This policy brief sheds light on how the ongoing conflict in Yemen has affected women’s participation in the workforce. It finds that the protracted conflict has, on the one hand, pushed more women into the workforce and new labor markets, in some cases into professions previously dominated by men. While some women have established new enterprises, often home-based businesses, others have engaged in poorly paid physical work in response to the economic crisis and the loss of male breadwinners. On the other hand, the war has imposed new constraints on an already low women’s participation rate.
This policy brief recommends that micro-economic initiatives to bring women into the workforce must be accompanied by long-term efforts to address socio-economic structures that have historically constrained women’s access to the workforce. Interventions must be guided by local consultations with women and men from all demographics, and must promote work that is fairly paid and provides security and social protection. Quota systems could ensure that women play an active role in recovery and reconstruction efforts; women must also be engaged at all decision-making levels in peace building efforts and in post-conflict Yemen.
Yemen has one of the lowest female labor force participation rates in the world. The conflict-driven economic collapse has devastated Yemen’s labor market, and available data suggest that working women were initially harder hit by the conflict than their male counterparts; proportionally, more women lost their jobs while women-owned businesses were more vulnerable to closing down. Subsequently, however, the prolonged war has pushed more women into the workforce, often through financial necessity due to the economic crisis and the loss of male breadwinners rather than any planned economic empowerment for women.
During the conflict, women have started new enterprises, often home-based businesses, or entered professions like waitressing or retail which were previously dominated by men. The humanitarian response in Yemen has created new employment for women, while some women have been employed in security forces for parties to the conflict. Yemeni women have been pushed into poorly paid, informal physical labor like domestic work, while others have been forced into negative coping mechanisms such as begging.
This policy brief surveys these emerging trends and introduces principles to guide efforts to sustain potential gains in women’s labor force participation and to improve access to decent work for all women in post-conflict Yemen.
Yemen’s labor force is largely uneducated and informal, with a low labor force participation rate.[1] It is characterized by a mismatch between workers’ qualifications and their roles, and high unemployment.[2] While definitive statistics are unavailable, prior to the conflict estimates suggested that between a quarter and an eighth of the Yemeni workforce were unemployed, with these numbers substantially higher for youth and women.[3] Some 42.4 percent of the workforce was self-employed or worked in family businesses.
Most of Yemen’s workforce is male. Current quantitative data on women’s labor force participation is not available. Prior to the conflict, estimates for female labor force participation varied widely;[4] measuring women’s work is a difficult task with methodological challenges, such as whether to include unpaid work like fetching water as economic activities.[5]
According to an ILO labor force survey conducted in 2013-2014, only 6 percent of women participated in the labor force prior to the conflict, while just 7 percent of jobs were held by women. In 2013, higher education levels were linked to greater workforce participation for women. Some 62.1 percent of women with a university education were part of the workforce in Yemen, compared with just 4.5 percent of those with a primary education or lower. The ILO survey found that of the 293,000 women employed before the conflict, around half worked in agriculture, either as dairy and livestock producers or field crop and vegetable growers, while around one third were employed in the service industry. More than one-third of women worked in family businesses, compared with less than one-tenth of men.
Data assessing upward or downward trends in female labor force participation is lacking and often inconsistent when it does exist. However, by all metrics, women’s labor force participation in Yemen remained low, even for a region in which low female participation is a feature of labor markets. This is despite legal provisions to protect women in the workforce. Labor Law No.5 of 1995,[6] which governs labor issues in Yemen, recognizes that women are entitled to equal pay, promotion, opportunities, training and duties and prohibits discrimination on the grounds of sex. It also provides for shorter working hours for pregnant or breastfeeding employees and maternity leave for 60 days with full pay.
