The UAE has been scaling back its military commitment to Yemen, in an unannounced move which appears to have been at least partly prompted by the Hodeidah peace agreement between the Houthi rebels and the Saudi-backed government of President Abd Rabu Mansour Hadi signed in Stockholm in December.
Try as it might, Saudi Arabia can’t put the murder of Jamal Khashoggi behind it. Four months after the brutal killing in Istanbul by a team of men close to Crown Prince Mohammed Bin Salman (MBS), the late journalist’s many friends are unwilling to let the matter be forgotten. Saudi Arabia is making great efforts to win back influence, but looks powerless to change the narrative – at least in the West.
Every month, more than 700 trucks rumble up and down the highways of Syria delivering food and other aid to hundreds of distribution points across the country. The trucks carry basic commodities such as rice, lentils, canned food, salt and cooking oil from the U.N.’s World Food Programme (WFP).
The WFP is working with more than two dozen organisations, including the Syrian Arab Red Crescent, the Agha Khan Foundation and 26 local charities. Together, they are helping millions of people stay alive in extremely challenging conditions. Some 4.25 million people inside Syria and another 1.5 million who have fled to neighbouring countries are receiving aid.
The scale of the operation is both impressive and depressing, but it’s a lifeline that is at times hanging by a thread. During the summer, the WFP was forced to cut aid to a large number of Syrian refugees in Jordan and Lebanon. As a result, instead of an average of $27 per person per month, 211,000 refugees in Jordan are now receiving $14 a month, and 635,000 refugees in Lebanon receive $13.50. Not all refugees receive aid from the WFP, but these numbers represent a significant proportion of the total refugee population in the two countries. The UN's refugee agency, UNHCR, puts the number of Syrians seeking refuge in Lebanon at 1.1 million and in Jordan at around 630,000.
The cuts were needed so the organisation could focus on the even more vulnerable families within Syria amid a bleak funding outlook. The WFP needs $1.5 billion to fund its operations in Syria and for refugees in neighbouring countries this year. At the moment, it has a shortfall of $222 million for the final quarter of this year. Even if that gap is closed, the organisation will need to be cautious about restoring aid levels too quickly.
“Only if we receive enough funding to cover the first six months of 2016 would it be possible to re-include families who have been cut off from assistance and to restore the value of the voucher to its original average of $27 per person’, says Dina El-Kassaby, a spokeswoman for the WFP. “We want to avoid a situation where families are left in the lurch, not knowing if they will receive assistance in the coming months or get the depressing message that they have been cut off from assistance again. This has been a hand-to-mouth operation since its start, and this year has seen the worst levels of funding yet. It has taken its toll on hundreds of thousands of families.”
As fighting intensifies and continues to draw in more actors, the problems appear to be getting worse. When civil the war broke out in 2011, the WFP began offering food aid to 50,000 people. They are now helping more than 85 times as many.
The organisations might find it easier to cope if there weren’t also critical problems in other parts of the region. In Yemen, where another civil war rages, some 6.1 million people are severely food insecure. In Iraq, there are 8.2 million people in need of humanitarian assistance.
“Four out of the world’s 10 top countries with the highest stunting rates among children under 5 are Muslim countries”, says Abeer Etefa, another WFP spokeswoman. “Poverty and conflict exacerbate the problem. This year alone in Yemen, 1.8 million children are expected to suffer from some form of malnutrition. The humanitarian system is being stretched to [the] breaking point, with an unprecedented level of need in Syria, Iraq and Yemen.”
Can new e-money services alleviate some of the difficulties facing Yemenis during wartime?
Times of war are times of hardship, when meeting even simple needs can become complex if not impossible. That is certainly the case in Yemen these days. The UN says that 12.9 million Yemenis are in need of food aid and 15.2 million are in need of basic health care.
The economy is also spiralling downwards at a depressingly fast rate. The IMF reckons that oil production is 40 per cent lower than it was a year ago, public revenues and spending are down by a third and youth unemployment is running at around 40 per cent.
There will be no economic recovery without a political solution, and for as long as that remains elusive many aspects of day-to-day life will be tough. To take one example, according to the Central Bank of Yemen a third of bank branches are closed as a result of the ongoing war, which is undermining the ability of people to carry out even simple transactions.
