The construction sector in Yemen, despite being significantly impacted by political and economic crises and the effects of war, continues to be a crucial sector for the country’s recovery and reconstruction efforts. Within the wider context of the construction sector in Yemen, this brief presents a comprehensive analysis of the contracting sector, which covers the physical work carried out on the production site such as constructing, renovating, or repairing buildings and structures, as well as other heavy constructions such as roads, bridges, and dams. The brief examines the state of the contracting sector before the war, its transformations over the past three decades, and the challenges it has been facing, such as security issues, ineffective legislation, and widespread corruption leading to informal activities. The brief also highlights the remarkable resilience and adaptability of the contracting sector, and argues that local contractors, with their expertise and understanding, are critical for the sector’s future and are well-positioned to play a key role in any upcoming reconstruction opportunities.
In addition, this brief explores the state of adopting green building standards in the contracting sector in Yemen, and the importance of integrating sustainable development strategies and environmentally friendly practices. Furthermore, the brief emphasizes the sector’s role in job creation, especially for youth, and analyses the role of Yemeni women in the sector and how their participation can be enhanced.
The brief concludes with recommendations for a holistic approach engaging all stakeholders. The recommendations include convening technical meetings between contracting companies and government entities, forming a national committee to formulate a strategic vision, and exploring ways to revitalize the sector so that it can effectively participate in future recovery and development phases.
Yemen’s microfinance sector is undergoing a radical transformation. Despite initial success in empowering small businesses, the ongoing conflict has exposed deep vulnerabilities. Competition between the fractured central banks has driven a surge in microfinance bank (MFB) licenses. While this promises to expand financial inclusion, it raises serious concerns about long-term sustainability and financial stability.
Several other factors are driving the transformation of existing money exchange companies into MFBs. These include the erosion of trust in the traditional banking system, the growth of the informal financial sector, and maneuvering by the exchange companies themselves. Additionally, lower entry requirements compared to conventional banks make becoming an MFB an attractive option.
However, the surge in MFBs presents its own challenges. The divide in the Central Bank of Yemen (CBY) creates an uneven playing field, hindering financial inclusion efforts. The rapid issuance of licenses devoid of proper planning could threaten financial stability. Geographic dispersion and limited infrastructure make reaching rural populations difficult and expensive. Lack of financial literacy and a cultural aversion to debt in some regions further complicates client acquisition.
Inexperienced staff at new MFBs also raise concerns about microfinance expertise and responsible lending practices. “Mission drift” looms large as a systemic risk, as MFBs prioritize easily reachable clients in major cities over underserved rural populations. Fierce competition could lead to unsustainable practices like excessive lending, jeopardizing the very clients these institutions aim to serve.
Despite these challenges, MFBs hold immense potential. They can bridge the financial inclusion gap and empower underserved rural entrepreneurs. Unlike traditional donor-dependent microfinance institutions (MFIs), MFBs benefit from a sustainable financing model through customer savings. Yemen’s regulatory framework also allows MFBs to offer a broader range of financial services compared to most other Arab nations.
To ensure a sustainable future for the sector, a collaborative effort is needed from the CBY, MFBs, and international donors. The rival CBYs should institute a temporary pause on new MFB licenses and conduct a thorough assessment of the existing landscape. The regulatory framework for MFBs should be strengthened, focusing on fair competition, risk management, and client protection.
Consolidation of MFBs’ activities and increasing focus on offerings to lower-income clientele can create stronger institutions and a more efficient financial sector. MFBs themselves must develop sustainable business models and build capacity through training and technology adoption. Collaboration is crucial to developing client outreach strategies for rural areas, potentially leveraging financial technology (FinTech) solutions. Effective risk management frameworks and a national credit information system are essential to prevent over-indebtedness. Finally, knowledge sharing and impact monitoring are necessary for continuous improvement and to guide data-driven decision-making.
MFBs present both opportunities and challenges for Yemen’s financial sector. By addressing the challenges and implementing a comprehensive strategy, MFBs can become a powerful engine for financial inclusion, economic growth, and poverty reduction in Yemen.
