© The Financial Times Ltd 2014 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
Last updated: April 15, 2013 4:17 pm
Yemen’s fragile political transition risks being derailed by economic problems linked to security concerns, the slow release of promised investments and fears over the widening wealth gap between the capital and the rest of the country.
While the Arab world’s poorest nation has barely begun to recover financially from its 2011 near-civil war, it is gripped by humanitarian crisis and is some way from securing billions of dollars of investment conditionally pledged by international powers.
Analysts says more and bigger aid injections such as the multibillion dollar doses from Saudi Arabia over the past year will be needed if Yemen’s planned shift from dictatorship to democracy is to have a chance of lasting beyond elections due early next year.
“The humanitarian budget keeps going up,” said Abdo Seif, head of the advisory and oversight team at the UN’s Development Programme in Sana’a, Yemen’s capital. “[But] there is no development.”
The Yemeni national dialogue launched last month has understandably focused on the existential political questions that need to be settled after President Ali Abdullah Saleh was forced from office last year. But some of the same factors that have made the country so volatile – a chronic lack of infrastructure, huge tensions between regions, and the unregulated spread of weapons throughout the country – are also hitting prospects for economic recovery.
The International Monetary Fund estimates Yemen’s gross domestic product grew 0.1 per cent last year and will rise 4.4 per cent this year – but only because it plunged 10.5 per cent in 2011, during the conflict that followed an uprising against Mr Saleh.
Yemen is now even more the poor relation of the surrounding oil-rich Gulf region, ranking 160th out of 186 countries in the UN’s annual worldwide human development index published last month, sandwiched between Togo in west Africa and Haiti. Only a quarter of Yemeni men and less than 8 per cent of women go to secondary school.
Yemen’s oil sector – which accounts for 90 per cent of export earnings – has superficially run more smoothly this year after conflict last year wiped out scores of production days in some areas. But the security that now envelops the energy industry is emblematic of the country’s enduring difficulties, with large numbers of troops deployed defending pipelines and power grids that have come under attack in what some see as attempts to disrupt the transition process. Foreign oil executives – such as western diplomats – remain on near-lockdown, after two people died in an attack on a Total vehicle in the east of the country last year.
The disruptions echo broader problems that are plaguing Yemeni industry, which was estimated to account for about half of gross domestic product before the crisis. Saad al-Din bin Talib, trade and industry minister, said that by last month four of the country’s seven cement plants were closed, one because the government couldn’t send dynamite there because of security concerns and another because of power disruption.
“Yemen is an oil and gas country, but it does not have its own fuel,” Mr bin Talib said, deploring the domestic gas shortages that plague Yemen even though it is a gas exporter. “These are the basic structural problems of industry in general.”
Another important source of income for Yemenis – remittances from workers in neighbouring Saudi Arabia – has also come under threat.
Riyadh has a programme to reduce the number of migrant workers at hundreds of thousands of companies, implementation of which it postponed at the last minute this month – but only for three months.
It is another big potential problem for Yemen, where – in a crisis whose severity has been overshadowed by Syria’s war – four-tenths of the 25m population go hungry, according to humanitarian agencies. The extent of Yemen’s aid dependency is underscored by the $2bn of oil products pumped in over the past two years by Saudi Arabia, along with a $1bn cash deposit at the central bank that many observers think is the only reason the exchange rate of the Yemeni rial is holding firm.
Yemen’s great economic hope is the more than $8bn in infrastructure and other investment promised by the unusually unified coalition of world powers backing its transition. But diplomats admit there is a danger that assistance will end up being skewed to the more stable and thus less needy areas because security there is better, widening the already large inequality between urban areas where the government is in control and tracts of the countryside where it is not.
“It’s a huge risk,” said one diplomat, citing the power vacuum in the southern province of Abyan, after battles between government forces and Islamist militants there. “It all comes down to this question of the government being present in territories in a way they are not at the moment.”
Pessimists also point back to a 2006 international whipround that yielded about $6bn for Yemen, but is widely accepted to have resulted in no more than a quarter of that being spent. As the country searches for a route to democratic yet authoritative rule, it can ill-afford another international economic false dawn.
“I am afraid this may happen again,” said Ala Qasem, director of Resonate! Yemen, a non-governmental group focused on development. “And I honestly don’t know whether the government has a way to address this.”
Copyright The Financial Times Limited 2014. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.