“Around 30 to 40 per cent of all bank branches are closed. Many people have lost their business. Some customers cannot withdraw money from their bank account,” says Mansour Rageh, deputy manager for Islamic and specialist banks at the central bank.
One partial solution to the problem of bank closures is now on the horizon. In December, the central bank issued a new set of regulations covering e-money and mobile banking, with support from the World Bank and organisations such as USAID, the Consultative Group to Assist the Poor (CGAP) and German international development agency GIZ. It may seem incongruous for the central bank to focus on such matters in the current environment, and it will certainly not solve any of the big problems facing the country, but it may at least alleviate some of the symptoms, particularly among poorer Yemenis.
Yemen is in any case one of the most ‘under-banked’ countries in the world. According to the World Bank, there are only two commercial bank branches for every 100,000 adults in Yemen, compared to a global average of 12 branches. Only six per cent of adults have an account at a formal financial institution, with the figure for women at less than two per cent. All that means it is expensive and difficult for people to send or receive money, to save for the future or take out loans to build up a business.
“Yemen’s financial inclusion level is abysmal. It’s as bad as it gets,” says one finance industry executive.
The lack of financial inclusion is a problem that the central bank has been trying to tackle since at least 2009, when it unveiled a set of microfinance regulations. That has been relatively successful. According to the Washington-based Microfinance Information Exchange, there are now 11 microfinance institutions in Yemen and between them they have 117,000 borrowers and outstanding loans of $51 million. Some of these institutions also accept deposits. It is estimated there are 370,000 account holders with deposits totalling almost $138 million.
Mohamed Khaled, Middle East programme manager for microfinance at the International Finance Corporation (IFC), says that Yemen has one of the most supportive regulatory frameworks for microfinance in the region.
Even so, there are plenty of gaps in the system. Yemen has a large population spread out over a wide geographic area. That makes it hard for traditional banks, which rely on expensive branch networks to reach out to the population. Even microfinance banks, which have far lower costs, can find it tough to make a profit in such an environment.
“There are 26 million people in Yemen, but the population is very scattered and that makes it very difficult for banks, even microfinance banks, to target them. Most people live in rural areas where there are no banks or any financial institutions,” says Rageh. “So we began to think about mobile banking and how we can use it to reach most of the population.”
While there are just two million bank accounts in Yemen, there are around 16 million mobile phone users. That looks like fertile ground for the sort of e-money services that have proven so successful elsewhere in the world and have been an important tool in reducing levels of poverty. Such services first emerged in east Africa, in places like Kenya and Tanzania. Now, according to the GSMA, a mobile industry trade body, there are 255 mobile money services up and running in 89 countries.
Yemen’s new mobile banking regulations cover a range of services, including transferring money between e-money accounts, and traditional bank accounts and paying utility bills. Rageh is hopeful that the services will prove useful, particularly given the extent of bank branch closures.
“Right now there are areas in Yemen where the banks are closed and people cannot send money. They have to go to Sana’a or another big city where branches are still open, which is difficult for them,” he says. “So I think mobile banking will be very helpful.”
However, Yemen may have missed a trick in taking a rather conservative approach. During the process of developing the regulations, the Alliance for Financial Inclusion (AFI), a non-profit body, helped to arrange a peer-review of the draft rules, with the authorities in Kenya, Tanzania, Bangladesh, Zambia and Panama all offering their advice.
“Mobile financial services in Kenya, Tanzania and Bangladesh are quite developed so I’m sure the regulations benefitted from that,” says Klaus Prochaska, head of policy analysis and capacity building at the AFI.
However, rather than following the lead of some of these African countries in allowing telecoms operators and others to launch services independently of banks, Yemen is insisting that banks alone issue e-money. While this conservative approach adopted may prove to be successful in the long-run, it is likely to take longer for any momentum to build up.
“In a difficult environment where infrastructure is really challenging like in Yemen, there would probably have been quicker and easier wins if they allowed non-banks to issue e-money,” says the industry executive.
