ECONOMIC VISION OF YEMEN 2030
CONCEPT PAPER
May 2013
Foreword
This paper represents a concept paper for the proposed Economic Vision of Yemen 2030.
The core team for drafting this vision was established under the leadership of Dr. Saadaddin
Bin Taleb pursuant to the Cabinet Decree No. 26/2012.
For the preparation of this vision, a team of specialized academics and managerial leaders
from different economic sectors worked together. Consultations also involved the private
sector as well as experts from different regions in workshops, studies and analyses. The vision
will be presented to different stakeholders to enrich and finalize it.
This economic vision represents a national opinion that has taken into account the past
experiences and the existing political and economic situation as well as the developments in
the last two years. This vision takes also into consideration that there is ongoing political
dialogue envisaged to produce a political agreement on the state structure, its institutions and
mechanisms. Hence, this vision is not jumping ahead the outcomes of this dialogue but it can
rather be developed to be harmonized with the outcomes of the National Dialogue.
The full version of the vision will be fully developed and then published on the hands of local
and international experts.
We may express our thanks and gratitude for all the donors who contributed in producing this
document; in particular the USAID-RGP and UNDP/ECDF. We also thank all regional teams
who contributed in the drafting of this project.
Chairman of the Economic Vision Team
Dr. Saadaddin Bin Taleb
2
Introduction:
In the year 2012, Yemen celebrated 50 years after the revolution of the 26th of September and
45 years of the revolution of the 14th of October and the independence of the south from the
British occupation.
Through these liberation efforts, the people of Yemen aspired to make steps towards a better
future characterized by justice, freedom, welfare, security and peace.
Following decades of experimenting different regimes, conflicts, political and economic
turmoil, Yemen still finds itself among the least developing countries and its people are still
suffering from the manifestations of poverty, ignorance, economic, political and social
retardation. The international community views Yemen as a potential failed state with
possibilities of protracted armed internal conflict.
During the past decade, the development that meets the aspirations of the Yemeni people
was not realized with the exception of short and limited periods of history. Recent indicators
show that poverty ratio is 54.5%1 and child malnutrition is 47%2. As per government
estimations, unemployment rates are between 36-40%. This is in addition to other indicators3
that require responsible consideration and making necessary changes to redirect the trend
into a better future.
It is evident that political conflicts in the northern and southern parts of the country before
the unification in the years that follow were key reasons for the failure in achieving the noble
aims of the revolutions, which were also the aims proclaimed by subsequent governments in
the platforms. In the northern part of the country and since the eruption of the revolution,
political conflicts burdened with traditional social structures continued to prevent the
creation of the modern state; the state of institutions, the rule of law and equality, which is
the state the revolution took place to achieve.
Even with the first oil boom in neighboring countries in the 1970 and 1980s, the envisaged
economic, political or social development did not take place except for a short period and in
a limited manner despite the existence of favorable conditions for achieving a real
transformation. It is even with the discovery of oil in Mareb mid-1980s and the beginning of
1
Joint Social and Economic Assessment 2012
The comprehensive food security survey report in Yemen 2012 conducted by food world program (WFP)
3 Other indicators related to males and females show that the gender gap is huge. Gender differences indicators
rank Yemen one rank above the lowest country (146 out of 147 states). This indicates an almost complete lack of
equality and that disadvantaged groups are bearing the brunt of this deprivation and the consequences of gender
differences.
2
3
the oil era in the north, sustainable reconnaissance or development was not achieved nor any
real improvement in the livelihoods of people was achieved.
In the south, the British army left in 1967 following more than one century of occupation and
foreign exploitation of Aden strategic location. The leadership of the country was assumed by
one national front without involving other forces. It adopted a socialist political and economic
system depending on the support of the international socialist system. This approach placed
the country in the forefront of the cold war against the capital system in the west.
Hence, political and economic situation in the country did not settle. Internal conflicts, in
addition to disputes with neighboring countries, continued to exist. Sustainable economic
development was never achieved and internal political conflicts developed into armed
conflicts between factions inside the single ruling party.
A clear manifestation of the deterioration of the situation during the socialist era was the mass
exodus of citizens to neighboring countries looking for better economic opportunities.
In the year 1990, the northern and southern parts of the country unified in a rush and
surprising unification. It was agreed then to adopt political pluralism and market economy
principles. However, many of the foundations for building the state were not agreed upon
assuming that such agreements will be made during the transitional period 1990-1993.