Yemen’s constitution guarantees that all citizens have the right to participate in the economic life of the country.[7] Yemen has ratified the Convention on the Elimination of all Forms of Discrimination Against Women (CEDAW),[8] although many aspects of Yemen’s national legislation are not in compliance with the treaty.[9] The Committee on the Elimination of Discrimination against Women, which monitors implementation of the CEDAW treaty, noted in its last review of Yemen that women’s opportunities to work in the private and public sector were limited; most working women were engaged in the agricultural sector, doing unpaid work.[10]
Multiple factors have hindered women’s entry into the workforce. Yemen has placed last in the Global Gender Gap report every year for the last decade, signalling the country’s significant gender-based disparities.[11] Yemen’s tribal and patriarchal social norms are a key factor contributing to low female labor force participation. Female access to paid employment has been challenged by widely-held beliefs that women’s roles are primarily domestic, entailing reproductive and extensive household responsibilities, as well as a prevalent negative stigma around women who work outside the home.[12] When surveyed by the ILO, most women said they did not participate in the labor force for personal reasons, like family responsibilities or resistance from families, rather than due to the lack of available jobs. A 2010 study found that 76.9 percent of Yemeni women outside the labor force were economically inactive because they were engaged in household chores.[13]
Cultural values limiting women’s interaction with men outside the family have limited the types of work that women could perform, and women’s employment options have been largely restricted to “feminine” jobs such as clerks, secretaries, teachers and nurses.[14] Many jobs are recruited through personal networking in Yemen, disadvantaging women who are restricted to the private sphere.[15] The segregation of genders has also affected girls’ education, particularly in rural areas where female teachers may not be available.[16] The enrollment of girls in education in rural areas has also been limited by factors like the remote locations of schools and the lack of sanitation facilities.[17] In addition, girls are more likely to be expected to perform household labor than boys. Fewer girls are enrolled in school than boys, and this is compounded by a higher dropout rate among girls.[18] The resulting low literacy levels among women restrict women’s employment opportunities; 55 percent of Yemeni women are literate, compared to 85 percent of Yemeni men.[19]
Early marriage and high fertility rates have also limited women’s educational opportunities and their ability to join the workforce.[20] High rates of childbearing can lead to discriminatory practices by employers who are deterred from employing women due to the costs associated with recruiting replacements and investing in new employees.[21] Poor transport options and lack of childcare have also constrained women’s employment options.[22]
The current conflict has devastated Yemen’s economy, leaving millions of Yemenis unable to afford basic necessities; the economic collapse has driven the humanitarian catastrophe. Yemen’s economy has contracted by an estimated 50 percent[23] amid reductions to oil exports, the depreciation of the Yemeni rial, the Saudi-led military coalition’s blockade of Houthi-held ports, and physical damage to businesses and infrastructure.[24] The conflict has significantly diminished employment opportunities, while most public sector workers have not been paid regularly or in full since August 2016.[25] Approximately 55 percent of private sector workers lost their jobs, while the agricultural and fishing sectors — key employers of the rural workforce — have been severely curtailed.[26]
The conflict-driven challenges to the labor market have had multifaceted impacts on women. Research suggests that initially, the war affected a larger proportion of women in the labor force than men. In 2015, male employment had declined by 11 percent, while female employment had fallen by 28 percent.[27] These figures varied nationally; 43 percent of the employment decline for women occurred in Sana’a, due to the heavily-hit private sector, while in Aden the number of women in employment actually rose by 11 percent.
In 2015, women-owned businesses were harder hit than male-owned businesses, although in actual terms far fewer were affected as they accounted for just 4 percent of all businesses prior to the conflict.[28] While 26 percent of businesses in the trade, services and industrial sectors had closed by 2015, this rate rose to 42 percent among female-owned businesses, usually due to physical damage, as well as loss of capital and shortages of electricity and fuel.[29] Female business owners found it more difficult than their male counterparts to access dollar bank accounts, according to a study by the UN Development Program (UNDP).[30]
As the war has progressed, however, the prolonged conflict has led to some increases in women’s employment. Fighting has caused a sharp rise in female-headed households; many men have lost their incomes due to the conflict, and in some cases women have become the breadwinner.[31] Financial necessity has led a growing number of women to start new enterprises, often home-based businesses like producing food for sale or selling clothes and accessories online through social media.[32] Those who have established successful businesses have been able to support extended families with their income. Some widows have taken over businesses once owned by their deceased husbands.[33]
The war has opened new professions to women. The influx of humanitarian funding to Yemen has driven employment in the aid sector. According to a study conducted in 2018, women are more likely to work for national NGOs than men.[34] Women have been involved in distributing humanitarian assistance, facilitating access to services and managing projects on gender-based violence and hygiene promotion, as well as providing psychiatric support, livelihood-oriented training and awareness-raising on health and education .[35] During the conflict, women have entered professions previously closed to them by cultural restrictions, like waitressing and retail, although this has varied regionally, and even within governorates.[36] In Taiz, while some women reported entering the workforce for the first time during the conflict, the presence of Islamist groups has restricted women’s mobility and led to women losing their jobs.[37] Some women have been employed in security forces for parties to the conflict. Women have been enlisted into the Popular Resistance forces in Taiz, where they have manned checkpoints and participated in home raids,[38] and have joined the zainabiat, a militia of the armed Houthi movement.[39]
The suspension of civil service salaries in September 2016 affected the livelihoods of civil servants as well as millions of Yemenis dependent on them as breadwinners. While some civil servants continued to work, but without regular payment, others were pushed into different professions. Yemeni women reported cases of female nurses and teachers now working as seamstresses and hairdressers.