One advantage of allowing telcos into the front line is that they tend to be better than banks at building up distribution networks and they are used to handling relatively small amounts of money in a cost-efficient way. In comparison, banks tend to be more risk-averse and slower moving.
Certainly, the development in Yemen has got off to a slow start. Since December, just three institutions have applied for licences, but two of those have suspended their applications while they focus on looking after their main business during the war. At the moment, the central bank says that only one institution is pushing ahead with an application, Al Kuraimi Islamic Microfinance Bank.
Having said that, bank-led mobile services have proved to be a success in some other markets in Asia, such as Bangladesh and Pakistan. Prochaska says there is no perfect model for mobile banking services and different things work in different countries.
“For the Central Bank of Yemen to have financial inclusion on their radar is a great thing. They’re doing the best they can in their situation,” he says. “There is ‘no one size fits all’ model. In some countries it takes off, in other countries it doesn’t. It’s anybody’s guess if it will work well in Yemen.
“Having the regulations is a very important start but that’s when the work for the provider starts. It’s now in the hand of the providers to design and offer services that meet the needs of potential customers, especially the poor.”
The war is making it more difficult to set up the new services than would otherwise be the case, but the central bank is trying to be accommodating, for example in the way that it checks whether a bank’s IT system is viable.
“Under the regulations, a bank’s IT system and platform needs to be tested by a third party to ensure that it is suitable for mobile banking, but there is no company, which can do that in Yemen and right now it is difficult for banks to bring experts from outside the country into Yemen. So we will try to use our IT staff to test the system. We will try to be more flexible on that point,” says Rageh.
In the meantime, other microfinance institutions are finding that the war is making it difficult for them to continue with their normal operations too. The US-based peer-to-peer lending firm Kiva, which works in Yemen via Al Amal Microfinance Bank, says that its local partner has suspended making loans in Yemen and Kiva says that it expects to see increasing rates of non-performing loans there.
All this highlights both the difficulty of offering financial services during wartime, but also the potentially useful role that mobile banking could play. After all, it can continue operating for as long as a customer is able to get a mobile phone signal.
“As long as you have mobile reception and a functional agent network, you can put cash in and take cash out,” says Prochaska. “I’d say that e-money is more crisis-resistant than a traditional bank branch. In Somalia, with its well-known stability issues, mobile banking has been very popular at times when it was dangerous to walk on the street. Cash can be stolen, but if your cell phone is stolen you still need a PIN code and without that they can’t steal from your mobile money account.”
The nature of war is changing in the Middle East and North Africa, and the death toll is increasing day by day. Published in MEED, 1 June 2015
In the first 24 hours after taking control of the Syrian city of Palmyra in May, forces from the jihadist group Islamic State in Iraq and Syria (Isis) executed at least 17 people, according to the Syrian Observatory for Human Rights (SOHR). Several hundred more have been killed since.
Further east, at around the same time as Palmyra fell, the group was carrying out mass executions in the Deir al-Zor province, including one man named as Ibrajim al-Shridah, who was killed by a rocket-propelled grenade fired by an Albanian recruit.
The brutality of the Syrian conflict is often shocking, but it is not only Isis forces who are guilty there. SOHR says 9,000 barrel bombs have been dropped from government helicopters on towns and cities across the country over the past seven months, killing rebel fighters and civilians without distinction.
The civil war in Syria is by far the deadliest conflict in the world, with an estimated 70,000 people losing their lives in 2014, according to data compiled by the London-based think-tank International Institute for Strategic Studies (IISS).
The second deadliest conflict is also in the Middle East, in Iraq, where 18,000 perished last year. Both figures mark a worryingly sharp rise from the year before. In 2013, some 49,000 people lost their lives in the Syrian war and a further 8,500 in Iraq.
The escalating death toll in these two countries is part of a global trend of conflicts getting more deadly. Around the world, the number of wars, insurgencies and other violent conflicts has actually been steadily declining over recent years, from 63 in 2008 to 42 last year, but what they have lost in number they have gained in ferocity. Total fatalities have risen from 56,000 in 2008 to 180,000 in 2014, says IISS.