Yemen’s agricultural communities face a perfect storm of growing ecological threats amid protracted conflict. Flash floods destroy farms, crops, and irrigation systems. Late rains risk drowning mature harvests, and waterlogged fields hinder root growth. Coastal areas battle salinization, and collapsed roads and buried wells hamper recovery. As flooding and changing rainfall patterns undermine yields, farmers struggle to sustain their livelihoods. Over half of Yemen’s population is dependent on farming and agricultural work for income. Terrain altered by flooding has stirred tensions as property lines and irrigation channels shift, displacing communities already uprooted by the war. Traditional flood management faces pressure from uncoordinated development and fading communal cooperation, and information gaps persist due to outdated estimates and limited monitoring capacity.
Stakeholders are employing various strategies in order to adapt. Some communities are able to divert excess water flows and rebuild cooperatively. NGOs are rehabilitating degraded lands and establishing early warning systems. Private sector actors have improved monitoring to fill gaps in government data. But disjointed and inconsistent policies, a lack of coordination among stakeholders, limits on women’s participation, and widespread financial hardship all weaken comprehensive risk management.
This paper examines the impact of floods on agricultural communities, based on the discussions and outcomes of a workshop implemented by the Rethinking Yemen’s Economy initiative with representatives from different governorates. It presents an analysis of the impacts of flooding and explores local prevention, mitigation, and adaptation measures. It concludes with policy recommendations to mitigate flooding and its impact on agricultural communities, enhance food and water security, and build resilience against future extreme weather events.
This policy brief outlines a set of recommendations aimed at empowering local authorities in Yemen to effectively provide services and lead local economic development. The aim is to analyze and draw lessons from three ongoing tracks that seek to empower local authorities in Yemen, while also addressing the challenges and opportunities associated with these efforts.
The analysis concludes that building consensus between the central government and local authorities is of paramount importance for the successful empowerment of local authorities. It is imperative to address political concerns and achieve a minimum level of political consensus in order for these efforts to move forward. Furthermore, it is crucial to overcome challenges related to financing, enhance transparency and accountability, and build local capacity.
The Development Champions Forum therefore recommends the importance of establishing clear and precise guiding principles for the distribution of powers and authorities between the center and local authorities. It also emphasizes leveraging the potential of the private sector to drive economic growth, create job opportunities, provide services, and invest in local communities. Lastly, it encourages partnerships between international organizations, donors, and local authorities towards empowering local authorities in providing services and local economic development.
Since April 2022, the war in Yemen has mutated from a high-casualty conflict to a protracted stalemate with relatively stable frontlines. The contest is now over the economy, as the Houthi group (Ansar Allah) leverages negotiations and its military power to put fiscal pressure on the internationally recognized government. The current phase has been marked by the expansion of economic warfare, with the Houthi authorities shutting down trade from government-controlled areas, stoking discontent as public utilities break down and the currency tumbles.
The Houthi attack on government revenue streams began last fall with a blockade of oil exports and has expanded into competition for customs revenues and a ban on cooking gas produced in government-held areas.
The precipitous decline in oil, gas, and tax revenue has resulted in massive budget deficits and reduced the government’s capacity to cover essential expenditures, including the payment of public sector salaries and the provision of electricity.
The expiration of a Saudi fuel grant has precipitated an electricity crisis in the south, with the government and private operators unable to run power plants. By September, residents in the interim capital of Aden received as few as four hours of power each day.
The August 2023 announcement of a new US$1.2 billion grant from Saudi Arabia will provide a measure of relief, but the vast public sector cannot subsist on irregular handouts, and private investment is limited by conflict and political fragmentation.
Without substantial and sustained financial assistance, the economic and humanitarian situation in Yemen will rapidly deteriorate.
Hundreds of thousands of employees working in the government-controlled public sector and their dependents will lose their primary source of income if salaries go unpaid, and their purchasing power will fall with the devaluing rial as the central bank’s foreign currency reserves dry up.
This paper details the circumstances of the destruction of the public revenue streams of the internationally recognized government and identifies potential avenues for their restoration. It was informed by the research of the Sana’a Center Economic Unit and consultations and discussions at the 9th Development Champions Forum (DCF), held from May 24-26 in Amman, Jordan, as part of the Rethinking Yemen’s Economy Initiative. [1] Participants discussed and debated potential avenues for relief of the government’s fiscal crisis and suggested streams of exploitable revenue for further study of their viability.