Short while after the unification, in 1994, major differences started to appear between the
two regimes of the new state. These differences escalated and climaxed in the form of an
armed conflict for more than two months and ended with the sweeping of the lands of the
south by the General People’s Congress and its allies and sending the former leaders of the
south to exile.
Key causes for such disagreements include the contrasting geo-demographic reality between
the north and the south in addition to the differences in social, economic rights and political
realities.
The south contains one fifth of the population of the unified country but double the area of
the north. The south has natural and economic resources including oil, gas and strategic
infrastructure (Aden seaport for example), while the north has a population that is four times
the population of the south and is dominated by traditional and armed tribal forces that
permanently hindered the establishment of a modern state of institutions.
4
Following the removal of socialist leaders from the south, these political structures, with their
tribal and military formations, dominated political and economic decisions.
As the case in similar experiences, such ruling structure secured an optimal environment for
rampant institutional corruption that amplified during the last two decades so it controlled all
components of the state and its economy.4 This can be noted clearly from the corruption
perception indicators of Transparency International.5
The problem became even more complex with Yemen becoming a rent income country
depending basically on selling its natural resources (oil and gas), which represented more than
80% of the state budget revenues. Yemen became a typical example of the “resource curse”
in its classical definition.6
There were various attempts and slogans for reforms promoted during different phases,
sometimes as a result of demands and pressures from international donors for a country that
was heading towards failure. However, there were no tangible results of these programs due
to the resistance of the political center against giving concessions from its patriarchal powers7
in political and economic fields as well as the fierce resistance from major power interests
which were arranged during past years.
Therefore, centralization and the structures of political and economic forces became the
major impediments before any reforms or the implementation of any economic development
programs depending on production and investment.
All this resulted in inefficient management of natural resources resulting in a deficiency in
financing basic services. Indicators of resource depletion started to appear at the advent of
the new millennium and this required the authority to seek foreign loans and aids. These
resources (loans and aids), in terms of size and type, were not sufficient to achieve a tangible
transformation in the livelihoods of citizens.
Moreover, the livelihoods of people continued to decline with unemployment and poverty
levels skyrocketing. As a result of that, in addition to the seizure of political and economic
interests by the previous regime; protests and demands from various political, regional and
4
Yemen Corruption Assessment, USAID ,SEPTEMBER 25, 2006
Yemen scored 2.1 in corruption perception indicator in 2011 and ranked 164, meaning that it has high levels of
corruption
6 http://en.wikipedia.org/wiki/Resource_curse
7 http://en.wikipedia.org/wiki/Patrimony , http://www.onislam.net/arabic/madarik/concepts/131044-parentalauthority.html
5
5
sectarian groups arose. Some of these demands manifested in the form of armed conflicts
(Sada war in 2004) and calls for the secession of the south (Southern Hirak in 2007).
As a result, Yemen entered into a political, economic and security crisis threatening the
country to failure since 2006. This stoke the local and international concerns. As a
consequence meeting and conferences for international community and donors were held to
assist Yemen to pass the crisis, to diagnose obstacles and problems and to call for serious
demands to prevent the collapse of the state.8
However, no real actions or reforms were taken and the authority was not able to benefit
from most of the financial pledges to assist Yemen. Crises and protests continued to grow.
By the end of 2010, “Arab Spring” revolutions erupted in Tunisia and ousted the regime there
followed by a revolution in Egypt that toppled the regime. Yemen was well prepared for the
uprising that took place in most of its governorates and cities. Women and youth had a leading
role in that uprising. Then the country witnessed military and political defections leading to
armed conflicts that could have dragged the country into a long term destructive civil war.
Basic state services, including security and electricity collapsed. Economy also collapsed.
Poverty and unemployment rates grew rapidly and worrying child malnutrition trends
appeared. Terrorist groups availed the political and security vacuum and strengthened their
presence and control on large portions of the state territories.
Neighboring countries and international actors intervened to prevent conflicts and total
collapse in Yemen, with the potential regional and international security threats. The GCCInitiative was put forward as a solution for the crisis and it was signed by key political forces
in November 2011.
Key provisions of the GCC-Initiative provide for the transfer of presidency to the then VicePresident through elections, the formation of a national unity government and conducting an
inclusive national dialogue comprising all parties to draft a new constitution and restructure
the state to meet political, economic, social and human aspirations of the people who long
awaited this state.