While the conflict may have created new opportunities for some women, fighting has also driven women to negative coping mechanisms, including debt, begging and prostitution.[40] Child marriage has soared during the conflict, as families have resorted to marrying their daughters early to secure dowry payments and to be relieved of the costs of caring for them.[41] The rate of gender-based violence has also risen by an estimated 63 percent.[42] In some areas, fighting has left women less able to leave the house due to security concerns.[43] Some women have been forced into poorly-paid, informal physical work, like house cleaning, collecting firewood and washing clothes.[44]
Some research suggests that women’s growing participation in the labor force has had positive impacts, for example by increasing women’s decision-making power in the family.[45] Women have reported that in some families, where women have started earning income and managing the household, men have taken on traditionally female responsibilities like cooking, childcare and collecting water, leading to a reassessment of gender roles.[46] While this suggests a significant change in a strongly patriarchal society, it has also led to increased domestic conflict, including verbal and physical abuse of women and children.[47] Further, women and men have reported that the conflict has negatively affected relations between husbands and wives, in some cases due to men’s frustration over losing their role as breadwinner, and in other cases because women have been confined to the home due to the deteriorating security situation, leaving them more dependent on their husbands.[48] Preserving positive changes to women’s participation in the labor market post-conflict will require sustained efforts to support women’s employment and enable women’s engagement in decision-making roles.[49]
Yemen’s socio-economic development will continue to be stifled without rebalancing the entrenched gender-based inequity in the country’s labor force. Yemen’s immediate, urgent priority is a political settlement to end to the conflict. Post-conflict, all efforts must be made to sustain and expand any positive gains in women’s employment rates the war has allowed for. Long term gains, however, will require widespread socio-economic and cultural transformation to ensure that all Yemeni women have the opportunity to be economically active and to participate in work that is productive and delivers a fair income.
The following principles are presented to guide efforts to boost women’s employment opportunities in Yemen:
Dr Fawziah al-Ammar is Director of Gender at the Sana’a Center for Strategic Studies.
Hannah Patchett is an Editor at the Sana’a Center for Strategic Studies.
Notes:
[1] The International Labor Organization (ILO) estimated that less than one third of Yemen’s workforce had secondary or tertiary education, while 73.2 percent of jobs were in the informal sector. The labor force participation rate was 36.3 percent. See: “Yemen Labor Force Survey 2013-2014,” International Labor Organization (ILO), 2015, https://www.ilo.org/wcmsp5/groups/public/—arabstates/—ro-beirut/documents/publication/wcms_419016.pdf. Accessed March 19, 2019.
[2] The ILO estimated that 83 percent of Yemenis were either overqualified or underqualified for their jobs. See: ILO, Yemen Labor, 5.
[3] The ILO estimated total unemployment at 13.5 percent, while the unemployment rate among women stood at 26.1 percent and among youth at 24.5 percent. See: ILO, Yemen Labor, 5. Estimates from the International Monetary Fund differ, with total unemployment estimated in 2014 to be roughly 26 percent. See: Republic of Yemen IMF Country Report No. 14/276, International Monetary Fund, September 24, 2014, https://www.imf.org/en/Publications/CR/Issues/2016/12/31/Republic-of-Yemen-2014-Article-IV-Consultation-and-Request-for-a-Three-Year-Arrangement-41901. Accessed March 19, 2019.
[4] According to data presented by the World Bank, the female labor force participation rate declined from 23 percent of women in 1999 to 6 percent in 2014. However, Yemen’s Central Statistical Organization recorded a 36.5 percent rise in the number of women participating in the labor force between 2004 and 2010 – partly explained by a 29.4 percent rise in the female working age population over this period. While this suggested a greater willingness among women to enter the workforce, the 88.9 percent rise in the number of unemployed women between 2004 and 2010 reflected insufficient demand for their labor. In absolute terms, 172,000 women entered the labor force between 2004 and 2010, but the number of employed women increased by just 7,000. See: “Labor force participation rate, female,” World Bank Open Data, https://data.worldbank.org/indicator/SL.TLF.ACTI.FE.ZS?contextual=default&end=2018&locations=YE&start=1990&view=chart. Accessed March 19, 2019; Michele Bruni, Andrea Salvini, and Lara Uhlenhaut, “Demographic and Labor Market Trends In Yemen,” ILO, 2014, https://www.ilo.org/wcmsp5/groups/public/—arabstates/—ro-beirut/documents/publication/wcms_358144.pdf. Accessed March 19, 2019.
[5] Mansour Omeira, “From informality to decent work in Yemen,” ILO, March 2013, https://www.ilo.org/wcmsp5/groups/public/—arabstates/—ro-beirut/documents/publication/wcms_218216.pdf. Accessed March 19, 2019.
[6] Labor Code, Act No. 5 of 1995, Republic of Yemen, https://www.ilo.org/dyn/natlex/docs/WEBTEXT/44043/65001/E95YEM01.htm#a42. Accessed March 19, 2019.