Raising or improving the collection of income, commercial, or even point-of-sale taxes in Yemen is currently beyond the government’s ability to enforce, due to its limited wartime capacity and geographic fragmentation.
Calibrating the realities of the current political situation, a number of suggestions were proposed for the exploitation of public assets and utilities that the government may wish to consider.
Crude oil might be sold on restructured futures contracts, or dealt to private regional exporters, through a transparent process. Customs and tax collection could be streamlined or decentralized.
Also, the government should explore optimal models for creating effective partnerships with the private sector and encourage it to provide electricity distribution services, as well as studying the possibility of privatizing the electricity sector, even partially, or financing and rationalizing it through a pre-payment system to address the woeful collection of utility bills.
Other assets, including the publicly owned telecommunications company, could be reformed, as could expenditures, including the security and public sectors.
Deeper reforms are dependent on strong and effective state institutions, which have long been absent from Yemen and whose reconstitution likely awaits the conclusion of the war. Additional support for the machinery of state could have a multiplier effect in alleviating the longer-term crisis, but would take time to have an effect.
The measures outlined here will not rapidly reverse the government’s financial fortunes on their own, but could mitigate its current predicament and restore a measure of faith in its ability to govern. Ultimately, Yemen requires two developments: an economic truce to decouple its stalled military competition from the livelihoods and well-being of its civilian population, who are being pushed further into poverty and desperation; and sustained financial support from Saudi Arabia and the United Arab Emirates, that it may engage in the long-term rationalization of revenues and expenditures and underwrite much-needed reforms.
Poor electricity services remain a key barrier to sustainable economic development in Yemen, exacerbated by the ongoing conflict and related damages to the electricity sector’s infrastructure.
Given Yemen’s high average hours of annual daily sunshine and its significant level of solar irradiation, solar energy is a viable and cost-effective alternative to the currently prevalent fossil fuel-based electricity supply.
This brief provides an introduction to electricity provision in Yemen and explores the viability of specific solar energy applications for Yemen’s fragile context. It further considers the feasibility of partnering with the private sector in the solar energy sector, and finally presents recommendations and practical steps to address challenges to scaling-up investments in this sector in Yemen. It argues that a paradigm shift is needed to address the energy crisis in Yemen and kickstart meaningful economic activity: from an exclusive focus on large, fossil fuel-based, centralised power generation plants to a stronger prioritisation on smaller, distributed renewable power generation plants that could provide jobs and livelihoods to Yemenis; from centralised planning and implementation to empowerment of local authorities and local Public Electricity Corporation branches to lead in this sector; from an overemphasis on supporting small stand-alone solar systems delivered by international non-governmental organisations and development agencies to a stronger prioritisation on innovative financing models and market-creating interventions supporting the sustainability of the sector at scale.
Electricity is the backbone of any economy and one of the necessities of modern life. Since even before the current war, poor electricity services in Yemen have been one of the key barriers to sustainable economic development and basic service provisions, such as water supply, health care, and education.
This policy brief presents an overview of the electricity sector and its relevant indicators prior to the conflict. It then outlines the impact of the conflict on the sector, and concludes with a set of priorities for restoring the pre-war capacity of the electricity sector, then further reforming it to improve its performance.
Immediate- to short-term recommendations include: adopting a realistic and practical recovery plan; securing funds for rehabilitating the infrastructure; reviewing the electricity tariff; reducing technical and non-technical electricity losses; purchasing electricity when needed through a competitive process and via least-cost options, such as gas and renewable energy; securing the fuel supply and the salaries of sector staff; resuming all suspended projects; finding sustainable and feasible solutions for the electricity supply in each governorate to avoid the challenges associated with the centralized grid; and installing sustainable stand-alone solar systems, compatible for connection to the national grid (when restored).
The medium- to long-term priorities include specific recommendations under five categories, relating to: the legal and regulatory framework; institutional arrangements; capacity and performance; private sector participation; and technical issues.
This policy brief was developed based on a more detailed research paper published under the same title by Rethinking Yemen’s Economy project in May 25, 2021. The full research paper can be viewed on this the Development Champions Forum website or by clicking on this link.