The wars in Syria and Iraq account for almost half of the global total and mean the Middle East and North Africa (Mena) is today the world’s most dangerous region, with just over 101,000 deaths from eight conflicts last year. The next most dangerous regions are Latin America, where narcotics-led violence was largely responsible for the 30,500 deaths in 2014, and sub-Saharan Africa, where a dispiriting tapestry of ethnic, religious and political violence claimed more than 28,000 lives in seven countries.
In most parts of the Middle East, the situation has been getting worse rather than better. Last year was the deadliest in the Israeli-Palestinian dispute since the 1967 Six-Day War, for example. The Israeli assault on Gaza, called Operation Protective Edge, which began in June and lasted 50 days, resulted in well over 2,000 deaths.
The number of fatalities also rose in the Sinai Peninsula area of Egypt, where 900 people lost their lives in 2014; in Libya, where 3,000 people were killed; and in Yemen, where the death toll quadrupled to 4,000. Among the main areas of conflict in the region, it was only in the Darfur area of Sudan that the number of deaths declined, from 3,000 in 2013 to 2,500 last year.
The number of refugees and internally displaced people has also been rising as a result of these conflicts, with Syria again at the forefront of the problems. As of early May, the UN High Commissioner for Refugees estimates that there are 4 million registered Syrian refugees in Egypt, Iraq, Jordan, Lebanon and Turkey, as well as 6.5 million internally displaced people within Syria itself.
“It is civilian populations that continue to pay the price of conflicts, both in terms of short-term dislocation but also in respect of longer-term impacts resulting from the collapse of government services, in particular education and healthcare, and economic development opportunities foregone, blighting the prospects of future generations,” says Nigel Inkster, director of transnational threats and political risk at IISS.
There are some other important trends among these conflicts, beyond the merely depressing increase in the number of deaths and displaced people, which could have some far-reaching consequences for the region. Perhaps the most important is the changing nature of the jihadist groups fighting in these war zones and the strategies they are employing.
“Armed conflict has fundamentally changed the nature of jihadism, so that you now see jihadism as a state-building enterprise,” says Alia Brahimi, visiting research fellow at the University of Oxford in the UK. “I think that’s going to be the biggest impact on conflicts that are already going on.
“Jihadist space is geographically expanding, but also systematically deepening. Isis isn’t just exploiting chaos; it’s seeking to impose a long-term order, and that will have a significant effect on conflict.
“In order to compel local populations, you have to continually instill fear, so as a result we’ve seen ever more fanatical discourse, where mass casualty attacks against civilians are now presented as something self-evidently justified. This is a huge change from the days of [Osama] bin Laden.”
The strategy was clearly apparent in May, when Isis fighters captured Palmyra, but it has been going on for some time. SOHR estimates that the group now controls more than half of Syria.
“The capture of Palmyra is significant for several reasons,” says Matthew Henman, head of the terrorism and insurgency centre at IHS Jane’s, a UK research firm. “It further expands Isis’ territorial control, reinforcing its position as the single opposition group that controls the most territory in Syria. Palmyra is very strategically situated and can now be used as a launching pad for further territorial pushes towards Homs and Damascus.”
The more ground Isis controls, the more income it can generate from its territory, particularly from oil resources. This is to some extent a zero-sum game, with the government suffering a fall in its income every time an oil well or gas pipeline changes hands.
“So many states [in the Mena region] are fraying at the seams because of insurgencies and civil wars,” says Valerie Marcel, an associate fellow at UK think-tank Chatham House. “What’s happening in Syria and Iraq is that a fledgling state, previously just a jihadist group, is now acting like a government and controlling oil production.”
This is not just an issue in Syria. The practice of groups taking and holding land is also clearly visible in Yemen, where Al-Qaeda in the Arabian Peninsula (AQAP) occupies a substantial patch of territory in the east of the country, and in Libya.
“The loss of the state monopoly over the control of oil installations, production and marketing further weakens the central state,” says Marcel.
“If you look at Libya, you’ve seen different groups battle it out for territory, but more significantly for control over oil production facilities and export terminals. The more that sub-national groups control the oil infrastructure, the more it gives them the possibility to enrich themselves, but it also undermines the central states’ capacity to take the revenues, pay civil servants and consolidate their own power. So it hastens the weakening of the state.”