[7] Constitution of the Republic of Yemen art. 41, 42 https://www.refworld.org/pdfid/3fc4c1e94.pdf. Accessed March 19, 2019. While Article 41 states that citizens are all equal in rights and duties, some have said that Article 31, which states that women are “the sisters of men,” discriminates against women as culturally, the status of a sister is worth less than that of a brother. see: See: Elham Manea, “Yemen,” in Women’s Rights in the Middle East and North Africa: Progress Amid Resistance, ed. Sanja Kelly and Julia Breslin (New York, NY: Freedom House; Lanham, MD: Rowman & Littlefield, 2010). https://freedomhouse.org/sites/default/files/inline_images/Yemen.pdf. Accessed March 19, 2019.
[8] The People’s Democratic Republic of Yemen (South Yemen) ratified CEDAW in 1984, and this treaty obligation was transferred to the unified Republic of Yemen in 1990. See: Manea, “Yemen,” 6.
[9] “Concluding observations of the Committee on the Elimination of Discrimination against Women: Yemen,” Committee on the Elimination of Discrimination Against Women, July 9, 2008, https://www2.ohchr.org/english/bodies/cedaw/docs/co/cedaw-c-yem-co-6.pdf. Accessed March 19, 2019.
[10] CEDAW, “Concluding Observations,” 6.
[11] “The Global Gender Gap Report 2018,” World Economic Forum, December 17, 2018, http://www3.weforum.org/docs/WEF_GGGR_2018.pdf. Accessed March 19, 2019.
[12] Bruni, Salvini, and Uhlenhaut, “Demographic and Labor Market Trends,” 38.
[13] Bruni, Salvini, and Uhlenhaut, “Demographic and Labor Market Trends,” 53.
[14] ILO, “Technical and Vocational Education,” 1.
[15] ILO, “Technical and Vocational Education,” 4-5.
[16] Bruni, Salvini, and Uhlenhaut, “Demographic and Labor Market Trends,” 27.
[17] “Conflict and Gender Relations in Yemen,” Care International, Oxfam, and GenCap, November 2016, https://www.care-international.org/files/files/YemenGenderReport171116.pdf. Accessed March 19, 2019.
[18] Data from 2007-2008 showed the enrolment rate for grades 1-6 was 94.5 percent for boys and 76 percent for girls; for secondary education, the enrolment rate dropped to 43.3 percent for boys and 22.9 percent for girls. See: Bruni, Salvini, and Uhlenhaut, “Demographic and Labor Market Trends,” 27.
[19] “Adult and Youth Literacy National, Regional and Global Trends, 1985-2015,” UNESCO, June 2013, http://uis.unesco.org/sites/default/files/documents/adult-and-youth-literacy-national-regional-and-global-trends-1985-2015-en_0.pdf. Accessed March 19, 2019.
[20] In 2013, 31.9 percent of women aged 20-24 years were married before 18 years of age and 9.4 per cent were married before age 15. See: “Child Marriage in the Middle East and North Africa – Yemen Country Brief,” UNICEF Middle East and North Africa Regional Office in collaboration with the International Center for Research on Women, 2017, https://www.unicef.org/mena/media/1821/file. Accessed March 19, 2019; Fertility rates have declined in Yemen, from 8.86 births per woman in 1985 to 3.99 in 2015, however they remain above the global average of 2.4 births per woman. See: “Fertility rate, total (births per woman) – Yemen,” World Bank Open Data, https://data.worldbank.org/indicator/SP.DYN.TFRT.IN?locations=YE. Accessed March 19, 2019.
[21] Bruni, Salvini, and Uhlenhaut, “Demographic and Labor Market Trends,” 46.
[22] Fawzia Bamrahoul, “Legislation and laws related to the work of Yemeni Women,” Yemeni Parliament Observatory, http://www.ypwatch.org/page.php?id=960. Accessed March 19, 2019.
[23] “Yemen’s Economic Outlook – October 2018,” World Bank, October 3, 2018, http://pubdocs.worldbank.org/en/547461538076992798/mpo-am18-yemen-yem-9-14-kc-new.pdf. Accessed March 19, 2019.
[24] “Generating New Employment Opportunities in Yemen,” Development Champions, October 10, 2018, https://devchampions.org/publications/policy-brief/Generating-new-employment-opportunities. Accessed March 19, 2019.
[25] World Bank, “Outlook 2018,” 1.
[26] “Humanitarian Needs Overview 2018,” UN Office for the Coordination of Humanitarian Affairs, December 2017, https://www.unocha.org/sites/unocha/files/dms/yemen_humanitarian_needs_overview_hno_2018_20171204.pdf. Accessed March 19, 2019.
[27] “Yemen Damage and Needs Assessment – Crisis Impact on Employment and Labour Market” ILO, January 2016, https://www.ilo.org/wcmsp5/groups/public/—arabstates/—ro-beirut/documents/publication/wcms_501929.pdf. Accessed March 19, 2019.