The electricity sector in Yemen is managed by the Ministry of Electricity and Energy (MoEE) which is responsible for setting the sector policies and strategic plans, while the Public Electricity Corporation (PEC) is in charge of electricity provision, managing the electricity sub-sectors of generation, transmission, and distribution. The General Authority of Rural Electrification (GARE), established in 2009, is the body responsible for electrifying specific rural areas that are located outside the main and secondary cities.
The electricity sector activities are governed by Electricity Law No. 1 of 2009. The law stipulated several positive and ambitious measures to reform the sector and improve sector performance, such as unbundling the PEC into three corporate entities – one each for generation, transmission, and distribution – and creating an independent regulator to control sector activities. None of these measures, however, has been achieved to date.
Interrelations Among Key National Stakeholders
Private sector participation in the electricity sector started in 2006 and was limited to electricity generation activities. The PEC purchased the energy from private producers, based on short-term contracts, and supplied them with the fuel needed for generation. The role of the private sector was mainly to back up the PEC in bridging the electricity supply gap. In 2013, the share of purchased energy accounted for around 38 percent of overall generation, while from 2008 to 2012, the average cost of purchased energy represented around 48 percent of sold energy revenues. This indicates that the government – and the power sector in particular – incurred significant financial burdens due to purchased energy from private producers.
Until 2015, the residential sector accounted for most of the country’s electricity consumption, at 65 percent. Given the unreliability of the supply, most of the facilities in the economic sectors, such as commercial and industrial, relied on their own diesel generators as their main source, or as a backup system. In 2012, there were around 2 million subscribers in the electricity sector, and the gap in generation capacity was 376 MW. Due to limited capacity, the unserved energy demand was around 33 percent in 2011 and 25 percent in 2012. Thus, there was a need to disconnect some subscribers at peak times. The electricity tariff was heavily subsidized and was far below the high cost of supply. In 2014, the average cost recovery rate was only 33 percent (as per local market fuel prices).
The Marib I & II gas-fired power plant projects, as well as electricity interconnection projects with neighboring countries, are strategic components of the generation subsector. The Marib I gas power plant was installed in 2009 in Safer, near the gas field, supplying around 50 percent of all Yemen’s generated energy and 40 percent of its actual installed capacity (340 MW). The plant played a crucial role in enhancing generation capacity using the least-cost and locally available resources.
As a second phase, the construction of the 400 MW Marib II began in 2013, with plans to start generation in late 2014. There was also a plan to expand the capacity of Marib I & II by converting them from open-cycle gas turbines to combined cycles. Due to political unrest, the second phase was suspended. Interconnection projects with neighboring countries, namely Saudi Arabia and, via Djibouti, Ethiopia, were under discussion. These projects, however, did not materialize.
Worthy of note, too, is the country’s attempts to utilize renewable energy technologies. Yemen is endowed with significant renewable energy resources, specifically wind, solar and geothermal. Yet, although the National Strategy for Renewable Energy of 2009 set a target of 15 percent renewable energies in the generation mix by 2020, the deployment of renewable energy applications before the war was minimal. The first large-scale wind farm project, of 60 MW, was to be installed in Al-Mokha, funded by several international institutions. Again, due to the war, this project has been suspended.
Prior to the war, the installed generation capacity of the electricity sector was significantly low, at 1.5 gigawatts (GW), with the actual capacity only 67 percent of this. The main reason for this low capacity was that most of the key power plants were aging and inefficient. Electricity generation was improving steadily, however, up until 2010, with the 340 MW Marib I gas power plant mentioned above the most recent strategic project. In addition to the limited available generation capacity, losses were substantial, exceeding 40 percent in 2013. This energy loss, combined with a low bill collection rate, a significant tariff subsidy, and the purchase of electricity from expensive sources, were major issues bleeding the sector.
In terms of annual electricity consumption per capita, in 2014, this stood at 255 kWh/year. This was extremely low compared to the regional and international level, where the amounts are 2,900 kWh/year and 3,100 kWh/year, respectively. Due to stunted improvement in electricity expansion, the access rate to public electricity in 2014 was around 40 percent of the population. Furthermore, although the rural areas host around 75 percent of the Yemeni population, the electrification rate in those districts was extremely low, at 23 percent, compared to 85 percent in urban areas.
