ability to grow its business + international) capacity of about 90 passengers and to fully participate in accommodating the antici- (two-way) and 40 (one way). One-way interna- pated growth in demand for high quality air transport tional capacity is declared as 40. Although the total services generated by the Free Zone and the city is capacity of the building is adequate, inspection of very critical. AIA’s facilities have recently been up- the Tower Logs confirms that there are occasions graded but it continues to utilize only 0% of its op- when one-way flows exceed 00 passengers per erating capacity. Its share of domestic flights as well hour. Consideration may therefore have to be given as international flights has stagnated or declined in to development of the terminal, in the medium term. some cases. It has not been able to successfully at- The airport terminal is lacking in good shops, cater- tract and maintain the business of regional or inter- ing and other non-aeronautical facilities, which could national airline clients even though it holds the po- generate revenue and improve the quality of the ex- tential to do so supported by its high quality facilities, perience. the location of Aden and the potential for growth in business travel activity driven by anticipated growth Based on information from the General Authority of at the Free Zone and the growing scale of Arab tour- Civil Aviation and Meteorology, AIA handled ,047 ism to Aden and Southern Yemen. local flights and ,128 international flights in 2002. Based on this data, the number of international Air traffic within Yemen is currently dominated by flights handled by AIA grew from just over 500 in Yemenia through its domestic monopoly of both 1999 to over ,500 in 2001 while local flights de- passengers and cargo. The Open Skies policy was 4 introduced at the end of 00 for cargo in all airports container vessels calling at the Aden Container Ter- and in mid-006 on a pilot basis in Rayyan and Aden minal (ACT) and the Ma’alla Terminal (MT), general Airports for passenger traffic. This allows other car- cargo vessels calling at MT and other berths in the riers to operate in Yemen, which will likely spur in- inner harbor as well as fishing, passenger (commer- creased use of the Aden Airport. Providing AIA with cial and private) and other types of vessels using a higher level of autonomy in the area of promotion the port. It must also be enabled to keep track of the and marketing and streamlining the Civil Aviation capacities of all the terminals and berthing facilities Authority’s (CAA) procedures for reviewing and ap- within the port area and be informed of future plans proving applications submitted by international and by terminal operators to expand/modify capacities regional airline companies for initiating passenger or and services. cargo operations through Aden will contribute signifi- cantly to resolving this issue and would enable AIA to As shipping traffic grows and as the size of ves- gradually fulfill its economic potential and contribute sels calling on Aden increases, the port will begin to the competitiveness of the city. to experience capacity bottlenecks. In 00, about 80 container, 60 tanker and 400 general and bulk Seaport: It is evident that there is enormous potential cargo vessels called on the port. The number of for the development of marine facilities in the Aden container vessels declined considerably after Octo- area. Aden has one of the world’s great natural har- ber 00, but recovery is anticipated as a result of bors with a superb position right on the world’s busi- a reduction in insurance rates driven by Aden’s war est trade route, natural protection, easy construction risk ranking and further recovery is also expected conditions and very little maintenance dredging. As as tangible steps are taken by the port to address such, it is vital that the parts of the harbor which are other issues related to security, terminal efficiency suitable for port development are kept for that pur- and overall quality and cost competitiveness of port pose and not used for other facilities. Moreover, the services. Little Aden Refinery area should be kept for oil han- dling and that the whole of Caltex Island should be As growth rebounds and as the port begins to rees- reserved for container handling. tablish itself as a transshipment hub and as the Free Zone begins to function as a regional warehousing The Ma’alla terminal is close to capacity and addi- and re-export center, the number of vessels - partic- tional deep water berths will be needed in the near ularly container vessels could realistically increase future. The Yemen Ports Authority has developed to over ,000 and the percentage of large size a scheme to develop new facilities combined with mother vessels (6,00 Twenty foot Equivalent Units a new ship repair facility to the north of the Ma’alla (TEUs) and higher) will follow. Such growth will lead channel. This would rely on the use of the causeway to the development of bottlenecks at the three port by heavy vehicles. In the longer term, cargo facili- channels and at the two existing container/cargo ties could be built immediately to the west of Caltex terminals. The number of general and bulk cargo Island, although this area requires protection from vessels is also expected to increase gradually but wave action. Certainly there is the need to retain not as steeply as that of container vessels and will space for around two kilometers of general cargo be driven by demand generated by base-commod- and dry bulks berths, including a heavy lift facility for ity processors that have been setting-up operations exceptional project cargo. in Aden. In addition, the port is expected to handle a larger percentage of the country’s flow of imports Any potential limestone export facility would be and the anticipated growth in exports. dusty, noisy and generate a great deal of road traf- fic. It should therefore be kept away from centers of In addition, growth in demand for additional termi- population. Probably the best approach would be to nal capacity is also anticipated as new investment