[28] “Rapid Business Survey: Impact of the Crisis on Private Sector Activity,” UN Development Program and Small and Microenterprise Promotion Service, November 16, 2015, http://www.ye.undp.org/content/dam/yemen/PovRed/Docs/UNDP%20SMEPS%20Rapid%20Business%20Survey.pdf. Accessed March 19, 2019.
[29] “Yemen Socio-Economic Update Issue 25 – Costs of War in Yemen,” Ministry of Planning and International Cooperation Economic Studies and Forecasting Sector, July 2017, https://fscluster.org/sites/default/files/documents/yseu25_english_final.pdf. Accessed March 19, 2019.
[30] UNDP and SMEPS, “Rapid Business Survey,” 8.
[31] Brigitte Rohwerder, “Conflict and Gender Dynamics in Yemen,” Institute of Development Studies, March 30, 2017, https://reliefweb.int/sites/reliefweb.int/files/resources/068-Conflict%20and%20Gender%20dynamics%20in%20Yemen.pdf. Accessed March 19, 2019.
[32] Author interviews with Yemeni women in Sana’a, Taiz, Hadramawt and Aden, December 2018.
[33] Ibid.
[34] Tom Lambert and Afar Consulting, “Yemen Multi-Sector Early Recovery Assessment,” UNDP and The Global Cluster for Early Recovery, August 18, 2018, http://earlyrecovery.global/sites/default/files/yemen-multisector-earlyrecoveryassessment.pdf. Accessed March 19, 2019.
[35] Care, Oxfam and Gencap, “Gender Relations,” 3.
[36] Author interviews with Yemeni women in Sana’a, Taiz, Hadramawt and Aden, December 2018.
[37] Author interviews with Yemeni women in Sana’a, Taiz, Hadramawt and Aden, December 2018; Marie-Christine Heinze and Sophie Stevens, “Women as Peacebuilders in Yemen,” Social Development Direct and Yemen Polling Center, June 2018, http://www.sddirect.org.uk/media/1571/sdd_yemenreport_full_v5.pdf. Accessed April 9, 2019.
[38] Nasser al-Sakkaf, “Yemen War: Women Play Growing Role for Anti-Houthi Forces,” Middle East Eye, December 21, 2016, https://www.middleeasteye.net/news/yemen-war-women-play-growing-role-anti-houthi-forces. Accessed March 19, 2019; “Yemeni Women: Armed and Dangerous,” The New Arab, December 21, 2015. https://www.alaraby.co.uk/english/society/2015/12/21/yemeni-women-armed-and-dangerous. Accessed March 19, 2019; “From the Ground Up: Gender and Conflict Analysis in Yemen,” Care International, Oxfam and GenCap, October 2016, https://oxfamilibrary.openrepository.com/bitstream/handle/10546/620112/rr-yemen-gender-conflict-analysis-201016-en.pdf;jsessionid=AF2BB237F802AC644E6EEA451B567741?sequence=1. Accessed March 19, 2019.
[39] Samia Al-Aghbari, “Houthis ‘Zainabia’ – Soft Hands for Dirty Work,” Al Masdar, November 22, 2018, https://www.almasdaronline.com/articles/161296. Accessed March 19, 2019.
[40] Author interviews with Yemeni women in Sana’a, Taiz, Hadramawt and Aden, December 2018.
[41] “Falling Through the Cracks: The Children of Yemen,” UNICEF, March 2017, https://www.unicef.org/videoaudio/PDFs/Yemen_2_Years_-_children_falling_through_the_cracks_FINAL.pdf. Accessed March 19, 2019.
[42] “UNFPA Humanitarian Response in Yemen – 2017,” UN Population Fund, October 2017, https://www.unfpa.org/sites/default/files/resource-pdf/2017_Yemen_Humanitarian_Response_brochure_-_Oct_2017_final_f-_email_version.pdf. Accessed March 19, 2019.
[43] Shared Tandon, “Quantifying the Impact of Capturing Territory from the Government in the Republic of Yemen,” World Bank, May 2018, http://documents.worldbank.org/curated/en/834521527693205252/pdf/WPS8458.pdf. Accessed March 19, 2019.
[44]Author interviews with Yemeni women in Sana’a, Taiz, Hadramawt and Aden, December 2018.
[45] Brigitte Rohwerder, “Gender Dynamics,” 8; Care, Oxfam and Gencap, “From the Ground Up,” 47.
[46] Care, Oxfam and Gencap, “Gender Relations,” 14.
[47] Care, Oxfam and Gencap, “Gender Relations,” 14.
[48] Author interviews with Yemeni women in Sana’a, Taiz, Hadramawt and Aden, December 2018; Marie-Christine Heinze and Sophie Stevens, “Peacebuilders,” 27.
[49] Marie-Christine Heinze and Sophie Stevens, “Peacebuilders,” 26.