During the current war, the public electricity sector has been substantially affected by the ongoing armed conflict, suffering considerable physical and non-physical damage. The conflict and the absence of reliable infrastructure have also negatively affected the provision of other basic services, such as health, water, and education. Indeed, it is estimated[1] that during the ongoing war, about 90 percent of the population has not had access to public electricity. In 2020, only 50 percent of health facilities were functioning and they remain negatively affected by power outages up until today[2]. While around 32 percent (303 MW out of 906 MW) of the available capacity of the power plants previously connected to the national grid are still functioning, given the collapse of the grid, those power plants mainly supply local demand.
There is also a divergence between those areas controlled by the internationally recognized government and those controlled by the armed Houthi movement (Ansar Allah), in terms of electricity supply. In the former, supply has remained largely the same; the government-led supply and tariff remain subsidized, with significant reliance on purchased electricity from private producers, and with sporadic fuel grants and support from Saudi Arabia and UAE to address the limited fuel supply. In Houthi -controlled areas, electricity generation has changed to private-led supply. Several private grids are currently providing electricity through small generators.
Since the collapse of the national grid, the solar photovoltaic (PV) market has also boomed at an unprecedented rate, becoming an attainable electricity alternative. This is especially so in the northern and central governorates, where national power plants are not functioning and the price of private electricity is unaffordable for most. In December 2019, around 75 percent of the population used small solar systems as the main source of electricity.
Despite the deteriorating situation in the power sector, especially since the start of the current war, there is an opportunity to build a stronger electricity sector in Yemen.
The following section includes priorities for restoring and reforming that sector. The applicability of these recommendations, however, relies on a highly supportive political environment and the support of international donors/lenders, as well as effective management by sector leaders.
The recommendations below are timed for the current situation and the first year following any potential peace agreement and/or political stability. The aim at this stage is to restore the sector to its previous capacity before the war and prepare a sound foundation for the reform process that must follow the initial recovery phase. The following steps are therefore recommended:
These recommendations are applicable during the two- to five-year period following any potential peace agreement and/or political stability. This stage focuses mainly on reforming the sector in accordance with the relevant steps taken before the war and best international practices.
In general, the success of the reform process – especially the restructuring of the sector, the creation of an independent regulator, and the degree of private sector engagement – needs a political commitment translated into an enforceable decree for reform. High-level leaders, supported by a committee of senior experts, should work on initiating, supervising, and directing the reform process so that it obtains stakeholder consensus and ensures smooth reforms leading to the establishment of a modern electricity sector.
There are a considerable number of important laws and regulations, drafted and/or adapted before the war, that need to be enforced. The reform process can thus build on previous efforts, as well as develop new laws and decrees, to better govern the sector. The following steps are therefore recommended:
The Electricity Law of 2009 included the main necessary steps for reforming the structure of the electricity sector. The following points emphasize the importance of enforcing the electricity law, as well as supplementary recommendations:
Enhancing the capacity of institutions and individuals is key to improving the sector’s performance. Thus, the following steps should be taken:
Perhaps counterintuitively, countries during a conflict or in a post-conflict transition phase have many investment opportunities, usually centered on the provision of unmet basic services and needs. The private sector can play an important role in infrastructure and economic reconstruction, which in turn results in several positive outcomes, such as an increase in private capital and job creation while (re)building local capacities and skills. The private sector also generates revenue for the government by paying taxes and other fees. Therefore, the following measures are recommended:
Several technical recommendations are needed to improve the electricity services and their quality. The top technical priorities to enhance the performance of the generation, distribution, and transmission sectors are:
Even before the events of 2014 and 2015 that led Yemen into the ongoing civil war, its economy was fragile. The years of hardship that have haunted the country ever since have been devastating. Yemen is now rated as one of the hardest places in the world for businesses to operate and is last or near last in a host of global business competitiveness indexes. From January 25-27,2021 the seventh Development Champions Forum, held virtually, focused on this dire national situation. To help address local economic challenges, the Development Champions discussed the possibility of establishing Local Economic Councils. According to their analysis, between the existing community-level local development committees (which guide targeted, small scale infrastructure investment from development funds such as the Social Fund for Development and the World Bank) and the Supreme Economic Council (which guides sector-led state investment at a national level), a space exists for a governorate-level body to drive development by guiding investment to serve local needs and strengthen ties between the governorates and the private sector.
