EIG will build two residential and commercial complexes in Sana, the Yemeni capital.

The Sana Terraces project will cover an area of 140 million square metres of land, 10 kilometres from the city’s airport. The Sana East development will be located near Sana’s embassy district.

Construction work on the projects is due to start in the fourth quarter of 2008.

A company spokesman said: “Soil testing and levelling shall begin in a few weeks. “Once the masterplan is announced and the request for proposals is finalised, we will consider the various options and award the construction contracts.”

Yemen, one of the poorest countries on the Arabian Peninsula, is trying to boost foreign investment in the country to help stimulate the economy.

In February, the government announced plans to cut the corporate tax rate by 15 per cent in an effort to stamp out evasion and generate more interest in the private sector.

However, sporadic violence – blamed on religious militants – and kidnappings involving foreigners in remote areas act as a deterrents to potential investors.

In the country’s most recent violence, on March 18, a girls’ school near the US embassy in Sana was hit by mortar rounds which killed one pupil and a policeman. The US government believes its embassy was the target of the attack.