In Iraq, meanwhile, Isis forces have consistently shown themselves to be a good match for the under-motivated national army and, as a result, the jihadists now hold vast swathes of territory covering much of the west of the country. It has only been a combination of airstrikes by the US-led coalition and the response of Shia militia organised by Iran that has held them back from even greater gains. Even so, Isis was able to capture the city of Ramadi, little more than 100 kilometres west of Baghdad, in May this year.
“What we have seen in Iraq is that the great blitz attack that Isis did last year has, broadly speaking, been contained by the coalition air strikes, but also just as importantly by the mass mobilisation of Shia militia,” says Ben Barry, senior fellow for land warfare at IISS.
“Quite clearly, the [recent events] in Ramadi demonstrate Isis still can counter-attack at the tactical and operational level and it can seize the initiative. It’s displaying tactics of quite a high order. My prediction is that this to-ing and fro-ing in the near future will continue.”
In the case of both Iraq and Syria, it is very hard to see how any side can win an outright military victory any time soon. As is the case in other conflicts such as Libya, Yemen and Palestine, a long-term political solution is needed if there is to be any hope of restoring stability, peace and prosperity. The prospects for diplomacy do not look promising at the moment, however. The Middle East looks set to remain a dangerous neighbourhood for many years to come.
Yemen’s National Dialogue Conference is due to conclude on 10 October and is expected to recommend a federal structure for the country. Published in MEED, 8 October 2013
The province of Taiz in southwest Yemen has a population of around 3 million people, but Shawki Ahmned Hayel, the governor of the province, says he has a security budget of just $80,000 a month. Such mismatches between needs and reality are not uncommon in Yemen, a country where 13 million people need some form of humanitarian aid according to the UN.
Yemen’s economic, security and political challenges are myriad and interlinked, but there is at least some movement on the last of these three. The National Dialogue Conference, which began on 18 March is due to conclude on 10 October and is expected to recommend a federal structure for the country, dividing it up into perhaps five or six regions.
Abdullah Alsaidi, a former permanent representative of Yemen to the UN, says “There is now a consensus that the state will become federal.”
This will not be enough to satisfy everyone though. The revolutions that swept through the Middle East since 2011 have often failed to meet the lofty hopes of the people that took to the streets. That is as true in Yemen as anywhere. Some members of the old guard may have been removed from power, including President Ali Abdullah Saleh in November 2011, but many still remain.
The current president, Abd Rabbu Mansour Hadi, was Salah’s deputy. A report released in late September by London-based thinktank Chatham House, called Yemen: Corruption, Capital Flight and Global Drivers of Conflict, talks of the “self-enriching behaviour of the country’s elites” who continue to drain the country of its wealth.
It is unlikely that the results of the National Dialogue will do much to dent the influence of these elites, in the short term at least. And a federal structure may also not be enough to stifle the deep-seated desire of many in the south to secede and turn the clock back on the unification of North and South Yemen in 1990.
But even if a workable constitutional compromise can be found, resolving Yemen’s economic and security problems will be just as crucial if the country is to have any chance of climbing out of the desperate position it is in.
Yemen’s oil wells are running dry and revenues from them cannot keep pace with the rise in government spending, but there are few other natural resources the country can draw on. The country is the poorest in the Gulf and one of the most water-deprived in the world, largely due to the local appetite for chewing on the leaves of the aquifer-draining khat plant.
Yemen’s allies in the Gulf and some Western capitals have pledged more than $8bn in assistance at a series of conferences over recent years. To date less than $2bn has been handed over.
That might seem like donors are dragging their feet, but there are real question marks as to how much aid the economy can effectively absorb in a short space of time. Corruption is already a big problem and throwing more money into the mix too quickly could simply exacerbate that.
Help for Yemen
The interest that other countries have shown in Yemen is not limited to financial support. Iran and the GCC states are playing out a proxy war of influence with different groups and US drone attacks continue with distressing frequency. Washington defends this as a necessary tactic in its battle with Al-Qaeda in the Arabian peninsula, but it is often civilians that bear the brunt of the attacks.