Rationale of the economic vision:
8 London Conference,
28 January 2006, Riyadh Conference 27-28 February 2010 and the creation of Yemen Friends
Group in October 2006.
6
The state function and powers and known and recognized. They include ensuring welfare of
the people by organizing and protecting the state to provide security, the rule of law, welfare,
equality, justice and protecting personal and public rights under the cover of citizens’
satisfaction.
By following developments and events during the last five decades, we find that the
aspirations of people in both countries before the unification and in unified country were not
realized even at minimum levels. People find itself in a country permeated by poverty,
injustice, inequality and lack of security in a society threatened by fighting and collapse.
Due to the lack of the state of institutions, political conflicts continued with no effective laws
and judiciary. The existence of effective legal system and judiciary is a precondition for the
creation of an economy that depends on the labor force production to achieve the
accumulation of wealth and building a welfare state.
It is the duty of any authority to provide to its people programs for the development of the
society from all fields under a common vision to mobilize the energies of the society. It is the
right of every citizen, be a man or woman, to know the intentions of the authority for his/her
future and the future of his/her children and the society as a whole. By this, citizens, be young
or old, rich or poor, workers or investors, can plan for their future and integrate in their
society.
Therefore, it is essential for the state to have a clear and agreed upon vision for the economy
and politics in the present and the future so it can mobilize public and private energies to
achieve and protect it by allowing wide space for the scrutiny of citizens and their community
institutions. The state shall also protect this national project from any selfish coverts stealing
their dreams.
This economic vision represents a national opinion that has taken into account the past
experience, the current political and economic situation and the developments in the past
two years. This vision takes also into consideration that there is ongoing political dialogue
envisaged to produce a political agreement on the state structure, its institutions and
mechanisms. Hence, this vision is not jumping ahead the outcomes of this dialogue but it can
rather be developed to be harmonized with the outcomes of the National Dialogue.
This vision was developed by a team of specialized academics and managerial leaders from
different economic sectors. Consultations also involved the private sector as well as experts
from different regions in workshops, studies and analyses for almost 9 months.
7
This paper remains as a concept note that is subject to community and institutional
discussions to amend and refine it. This vision shall secure broad community approval in all
parts of the country from different groups. The team responsible for this vision will allow all
possible opportunities for its broad discussion and will carefully listen to all opinions.
The overarching goals of presenting this paper is to put forward ideas for serious discussion
to reach the best proposals for the economy management structure to avoid crises and move
to the space of real and sustainable development achieving welfare, stability and dignity life
for citizens and societies in all parts of the country.
Goals of the economic vision:
The economic vision of the Republic of Yemen is built on the basis of economic regions
following a scientific analysis. It adopts the principle of decentralization to resolve political,
economic and social problems through achieving the following goals:
1. Improve service delivery efficiency, boost economic growth and strengthen the
legitimacy of government.
2. Improve decision making process by expanding people’s participation, especially the
participation of women and youth groups in political and economic activities.
3. Improve economic efficiency leading to economic growth9 through the work of local
authorities in revenue collection, budgeting for public revenues and identifying
appropriate service delivery levels for concerned localities.
4. Focus on economic features of different regions and build on them.
5. Improve the environment of local investments and create competition to attract
investments.
6. Improve management efficiency in the use of resources.
7. Achieve economic growth in faster rates leading to creation of job opportunities and
improving the situation of poor citizens (pro-poor growth).
Criteria for defining economic regions:
The identification of the six economic regions is a model to guide development but not a
methodology to be used. It shall be subject to the agreements within the national dialogue
conference. The following criteria were taken into account in defining economic regions:
1. Existence of sustainability factors
2. Existence of resources and economic opportunities than can be developed.
3. Social and historical harmony
4. The potential integration between regions
9
Tiebout C. (1956) A pure theory of expenditure. Journal of Political Economy 64: 416-424
8
5. Clear identification of relations among regions and between regions and the center
6. The availability of the minimum level of physical and human infrastructure
Based on above criteria, six economic regions were identified.
Proposed economic regions:

Amran, Sadah, Sana’a, Dhammar and Albaidha

Hadramout, Almahara, Shabwa and Socotora Archipelagoes

Aden, Lahej, Abyan and Aldhalea

Taiz and Ibb

Mareb and Aljawf

Hodeidah, Hajja, Raimah, Almahweet and Red Sea islands
A scientific analysis for each region built on strengths, weaknesses, opportunities and threats
will be presented in a detailed manner in the main document. This identification does not
prejudge the outcomes of the national dialogue conference and may be refined based on the
final political agreements taking into account above scientific criteria.