Executive Summary
This paper examines governance as the decisive factor shaping the success or failure of government reforms and current government plans in Yemen. It starts from a central premise: Yemen’s reform crisis is not primarily a crisis of planning or vision, but a crisis of structural weakness in the governance system that should regulate policy design, implementation, monitoring, and accountability. Yemeni experience, before and during the war, shows that reforms without a clear governance framework become formal decisions that are selectively implemented, stripped of substance, or unable to deliver sustainable impact.
The paper demonstrates that the implementation gap represents the central challenge facing government reforms—a gap resulting from overlapping mandates, multiple decision-making centers, weak institutional coordination, absence of effective accountability, lack of transparency and data, as well as the chronic disconnect between financial and institutional reforms. It also shows that corruption in the Yemeni context is no longer an isolated administrative phenomenon but has become part of deeper dysfunctions in the state’s political economy, making its treatment possible only through comprehensive governance reforms, not through discrete oversight tools.
Through analysis of a case study involving clearly formulated reforms that later stalled in implementation, the paper concludes that political decisions alone are not enough to ensure execution in the absence of an integrated governance system. Weak effective executive authority, the absence of a clear accountability chain, undeclared institutional resistance, and poor alignment between reforms and institutional capacities all contribute to disruption and operational paralysis.
Based on this diagnosis, the paper proposes a practical governance framework for reforms in Yemen. The framework treats reform as a continuous political-institutional process rather than an isolated technical or financial intervention. It is built on the need for a unified national reference for reform governance, clear mechanisms for assigning roles across institutions, a workable balance between centralization and local governance, and the integration of transparency and information systems at the core of the reform cycle. It also adopts a gradual approach that builds trust and reduces implementation resistance.
In light of this framework, the paper presents a package of practical recommendations to strengthen the governance of government reforms. These include adopting a unified national framework for institutional performance governance, strengthening financial governance through budget discipline and expenditure control, establishing a unified digital data system, and activating central and local accountability mechanisms based on clear performance standards, while also allowing regulated exceptional tools for economic crisis management. The paper emphasizes that these recommendations can succeed only through clear role distribution among the central government, local authorities, the private sector, civil society, and international partners, within a single national framework that leads the reform process without replacing state institutions.
The paper concludes that governance is not a procedural issue or an external condition, but rather the most realistic entry point for reconsidering government plans and transforming them into effective tools for economic recovery and institutional stability. Without systematically addressing governance gaps, government reforms will remain vulnerable to stumbling regardless of their technical quality or the support allocated to them. Building a clear and implementable governance system represents a genuine opportunity to rebuild trust between the state and society, improve resource utilization efficiency, and put Yemen on a more sustainable reform path.
Why this paper now?
The Yemeni government today does not primarily suffer from a lack of plans or weak vision; it suffers from a chronic inability to convert approved decisions and plans into tangible results. Experience shows that this pattern undermines the credibility of political decision-making and reduces reforms to low-cost rhetorical commitments for actors who do not intend to comply.
What does this paper show?
This paper proceeds from a clear premise: the reform crisis in Yemen is a governance implementation crisis, not a policy crisis. Government reforms, regardless of their technical quality or political level, will not be automatically implemented in the absence of a governance framework linking decision, implementing entity, resources, follow-up, and accountability.
What does political decision-making require now?
Addressing this gap does not require launching new plans. It requires specific decisions that reorganize how reforms themselves are managed, strengthen the implementation and accountability chain, and protect political decisions from undeclared institutional disruption.
Risks of inaction
Continuing the current situation means the persistence of implementation gaps, erosion of domestic and international confidence, and transformation of reforms into accumulated political and administrative burdens. This paper presents a practical framework for reform governance without creating parallel structures or suspending accountability rules, preserving the role of state institutions and enhancing their implementation capacity.
Executive Summary
The Republic of Yemen today faces one of the most complex investment environments in the region. This reality is the result of structural weaknesses that predated the war and were then intensified by political and institutional fragmentation, security deterioration, and economic collapse. Even so, international experience in fragile and conflict-affected states suggests that Yemen can combine high levels of risk with promising investment opportunities in sectors that can operate before full peace is achieved – provided that reforms are clear, political will exists domestically, and regional support is active.
Over the past decade, the war has produced financial and monetary fragmentation, multiple decisionmaking centers, and divergent laws and procedures. This has created two distinct economic environments: one in government-controlled (liberated) areas and another in Houthi-controlled areas. The result has been a sharp decline in confidence, weaker institutions, severe deterioration in purchasing power, and a continuing fall in the Riyal’s value, alongside rising operating, transport, and insurance costs. At the same time, many of these constraints predate the war: even before the conflict, Yemen was a difficult investment environment due to corruption, complex procedures, a weak judiciary, widespread illegal levies, and capture of state resources by influential power centers.
Despite this bleak picture, the regional and international context offers encouraging indicators that investment space can still be created, especially in government-controlled (liberated) governorates. Compared with Houthi-controlled areas, these governorates offer internationally recognized legal authority, open ports, limited but workable banking channels through official institutions, and stronger prospects for investor protection through international arbitration.