Even before the events of 2014 and 2015 that led Yemen into the ongoing civil war, its economy was fragile.[1] The years of hardship that have haunted the country ever since have been devastating. Yemen is now rated as one of the hardest places in the world for businesses to operate[2] and is last or near last in a host of global business competitiveness indexes.[3] On a national level, stressors have included the interruption of oil and gas exports, suspension of donor development support and drop in remittances.[4] In addition, there has been a bifurcation of monetary policy and financial regulation between rival central banks, a general shortage of foreign currency in the market to finance imports, a major depreciation in domestic currency value that has eroded local purchasing power, and widespread loss of livelihoods and income.[5] Damage to vital infrastructure has also been widespread and public finances are in disarray.[6]
The devastating results of this economic collapse cannot be overstated. Poverty and hunger are rife.[7] According to UNICEF,[8] “Yemen is the largest humanitarian crisis in the world, with more than 24 million people – some 80 per cent of the population – in need of humanitarian assistance, including more than 12 million children.”
The Development Champions (DCs) are senior Yemeni experts and professionals from various backgrounds, with established expertise in development and economy. The seventh Development Champions Forum (DCF7), held virtually on January 25-27, 2021, discussed how within this clearly dire national situation, businesses still operating in Yemen today face considerable local-level challenges. The forum considered challenges both unique to, and shared by, the country’s various governorates,[9] regarding areas such as vital infrastructure. Roads, power, fuel supplies, water, and access to communications across the country are often either below standard or not functioning at all.[10] Issues raised also included: a lack of skilled workforces and training opportunities; governorates’ lack of decision-making powers required to react to their specific circumstances; inadequate oversight of funds available to invest in local economies; and scarcity of microfinance opportunities.[11]
Yemen’s local authorities are, for the most part, weak clients of the central authority,[12] and require more resources to cover local development needs.[13] The implementation of the Local Authority Law in 2000 devolved responsibility for providing local services to the district-level local councils within each governorate, to be paid for by revenues generated through taxation. Economic collapse and lack of access to national wealth generated by oil and gas sales has left the councils in many cases unable to fund basic services required by their populations, let alone stimulate economic development.[14] Measuresagreed upon in the National Dialogue Conference to strengthen the autonomy of governorates and their local councils are still waiting to be implemented.[15]
As a possible solution , the Development Champions discussed the idea of a possible establishment of Local Economic Councils (LECs)that. According to their analysis, between the existing community-level local development committees (LDCs) (which guide targeted, small scale infrastructure investment from development funds such as the Social Fund for Development (SDF) and the World Bank)[16] and the Supreme Economic Council (which guides sector-led state investment at a national level),[17] a space exists for a governorate-level body to drive development by guiding investment to serve local needs and strengthen ties between the governorates and the private sector.
The LECs, as envisioned by the Development Champions, would comprise experts drawn from the private sector, academia, NGOs and local authorities, who would both assess the real needs of the governorate’s economy, and advise the local governor and relevant local offices on how best to address them.
Amongst others, the LECs could work on plans to improve local productivity in areas of priority in the governorate and will have to market their ideas to donors and the private sector to facilitate and mobilize funding to reach those in need. Unlike the LDCs, which are project-based temporary structures, LECs would focus on future development plans and implementation at the governorate level.
For example, if access to finance is found to be a major productivity barrier that needs to be addressed in a given governorate, the relevant LEC would advocate for extending microfinance services to the governorate. The LEC could target microfinance stakeholders such as the SFD, Yemen Microfinance Network, microfinance institutions and donors, with needs assessments, studies and presentations and a clear message that facilitating microfinance in the governorate is feasible and a priority.
LECs would also be well placed to better facilitate private-sector bids for large-scale operations currently under the purview of the central government, such as power production and waste management, which could open the door for more significant investments.
Creating these credible, transparent bodies that could present a clear economic vision for their areas would also provide a more appealing environment for international donors looking to sponsor development projects, train workforces and distribute aid.
The Development Champions stand ready to support in drafting clear legal mandates for the implementation of the LECS. Both the nature of the mandates and the structure of each LEC should be flexible, decided by the local authorities depending on their needs. Once formed, the day-to-day running of the LECS should be left to their members.