is develop a dirty cargo area between Little Aden and made in natural resource, petrochemicals and base- the power station/desalination plant. This area could commodity processing activity. This will require that include dedicated cement import and processing fa- the port accurately plans for such growth in demand cilities. Space for a total of approximately six berths and move efficiently and in a timely manner to in- would be needed either as  kilometers of alongside troduce the necessary adjustments in port services quay or as a series of finger jetties. Some wave pro- capacity, channel depth/width, terminal capacity and tection would be needed. efficiency as well as the set-up of new terminals needed to absorb such growth in demand. In order for the Port of Aden to effectively gauge the level of capacity of its current services to vessels and Aden Free Zone: Despite strong fiscal incentives, to continue to responsively modify them or alert oth- the Aden Free Zone has experienced a very low er operators of the need to do so, it must be enabled level of investment activity during the  years since to track total vessel activities at the port. This would its establishment. Several issues have impeded the include oil tankers calling at the Oil Terminal (OT), full development of the AFZ, including the lack of de-  fact it is the third most important constraint to doing business in the city. The main avenue for improving this situation is to resolve provide infrastructure and utility services to industrially zoned areas, especially in the Free Zone. An additional recommendation is to further develop the City Periphery Industrial Zone, located along the Abyan Road, which has been des- ignated for industrial uses in the Master Plan, is well located, and is unencumbered. There is currently a major carpet factory in operation, which could serve as anchor tenant. In both cases, it is recommended that the development of the zones include strong pri- vate sector participation. Utilities: The power supply deficit has been identified as one of the most critical obstacles and the lead- ing infrastructure constraint to doing business in the whole of Yemen. In Aden, the situation is particularly acute as the available capacity of 99MW (relative to velopment vision and harmonization with the City of an installed capacity of 8MW) would barely meet Aden. the needs of Aden’s residential customers. In the face of such limited generation capacity, the large The space currently under the AFZ (,000 ha) is majority of manufacturing and commercial firms rely too large vis-à-vis the financial capability of the Zone on out-of-system power generation via private die- Authority to establish first class infrastructure. Such sel-powered generators. Out-of-system generation as vast amount of land, especially without a strategy in Aden is conservatively estimated by the PEC Aden to phase its development, renders the investment in branch at over 00MW for large known investment infrastructure too high. The supply of infrastructure projects. Since the reduction in diesel subsidies in needs to accompany the occupancy of the area to 2006, significant demand has built up for power con- provide a sufficient rate of return. Moreover, the lack nections by manufacturing and commercial custom- of continuity between the different parcels of land is ers, but the PEC has not been able to meet the in- an additional difficulty affecting the ability of both the creased demand. The question of power reliability is Governorate and the Authority to provide serviced especially critical. Power outages and staged black- land to investors. outs when demand peaks elsewhere in the country have been identified as a major problem by inves- A vision, an updated master plan and a phasing tors. The prevailing view among investors is that strategy are critical. The Free Zone occupies the “dedicated power supply in Aden is a must if the city majority of vacant land in Aden (thereby severely is to ever live up to its potential as the commercial limiting the city’s urban expansion possibilities) and capital of Yemen�. includes areas which the Free Zone does not effec- tively control (e.g. Aden airport is controlled by the Power is a critical ingredient for the Aden Free Zone Civil Aviation Authority, the Aden Container Terminal development. Currently, there is a 4MW privately- and the Port of Aden are controlled by the Ministry of managed power generation station dedicated to the Transport’s Aden Gulf Port Corporation). A revision Free Zone, but is deemed totally insufficient. A large of Free Zone landholdings and a clarification of its steel factory located in the Free Zone and in opera- relationship with Aden Governorate and the Minis- tion since 00 has built a power generation capac- try of Transport are therefore critical. In particular, ity of 6MW, with plans to expand to MW and sell a formalized institutional arrangement between the the surplus. In the two years since this factory went Free Zone and the Governorate, based on a shared into operation and despite its somewhat unattract- vision and clear responsibilities for enabling growth, ive location within the Free Zone area, the appeal would require harmonized land use planning and as- of private power generation has managed to attract set management roles, and would allow for a reve- several new investment projects (currently under nue-sharing scheme between both entities to ensure construction) to locate around it adequate infrastructure and service delivery to the benefit of the city and Free Zone. Investment Priorities The LED Strategy and Mukalla Master Plan 0 re- Industrial Areas: Access to industrial land was identi- sulted in the identification of ten priority investments fied by 8.8% of surveyed firms in the Yemen ICA in the city of Mukalla focused on (i) core economic as one of the most severe constraints to doing busi- assets and clusters and (ii) strategic infrastructure ness. The problem figures prominently in Aden – in investments. 