“You can expect a strike to happen any day and at every moment. You don’t know when and where the drones are targeting,” says Baraa Shaiban, a local activist for the human rights group Reprieve. “A lot of people now say that we are afraid of gathering in public places because we might be targeted by these drones.”
Perhaps the best thing to be said about Yemen is that the situation is not as bad as it could be and not as bad as in some other parts of the Middle East.
There may be violence, but nothing on the scale of Syria. There may be political tension, but nothing equivalent to Egypt where a court has banned the activities of the largest political party, the Muslim Brotherhood. Even Bahrain looks worse on some measures – the National Dialogue process in Yemen is far more inclusive and open than what is happening in Manama.
What follows after the National Dialogue publishes its conclusions is an open question. In the short-term, parliamentary and presidential elections are due to be held in February 2014.
Some observers predict more violence too. But reshaping and rebuilding a country will clearly take more than an election or two and Yemen will need the financial, diplomatic and political support of its international allies for many years to come if it is to have any chance of emerging as a politically coherent and economically stable country.
As Yemen edges closer to potential civil war, the GCC is desperate to ensure the problems do not spill over. Published in MEED, 1 April 2011
President Ali Abdullah Saleh of Yemen says he is ready to leave office, but after more than 32 years in power he does not seem to be in much of a hurry. While he has promised to go, he wants to do it on his terms.
“We in the leadership do not want power and do not need it,” he told his supporters at a rally in Sanaa on 25 March. “We are willing to hand over power to safe hands, not to frivolous, sick, hateful and corrupt hands.”
What Saleh’s neighbours in the GCC want is to ensure that Yemen avoids economic collapse and civil war that would threaten the stability of their own countries, especially Saudi Arabia.
Saleh’s tactics are, at best, only delaying the inevitable. Senior generals, influential local businessmen and ambassadors in key foreign capitals have all deserted his regime in recent weeks. Although he managed to attract large crowds of supporters to the streets on 25 March, his opponents have been both more numerous and vociferous. Right now the political momentum lies with them.
Political tide turns in Yemen
“The political tide has turned decisively against Saleh,” says April Longley Alley, senior analyst for the Arabian peninsula at the Brussels-headquartered International Crisis Group. “We know he’s going to go. The question is how and when.
“The quicker an agreement can be reached and the quicker Saleh can announce how he is leaving and how he will transfer power to a civilian government, the better it will be for Yemen and everyone involved. In this situation, there’s so much room for miscalculation and bloody conflict.”
The timing and nature of Saleh’s departure are important questions for Yemen’s neighbours too. For GCC states concerned that instability in Yemen could rock their own countries, the situation is at a critical juncture.
Yemen’s many political problems include the Al-Houthi rebel movement in the north and secessionists in the south, as well as the presence of Al-Qaeda in the Arabian Peninsula (AQAP). Economically, the country is facing dwindling oil reserves and has few other sources of income. Its gross domestic product per person is among the lowest in the whole Middle East.
These problems have already been seeping across its borders, particularly into Saudi Arabia. In August 2009, AQAP tried, but failed to kill Saudi Arabia’s Prince Mohammed bin Nayef, the deputy interior minister in charge of counter-terrorism. Riyadh also fought skirmishes with Houthi rebels along its southern border in late 2009 and early 2010. The days ahead will decide whether such problems will increase or fade.
“The GCC states are deeply concerned,” says Mustafa Alani, director of the security & defence research Programme at the Dubai-based Gulf Research Centre. “They understand that Saleh has to go. The major concern is the vacuum of power. They don’t want Saleh to go without a smooth transfer of power because Yemen is a very dangerous place. You have a whole cocktail of threats.”
The US has been the main international player trying to resolve Yemen’s political impasse. While it has refused to take sides publically, its ambassador Gerald Feierstein was present at meetings on 24 and 25 March between vice-president Abdu Rabo Mansour Hadi and opposition leaders, including Major General Ali Mohsen and members of the Joint Meeting Parties.