Located in the east of the country, Hadramawt (population 1.7 million officially, and 3 million anecdotally[18]) is geographically the largest governorate in the Republic of Yemen. Its 28 districts cover some 193,000 square kilometers, around 36 percent of Yemen’s landmass. The governorate’s capital, Mukalla, is considered Yemen’s third largest seaport.[19]
Economic activity in Hadramawt is hampered by general insecurity, especially in the valley and desert areas, in addition to specific conflicts between the components of the central authority, local authority and the Southern Transitional Council (STC). However, with the exception of some limited confrontations with Al-Qaeda in the Arabian Peninsula – most notably, the military operations to drive the extremist group out of Mukalla in 2016 – the governorate has not seen major military operations and has thus largely kept its economic infrastructure intact during the war. This leaves the governorate in an excellent position for economic development, if the appropriate policy steps are taken. Its coastline allows access to well-stocked fishing grounds; the governorate is rich in agricultural land with fertile soil and is known for animal husbandry and beekeeping. Hadramawt is rich in minerals, including gold, and the area currently produces some 65 percent of Yemen’s oil.[20]
Hadramawt is a national outlier, enjoying relative stability and comparatively greater economic resources than other governorates in the country. Local government here functions at a much higher level than elsewhere and already has some working relationships with the private sector.[21] As a result of the weakened power of the central government, Hadramawt has since 2015 exercised a reasonable degree of autonomy. The governorate takes a share from oil export revenues as well as from local financial resources. Compared to other governorates, Hadramawt’s infrastructure was not damaged by the fighting and enjoys a reasonable degree of security and stability.[22]
A Hadramawt LEC comprising members of the private sector, academia, NGOs and local government would be well placed to create locally focused initiatives and economic partnerships that would stimulate growth. For example, the governorate has a well-established fishing industry but without investment it is unable to be exploited to its full potential. Similar to national trends, many fishers still use small artisanal vessels, which are inefficient, and only moderate landing and storage infrastructure exists.[23]
Fisheries interventions in Yemen prior to 2015, of which Hadramawt was a part, came in the form of policy support to improve efficiency of the domestic and export marketing of fish and in the form of infrastructure support, such as the construction of fish-handling facilities, fish-receiving stations, engine maintenance, and net-repair facilities. In addition, efforts were made regarding capacity building for the fishermen in the areas of marine engineering navigation and fish-processing technology and for government fisheries personnel.[24] However, these projects were limited and there have been no studies regarding their sustainability. The LEC could coordinate and advise development partners on existing as well as future interventions, based on consultations with the Yemeni Seafood Exporters Association (YSEA)[25] and the local fisheries’ associations in Hadramawt.
Meanwhile, the LEC could advocate for bringing further microfinance into the governorate, which would help fishers invest in more modern boats, improve landing stations and establish a broad ecosystem of related businesses, such as fish farms, canning factories, boat builders and deep-sea fishing companies.[26]
In addition, DCF7 found that poor catch quality, poor hygiene standards and a lack of quality management systems within fishing companies were affecting productivity.[27] Assistance is needed in improving the quality of fishing and exporting practices based on international requirements, as well as awareness and monitoring campaigns to insure against overfishing. A close partnership with INGOs, facilitated by an LEC, could also help to introduce new fish-based food products, which would create local business, as well as help to mitigate malnutrition at the national level.
Similarly, an LEC could help facilitate targeted investment in Hadramawt’s agricultural sector to help with the significant problems currently caused by a lack of energy and fuel. For example, DCF7 members suggested that an investment fund of around 10-30 million United States dollar (US$) would help farmers move from diesel to solar power and increase productivity.[28]
In the event of smaller-scale successful outcomes, the LEC could further guide the governorate to work with the private sector to develop more investments that entail major infrastructure improvements. For example, DCF7 members suggested LECs could investigate the merits of establishing an oil refinery or expanding export facilities to allow for exploitation of the governorate’s mineral resources.[29] In the longer term, the council could guide the governorate to invest strategically in education, ensuring an educated workforce capable of staffing the governorate’s nascent industries and elevating them to higher levels.
