Yemen: Attempting to Reap the Rewards of Economic Reform
Despite being the Middle East’s poorest nation, experts contend that Yemen should have one of the region’s most thriving economies. Yemen has considerable resources and is engaging in a radical, and so far, successful economic reform program that is creating one of the most open trading and investment climates in the Middle East. Thus far, Yemen has removed nearly all import restrictions and is one of only a handful of Arab nations to have a free-floating currency and to allow foreign participation in banking. Furthermore, Yemen is the only Arab nation that currently allows foreign investment in the oil industry.
Evidence of the country’s successes can be seen in various economic indicators. Once one of the world’s most indebted nations, the country has reduced its debt to manageable levels, which has led to stronger foreign currency reserves. This, in turn, drove down inflation from double digits to a low of 5.3% in 1997. Furthermore, real positive interest rates have surfaced for the first time in a generation, and the removal of financial restrictions plus renewed confidence of Yemenites in their banks has facilitated a return of funds to the banking sector.
These economic achievements, driven by President Ali Abdullah Salih, have not gone unrecognized. The International Monetary Fund and the World Bank are guiding, supporting and funding the reforms, with the former reportedly prepared to provide Yemen with $220 million to drive financial and administrative reforms. Further, the country is receiving sizeable debt relief from countries impressed with the economic changes.
Yemen’s economic future holds some strong opportunities. Yemen is attempting to transform into a profitable trading nation. To that end, the port of Aden is being refurbished to capture world transshipment business. Yemen is also trying to realize its hopes of becoming a main fish and seafood exporter to Europe.
Economic matters aside, the Republic of Yemen also has serious social issues that experts believe need to be addressed if the country is to thrive. Among them are: 1) The negative effects of Yemen’s large qat industry (a massively popular mild narcotic). 2) Tribal kidnappings of foreigners – a perpetual thorn in the side of the country’s tourist industry. 3) Rapid population growth 4) Widespread corruption
Yemen possesses a rich culture, a long history and beautiful terrain. Yet it has one of the region’s smallest tourism industries. The reasons are numerous, but perhaps the biggest is the tribal kidnappings of foreigners. In most cases, the kidnappers do not intend to harm the foreigners, but rather coerce the government into meeting their demands (i.e. providing increased services, or releasing political prisoners). This type of kidnapping did change, however, in 1998, when Islamic militants kidnapped a group of foreigners. During the internationally seem spectacle, four westerners were killed when government forces stormed the militants’ hideouts.
While this was an exception, President Abdullah Salih is seeking to end all kidnappings, recognizing the impact this has on the country’s tourism industry. He praised local security forces for securing the release of two French tourists kidnapped January 17th, saying, ``[W]henever security forces act in a speedy, effective and firm manner, the state’s prestige is enhanced and the criminals and all those who dare to sabotage the society’s security and stability are deterred" (Republic of Yemen Radio).
To help end these kidnappings, the president created a special anti-terrorism unit, headed by his eldest son. Moreover, the government created special courts in which to try kidnappers. Convicted offenders may receive the death penalty.
But kidnappings are not the only issue putting the country in the region’s unenviable 18th place in terms the number of tourists visitors. Other realities include the following:
· Tourist attractions and accommodations are generally insufficient and of low quality and are virtually non-existent beyond major cities. One-star hotels constitute 55 percent of all hotels in Yemen.
· Insufficient tourism laws.
· Polluted streets and tourist areas.
· Gun control: gun carrying is both unregulated and a perceived right in Yemen. Surveys indicate that there are more guns in circulation than there are inhabitants (population: approximately 17 million). Recently, the Yemen Ministry of Interior called for a prohibition on carrying weapons in the capital, Sanaa, and major cities.
The Qat Concerns: Chewing away at the problem
The World Bank reports that cultivation, retailing and distribution of Qat, a naturally-grown narcotic, account for up to 25 percent of Yemen’s Gross Domestic Product.
But experts agree that this plant offers little economic benefit, since very little of it is exported. In fact, qat-chewing is virtually a national pastime. During the afternoon, the country comes to a virtual standstill while people indulge in social chewing sessions. The problem has become such a national issue, that the president publicly announced his commitment to dropping the habit and urged others to follow his example. Furthermore, the government passed laws that would limit the places and times that people could chew Qat.
The government’s main concerns with this endemic are as follows:
· There are adverse affects on human health and productivity, which have economic implications. Studies show that people consume more Qat than any other fruit or vegetable.
· "Qat sessions" result in a loss of 1 million human-hours a day.
· Qat cultivation uses more land than does wheat, fruit or vegetable farming. Qat farming currently consumes 70 percent of all agricultural land and 55 percent of ground water, further exacerbating an existing water scarcity problem.
Besides the problems of Qat chewing and kidnapping, there are many other challenges that the country must address. Among them are the following:
· Yemen needs to settle its border dispute with Saudi Arabia. The two sides often clash along the disputed Harad area in northwestern Yemen.
· Yemen must develop and receive high prices for its potentially lucrative Masila crude oil. The President is scheduled to visit Canada in March in attempt to attract Canadian investment in the oil sector.
· The effects of the internal government conflict between the General People’s congress and opposition parties. Recently, there have been many disputes over Hague rulings regarding Eritrea’s fishing rights in local islands. Opposition parties accuse government press of not fully disclosing the decision documentation, and of not being clear about the arbitration results.
With a loaded agenda, experts concur that if Yemen is to fully ‘reap the rewards’ of its economic reform program, it must effectively tackle issues both in and out of the economic arena. Guns, water, Qat and kidnappings, will all play critical roles in the stability of this developing nation.
All pictures are courtesy of Edition Vasco, with the exception of the Qat bundle - provided by Publishers Group.