Yemen’s problems are deeper than drone strikes

Internationally, it is important for Yemen to continue to work with international financial institutions such as the World Bank and IMF.

July 16, 2012 22:37
4 minute read.
HOUTHI SHI’ITE rebels in Yemen

HOUTHI SHI’ITE rebels in Yemen 370. (photo credit: Khaled Abdullah/Reuters)

Below the surface of drone strikes and violence, Yemen is a country struggling with deeper problems. The end of bloody protests during the Arab Spring and a 33-year presidency gave some Yemenis hope that the road to socio-economic and political change was clear. This road, however, is riddled with challenges deeper than al-Qaida cells and insurgents. The deeper problems in Yemen are the high unemployment rates, widespread poverty, lack of food, and economic under-development. It is indeed a sad story that reminds the world how resource mismanagement can hinder economic progress and development. There are, however strategies and inspiration that Yemen can adopt to move forward in a positive direction.

Yemen is one of the poorest countries in the Arab World due to its economic under-development. This is unfortunately a continuing problem that was not addressed under Saleh and is continuing into Hadi’s tenure as president.

Yemeni oil production makes up 25 percent of its GDP and almost 70% of the country’s revenue. Economic growth outside of oil was restricted largely to commerce and transportation. Yemen’s oil years since the North-South unification in 1990 did little to stimulate the productivity of Yemen’s economy.

Instead, the government became entirely dependent on oil and revenue was put into the pockets of corrupt officials and not into updating infrastructure or social services projects.

Yemen has tried to harness and export reserves of natural gas out of fear that oil production in the country will peak within the next 15 to 20 years and ultimately run out, consequentially removing a chunk of its export economy. Oil is not the only resource running dry, as water in the country is also set to run out within about the same time-frame, if not sooner.

To make sustaining resource development more difficult, Yemen’s current population growth rate is at about 2.5% and its unemployment rate near 35%.

At this rate, Yemen will ultimately begin to feel its economy totally collapsing. Natural resources are an asset for Yemen, but their benefit to the economy depends upon the government’s ability to use them productively for long-term growth.

There are ways for Yemen to diversify its economy away from the oil and gas sectors. Yemen has a mining and mineral sector that could yield revenue if the security situation improves. If Abyan can be stabilized, then the use of Aden as a prominent port can be profitable in the future. Historically, Yemen had success using the city as a deep-water port and free trade zone.

Tourism in the country has also decreased due to violence and turmoil. The country possesses culturally pristine elements of architecture and natural beauty. The country remains under-developed and intriguingly provides a historic environment virtually untouched by modern development.

These three sectors could also potentially increase Yemen’s labor force and thus open up opportunities for domestic labor instead of unemployed Yemenis trying to flee to other countries such as Saudi Arabia for work. Exploiting these three sectors will not not be enough to save Yemen’s economy, however these sectors can further develop and coincide with current oil and gas sectors as a base for future development.

Internationally, it is important for Yemen to continue to work with international financial institutions such as the World Bank and IMF. Temporary multi-lateral aid is not a permanent solution, although Yemen does need it to stand on its own feet for the short-term. Yemen has received a multi-year, $370 million aid package on behalf of the IMF as of 2010 that will expire at the end of 2012, but this is not enough to provide a permanent fix.

Yemen has the potential to use its limited resources for multi-lateral trade deals. Under-developed nations such as Angola have made bi-lateral development agreements with economic powers such as China and the United States. In exchange for energy resources, Chinese or American companies will build roads, hospitals and generally improve infrastructure under bi-lateral development agreements. If the security situation stabilizes, this could potentially increase Yemen’s investment capital and give it a breath of fresh air to focus on economic issues that have benefits for the country.

If Yemen does not expand its approach to economic development through diversification and socio-economic reform, then the post-Saleh era will perpetuate the problems of his reign. Yemen can look over the border to Oman for inspiration.

In the 1970’s Oman was an impoverished, corrupt and volatile country filled with violence and socio-economic problems similar to Yemen’s.

Oman learned how to use its resources to broker multi-lateral trade deals and is currently focusing on developing advanced infrastructure and educational systems. The result is a fairly modernized country that adopted serious reforms and put its disruptive past behind it. Yemen’s problems go deeper than drone strikes, but inspiration for change is not far away.

The writer is an international security analyst based in Washington, DC.

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