Taiz, located 256 kilometers south of the national capital, Sana’a, is Yemen’s most populous governorate. With an estimated 3.5 million[30] to 5 million[31] people, the area holds about half of the population currently living under the control of the internationally recognized Yemeni government.[32]
Any economic activity in Taiz must overcome extreme challenges. The governorate is one of the worst affected by the ongoing war, having been an active frontline in the conflict throughout the war. Six of its 23 districts are currently held by the armed Houthi movement (Ansar Allah).[33] Its eponymous principal city has seen the second highest proportion of damage of all Yemeni cities, according to the World Bank’s 2020 assessment, and suffers from a suffocating siege that has been in place for more than five years. The city ranks second worst for functioning services in the country, has suffered the worst damage to housing stock of any city in Yemen, has seen significant damage to its medical infrastructure and has no public access to electricity and very little public access to water.[34] More than 80 percent of the governorate is food insecure.[35]
The Taiz districts with large manufacturing plants and industry are controlled by the de facto Houthi authorities. Additionally, the coastal districts, although liberated, are still under the influence of the United Arab Emirates. Military interference in the coastal districts is limiting the effectiveness of the fishing sector.[36] Consequently, investment momentum is nearly suspended. Internal sources of investment are insignificant and, since 2015, all sources of external funding have dried up.[37]
The DCF7 believes that economic rejuvenation in Taiz will be limited without a peaceful solution to the fighting and the unification of its authorities under the state. However, the DCF7 has called the economic environment in Taiz “encouraging despite the current blockade and war,” given the adaptability and resilience shown by the businesses still in operation, and called for “urgent intervention in the field of commerce” to assist them.
With the right investment and opportunity, the DCF7 suggests that Taiz would be able to exploit diverse resources and bolster economic activity, with a focus on agriculture, livestock, fishing, and the manufacturing of, for instance, paint and foodstuffs.
The World Bank estimates that between US$44.5 million and US$54.5 million is required for the full rehabilitation of Taiz city.[38] An LEC would be well-placed to ascertain the most suitable sectors to target and the most efficient methods with which to do so.
Exploring channels for adequate financial resources to build suitable infrastructure would be a key directive for an LEC in Taiz, as would facilitating economic partnerships with the private sector in order to achieve an economic boost, especially in sectors with untapped capacities – such as industry, fisheries and mineral wealth.[39]
For instance, improvements in transportation infrastructure would help reduce the current high prices of goods and rehabilitation of power infrastructure would be crucial to drive down the crippling cost of electricity. An LEC would be well placed to guide investment into small-scale initiatives that would reap tangible benefits for local producers. For example, microfinance arrangements to allow the governorate’s farmers and other businesses access to solar power would be of great benefit, as would schemes to help reopen small factories and support artisanal producers.[40]
A transparent, integrated LEC could also help restore trust in the local authorities, which, according to the World Bank,[41] have been eroded over recent years, particularly regarding long-standing issues over garbage collection and sewers. Such issues might be alleviated with private-public partnerships.
In the continuing absence of steps to empower governorates and their local councils, as recommended by the 2013-2014 National Dialogue Conference,[42] the DCs propose that emergency measures be taken to create a mandate for LECs. The central authority should create a legal framework – informed by the proposals of an independent legal consultant – to allow for the creation of LECs in each governorate; it should then validate their mandate. If, or when, the NDC recommendations eventually become law, the LECs could be absorbed into the structure of the local councils, perhaps as economic advisory committees. In order to establish the credibility of the LECs as a viable concept, the DCs recommend a three-year trial phase in which councils are implemented in two governorates.
The work of the LECs will be greatly aided if their governorates have funds to invest in development. The existing system does not encourage governorates to effectively collect funds, and any money available is redistributed without sufficient awareness of each governorate’s needs.[43] At the DCF7, the governor of Taiz suggested that centrally collected funds should be redistributed in a more practical manner, whereby the poorer governorates receive a more generous contribution. Delegates also called for budget caps on autonomous spending – currently set at YR50 million – to be lifted, to allow governorates more flexibility to develop their own infrastructures as they see fit.
The political divisions of the center are reflected on the governorate level, with appointments often politicized. The LECs must remain apolitical if they are to succeed in gaining the trust, and thus investment, of a wary private sector. Many private investors are ready to support projects, but they fear that projects will be shut down centrally.
Endnotes