International experience in Iraq, Lebanon, Rwanda, and other conflict-affected countries shows that investment can begin gradually in sectors least affected by war, and that success in fragile environments depends on four pillars: understanding risks while limiting exposure, strong risk management, clear government reforms, and organized regional and international support. With current Gulf investment shifts toward Iraq, Lebanon, and Syria, Yemen – given its geostrategic location along major trade routes, its young population, and its strategic relevance to Gulf security – is a logical candidate to attract part of these investment flows.
There are also conflict-compatible sectors that can be entered today, such as:
These sectors operate by their nature in unstable environments and do not require comprehensive national stability, and can be a starting point.
The paper emphasizes that investment in Yemen, at this stage, cannot be treated as an unrestricted open
field. It must be governed by clear requirements, including a government commitment to supporting
investment, legislative reform, procedure digitization, elimination of illegal levies, access to international
arbitration, specialized government units for investor services, and the launch of a unified investment
window in Aden. It also requires regional guarantees and practical enablers through direct partnerships
with Saudi Arabia, the United Arab Emirates, and other Gulf countries.
Foreign investment also requires active participation by the Yemeni private sector through alliances,
stronger governance standards, audited financial statements, and partnerships with Gulf investors through joint ventures (JVs) rather than stand-alone efforts. It also calls for a new donor role that goes beyond relief to support joint investment, improve the business environment, and provide financing guarantees and blended-finance tools.
Geographically, while the analysis covers Yemen as a whole, the practical application of opportunities
focuses on government-controlled (liberated) governorates. This reflects the current impracticality of
operating in the Houthi-controlled environment, which is marked by sanctions, extortion, capital flight,
institutional destruction, tight control over companies, and the absence of minimum legal and institutional guarantees for local and foreign investors.
The paper concludes that Yemen, despite its fragility, possesses rare strength elements in the region,
including:
The paper presents practical recommendations for the Yemeni government, the Yemeni and Gulf private
sectors, and donors aimed at transforming Yemen’s investment environment from a deterrent environment into an enabling one through short- and medium-term reforms, strategic partnerships, and a limited number of high-impact model projects that can build confidence and unlock larger investment flows later.
Based on this analysis, foreign investment in Yemen is difficult but not impossible. In the right regional
context and with clear government reforms, it can become a major driver of economic stability, a lever for reconstruction, and a tool for integrating Yemen into the Gulf and wider regional economy. The most logical starting point is in government-controlled (liberated) governorates and in sectors compatible with the current conflict context, before moving to larger projects in a later political settlement phase.
The war has fundamentally altered Yemen’s trade finance system, transforming it from a reliable, unified, bank-led mechanism into several divergent, conflicting structures that have made import financing cumbersome, costly, and unstable. The conflict has led to the suspension of oil and gas exports — the country’s primary source of revenue and foreign currency — and resulted in the division of key economic institutions across regional zones of control. Specifically, the fragmentation of the Central Bank of Yemen (CBY) into rival branches (Sana’a and Aden) and the subsequent prevalence of dual currency and monetary systems has created a complex trade financing landscape. The two branches have engaged in a power struggle, issuing conflicting monetary and financial policies that weaponize all aspects of import regulation and financing.
The collapse of the formal banking system, combined with liquidity shortages, has eroded confidence in banks’ financial services and entrenched the rise of less-regulated financial transfer networks, which dominate the monetary cycle and trade facilitation. The fragmented regulatory environment has heightened the country’s vulnerability to global de-risking measures and exposed it to severe risks related to Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) requirements. Yemeni banks have struggled to access foreign correspondent banks, which has inflated import costs and exacerbated food insecurity in a country that imports up to 90 percent of its basic staples from abroad.
The US designation of the Houthis as a Foreign Terrorist Organization (FTO) and subsequent sanctions catalyzed a significant shift away from Yemen’s historically centralized financial system. The sanctions forced banks to relocate to government-controlled areas, eliminating the Houthis’ dominance over their primary operations. Today, these relocated banks are facing operational challenges due to the historic centrality of the financial system, the commercial market, and customer base in Houthi-controlled areas.
After the failure of several import financing mechanisms, the internationally recognized government, along with the Central Bank of Yemen in Aden (CBY-Aden), has recently begun implementing much-anticipated economic reforms that have stabilized the Yemeni rial. These reforms helped institutionalize a new mechanism for trade finance, culminating in the establishment of the National Committee for Regulating and Financing Imports.
To effectively operate on the ground, the Import Committee and CBY-Aden need to be fully empowered to curb currency destabilization and secure hard currency inflows, and to use those funds to finance basic commodity imports. The government should create a conducive business environment for banks to provide financial services and facilitate trade nationwide. Additionally, it should shift from short-term collective measures to long-term economic reforms. These should include working to access sustainable sources of hard currency to finance trade. Sustained financial support from Saudi Arabia and other donors is critical to replenishing the CBY-Aden’s foreign reserves and preserving the value of the rial.