Behind the scenes, GCC states have also been getting involved, particularly Saudi Arabia. “The security of Saudi Arabia starts in Yemen,” says Alani. “There is a lot of diplomatic pressure and effort from Saudi Arabia, and from other GCC countries as well, to make sure things will not collapse. The contact is not only with Saleh, it is with the military institutions, the security institutions and the political opposition.
“The Saudis have influence in the country. There is a very active effort to secure some sort of smooth transfer of power. They have no favourite [to replace Saleh]. They want a fair and transparent election, whether it is in three months or six months.”
Such transitional periods can make for unstable times and, in the absence of any clear alternative leader to Saleh, no one can predict with confidence what sort of government will emerge. The greatest short-term risk is of civil war breaking out between security forces loyal to Saleh and those opposed to him. The country itself could also fracture, if southern secessionists achieve their aim.
The degree to which the US, the GCC or anyone else can influence the events in Yemen and prevent is limited. One lesson from revolutions in the region is that the most important actors are usually domestic ones unless, as in Libya, other countries are willing to use military force.
What can be predicted with certainty, however, is that any new leader will face the same daunting economic challenges which Saleh proved unequal to. The start of liquefied natural gas production in late 2009 provided a welcome boost to the economy, but it does not completely make up for the gradual decline in oil output. The fiscal deficit in 2010 was still around $1.6bn, an estimated 43 per cent of the population live below the poverty line and unemployment is at least 35 per cent.
Unless these problems are tackled, they could fuel further instability in the country. This is where the GCC could play a more central role. In particular, the Gulf countries will, along with Yemen’s other allies, need to step in with greater financial assistance.
“Whatever government takes over is going to face an almost immediate economic crisis,” says Alley. “The GCC is going to be a critical player in addressing these financial and economic challenges. Saudi Arabia has much more financial leverage in the country and much more historical weight than the US will ever have in Yemen.”
Aid and soft loans have been forthcoming in recent years and more will almost certainly be extended to any new government. In July 2010, the Washington-headquartered IMF approved a three-year loan worth $369.8m, $53m of which was available immediately. That was followed in December by a $200m loan from the Abu Dhabi-headquartered Arab Monetary Fund.
Far more substantial has been the more than $2bn in aid which GCC states have pledged since 2006. However, it has not always been easy to convert these pledges into concrete action. Many projects that should have received funding have been hit by delays, partly because the security situation has meant contractors have been unwilling to work on the infrastructure schemes such aid has been focused on.
Speaking in London on 10 November 2010, Abdel Aziz Aluwaisheg, director general for international economic relations at the GCC Secretariat, acknowledged some of the shortcomings. “The speed with which disbursement has gone has not been satisfactory for us or for Yemen,” he said. “Less than 50 per cent has actually been disbursed.
“One of the projects that the GCC is funding is the building of a power station in Marib, [but] no qualified contractors submitted tenders to this power station. Yemen contacted some specific companies and they declined because of the security situation.”
Additional aid for Yemen
Yemen has said it needs another $6bn and donors will need to find new ways to ensure aid does get through despite the lack of security. The GCC at least seems to recognise the urgency. “While some donors would like to see long-term reform of the civil service before they advance funds to various projects, other donors think that we cannot afford to wait that long – that includes the GCC,” said Aluwaisheg.
Along with the recent downturn in the global economy, the security concerns have also contributed to falling trade levels. Most of Yemen’s trade with the GCC is carried out with the UAE, Saudi Arabia and Kuwait. In 2009 alone, imports and exports with the GCC were both down 32 per cent to $2.2bn and $591m respectively, according to the IMF. This put trade levels back to 2006 levels.
One way to boost trade would be to invite Yemen into the GCC, but while talks about Yemen becoming the seventh member of the bloc have taken place in the past, its economic weakness and fractious political scene has meant the idea has gone nowhere.
The current political crisis means that membership is as far away as ever, but closer integration without full membership may be possible. In the meantime, more financial aid in tandem with diplomatic support could help to stabilise any new regime, which emerges once Saleh finally leaves office.
The hope in Gulf capitals will be that the domestic challenge to Saleh’s leadership does not translate into an even bigger challenge to them from whatever follows.