Potential structure of authority:
The structure shall be organized as follows:
1. There are three levels: central, regional and local (governorates and districts)
2. All these levels should meet the conditions of good governance with effective control
institutions at all levels
3. Authorities shall be as follows:
a. At the center: three authorities (legislative, executive and judicial)
b. At the level of regions: three authorities (legislative, executive and judicial)
c. At the local level: two authorities (executive and judicial)
Management of resources:
Natural resources available in regions shall be owned by the regions themselves and under
their authority with a tax to be paid to the center. The center shall observe fairness in the
distribution of resources to regions. Each region shall contribute to the budget of the center
to finance its services and to achieve appropriate growth in other regions. There should be
distribution of other resources at different levels to allow delivery of appropriate services at
different levels.
The expected impact of the economic vision on the macroeconomic level:
9
It is envisaged that the economic vision of the Republic of Yemen is achieved through adopting
the principle of decentralization and defining economic regions with independent decisions
and having their own resources and capabilities. At the beginning, a mechanism for serving
these regions using currently available resources with the center will be developed. Clear
economic plans based on resources and opportunities will be developed. Weaknesses and
threats will be addressed. The plans will promote having efficient administrative and financial
systems and an investment-friendly environment in every region separately to ensure
achieving security and socioeconomic growth.
The goal of this vision is to achieve a macroeconomic growth rate in the first 10 years of 8%
annually. Work will continue relentlessly under favorable circumstances to achieve a growth
rate of 10% annually beyond 2023 until 2030.
If we examine some indicators, such as the ones mentioned earlier in this paper, it becomes
obvious that past policies were not suitable for the requirements of sustainable growth and
did not meet the needs of the society.
Therefore, and while we look forward to a better future, it is essential to reconsider the
options of the past and to plan for beyond the transitional period by formulating the headlines
of successful future policies and strategies under a long term economic vision.
It is essential to build future development on a set of principles to overcome challenges facing
Yemen. Key of these principles are:
1. Social justice and regional equity
2. Efficiency, effectiveness, competition and sectorial and geographic integration
3. Improve qualitative and studies involvement in the globalization process, seize
opportunities globalization offers and avoid its disadvantages.
This may be realized based on the following bases:
1. Prioritize unemployment and poverty dilemmas and utilize all possible resources to
address them.
2. Link human development, employment and social policies with economic policies
built on free initiatives, innovation, creativity, added-value, competitiveness and
productivity.
3. Prepare the environment that ensures fair distribution of infrastructure, sectorial
invest nets, economic activities and public facilities in all regions and enhance their
abilities to attract investments.
10
4. Eliminate sharp regional differences and the urban-rural inequalities. Roll out
economic, social and human development in all regions. Ensure communication and
integration between different segments of the society.
5. Unleash idle local and regional development powers in different regions by giving
them more powers to use their self-capacities to define their development paths and
build on their assets based on their comparative advantages and requirements.
6. Build effective and real partnership between the public and private sector to build a
diverse, productive and integrated economy able of meeting the demands of the
society and the requirements of international competition.
7. Streamline the utilization of natural resources and protect the environment.
8. Build a diverse economic fabric where medium and small enterprises play a major role
and where the government fosters development through funding, guidance, scientific
research and facilitation of product marketing.
9. Plan for human resources to match the outputs of educational institutions with labor
market
requirements
including
focusing
on
technical
and
technological
specializations.
10. Control demographic factors as they represent pressure on the economy as a whole
and the public facilities and employment in particular. A demographic pressure is also
represented in the migration from rural to urban area, child labor, migrants and
refugees. All these pressures require special attention.
11. Engage women in the economic cycle as active members of the society. Ensure
women’s rights in health, education, employment and representation in state
institutions and civil society organizations.
12. Give special attention to social insurance, human aids and health insurance within
development option. This includes the expenditures of local government. Gender
budgeting in health and education sectors shall be considered.
At the end, all these elements aim at securing robust and qualitative economic growth
absorbing job applicants, eliminating severe poverty, integrating all segments and enabling all
groups of benefiting from economic growth, which is not an end by itself but a mean to reach
a superior goal, which is the human development and securing dignity of the citizens.
11