Close coordination with international financial institutions and US decisionmaking bodies (such as the Department of the Treasury’s Office of Foreign Assets Control) is essential to enhance Yemeni banks’ capacity to comply with AML/CFT standards. Houthi authorities must suspend punitive measures against banks and traders and refrain from any future actions that could further deepen the monetary division and complicate trade financing.
In parallel, the UN and broader international community should exert immediate pressure on the warring parties to halt their weaponization of trade financing and respect the neutrality of the banking sector. They should help establish sanctions safeguards to protect humanitarian and remittance flows. As circumstances improve, the international community should support the creation of a nationwide trade financing scheme that is technically effective and insulated from political conflict.
Yemen’s e-commerce sector holds significant potential to drive economic growth and financial inclusion, particularly for women and rural communities, but faces major challenges, including poor internet connectivity, limited digital payment systems, and the absence of legal and regulatory frameworks. The country remains heavily cash-based, with minimal access to formal banking and fragmented oversight, exposing consumers and providers to fraud and limiting sector development. Internet infrastructure is among the worst globally, with only 17.7 percent of the population online in 2024, though the recent introduction of Starlink offers hope for improved connectivity. Conflict-related damage to transportation networks further hinders delivery services. Despite these obstacles, some businesses have found success, especially in urban areas, by adapting to logistical constraints. Yemen’s youthful, increasingly smartphone-connected population, along with emerging technologies and business models, offers promising opportunities for inclusive e-commerce growth—provided that policymakers invest in digital infrastructure, enact protective regulations, and create a supportive environment for online enterprise.
Historically, Yemen’s industrial sector has been characterized by small-scale, private initiatives, with 78% of establishments employing fewer than four workers and dominated by food, metal, and textile industries. Yemeni industry’s reliance on imported inputs and weak infrastructure left it vulnerable even before the 2015 escalation of war. Post-conflict damage has been extensive, with losses exceeding $35 billion, industrial output collapsing, and over half the workforce displaced. Legal frameworks exist but lack consistent enforcement. Gender disparities remain stark, with women accounting for just 1–6% of industrial employment. Environmental degradation further complicates recovery, driven by outdated laws and limited compliance capacity.
Despite this, some local industries have demonstrated resilience, particularly in informal light manufacturing. Drawing from regional and international models of industrialization, this RYE Policy Brief identifies viable paths for industrial renewal anchored in local resources, community participation, and adaptive governance.
Develop a national industrial strategy in partnership with the private sector, including identification of key sectors, support measures, and coordination mechanisms.
Simplify business registration, update laws, and establish industrial arbitration councils.
Expand training, develop women-friendly zones, and launch targeted financing for female entrepreneurs.
Fund industrial research labs and foster private-sector innovation partnerships.
Rehabilitate industrial zones with solar energy, logistics hubs, and streamlined port access.
Create an Industrial Finance Fund and expand concessional credit for SMEs.
Enforce pollution controls, incentivize clean tech adoption, and integrate safeguards into industrial planning.
Yemen is vulnerable to climate change and affected by ongoing conflict, facing worsening environmental crises such as water scarcity, degradation of arable land, and an increasing frequency of extreme weather events. The country’s capacity to address the impact of climate change is severely hampered by limited access to international climate finance. Obstacles include the absence of clear criteria for fund distribution, bureaucratic complexities that exceed local institutional capacity, an emphasis on mitigation over adaptation measures, and a preference for providing loans over grants. Fragmented governance and a decade-long climate data gap further undermine the country’s eligibility for funding. Yemen lacks accredited national institutions capable of directly accessing climate funds, which forces it to rely on international non-governmental organizations (INGOs). This reliance introduces additional layers of bureaucracy and high transaction costs.
This policy brief, based on a desk review and a two-day workshop held in Amman, Jordan, in November 2024, examines Yemen’s climate finance barriers and explores opportunities for improving its access to climate finance. The paper highlights funding allocation disparities, in which climate-vulnerable and fragile states receive disproportionately low shares of climate finance. For instance, Yemen received a mere US$0.60 per capita in adaptation finance between 2015 and 2021, compared to over US$100 per capita in stable countries during the same period.
The paper draws lessons from other countries, including Rwanda, Somalia, and Bangladesh, which improved access by utilizing national climate funds, engaging in diplomatic advocacy, and implementing community-based data initiatives. Recommendations emphasize urgent actions for Yemen’s government, including establishing a multi-stakeholder climate task force and climate fund, finalizing Nationally Determined Contributions (NDCs), and enhancing regional cooperation. For international actors, reforms such as simplifying accreditation processes, prioritizing grants, and supporting climate diplomacy are critical.