6 CORE ECONOMIC ASSETS AND CLUSTERS (Costs in 2008 US dollars) Project Estimated Description/Comments Time Frame Public Investment Off-site Infrastructure for $ million Roads, power, water, and wastewater net- 008 to 0 Aden Free Zone Light works to and within 760 hectare site, to allow Industry and Warehousing international concessionaires to develop and (Zone J) manage specific blocks. Site is secure, flat, and without obstructions and is extremely well located both for port and container terminal access and for proximate labor pool. Prelimi- nary designs and cost estimates completed in 007. Aden Seaport New Berths $90 million Major project to enhance general cargo port 009 to 04 and Cargo Village to meet international standards. Location near ACT. Will require re-negotiation with international port operator. Concept designs completed. Requires feasibility and engineer- ing studies. Aden Container Terminal TBD Extension of quays westward in addition to 009 to 0 Concession Expansion dredging, cranes, and marshalling yards. Pre- liminary plans complete. Minor upgrading of power and other infrastructure required. Off-site Infrastructure for $4 million Location seaside along Bureiqa Road. Site 0 to 04 Bulk Commodity Port & secured and free of encumbrances. Requires Raw Materials Processing interested private sector investor and operator. Zone and Port. Feasibility studies required. Off-site Infrastructure to $-0 million Designated industrial zone on unencumbered 00 to 0 Develop City Periphery land along Abyan Road. Major carpet factory Industrial Zone in operation, which could act as anchor tenant. Requires strong interest from private devel- oper. Pre-feasibility and environmental studies required. Enhanced Bonding and TBD Improved warehousing and modernized bond- 0 to 0 Warehousing Facilities in ing regime, including improved access and Tawahi open storage. Design and feasibility studies required. Cargo Village and Cold Access road and lighting completed. Requires 0 to 0 Storage at Aden Airport agreement with military. Design and feasibility study required. Source: Aden Priority Economic Development Investment Plan 7 STRATEGIC INFRASTRUCTURE INVESTMENTS (Costs in 2008 US dollars) Project Estimated Description/Comments Time Frame Public Investment Electricity: New 0-40 MW $-4 million Additional power needed to supply expected 009 to 0 Power Generation development of ACT and Free Zone. (See Core Station in Aden Economic Assets projects). Engineering designs Free Zone and feasibility study required.  KV Line Hiswa $4 million 7 kilometer,  KV overhead line to replace  008 to 00 – Al Arish and  KV line. Right-of-way reserved. Includes substa- KV cables to Aden tion at Al Arish, KV cables to Aden Peninsula, Peninsula and switch gears at Shenaz and Khormaksar substations. Will resolve overloading and reduce losses. Complete feasibility study in 99 by con- sultant, updated cost estimate in 007.  KV Network and $. million Package of four sub-projects. New sub stations at 008 to 00 Substation Improve- Al Khusaf, Al Hashed-Cabuta, and Bir Fadhl-Man- ment soura, plus rehabilitation of Hedjuff primary sub station. To meet increasing power demand and overloading of old sub-stations. Feasibility studies prepared by PEC.  KV Network $9.5 million Requires new  KV cables, transformers, and 2008 to 2010 Rehabilitation ring main units. To meet increasing power de- mand and overloading. Project designs by PEC. Water: Urgent Source $10 million Due to increased water demand and drawdown 2008 to 2012 Development & and increasing salinity of existing wells, explora- Conveyance tion, new wells, and transmission lines needed in all four of Aden’s well fields, including preparations for treatment plant to reduce salinity. Urgent System $5 million System losses estimated at 0%, with low and 2009 to 2012 Rehabilitation to uneven pressure. Detailed study required. Increase Pressure and Reduce Leak- age Wastewater: Complete Rehabilita- $8 million Mansoura plant cannot meet secondary treatment 2010 to 2012 tion and Increased standards. By-passing sometimes necessary. Proj- Capacity of Mansoura ect design and feasibility needed. Should include Treatment Station study of re-use of treated effluent for irrigation of public parks and green areas throughout Aden, especially to estimate financial gain (by reducing need for drinking water for irrigation). Source: Aden Priority Economic Development Investment Plan 8 Project Estimated Description/Comments Time Frame Public Investment Roads: New Entrance to $ million  kilometers length and 90 meter total right- 008 to 00 Aden Highway of-way, limited access, includes three junctions. (western by-pass Proposed priority investment in Aden Master Plan; from Sanaa Road to right-of-way reserved and surveyed. Designs Bureyqa Rd) being prepared. Will provide by-pass from exist- ing congested highway through Sheikh Othman, secure excellent access from all parts of Yemen to Free Zone and Container Port, and will promote planned westward expansion of city. New Arterial Road $ million 7 kilometers length and 0 meter total right-of-way. 009 to 00 for City Extensions Recommended in Master Plan. Serves new resi- in Northeast Quad- dential zones , , , 4, , 6, and 7 and connects rant Sheikh Othman with coast road north of Al Arish. New Arterial Road $4 million  kilometers length and 0 meter total right-of-way. 009 to 00 for City Extensions Recommended in Master Plan. Serves new zones West.  and  and Aden University site, main junction with Project B8. Right-of-way secure and sur- veyed, designs completed, and sub base along .8 kilometers implemented. Natural Gas Pipeline to TBD 00 kilometer pipeline would deliver natural gas 2012 to 2014 Aden from Belhaf to supply power stations and also provide cheap energy for industrial enterprises. Possible PPP. Aden Causeway Wid- TBD Widening of causeway from Caltex roundabout 2008 to 2009 ening to Aden Hotel roundabout by two extra lanes plus breakdown shoulder, plus replacing associ- ated water and power lines. Re-design of Caltex roundabout included. Design and feasibility study completed. Environmental impact study underway. Funding secured from Arab Development Fund. Source: Aden Priority Economic Development Investment Plan 9 40